Throughout the reading I was inclined to associate South Korea's ability to transition from an agricultural society to a high-tech industrial economy to their values and traditions. In the paper, the author attributed its economic success to South Korean values for "hard work, disciple, respect for learning, frugality, the importance of family, the emphasis on education, the high esteem in which civil servants were held that attracted talented technocrats to serve the state, and even the willingness to delay gratification that resulted in the high savings rate that characterized the period of rapid economic growth." Moreover, the quality of South Koreans made me think of T.W. Schultz's Quality of People theory, in which the characteristics of the individuals representative of a society is what drives economic growth. Since South Koreans were the ones providing labor to their country, for the centralized government (pre 1996), it was important to cultivate talent. This meant providing incentives to its citizens to pursue higher education domestically or abroad. Many South Koreans would send their children to cities to obtain a better education. I argue. that South Korea's cultural value for education and the country's determination to perform well is a driving factor for its economic success. Of course it's important to note that the operationalization of labor by an extremely heavy-handed government provided a vehicle for the manifestation of talent and enterprise in South Korea.
The story and path of South Korea's development achievement is long. One might say that South Korea's success can be attributed to the historical circumstances- development during a time of little export-led competition, its proximity to Japan during its production movement to low cost countries, the openness of the US market, etc., etc. One might say it was the US aid and troop presence that assured foreign investors. It might be South Korea's 'Confucian Ethos', a combination of hard work, discipline, respect for learning, frugality, the importance of family, and delayed gratification. South Korea's success was probably a mix of all of these. As we have learned from Ostrom and throughout this class, there is no cookbook formula for development. From the Growth Strategies reading, we have learned that attempts to emulate successful policies elsewhere often fail. While many of the steps in South Korea's development can be seen as an example, other countries looking to develop need to look within to write their own development story.
It is enlightening to see a success story of a developing country. Coming from one of the poorest countries per capita, being compared to modern-day Haiti, to a developed country is a story that has clearly been examined in great detail. Many of the steps South Korea had taken are steps that we have looked at in this class. For instance, starting with their First Five-Year Development Plan in 1962, the country had turned into a mostly imported country to light industry for exports. They also began to improve human capital, along with physical capital. We see South Korea as one of the success stories today, but it is interesting to note that one of the turning points of their growth, in my opinion, began with events that were not necessarily controlled for. Prior to the Korean War, three percent of landowners owned about 64 percent of the land. However, post-Korean War, the top six percent of landowners only owned 18 percent. This gave the opportunity to former peasants and landowners to move out of the countryside and redirect their attention to improving human capital and creating more entrepreneurs. I feel that this unexpected event gave South Korea an initial push it needed to redirect focus on human capital which led to higher innovations, increased exports, and the technocrats that studied abroad and went back to the country.
I really enjoyed reading about development economics from a case study perspective, and I think it makes the concepts much easier to understand. Obviously, as Didi pointed out and as we have read in the Growth Strategies paper, a one-size-fits-all approach to economic growth and development will not work. Still, the case study of South Korea is fascinating and illuminates many of the factors that lead to successful economic growth. Let me preface my comments by saying that as I read this paper I became aware of how little I actually know about the history (economic and otherwise) of South Korea, so things that surprised me might be perfectly obvious to other (or most) people. One of the things that I noticed was not present in this paper—probably because it’s a paper focusing on economic development—was a discussion of the social progress (or lack thereof) in South Korea that went along with its economic progress. I was also somewhat surprised to read that South Korea’s rapid growth came under a mostly authoritarian, military government regime. Towards the end of the paper, the author briefly mentions social costs of development, focusing on the exploitation of female labor and working conditions and length of the workweek, but I would be interested to read more about how social progress in South Korea maps over time alongside its economic growth. As economic development is context dependent, it makes sense that processes of social and political progress are as well; still, I was surprised, particularly after considering Sen’s view of freedom as the means to and ends of development, that such rapid economic growth could precede the provision of many real, substantial social and political freedoms in South Korea.
Seeing how South Korea developed and made significant economic progress helps to give a real life example to the concepts that we have discussed in class. I found it interesting how the government cracked down on the corruption of the top earning business owners in the country. They then instituted plans to gain state control of credit through national banks. To spark growth in the business sector, the country offered low interest loans. This strategy along with vast social reform and foreign investment led to a high rate of development. Its interesting that this growth and reform started under a military government as we usually link economic development to democracies.
One thing that was left out of the paper was the environmental effects of the development. During this time South Korea saw major urbanization as a result of the economic boom. I wonder how the growth of cities impacted the natural environment in the country. For example, the rates of air pollution could have raised significantly with the development. Obviously it is a great thing that South Korea was able to develop and fight the large scale poverty that existed in the country, but I think it would be interesting to see the environmental side of development as well.
It was exciting to read a case study about my own country, and more exciting yet to connect points from the reading to discussions we had in class about Sen's book. As Sen discusses in chapter 2 of Development as Freedom, there are some instrumental freedoms that can propel a country into economic advancement, including political freedoms, better economic facilities, and social opportunities. South Korea adopted these freedoms and quickly became more economically stable: it shifted away from import substitution practices and grew its steel, chemical, shipbuilding, and electronics industries; the country started investing more on education and made more social opportunities available for its people; a newer, better government's pursuit of rapid industrialization opened paths to improved economic facilities and policies.
Something that I found interesting is the contrast between the paths South Korea's and North Korea's governments took. Before the Korean Peninsula was divided into two, both its northern and southern regions were under Japanese colonial rule and abuse. Then in the 1950s, both North and South Korea suffered from a terrible war. In other words, both Koreas were equal (in that they were both at their poorest states ever), yet one is significantly more prosperous today. This difference in economic states highlights the importance of a good government: both North and South Korea were led by dictators after the Korean War, Kim Ill-Sung, and Park ChungHee, respectively. However, Kim practiced policies of "self-reliance" and obsessed over power, while Park focused on eliminating corruption and improving the country's economy. This makes me wonder if North Korea would look different today had its government took a different path. Furthermore, I wonder if the elimination of government corruption could help countries like Cambodia and other "3rd world" nations grow at a faster rate.
I think the most important point that you can draw from this article is that there are certain political, social, and economic factors that differ in each country that largely prevent a homogenous approach to economic growth policy. Whether it is because of the ‘Confucian ethos’ that attributed to the development of informal institutions regarding higher savings rates and emphasis on education, or because of the broader historical context with incredibly large FDI from the United States, there were several unique factors that required a unique approach to economic growth. With that said, there were several reforms that reminded me of textbook examples of economic growth theory, specifically the Lewis Two Sector model. For example, South Korea transitioning to capital-intensive industries such as textiles and later electronics and automobiles is modern-sector enrichment. However, they also provided programs to promote technological development in the agricultural sector and supported prices to mitigate the sectoral wage gap. This is akin to traditional sector enrichment. Underneath these broad changes though, there were a lot of actions by the government that I thought were unique to the situation, such as the nationalization of credit. This surprised me at first, but without well-developed capital markets it would have been impossible for South Korea to build up their modern sector as fast as they did, even with help from the US. Since the government was careful to promote competition and avoid monopolies by measuring the efficiency of the companies to which they provided credit, nationalization of credit was probably a smart government policy (though I’m critical as to why they favored provision of credit to the chaebols). Overall, the close interactions between the state and private enterprises probably helped a lot.
In this class we have discussed whether in order to create growth and development the burden lies on individuals/firms or the government. Like with many other issues the answer we put forth is that it depends. This case study on growth and development in South Korea highlights this “it depends” phenomenon as growth is linked to both market factors and governmental (policy) factors. Under the rule of Park Chung Hee, techniques combining state planning and private entrepreneurship were used to promote economic growth growth in South Korea. In another example regarding education, which is an input into human capital and thus can increase growth and development, a mix of state and private intervention was used to make South Korea have the best educated work force out of any country with comparable income level. State and private groups jointly worked to improve adult literacy. A nuance of the “it depends” phenomenon is that sometimes government regulation in one sector can cause a spillover effect as the market corrects itself given a new policy, thus both the market and the government pay intertwining roles. One example of this is land reform in South Korea in 1950. The land reform limited the amount of land that could be owned. This decreased tenancy, causing it to virtually disappear, Peasants became entrepreneurial farmers and many landowners invented in businesses or established schools. This reform thus redirected capital toward commerce, industry, and education. Another nuance of the “it depends” circumstance is whether or not the government has the ability to enact a policy that actually does what it is supposed to do. In South Korea the employment of technocrats likely tightened the ability of the government to make effective policy. While the role of the state versus the role of the market does depend, the answer generally lies somewhere in the middle where it is a mix of both private and state influences that lead to growth and development. In South Korea there are substantial policies in place that regulate the market and promote certain behaviors (for instance the creation of centers to promote research and disseminate knowledge especially as it pertains to technology), but despite these state controls there are still some market freedoms and private groups that aid in growth and development. I find the relationship between the private and public sector in South Korea to be very fascinating.
The story of South Korea’s economic take off is an unusual one at best, but it still highlights the common reforms that development economics suggests are key: education, income distribution, and most importantly the role of institutions. As Sachs would have put it, “good governance” plays a key role in the growth of an economy. Seth clearly demonstrates how important curbing corruption was in the Korean economy. The 1960s military regime is the one to straighten out and incentivize the chaebŏls. This surprisingly uncorrupt relationship between the government and the top corporate executives encouraged growth in terms of the whole economy and not just their pockets. What struck me most interesting about these chaebŏls is that they are family empires, and many of their business still stand as huge firms today such as Samsung and LG. No matter how much the economy improved, the big money of today is still part of the wealthy few prior to industrialization and the economic boom. It is later acknowledge that the relationship between the government and business tycoons broke down somewhat in the 1990s during the democratization. The uncontrollable growth and increased corruption lead to a slowing in the “transition into a modern, First World country,” which drives how the importance of good governance.
Furthermore, the growth policies heavily rely on basic principles of economics: profit-maximizing firms and rational consumers. The system of preferential loans and duty exemptions for chaebŏls who assist the government successfully grows the competitive market in Korea. It is unsurprising though that companies would act in their best financial interest. What is more surprising is how the government offering little in the form of social welfare actual improved savings rates. Perhaps the higher education levels of the citizens impact their rational decision making or cultural and traditional differences to Western economies. The final thought I had upon reading was similar to my question after reading last week’s paper: how important is it for a developing country to have a highly developed country, such as Japan, in close proximity for both modelling purposes as well as technology and capital gain? I once again wonder if there is a significant radial pattern of development around developed countries.
I found the history of South Korea's economic development and rapid growth to be one that was filled both with controversy as well as demonstrated lessons for growth that we have already learned about in class. I think a lot of people see South Korea today and do not understand or appreciate the long and tedious history of growth that the country has gone through. Some of the numbers in this paper were absolutely astounding. I found the focus on increasing education in South Korea to be especially impressive. In the paper it cites that from 1945-1960 primary school enrollment tripled, secondary enrollment increased 8x and higher education increased 10x. I think this is an incredible statistic that is backed by deliberate political action. This reminded me about the ideas of growth we were talking about on Monday in class. Perhaps the focus on things like education and health (another aspect where South Korea greatly improved) are actually more important than other institutional factors. Further, I found that the authoritarian manner in which many of the policies were carried out was in fact incredibly productive. For instance, the performance principle that was used to keep big business in check is one of the most direct ways in which I've seen a government enforce economic targets. I think when most people think about economic development they rarely consider authoritarian processes. The biggest thing I took away from the paper is that economic growth certainly can be attained in new and different ways depending heavily on society.
The South Korean "economic miracle" is an incredibly impressive accomplishment. Case studies of successfully developed countries should nonetheless be interpreted with an eye toward guarding against a “one-size-fits-all” attitude, as warned by Dani Rodrik in her "Growth Strategies" working paper. It seems very likely that South Korea’s economic success was rooted in policies that, perhaps, could only function well enough for such phenomenal success in a particular historical and institutional environment. As author Michael J. Seth points out, the supporting circumstances here were probably the timing of South Korea's development, its ties to and the condition of U.S. and Japanese markets, and national incentives for growth (competition with North Korea and desire for autonomy from Japan and U.S.). The policies of the military government would no doubt have a very different effect under other circumstances.
I think it’s very important to understand the costs of the economic growth in South Korea, however. The benefits to the country as a whole were certainly less than they were to what could be considered an oligarchy of government officers and chaebŏls. Clearly, the economic progress came at the expense of significant freedoms for laborers, especially citizens struggling in rural regions. Again, drawing on Amartya Sen’s work, economic development is truly successful when it creates and is created by freedom. Under a dictatorial government, this is not the case. I agree with Rodrik that each country’s distinct circumstances must play a part in designing effective policy, but there must have been a method whereby South Korea could have industrialized without violating the freedoms of many of its own citizens. The policies of education and land reform, for instance, led to increased freedoms and abilities, as well as equality among South Koreans. If the government could have proceeded with like-minded actions, the economic miracle could absolutely have been a success for all of its citizens.
I found this article to be particularly interesting, as I have always heard about the "economic miracle" of South Korea but never really explored how it happened. In this piece, Seth emphasizes how important the educational and land reforms of the 1950s were to the later economic success during the second half of the century. Once the country shifted from an import substitution policy to one that is export oriented, these investments in the work force paid off tremendously, as they had to rely on an educated and disciplined workforce in the absence of natural resources. As the economy began to grow, they reinvested profits into capital intensive industries and worked closely with Korean business leaders, paving the way for an industrialized economy.
One piece of the article that I found interesting was Seth's discussion of the "unique set of historical circumstances" that led to South Korea's economic success. When Seth lists the specific circumstances out, this notion seems very convincing. For example, South Korea became an export-oriented economy at a time when there were few of those, minimizing its competition. Additionally, it benefitted from its proximity to Japan, which was at the time looking to move production to a low wage country like South Korea. With all of these seemingly coincidental conditions that South Korea benefited from, maybe the "economic miracle" actually was just that: a miracle, or something that is so phenomenal and specific that it would be hard to replicate.
Another part of the article that grabbed my interest was the section related to the "Confucian Ethos." This component of South Korean culture emphasized hard work, discipline, frugality, and education among other things. As the Confucian Ethos is present among all of the "four tigers" (South Korea, Taiwan, Hong Kong, and Singapore), this makes me believe that a country's culture plays a crucial part in its growth. What other values would be considered beneficial to economic growth? What would the American cultural values be?
One thing that really stuck out to me from the article, that I have different opinions about, was the role that the Chaebols played in the economic development of South Korea. I think it is important to be wary of government control, but the initial “big push” of the government with the Chaebols led to obvious development. Seth stats that South Korea “poured credit into a few companies to develop industries target for development”. These initial family owned businesses ended up growing to “dominate the economy”. This government intervention got things moving, encouraged competition, and prohibited monopolies. The horizontal expansion of these chaebols also really stuck out to me. I would not expect the “Lucky-Goldstar”, a major toothpaste manufacturer, to become one of “the world’s largest consumer electronics firms”.
The article states two fundamental changes that took place in South Korea that contributed to their economic takeoff: their expansion of education and their land reform. From 1945 to 1960, South Korea went through a rapid expansion of education that lead to increasing the enrollment in primary schools by 3x, increasing the enrollment in secondary schools by 8x, and increasing the enrollment in higher education 10x. By 1961, South Korea “had the best educated work force of any country with comparable income level.” This reminded me of a couple of theories we have been discussing in class. It reminded me of W Schultz’s idea of investing in people which arose around the same time of this increase in education. Even though this theory was formulated a little later, it also made me think of Kremer’s O Ring model and the idea that more efficient people working together can lead to overall more efficiency. The land reform that took place is something that led to more equality within the country. The limitation of property holdings to 7.5 acres led to the top 6% of landowners only online 18% of land (from the top 3% owning 64% 12 years earlier). This is something that you don’t see in the US.
One thing in the article that I do have a question about is Seth’s statement that the “lack of social welfare safety net encouraged high rates of savings.” The thought process behind this makes sense to me because if you don’t have something to fall back on, you are going to be more likely to save. The reality of this statement, however, does not make sense to me. We have been talking in class about the people who need safety nets don’t really have the means to save. People in need of a safety net tend to not be able to save money because they need to spend their money on essential needs such as food, shelter, clothing, and utilities. So, I don’t quite see this statement as a reality.
Throughout the reading I was inclined to associate South Korea's ability to transition from an agricultural society to a high-tech industrial economy to their values and traditions. In the paper, the author attributed its economic success to South Korean values for "hard work, disciple, respect for learning, frugality, the importance of family, the emphasis on education, the high esteem in which civil servants were held that attracted talented technocrats to serve the state, and even the willingness to delay gratification that resulted in the high savings rate that characterized the period of rapid economic growth." Moreover, the quality of South Koreans made me think of T.W. Schultz's Quality of People theory, in which the characteristics of the individuals representative of a society is what drives economic growth. Since South Koreans were the ones providing labor to their country, for the centralized government (pre 1996), it was important to cultivate talent. This meant providing incentives to its citizens to pursue higher education domestically or abroad. Many South Koreans would send their children to cities to obtain a better education. I argue. that South Korea's cultural value for education and the country's determination to perform well is a driving factor for its economic success. Of course it's important to note that the operationalization of labor by an extremely heavy-handed government provided a vehicle for the manifestation of talent and enterprise in South Korea.
Posted by: Stelifanie | 09/15/2020 at 08:26 PM
The story and path of South Korea's development achievement is long. One might say that South Korea's success can be attributed to the historical circumstances- development during a time of little export-led competition, its proximity to Japan during its production movement to low cost countries, the openness of the US market, etc., etc. One might say it was the US aid and troop presence that assured foreign investors. It might be South Korea's 'Confucian Ethos', a combination of hard work, discipline, respect for learning, frugality, the importance of family, and delayed gratification. South Korea's success was probably a mix of all of these. As we have learned from Ostrom and throughout this class, there is no cookbook formula for development. From the Growth Strategies reading, we have learned that attempts to emulate successful policies elsewhere often fail. While many of the steps in South Korea's development can be seen as an example, other countries looking to develop need to look within to write their own development story.
Posted by: Didi Pace | 09/16/2020 at 03:43 PM
It is enlightening to see a success story of a developing country. Coming from one of the poorest countries per capita, being compared to modern-day Haiti, to a developed country is a story that has clearly been examined in great detail. Many of the steps South Korea had taken are steps that we have looked at in this class. For instance, starting with their First Five-Year Development Plan in 1962, the country had turned into a mostly imported country to light industry for exports. They also began to improve human capital, along with physical capital. We see South Korea as one of the success stories today, but it is interesting to note that one of the turning points of their growth, in my opinion, began with events that were not necessarily controlled for. Prior to the Korean War, three percent of landowners owned about 64 percent of the land. However, post-Korean War, the top six percent of landowners only owned 18 percent. This gave the opportunity to former peasants and landowners to move out of the countryside and redirect their attention to improving human capital and creating more entrepreneurs. I feel that this unexpected event gave South Korea an initial push it needed to redirect focus on human capital which led to higher innovations, increased exports, and the technocrats that studied abroad and went back to the country.
Posted by: Austin Lee | 09/16/2020 at 04:51 PM
I really enjoyed reading about development economics from a case study perspective, and I think it makes the concepts much easier to understand. Obviously, as Didi pointed out and as we have read in the Growth Strategies paper, a one-size-fits-all approach to economic growth and development will not work. Still, the case study of South Korea is fascinating and illuminates many of the factors that lead to successful economic growth. Let me preface my comments by saying that as I read this paper I became aware of how little I actually know about the history (economic and otherwise) of South Korea, so things that surprised me might be perfectly obvious to other (or most) people. One of the things that I noticed was not present in this paper—probably because it’s a paper focusing on economic development—was a discussion of the social progress (or lack thereof) in South Korea that went along with its economic progress. I was also somewhat surprised to read that South Korea’s rapid growth came under a mostly authoritarian, military government regime. Towards the end of the paper, the author briefly mentions social costs of development, focusing on the exploitation of female labor and working conditions and length of the workweek, but I would be interested to read more about how social progress in South Korea maps over time alongside its economic growth. As economic development is context dependent, it makes sense that processes of social and political progress are as well; still, I was surprised, particularly after considering Sen’s view of freedom as the means to and ends of development, that such rapid economic growth could precede the provision of many real, substantial social and political freedoms in South Korea.
Posted by: Sarah Hollen | 09/17/2020 at 09:31 AM
Seeing how South Korea developed and made significant economic progress helps to give a real life example to the concepts that we have discussed in class. I found it interesting how the government cracked down on the corruption of the top earning business owners in the country. They then instituted plans to gain state control of credit through national banks. To spark growth in the business sector, the country offered low interest loans. This strategy along with vast social reform and foreign investment led to a high rate of development. Its interesting that this growth and reform started under a military government as we usually link economic development to democracies.
One thing that was left out of the paper was the environmental effects of the development. During this time South Korea saw major urbanization as a result of the economic boom. I wonder how the growth of cities impacted the natural environment in the country. For example, the rates of air pollution could have raised significantly with the development. Obviously it is a great thing that South Korea was able to develop and fight the large scale poverty that existed in the country, but I think it would be interesting to see the environmental side of development as well.
Posted by: Gus Wise | 09/17/2020 at 02:16 PM
It was exciting to read a case study about my own country, and more exciting yet to connect points from the reading to discussions we had in class about Sen's book. As Sen discusses in chapter 2 of Development as Freedom, there are some instrumental freedoms that can propel a country into economic advancement, including political freedoms, better economic facilities, and social opportunities. South Korea adopted these freedoms and quickly became more economically stable: it shifted away from import substitution practices and grew its steel, chemical, shipbuilding, and electronics industries; the country started investing more on education and made more social opportunities available for its people; a newer, better government's pursuit of rapid industrialization opened paths to improved economic facilities and policies.
Something that I found interesting is the contrast between the paths South Korea's and North Korea's governments took. Before the Korean Peninsula was divided into two, both its northern and southern regions were under Japanese colonial rule and abuse. Then in the 1950s, both North and South Korea suffered from a terrible war. In other words, both Koreas were equal (in that they were both at their poorest states ever), yet one is significantly more prosperous today. This difference in economic states highlights the importance of a good government: both North and South Korea were led by dictators after the Korean War, Kim Ill-Sung, and Park ChungHee, respectively. However, Kim practiced policies of "self-reliance" and obsessed over power, while Park focused on eliminating corruption and improving the country's economy. This makes me wonder if North Korea would look different today had its government took a different path. Furthermore, I wonder if the elimination of government corruption could help countries like Cambodia and other "3rd world" nations grow at a faster rate.
Posted by: YoungJae | 09/17/2020 at 03:02 PM
I think the most important point that you can draw from this article is that there are certain political, social, and economic factors that differ in each country that largely prevent a homogenous approach to economic growth policy. Whether it is because of the ‘Confucian ethos’ that attributed to the development of informal institutions regarding higher savings rates and emphasis on education, or because of the broader historical context with incredibly large FDI from the United States, there were several unique factors that required a unique approach to economic growth. With that said, there were several reforms that reminded me of textbook examples of economic growth theory, specifically the Lewis Two Sector model. For example, South Korea transitioning to capital-intensive industries such as textiles and later electronics and automobiles is modern-sector enrichment. However, they also provided programs to promote technological development in the agricultural sector and supported prices to mitigate the sectoral wage gap. This is akin to traditional sector enrichment. Underneath these broad changes though, there were a lot of actions by the government that I thought were unique to the situation, such as the nationalization of credit. This surprised me at first, but without well-developed capital markets it would have been impossible for South Korea to build up their modern sector as fast as they did, even with help from the US. Since the government was careful to promote competition and avoid monopolies by measuring the efficiency of the companies to which they provided credit, nationalization of credit was probably a smart government policy (though I’m critical as to why they favored provision of credit to the chaebols). Overall, the close interactions between the state and private enterprises probably helped a lot.
Posted by: Danny Lynch | 09/17/2020 at 03:17 PM
In this class we have discussed whether in order to create growth and development the burden lies on individuals/firms or the government. Like with many other issues the answer we put forth is that it depends. This case study on growth and development in South Korea highlights this “it depends” phenomenon as growth is linked to both market factors and governmental (policy) factors. Under the rule of Park Chung Hee, techniques combining state planning and private entrepreneurship were used to promote economic growth growth in South Korea. In another example regarding education, which is an input into human capital and thus can increase growth and development, a mix of state and private intervention was used to make South Korea have the best educated work force out of any country with comparable income level. State and private groups jointly worked to improve adult literacy. A nuance of the “it depends” phenomenon is that sometimes government regulation in one sector can cause a spillover effect as the market corrects itself given a new policy, thus both the market and the government pay intertwining roles. One example of this is land reform in South Korea in 1950. The land reform limited the amount of land that could be owned. This decreased tenancy, causing it to virtually disappear, Peasants became entrepreneurial farmers and many landowners invented in businesses or established schools. This reform thus redirected capital toward commerce, industry, and education. Another nuance of the “it depends” circumstance is whether or not the government has the ability to enact a policy that actually does what it is supposed to do. In South Korea the employment of technocrats likely tightened the ability of the government to make effective policy. While the role of the state versus the role of the market does depend, the answer generally lies somewhere in the middle where it is a mix of both private and state influences that lead to growth and development. In South Korea there are substantial policies in place that regulate the market and promote certain behaviors (for instance the creation of centers to promote research and disseminate knowledge especially as it pertains to technology), but despite these state controls there are still some market freedoms and private groups that aid in growth and development. I find the relationship between the private and public sector in South Korea to be very fascinating.
Posted by: Sydney Goldstein | 09/17/2020 at 03:49 PM
The story of South Korea’s economic take off is an unusual one at best, but it still highlights the common reforms that development economics suggests are key: education, income distribution, and most importantly the role of institutions. As Sachs would have put it, “good governance” plays a key role in the growth of an economy. Seth clearly demonstrates how important curbing corruption was in the Korean economy. The 1960s military regime is the one to straighten out and incentivize the chaebŏls. This surprisingly uncorrupt relationship between the government and the top corporate executives encouraged growth in terms of the whole economy and not just their pockets. What struck me most interesting about these chaebŏls is that they are family empires, and many of their business still stand as huge firms today such as Samsung and LG. No matter how much the economy improved, the big money of today is still part of the wealthy few prior to industrialization and the economic boom. It is later acknowledge that the relationship between the government and business tycoons broke down somewhat in the 1990s during the democratization. The uncontrollable growth and increased corruption lead to a slowing in the “transition into a modern, First World country,” which drives how the importance of good governance.
Furthermore, the growth policies heavily rely on basic principles of economics: profit-maximizing firms and rational consumers. The system of preferential loans and duty exemptions for chaebŏls who assist the government successfully grows the competitive market in Korea. It is unsurprising though that companies would act in their best financial interest. What is more surprising is how the government offering little in the form of social welfare actual improved savings rates. Perhaps the higher education levels of the citizens impact their rational decision making or cultural and traditional differences to Western economies. The final thought I had upon reading was similar to my question after reading last week’s paper: how important is it for a developing country to have a highly developed country, such as Japan, in close proximity for both modelling purposes as well as technology and capital gain? I once again wonder if there is a significant radial pattern of development around developed countries.
Posted by: Emma | 09/17/2020 at 03:51 PM
I found the history of South Korea's economic development and rapid growth to be one that was filled both with controversy as well as demonstrated lessons for growth that we have already learned about in class. I think a lot of people see South Korea today and do not understand or appreciate the long and tedious history of growth that the country has gone through. Some of the numbers in this paper were absolutely astounding. I found the focus on increasing education in South Korea to be especially impressive. In the paper it cites that from 1945-1960 primary school enrollment tripled, secondary enrollment increased 8x and higher education increased 10x. I think this is an incredible statistic that is backed by deliberate political action. This reminded me about the ideas of growth we were talking about on Monday in class. Perhaps the focus on things like education and health (another aspect where South Korea greatly improved) are actually more important than other institutional factors. Further, I found that the authoritarian manner in which many of the policies were carried out was in fact incredibly productive. For instance, the performance principle that was used to keep big business in check is one of the most direct ways in which I've seen a government enforce economic targets. I think when most people think about economic development they rarely consider authoritarian processes. The biggest thing I took away from the paper is that economic growth certainly can be attained in new and different ways depending heavily on society.
Posted by: Jack Parham | 09/17/2020 at 05:16 PM
The South Korean "economic miracle" is an incredibly impressive accomplishment. Case studies of successfully developed countries should nonetheless be interpreted with an eye toward guarding against a “one-size-fits-all” attitude, as warned by Dani Rodrik in her "Growth Strategies" working paper. It seems very likely that South Korea’s economic success was rooted in policies that, perhaps, could only function well enough for such phenomenal success in a particular historical and institutional environment. As author Michael J. Seth points out, the supporting circumstances here were probably the timing of South Korea's development, its ties to and the condition of U.S. and Japanese markets, and national incentives for growth (competition with North Korea and desire for autonomy from Japan and U.S.). The policies of the military government would no doubt have a very different effect under other circumstances.
I think it’s very important to understand the costs of the economic growth in South Korea, however. The benefits to the country as a whole were certainly less than they were to what could be considered an oligarchy of government officers and chaebŏls. Clearly, the economic progress came at the expense of significant freedoms for laborers, especially citizens struggling in rural regions. Again, drawing on Amartya Sen’s work, economic development is truly successful when it creates and is created by freedom. Under a dictatorial government, this is not the case. I agree with Rodrik that each country’s distinct circumstances must play a part in designing effective policy, but there must have been a method whereby South Korea could have industrialized without violating the freedoms of many of its own citizens. The policies of education and land reform, for instance, led to increased freedoms and abilities, as well as equality among South Koreans. If the government could have proceeded with like-minded actions, the economic miracle could absolutely have been a success for all of its citizens.
Posted by: Katie Timmerman | 09/17/2020 at 05:21 PM
I found this article to be particularly interesting, as I have always heard about the "economic miracle" of South Korea but never really explored how it happened. In this piece, Seth emphasizes how important the educational and land reforms of the 1950s were to the later economic success during the second half of the century. Once the country shifted from an import substitution policy to one that is export oriented, these investments in the work force paid off tremendously, as they had to rely on an educated and disciplined workforce in the absence of natural resources. As the economy began to grow, they reinvested profits into capital intensive industries and worked closely with Korean business leaders, paving the way for an industrialized economy.
One piece of the article that I found interesting was Seth's discussion of the "unique set of historical circumstances" that led to South Korea's economic success. When Seth lists the specific circumstances out, this notion seems very convincing. For example, South Korea became an export-oriented economy at a time when there were few of those, minimizing its competition. Additionally, it benefitted from its proximity to Japan, which was at the time looking to move production to a low wage country like South Korea. With all of these seemingly coincidental conditions that South Korea benefited from, maybe the "economic miracle" actually was just that: a miracle, or something that is so phenomenal and specific that it would be hard to replicate.
Another part of the article that grabbed my interest was the section related to the "Confucian Ethos." This component of South Korean culture emphasized hard work, discipline, frugality, and education among other things. As the Confucian Ethos is present among all of the "four tigers" (South Korea, Taiwan, Hong Kong, and Singapore), this makes me believe that a country's culture plays a crucial part in its growth. What other values would be considered beneficial to economic growth? What would the American cultural values be?
Posted by: Ben Graham | 09/17/2020 at 05:22 PM
One thing that really stuck out to me from the article, that I have different opinions about, was the role that the Chaebols played in the economic development of South Korea. I think it is important to be wary of government control, but the initial “big push” of the government with the Chaebols led to obvious development. Seth stats that South Korea “poured credit into a few companies to develop industries target for development”. These initial family owned businesses ended up growing to “dominate the economy”. This government intervention got things moving, encouraged competition, and prohibited monopolies. The horizontal expansion of these chaebols also really stuck out to me. I would not expect the “Lucky-Goldstar”, a major toothpaste manufacturer, to become one of “the world’s largest consumer electronics firms”.
The article states two fundamental changes that took place in South Korea that contributed to their economic takeoff: their expansion of education and their land reform. From 1945 to 1960, South Korea went through a rapid expansion of education that lead to increasing the enrollment in primary schools by 3x, increasing the enrollment in secondary schools by 8x, and increasing the enrollment in higher education 10x. By 1961, South Korea “had the best educated work force of any country with comparable income level.” This reminded me of a couple of theories we have been discussing in class. It reminded me of W Schultz’s idea of investing in people which arose around the same time of this increase in education. Even though this theory was formulated a little later, it also made me think of Kremer’s O Ring model and the idea that more efficient people working together can lead to overall more efficiency. The land reform that took place is something that led to more equality within the country. The limitation of property holdings to 7.5 acres led to the top 6% of landowners only online 18% of land (from the top 3% owning 64% 12 years earlier). This is something that you don’t see in the US.
One thing in the article that I do have a question about is Seth’s statement that the “lack of social welfare safety net encouraged high rates of savings.” The thought process behind this makes sense to me because if you don’t have something to fall back on, you are going to be more likely to save. The reality of this statement, however, does not make sense to me. We have been talking in class about the people who need safety nets don’t really have the means to save. People in need of a safety net tend to not be able to save money because they need to spend their money on essential needs such as food, shelter, clothing, and utilities. So, I don’t quite see this statement as a reality.
Posted by: Christina Cavallo | 09/17/2020 at 06:13 PM
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