Charles Harvie and Hyun-Hoon Lee wanted to show that South Korea experienced a remarkable economic transformation and yet at the same time they were unwilling to say with confidence that indeed it is an economic miracle that needs to be copied by others.
On the other hand the pair also emphasized the idea that what happened to South Korea, in the aftermath of the Korean War and the significant increase in GDP that changed the status of this country from impoverished to that of a newly industrialized nation is something that should not be underestimated.
In other words the authors have this ambivalence regarding the economic growth of South Korea between the years 1962 to 1989. They were both impressed and at the same time they have their reservations because they believe that South Korea’s economic recovery was forced and not a result of a market-driven economy.
The authors pointed to policies that resulted in an outward-oriented, industry led strategy. They pointed to the chaebols a Korean slang for large-scale industrial conglomerates that led to the attainment of economies of scale and the creation of technology that enabled the nation to compete internationally.
However, the same chaebols also became a problem for South Korea because as these conglomerates expanded and became profitable it amassed such power and influence that it prevented small scale firms from rising up – the same small scale industries required to sustain economic growth.
The authors strengthened their argument by showing that South Korea went through a period of crisis and yet in spite of shortages and bottlenecks, the chaebols continued to grow. It was a major goal of the South Korean government to focus on exports and to bring South Korea to the forefront of international trade and by pouring resources into these conglomerates. When South Korea shifted gears to become a market-driven economy things began to change for the better.
Empirical Evidence
In order to support their claim the authors presented South Korea’s GDP in billions of US$ and it was indeed impressive. From a GDP of US$ 2 billion in 1960 it grew to US$ 220.7 billion after twenty nine years. Savings were a mere 0.8% in 1960 and twenty nine years later it was 35.4.8% and yet in the same fourteen year period one can also observe a fluctuation in GDP growth.
There was a steep increase in between the years 1960 to 1964; and then all of a sudden it plummeted and then it grew once again and then nose dived and on and on there was no stability in growth up until the late 1980s.
In the crisis of 1980 the GDP even went down as far as -2.1% and yet it cannot be denied that exports grew significantly from a mere US$ 33 million to an astounding US$ 61.4 billion in 1989. Aside from all the economic factors that says South Korea was on its way to becoming one of the top economies in Asia the authors used economic data to point out the structural transformation that occurred within the country.
For instance there was significant decrease in the share of agriculture in GDP from 39.9% in 1960 to only 10.8% in 1987. On the other hand the share of the non-agricultural sector in GDP increased even further from 60.1% to 89.2% a testament indeed to the export orientated strategy of South Korea.
The empirical evidence used proved conclusively what the authors were trying to say from the very beginning. These statistics allow the readers to see the economy of South Korea not just the GDP and the increase in exports and the amount of money coming in but also in how the success of a few conglomerates allowed for the concentration of markets while at the same time stifling the growth of small firms.
The authors were also able to use statistics to show why they believe that between the years 1960 to 1989 South Korea was able to pull away from other Asia countries in terms of economic transformation and yet at the same time there is much room for improvement and it is imperative for the South Korean economy to move away from the chaebols and into a market-driven economy.
International Trade
The story of South Korea – how it was able to rise from the ashes of war – from a poor country into a highly industrialized nation is a good case study with regards to the importance of balancing exports and imports. Based on the data given by authors Charles Harvie and Hyun-Hoon Lee, one can easily understand that South Korea built a strong economy with an orientation towards exports.
nd yet at the same time they knew that these products that they were selling could never be completed without the use of importation. It is only through imports that they can have access to raw materials to manufacture their good and offer services to the outside world.
Another insight also on international trade is the importance of having a strong domestic base especially with regards to small firms and entrepreneurs considered as the backbone of the economy. An induced economy such as South Korea may look good in the beginning phase and but it cannot be sustained by the help of the government alone. It must be a market-driven economy where everyone contributes and not just the chaebols who used to dominate the economic landscape of the country.
In order to survive in a globally competitive economy the government really has to take a firm stand against the influence and power of South Korea’s conglomerates. They must not be allowed to control the country for it is counterproductive in the long run.
This was easier said than done in South Korea considering that these corporate leaders of these chaebols were seen as heroes who paved the way for this war torn country to rise up once again and provide opportunities to thousands of South Koreans looking for employment. Nevertheless, government officials were willing to do the right thing and they never regretted it.
References
Harvie, C. & Lee, Hyun-Hoon. (2003). Export-led Industrialisation and Growth: Korea’s Economic Miracle, 1962-1989. Australian Economic History Review 43(3): pp. 256-286