Miracle on the Hangan River: an economic breakthrough in the Republic of Korea



The article reveals aspects of the economic breakthrough in the Republic of Korea in the second half of the twentieth century. The principles and mechanisms of the development of South Korea's economic policy are considered. The main directions and areas of development of the economy of South Korea in the second half of the twentieth century are highlighted.

Keywords: economy, economic progress, South Korea.

The miracle on the Hangan River is the so–called economic breakthrough of South Korea, which happened in the second half of the twentieth century. The Korean economic miracle has changed the position of the Republic of Korea in the domestic and foreign markets. The economic crisis after the Korean War, the decadent mood in society, the low standard of living — radical measures and colossal efforts were necessary to change the situation in the country. In 1962, the President of the Republic of Korea, Park Chong Hee, started restructuring: the five-year plan began in the country. At that time, South Korea received great financial support from the United States of America: about $ 12.3 billion was allocated to help the Asian country. As Park Chong Hee himself wrote in his memoirs, he wanted to see his country strong and independent, self-sufficient and free. To create such a state, the President has developed a detailed plan for the development of the Republic of Korea. There is not a large amount of minerals on the territory of the state, the agricultural sector is also poorly developed. Park Chong Hee focused his attention on the abilities of the diligent Korean population. A big part of the economic miracle in Korea is the work and perseverance of the Korean people. First, the South Korean government focused on exports and the development of foreign economic relations. The Republic of Korea imported raw materials and special processing technologies, products from these raw materials were exported. With the assistance of third-party states, factories were built in the Republic of Korea, capital was attracted from abroad, and domestic industry developed. However, there was another problem in Korea: the lack of highly qualified workers. Most of the population of South Korea at that time did not have the list of knowledge and skills necessary to perform more complex specialized work. Based on these circumstances, the South Korean authorities focused on light industry: toys, clothing, stationery.

The government developed a policy of protectionism: the needs of the population were covered by domestically produced products and services. The share of imports decreased: a high customs duty was imposed on imported goods, the cost of goods from other countries was increased — it was much more profitable to buy Korean-made goods. The hard work of Koreans and the government’s carefully elaborated economic development plan began to bear fruit: by 1963, the country's GNP had grown by 9 percent. This turned an agrarian lagging third world country into a dynamically developing economically active system. [4]

The second stage of the economic miracle begins in the seventies. Having achieved success in the light industry, the South Korean government is taking a course for the development of heavy industries. There is a breakthrough in metallurgy, chemical industries, and shipbuilding. Korean metallurgy and shipbuilding have achieved particularly remarkable success. Korea is becoming one of the largest producers of steel and ship tonnage. In the mid-seventies, the development of the automotive industry and electronics began.

During the presidency of Park Chong Hee, a specific form of capitalism flourished in South Korea. The state was the source of the schemes and principles of development, while personal business accepted the rules of the government. There was a constant symbiosis of private entrepreneurship and government: government agencies supported and controlled business, business accepted the position of the government. Most of all, the authorities focused on large successful enterprises: there were fewer of them, they brought more profit, respectively, they were more profitable for the country. It was during that period that the concept of «재벌» — chaebol — the largest monopoly companies in Korea appeared. Park Chong Hee independently chose the most promising and educated Koreans for the role of founders of these companies. The first three large chebols are «Samsung», «Hyundai» and «Daewoo». Corporations have developed rapidly in various areas of the market, bringing profits and increasing brand awareness in the international market. The process of doing business was carefully controlled by the president: Park Chog Hee trusted those whom he chose, but also monitored the quality of business by the heads of chaebols. [2]

The state not only controlled entrepreneurial activity, but also actively invested in infrastructure and education. Thus, large funds were allocated from the budget for the construction of the Seoul-Busan highway. The government also invested money in the intellectual capital of the country. Education has become not only more accessible, but also more in demand among the population itself: in the sixties, more than 105 thousand students graduated from higher educational institutions.

A socio-economic program was conducted in the Republic of Korea to improve the backward regions of Korea. The Movement for a New Village is about twenty social projects aimed at maintaining and developing remote villages. By the seventies, the condition of the villages was critical — the backwardness of remote regions was catastrophic. To help the villagers, the government improves the condition of rural roads, allocates funds for the repair of dilapidated houses, provides sowing and agricultural tools, conducts the construction of schools, hospitals, kindergartens. In addition to financial investments, the state authorities have opened an Academy to study and improve the spirit of strengthening the rural family. Village elders were trained there to improve public administration at the regional level. The model of the «Movement for a New Village» has proved so successful that many countries have taken this model as the basis of their social policy. The countries of Asia, Latin America and Africa followed the example of South Korea and applied the principles of the «Movement for a New Village» in their programs. [1]

The miracle on the Hangan River is not just a coincidence, it is a cause-and-effect relationship. One of the main reasons is the active support from other states. South Korea took loans and development loans from the United States. The external debt of the Republic of Korea was impressive: more than $ 46 billion. The image of an ideal solvent borrower allowed Korea to receive financial support from many international organizations, governments and banks.

The second reason for the economic success of South Korea is the relatively tough governance of the state by Park Chong Hee. Many argue that an authoritarian regime or dictatorship prevailed in Korea at that time. Compared to the Democratic People's Republic of Korea, South Korea's political regime was more authoritarian than totalitarian — a «soft dictatorship». For the progressive development of the economy and the stabilization of political situations, the government used various methods. Since the social infrastructure in the country was poorly developed, Koreans often organized independent trade unions and went to rallies. The authorities strictly suppressed any attempts of the population to go against the authorities, as this hindered the successful development of South Korea in the domestic and foreign markets. Park Chong Hee was aware of the mood of the population, so he chose the fight against inequality and the reduction of the gap between the incomes of the poorest and richest in the country as one of the most important concepts of the development of society. Propaganda actions were often conducted: oligarchs living in excessive luxury were censured and a number of sanctions were applied to them, corruption was considered a crime. In the middle of the second half of the twentieth century, the Gini coefficient in South Korea was much lower than in third world countries. Thanks to the tough anti-corruption policy, the social mood in the country was calm. [3]

Education in South Korea has become increasingly in demand and necessary for further personal and career growth. Anyone who passed the entrance tests could enter the university. Corruption schemes in exams were severely suppressed, the state did not support private tutoring and private university preparation schools. Such preventive measures helped Koreans from all social strata, different families and regardless of the level of wealth to have the opportunity to enroll in a prestigious university and get a diploma. Strict selection allowed only the most hardworking, diligent and talented students. A university degree allowed children from the lower strata to become part of the middle working class and get a decent job and salary. [1]

South Korea's economic breakthrough is a unique process that no one has been able to repeat. The Republic of Korea, thanks to the successful state regulation and hard work of the population. South Korea has taken a stable competitive place in the international arena.

References:

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