Success of Korea’s catch-up development

Cho Lee-jay, chairman of the Northeast Asia Economic Forum based in Hawaii, delivers a keynote speech during the international conference on the Korea development model organized by the Korea Institute of Public Administration and The Korea Times at the Korea Chamber of Commerce and Industry, Thursday. / Korea Times photo by Shim Hyun-chul

By Lee-Jay Cho

The history of the role of government in economic affairs goes back as far as the second century B.C. as recorded in “Yantie Run” (Salt and Steel Logic) during the Han Dynasty of China. This classic work describes the debate about government intervention in the production and distribution of salt and steel, as well as other fascinating topics such as trade via tributary exchange with the Northern Xiungnu.

During the Han Dynasty, the reality ranged between laissez faire and government controls, representing the two philosophical schools of thought―the Taoism of Lao-tzu and Confucianism―the latter becoming increasingly dominant in later centuries. Two thousand years later, Adam Smith and subsequently Friedrich List set the tone for contemporary national economies in Europe and North America.

England through its industrial revolution based on the free market economy (as illustrated by Adam Smith’s “Wealth of Nations”) shot ahead in economic development and left Germany, Russia and Italy behind as underdeveloped countries.

It was against this backdrop that Friedrich List―a German economist, who is also credited with the original idea of the European Economic Community―elaborated a doctrine against a completely free market economy in his “National System of Political Economy.” List argued for the “catch-up,” by which he meant “late development,” referring to the economic development that took place after and in response to the original beneficiaries of the industrial revolution.

In Japan, a number of prominent leaders of the Meiji Reformation led by Okubo Toshimichi went to Europe and observed England, Germany, Russia and Italy, and concluded that Germany was their model of late-comer development.

How can a nation overcome poverty and hunger? How can an underdeveloped country catch up with developed countries? The theory of late economic development pioneered by writers such as Thorstein Veblen, Joseph Schumpeter, and Alexander Gershenkren has been further refined by the model of the “Capitalist Development State” (CDS) by Chalmers Johnson and represented later in the works of Alice Amsden on Korea and Robert Wade on Taiwan.

I would like to mention here my own “Propositions on the Consequences of Expedited Catch-up Development.”

The theory of late development or catch-up must be coupled with the proposition on the consequences of expedited development. Economic development must be accepted as part of a larger societal transformation encompassing culture and institutions, more than as a mere increase in per capita GDP.

The Meiji Reformation and the subsequent rapid economic development is a sociological phenomenon where all segments of society were mobilized and geared to economic productivity. The proposition contains a set of postulates and hypotheses on the issues of institutional aging, structural innovation, leadership, and cultural, institutional and behavioral lags.

Korean Case of Developmental Challenge and Accomplishments

There is a well- known line in the classic work of Mencius, a Chinese Confucian philosopher of the third century B.C., which goes like this: “Those with constant means of support will have constant hearts.” To phrase it another way, people who lack constant hearts will go astray and get into excesses, stopping at nothing. Where production is sustained, there is individual and social stability.

Overcoming hunger and poverty was one of the basic challenges Korea faced after the devastating war of the early 1950s in the Korean Peninsula. I thought it appropriate to quote this line from Mencius to set the tone for providing a historical perspective of the Park Chung-hee regime, its accomplishments and failures (from May 1961 to October l979).

He undertook a revolutionary effort toward “modernizing the fatherland,” creating the critical momentum for economic growth and modernization. More than one generation has passed since the end of the Park era, and the passage of time has helped to settle the dust surrounding the events and changes of that period, which enables us to take a more objective look in retrospect.

The volume titled “Korea’s Modernization” (by Cho et al.) published in Korean a few years ago and “Park Chung Hee Zidai” (“The Park Chung Hee Era”) published early this year by Tokyo University Press examine the issues and substance of the process and accomplishments in economic development and modernization in Korea.

Park Chung-hee and his government through “economic revolution” succeeded in meeting the following basic challenges:

First, the rapid economic development, during the roughly two decades of his leadership, raised the per capita GDP from $87 to a level 19 times as high. For this achievement alone, Park is recognized as “the architect of the South Korean economic miracle” (as stated in the World Bank Report on “The East Asian Miracle: Economic Growth and Public Policy”).

I had a conversation some years ago with Prof. Walt Rostow, now deceased, who was a leading economist and served as presidential security adviser during the Kennedy and Johnson administrations of the 1960s.

He revealed the interesting fact that most of Kennedy’s cabinet members expressed strong doubts about Korea’s ability and potential for economic growth, but Rostow was able to persuade the President to work with the new government headed by Park Chung-hee. Rostow’s visit to Korea convinced him that the country had most of the necessary and sufficient conditions required for the “take-off” stage of economic growth.

Second, at the very basic grass-roots level of society, the Park Chung-hee era overcame hunger in the poor village communities and narrowed the uncomfortable gap between urban and rural areas, in terms of income and standard of living. This was achieved by developing innovative institutions such as Korea’s New Village Movement, a national social security system, and a health insurance system.*

Third, one can easily argue ― like Nicholas Kristof, a long-time columnist of the New York Times ― hat Park “paradoxically contributed enormously to Korean democracy, despite his repression of democratic movements, for he nurtured an economic boom that created the middle class that is the backbone of Korean pluralism today” (New York Times, N. Kristof, November 24, 1995).

Fourth, the Park regime regenerated and uplifted the national spirit by inculcating self-reliance, individual dignity and pride, and a spirit of communal cooperation from the level of rural villages and local governments to the national level of government institutions and business.

It contributed greatly to national self-confidence and pride, which in the course of the subsequent generation was manifested not only in economic affairs but also in social and cultural affairs, science and technology, the arts, and sports.

Conclusion

In his book titled “The Pacific Century,” Frank Gibney lists three remarkable men credited with East Asian economic miracles. He points to three leaders who accomplished what they set out to do: Park Chung-hee, Chiang Ching-kuo (who took over power from his aging father, Chiang Kai-shek, in Taiwan), and Lee Kuan Yew, former Prime Minister of Singapore. The list, however, should also include Deng Xiaoping, under whose dynamic leadership China has been transformed into a booming market-oriented economy.

The four leaders had widely different and diverse backgrounds, and distinct political orientation. Lee Kuan Yew is a lawyer with a Western education obtained at Cambridge, England; Park Chung-hee was a military officer, educated and trained in the Japanese military academy; Chiang Ching-kuo had ten years of socialist education in the Soviet Union; and Deng Xiaoping was a dynamic communist party cadre and political commissar with the Chinese Liberation Army, with a few years of study abroad in France.

All four, of East Asian ethnic origin, share a few things in common. The first is Confucian values manifested in different ways, yet providing the basic underpinning for benevolent authoritarian rule aimed at the good and economic welfare of the majority of the people. The second is that all four entertained socialist tendencies and thinking during different times.

The third is pragmatism in achieving long-term national goals. Fourth, they were known to be modest in their life styles, and made a clear distinction when placing public service above personal and family interests, characteristic of the Confucian moral ruler. They were not known for ostentation, corruption, or greedy accumulation of personal wealth.

Morris Janowitz, a leading military sociologist at Chicago, maintained that Park, Deng, and Chiang share the leadership characteristics acquired in the military, normally the largest formal organization in a nation, which contributed saliently to the effective management of social transformation through economic development.

Yet there is no perfect jewel. Park Chung-hee’s leadership made historic achievements possible in the economic development and modernization of Korea. But one of the principal flaws in the leadership was an inability to institutionalize the structure of leadership and the succession of power, to ensure the continuity of reforms and policies, and it relied more on the traditional governing style based on “human relations and network.”

As a revolutionary and a professional soldier with a Japanese military education, he was not able to liberate himself completely from military cronyism. Especially in the later years of his life, with increasing self-confidence, he felt more comfortable with the members of the ruling nucleus, consisting of his military colleagues and subordinates. He was betrayed by one of his closest cohorts, and his regime was left with no designated successor and no proper institutional arrangements for a smooth transition.

“Rome was not built in a day.” Political development toward mature democracy―which is a slower process than successful economic development―requires the addition of a deeper understanding of human nature and aspiration in the societal context.

The mature democracies of Great Britain and United States, for example, are the result of the institutional experiments and accumulations of centuries, whereas the catch￢up in the economic development in Germany and Japan took only decades.

The progress toward democracy must be considered as a long and sometimes a tortuous process. With economic development as a necessary and enabling condition, the Park regime certainly laid the foundations for Korea.

The greatest challenge is to search for and develop institutional arrangements for becoming a more advanced civil society and democracy, fitting the culture and temperament of the Korean people.