Koreans setting example for development

By Walter Klitz

Director of German Friedrich Naumann Foundation for Liberty in Korea

Yes, in 2009 the Republic of Korea became the 24th member nation of the Organization for Economic Cooperation and Development's (OECD) Development Assistance Committee (DAC) and therefore the first nation ever to go from an aid recipient to a donor state. There are currently quite a few key figures that fill Korean hearts with pride, demonstrating the "Miracle on the Han River", which was also a unique success story for the nation.

In order to understand Korea's astounding ascent to world power status, we need to identify the factors that have made such accomplishments possible and take a closer look at the correlations among development aid, economic and social progress and the establishment of the rule of law. That latter principle, along with a market economy, free trade and the linking up to world markets appear to be the secrets to Korea's amazing success. The fact that South Korea has always been in charge and "owned" the process of its development is a crucial contribution to the country's prosperity today.

Economic development

Only half a century ago, as many older Koreans can vividly recall, the ROK was one of the world's least developed countries. In 1962 its per capita income measured only a slender $82! From the early 1960's until the late 1990's, the economy of the largest of the "Four Asian Tigers" emerged as one of the fastest growers. In 2007 the per capita income reached just past the $20,000 mark for the first time, falling again in the wake of the global financial crisis. Today, the World Bank classifies the Republic of Korea as a "high-income economy", ranking among the ten strongest export nations. It will be the first Asian country to host and chair the summit in November 2010 of the Group of Twenty (G-20).

Today the Republic of Korea is widely regarded as a dynamic and telling example of economic and democratic development in Asia. Regional factionalism, the legacy of its authoritarian past, and deeply- rooted Confucianism are among the factors requiring further attention in order to fully consolidate the country's democracy. Further socio-political reforms are needed to foster transparency and accountability. However, in general the vital dimensions of political life, the state, the media and civil society, are imbued with a democratic spirit.

Democratic development

The relationship between political democracy and economic growth has for decades been subject to heated debates. Even assuming the absence of a direct link, there has been proof of significant indirect effects. On the other hand, a high level of per capita GDP has always been favourable for democratic stability. In our understanding today a "constitutional -" or "liberal democracy" implies majority rule as expressed in free and fair elections. But democracy should guarantee freedom for not merely for members of the majority group. Its crucial challenge is the freedom it guarantees to minorities. These democratic requirements are safeguarded by the rule of law and usually a written constitution.

When talking about democracy in Asia it is important to acknowledge cultural and historical differences. Democracy, an emerging healthy civil society and the growth of civic participation take their time to mature. Hence, we should refrain from imposing the benchmarks of past Western democracies upon Korea.

Within the 20th century Korea's political system underwent continual change. Following the end of the Joseon dynasty (1392-1910), Korea became a Japanese protectorate forced into colonial status. After liberation from gruesome colonial rule in 1945 the country was ruled by a U.S. military administration. While Korea's First Republic was a semi-democratic presidential democracy, the second was an unstable parliamentary democracy that was finally toppled by a military coup in 1961. In 1963 Park Chung-hee introduced a special kind of military rule, appointing civil ministers, before he established his authoritarian Yushin regime of the Fourth Republic. After his death Chun Doo-hwan's coup d'?tat in 1979, the Gwangju democratization movement aroused public outrage, so that civil society was able to pave the way for the first democratic elections in 1987.

The constitution of 1987 broke away from the authoritarian past. It was only with the advent of the Sixth Republic of Korea in 1987 that the nation gained stability and gradually came close to what we call "liberal democracy". Korea saw a substantial development in culture, economy and education. In 1992, Kim Young-sam was elected, the first civilian president since Yun Po-sun (1960). When Kim Dae-jung finally assumed office in 1997, the first change of governmental power between the opposing political parties was achieved by peaceful means. In 2004 the partisan attempt at impeaching President Roh Moo-hyun failed within the National Assembly and received its democratic comeuppance in the following elections. Finally the principles of democratic rule gained stability. Korea's route to liberal democracy was not always straightforward, but it led to a high degree of consolidation in the long run. It allowed opposition leaders and dissidents to participate actively and finally to become stakeholders in the system. Today rival parties take turns in governing the country. The public system's political order has matured into a sound legitimacy.

Development aid

For over two centuries liberalism has demonstrated in theory and practice that it is capable of overcoming poverty, dependence and immaturity. Those problems are not God-given but mainly the result of human action and omission. Poverty - at least to the extent it still exists today - would not be inevitable if the lessons of classical liberalism were taken seriously.

Between 1953 and 1960 South Korea received $23 billion in foreign aid, the annual average being US $ 1.8 billion. Since the first President Syngman Rhee (1948-1960) followed a rather domestically- oriented strategy of industrialization favoring the reduction of imports the results in terms of economic growth were rather modest. His successor, President Park Chung-hee, received the same amount of foreign aid throughout the 1960s, although US economic assistance dropped to US $ 1.3 billion, per annum owing to developments in US domestic politics.

Park actively solicited abroad for international loans and was dedicated to using them to substitute foreign aid. By doing so he created new incentives and an economy-friendly environment. Thanks to his outward-look and export-oriented economic policy, he succeeded in fostering dynamic growth, laying the foundation for Korea's economic upturn.

It is probably correct to say that in some cases development aid aggravates destitution and misery. In most cases it fails to remove the causes. Development aid has to do so, otherwise it is useless. Eventually development aid has to come to an end. The recipient of help must "develop" - or something has gone wrong. The aim of all development aid and development policy should be to become superfluous as early as possible.

In our globalized world we have proof that liberalization has lifted millions of people out of poverty. Free trade and free markets are the prescription for the developing countries in the world. Foreign aid has no impact on economic growth. On the other hand, liberalizing trade and payments and fostering private property generates a growing prosperity. Its precondition is the free circulation of goods, services, capital, and people. Without these freedoms it seems impossible to attract foreign direct investments. They ensure greater choice for consumers, gains in efficiency, specialization, and international technology transfer. On the other hand, we always need to be aware of each country's uniqueness and manifold differences in tradition, history and politics. We should not look for a uniform solution, a panacea for each and every case. Korea has demonstrated that "owning the process of development" is of outmost importance.

Our analysis arrives at a general observation: a measure of economic liberalization, that integrates a country into the global market, is independent of the respective political system. Focusing on the indicators of foreign direct investment flows we can see that the safety and the return of investments are of outstanding importance. This is exactly the reason why North Korea should follow the path of China or Vietnam. The DPRK, one of the poorest countries, suffering from isolation, has nothing to lose but a lot to win.

There are two assumptions about development which have been disproved by South Korea's case. First, the idea that development can be bought. For decades this assumption has been the basis for development policy. The purchasing price has been stable: Since the 70s it remains at 0.7% of the OECD states' gross national product. The doctrine is that if rich countries transfer this amount of money, development will occur. But people cannot be developed like films or cars. It is possible to buy a refrigerator or a loaf of bread, but not development. People have to develop themselves. Second the Korean case proves that development does not have to come from outside. Development happens invariably when people recognize incentives and are given opportunities to produce or trade something. Incentives are provided in situations where producers and traders can be confident that the benefits of their efforts will end up in their pockets. Opportunities exist when people have the chance to engage in enterprise. That is to say that incentives and opportunities are created in countries which respect personal freedom, protect private property, implement the rule of law and open up markets with equal access for all.

The author Walter Klitz is the Director of the German Friedrich Naumann Foundation for Liberty in Korea. The main partner of the foundation in Korea is the Research Center for Local Autonomy (CLA) of Hanyang University. The foundation also holds civic educational programs with the Institute for Far Eastern Studies (IFES), the Korean Institute for Public Administration (KIPA) ,the Jeju Peace Institute (JPI) and some organizations in the DPRK.