South Korean Economic Development

Development in South Korea

Japanese rule (1910-45)

• Control educational system– Japanese language and culture

• Control land (40% of entire country)

• Infrastructure– railroads and telegraph lines

• Industrialization

• Provisional Government-in-exile (1919)

38th Parallel (1945-50)

• Soviet & U.S. divided Korea along 38th parallel after Japan surrendered in 1945

• 1948-08-15, Republic of Korea established– 43% area, 60% population– President: Rhee Syngman

• 1948-09-09, Democratic People’s Republic of Korea established– Premier: Kim Il-Sung

Dulles, Rhee, & MacArthur

• nationalist goals vs. Cold War strategies

Korean War (1950 - 1953)

• Most fighting happened 1950 - 1951

• truce negotiations 1951 - 1953

• Military Demarcation Line (MDL) (1953 - )

Republic of Korea

• President Rhee Syngman (1948 - 60)– autocrat resigned amid popular protests

• 1961 military coup by Park Chung-Hee– relations with Japan normalized in 1965– economic takeoff– assassinated in 1979

• Army General Chun Doo Hwan (1980-7)

• 1980 Kwangju massacre

ROK Economic Takeoff

• Park’s authoritarian rule (1961-79)– annual economic growth rate of 9.2%– one of the four Asian “little dragons”

year per capita GDP (US$) export (US$)

1962 87 56.7 million

1980 1,503 17,500.0 million

Development in South Korea

• Development a matter of survival– high population density (48 mil./105km²)– few natural resources– external military threat

• one of the “Four Tigers” of East Asia– an incredible record of growth– integration into the high-tech modern world

economy

Development in South Korea

• Three decades ago GDP per capita was comparable with levels in the poorer countries of Africa and Asia

• Today its GDP per capita is roughly 20 times North Korea's and equal to the lesser economies of the European Union

• GDP p.p.p. $1012 (ranks 12th in the world)

Success through the late 1980s

• a system of close government-business ties– directed credit

– import restrictions• import of raw materials and technology

• at the expense of consumer goods

– sponsorship of specific industries

– a strong labor effort

Savings ratio

• savings and investment over consumption– savings 36.2% of GDP

– Japan 31.4%, US 16.2%

• small social welfare expenditure

0

5

10

15

20

25

30

35

40

45

50

South Korea USA UK Japan France Sweden

Social Welfare Expenditure / GDP

South Korea's Export & Import (in constant 1995 US$)

0

5E+10

1E+11

1.5E+11

2E+11

2.5E+11

3E+11

South Korea's Trade Partners

50

24

28

14

9

13

8

32

5

17

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1970 1993

Other

East Asia

Europe

Japan

North America

Trade Partners 2011

• Exports ($552 billion) to– China 24%– US 10%– Japan 7%

• Imports ($520 billion) from– China 17%– Japan 13%– US 9%

Asian financial crisis

• The Asian financial crisis of 1997 - 1998

• exposed longstanding weaknesses in South Korea's development model

• high debt/equity ratios

• massive foreign borrowing

• an undisciplined financial sector

Democratization in ROK

• 1987 election, former general Roh Tae Woo defeated opposition leaders Kim Dae Jung and Kim Young Sam

• 1987, Declaration of Political Reforms

• 1988 election, opposition parties won majority in National Assembly

• Kim Young Sam won presidential election in 1992 (1st elected civilian president)

Current President

• President Park Geun-hye (2013 - )

• Daughter of former president Park Chung-hee