What triggered South Korea’s rapid economic growth?

Some events including the student revolution of April 1960, the military coup of May 1961, strong state intervention in the economy together with the United States support through aid and access to US markets helped to raise and sustain rapid economic growth.

The students revolted against the Syngman Rhee for electoral irregularities and corruption. Government use of force against the student revolution earned them the support of the public forcing Rhee to step down. The bloodless military coup of General Park replaced the short-lived government of Chang Myun.

The military government was committed to rapid economic growth because it was essential for economic survival and dignity. It was also believed to be a national security issue considering that North Korea was more advanced economically. The military government was also unhappy about continued dependence on outside support. Furthermore, in a country where the military class was subordinated to the literary class for centuries, rapid economic growth was seen as a tool for legitimizing the military regime. Other explanations for high growth have stressed the role of the market mechanism while others have underlined a heavy dose of government intervention in the economy.

On balance it appears that government intervention was vital. The Korean economy grew at an average rate of 9 percent from 1963 to 1990. The government pushed its growth maximization policy in large part by disciplining elements including business and the working classes that deviated from the course set out in the development plans. Land reforms of the 1950s stripped the landlords of their political power and organized labor unions and other popular movements were suppressed and the middle-class did not exist when General Park assumed power.

With opposition out of the way, the military government set to maximize economic growth by focusing on the manufacturing sector that was heavily subsidized and destined for export markets. The US government provided support to the Korean economic plans and encouraged investments in infrastructure, existing industries and human resources. Although there were some critics the government pursued an industrial strategy based on ‘industrial deepening’ as the only way to realize economic self-reliance.

These policies raised and sustained Korean economic growth that averaged 9 percent between 1963 and 1990. The GDP per capita reached $6250 in 1991. However, this laudable growth maximization neglected the social ills and environmental degradation. Ipso facto, it has been argued that “The world would be on a dangerous course if the entire South [developing countries] were to emulate Korea. … the proper model of development must be one of ‘growth with environmental care’ instead of ‘growth at the expense of the environment’ as in the case of the Korean model”(V. Bhaskar and Andrew Glyn 1995).

What we have seen in Korea as in Japan reported earlier is that the state played a vital role in economic growth including using subsidies and rejecting classical comparative advantage of producing raw materials or low technology products in exchange for manufactured products from developed countries. Another lesson from the Korean case is that economic growth must pay attention to social welfare and environmental protection issues. This fits in well with the post-2015 sustainable development agenda that has been designed to integrate the dimensions of economic growth, social inclusion and environmental protection.