1. Economic Development under Park Chung Hee and in the DPRK
Nov. 13, 2012

2. Review Was Syngman Rhee a democratic leader of Korea?
What were Syngman Rhee’s economic policies?
Did he have any positive impact on the ROK?
Why was he overthrown in 1960?
Why was democracy cut short in 1961?

3. Economic Growth under Park
Year Per-capita income (2006 $)
$1,295
,615
,912
,279
,933
,221
Growth of GDP: averaged 8.2%/yr between 1962 and 1980.
New Village Movement and village life

4. Annual Growth Rates
— 5.2

5. Park’s policies
government encouraged borrowing from international lenders by Chaebŏl Also controlled domestic lending by controlling the banks.
government directed investment into areas its economic advisors suggested: Economic Planning Board
normalized relations with Japan, and earned money from Vietnam War
export-oriented (to earn foreign exchange) instead of import substitution.
force used to keep wages low so that Korean goods could be competitive.
started with labour-intensive industries, but then moved on to capital-intensive.
New Village movement--designed to make villagers more productive.

6. Factors which helped Korea
state intervened to keep prices “wrong,” made sure that subsidies kept Korean products competitive in overseas markets
state imposed performance standards on companies (unlike Rhee)
emphasis on education led to an abundant supply of engineers, who could help deal with imported technology (but that didn’t help India at the same time)

7. State intervention Government control of banking
control of capital flight
price controls
wage controls
unions were government controlled.
Economic Planning Board gave administrative guidance.

8. Good timing
World markets were beginning to open up to goods from other countries
Japan was moving beyond the first stage of industrial exports
there were financial institutions able to lend money to Korean corporations.

9. Chaebŏl
favoured by the government in order to concentrate capital and expertise.
unlike zaibatusu, did not own banks until recently.
family owned, not publicly-owned
top-down direction, not consensus like in Japan
Tended to have more engineers than managers
Hired the best, by paying better salaries than smaller industries.

10. Well-known Chaebŏl Hyundai: founded by Chung Juyoung
Samsung (Lee Byung-chul)
Daewoo (now defunct) Kim Woo Jung
Lucky-Gold Star (LG) Koo In-hwoi
Ssangyong (Kim Sungkon) Ssangyong Motors was recently purchased by an Indian company.

11. Negative and Positive effects
Negative: uneven development, favouring Seoul and the southeast over the southwest.
sacrificed democracy for economic growth
created tension in society as the rich grew richer and the poor grew frustrated (even though, for many of them, their incomes grew as well
Positive: A middle class began to emerge, which created pressure for democracy.
Koreans ate better, had better homes, were healthier and in general begin to have a higher standard of living.

12. The DPRK
Economic Decline starting in the 1980s, and then economic collapse in the 1990s.
Growing isolation from the rest of the world, again starting in the 1980s
A Communist dynasty: the third Kim ruler in a row: Kim Il Sung
Kim Jung Il
Kim Jung Un

13. How have the Kims lasted so long?
Coercion and control of communication
Kim Il Sung held legitimacy according to traditional criteria, and his son has inherited that legitimacy (paternalistic, nationalistic, and not corrupt--traditionally, democracy was not necessary for legitimacy)
The state controls the flow of information
Fear of the US keeps North Korean population in line
Juche provides sacred cover for the government. The fervor with which the North Korean express their belief in Juche resembles the fervor of extremely religious people.

14. North Korean economic policies
The government makes economic policy, and ensures that its policy dictates are followed.
However, it uses a mixture of ideological and material incentives to try to get the people to work hard enough to meet government targets.
1958--Chŏllima movement ---speeded up production
Chŏngsan-ri and Taean policies: policy makers and managers meet with the masses to get their input before issuing directives: farms and factories are run by committee made up of party members and experts.

15. Reasons for economic decline
still an import-substitution, heavy-industry economy
has spent too much on the military
loss of trading partners with the fall of Communism
has tried to grow rice in soil not suited for rice, and has bleached the soil and deforested hillsides
lacks foreign exchange for fuel
Can’t change polities drastically without tarnishing the leader’s claim to legitimacy.

16. The DPRK and its neighbors
China--is economically dependent on China. Chinese look down on North Koreans
Russia--used to be an ally. Now is closer to South Korea
Japan --never an ally but is more hostile than ever because of the North Korean kidnapping of Japanese.

17. Nothing to Envy
How did North Koreans react to the news of the death of Kim Il Sung?
What was life like in North Korea in the years following Kim Il Sung’s death?
How did North Koreans survive the hard times of the late 1990s?