Lesley Amaro Professor H.
Ege OzenComparative Politics 24028 November 2017 Why is South Korea’s economy developed? How did they manage to do that? In the middle of the 20th century, South Korea has become one of the most economic developed countries throughout Asia. To understand South Korea’s economic development, one must research and study other Asian countries and examine what did/didn’t work for them that worked perfectly in South Korea. How has South Korea reached an immense and successful economic growth despite recovering itself from the Korean War? How can South Korea progress economically under authoritarian rule right after the country gain its independence? Why are some Asian countries poor and why are others so rich despite using identical government policies? Has technological advancement, relationships with foreign countries, manufactured exports, trade openness, industrialization, and human capital helped us understand why such differences among these countries exist? What challenges will South Korea face on the long run? We will study two countries who adopt identical government policies as South Korea one of them being India and the other being Pakistan. South Korea had made a remarkable achievement, considered to be a developed country among other Asian countries like China and Japan.
Shortly after the Korean War, South Korea experienced severe poverty with little chance of economic survival. However, South Korea gave itself a huge turnover (thanks) to its independence from Japanese colonial rule. The country knew it had to act quickly to exclude themselves from poverty and not to rely on colonialism. At that time, President, and Dictator Park Chung Hee made it possible for South Korea to become a developed state. “The Park regime combined dirigisme with market-oriented development strategy, cronyism with technocracy, and formal institutions with increasingly personal exercise of political power” (Gemici 179). To remove the nation’s label of a weak and failing state, Park Chung Hee had close relationships with Chaebol members to improve economic growth.
His ties with the chaebols created heavy chemical industrialization and became a huge source of economic growth. Many businesses began to grow and one of them was the automobile industry. “The state Chaebol relationship was the political-organizational basis of the economic machine that led to the transformation of South Korea.
It is important to emphasize that, through this partnership. Park Chung Hee aimed to achieve goals that were infeasible from a technocratic standpoint” ___ (184). The economy has increased steadily until the 1997-1998 Financial Asian crisis that hit South Korea in a drastic way. Because of the Asian financial crisis, private sector bankruptcies and restructuring started a depression and created record high unemployment of 7 percent in 1998 (which fell to 4.4 percent in 2001).
To lift the country out of this recession, the Korean government created temporary jobs through public assistance and expanded the scope of social insurance, assisting the jobless to cope with the stumbling economy. Small businesses mandated to provide unemployment compensation to their workers, and those individuals who were self-employed were encouraged to participate in the national pension system with government subsidies for part of their contributions (Jung, Clark 27-45). The Financial Asian crisis gave a huge impact on other Asian countries besides South Korea. For purposes of this research paper, we will research on the ways India and Pakistan were affected and why these countries were unable to recover quickly from this economic crisis than South Korea. Prior to the Asian Financial Crisis, India was in the midst of recovering from another financial crisis they’ve faced in 1991. India had little foreign exchange and therefore were confident that their financial crisis will soon be put at ease. India’s currency collapsed due to the decline in export development and weak government.
Foreign portfolio investors continued to sell Indian stocks. Barely a week later the rupee hit Rs40 to a dollar, a fall of 13% from its value in July last year. The RBI had spent more than $3 billion of its reserves defending it. The situation was an uncanny reminder of the 1991 crisis. The trade deficit is set to widen this year, a higher current account and fiscal deficit is forecast, portfolio investment is declining and the threat of a Gulf crisis is looming.
A worsening exchange rate could just tip the scales, the government feared (Rao 55).Since the financial crisis was severe, it hurt a variety of currencies throughout Asia. Foreign exchange currency rates grew higher making it harder for investors to invest in these countries. This was a huge disadvantage for India and its neighbors.
Pakistan is also one of the many countries that experienced a critical period during the Asian Financial Crisis. Unfortunately their weak state lead to the country’s downfall in economics. Pakistan suffered the same fate as India and investors started to invest in countries whose economy were stable than others. As a result of the Financial Asian Crisis, many countries in South Asia suffered tremendous unemployment rates and high inflations. Pakistan’s exports dropped drastically by the mid 1990s.
“Merchandised exports for instance registered a growth of 15 percent during 1993 but during post 1995 period export growth substantially reduced and turned negative in 1998” (Irfan 1141). Weak reforms in the Pakistani government made it harder for the nation to overcome this economic hardship. Pakistan still doesn’t meet the requirements to be considered a developed state. Pakistan relies on agriculture and is an essential asset to create revenue.
Without having support in agriculture, revenues will decrease and jobs will be taken away. Another financial crisis hit Pakistan severely in 2008. “Its trade and budget deficits ballooned out of control, Pakistan was forced to seek assistance from the International Monetary Fund, which granted the country an $11.
3bn credit facility under a 25-month stabilisation programme” (Price). Trade openness is what also lead South Korea to become a developed country in East Asia. The Free Trade Agreement became a bilateral agreement between South Korea and the United States a few years ago. This agreement is essential for both countries’ relationship and economic stand. Since the United States is the wealthiest country in the world, this gives them an edge to create relationships with countries that are competitive among others. The United States and South Korea have good international relations whichs helps them succeed financially better than others. South Korea exported their products on an international level. Korean products such as Hyundai and Samsung, have made an enormous impact for consumers around the world.
Almost everyone around the world relies on technology to connect with loved ones, and the use of automobiles is also an important asset for everyday life. Hyundai and Samsung became popular products that goods export from the U.S. to South Korea grew ninety-two percent from 2002 to 2011 (Tong 136 ). South Korea went from a country that was covered in ruins to a country that transformed into a lively place.
Seoul is the city where cars go in and out and a place with amazing panoramic views and recently one of the most visited cities in the world. Entertainment and fashion trends make Korean culture popular in the eyes on foreigners. According to a travel report, travel and tourism in the Republic of Korea (South Korea) contributed 5.
1% to the national GDP and 5.4% of the country’s total employment in 2011. Also the amount of young Korean people are traveling more than previous years. Tourism influences travelers about their views in other countries as well as the people who recieve them. Tourism creates relationships from people all over the world. This travel report also stated that South Korea is aiming to make its country a tourist destination by 2020 attracting 2 million people.
The benefits are all for South Korea’s development to increase but what challenges will they face in the long run as a nation? Several reforms are on their way to being passed to prevent control from the Chaebols taking over the economy. The Chaebols being in power, will take a generation away from becoming successful. It will limit opportunities from young adults who have no connections with the rich in South Korea. Monopolies will increase and may lead to a weak or failing state. Although it’s now considered a developed country, it is still seen small by wealthier countries and will have to compete with countries like China, Japan, The U.
S etc. Unfortunately this will lead major support for the capitalist class and leave behind the working class. If Laissez Faire is implemented in governmental policies, citizens will feel at ease because Laissez Faire capitalism supports everyone and is neutral about businesses without having to favor one or the other. “The reason industrial policy and economic democracy are promoted by many while laissez faire capitalism is recognized in theory but not in practice is that economic policy is a creation of politics, not economic theory. When people use their resources and their political capital to influence political outcomes, they tend to do so to further their own interests, not argue for positions that promote the public interest” ( Holcombe, Randall 6).
This is what makes South Korea stand out from other developed countries. Markets outside of their country are successful and their strong entrepreneurship makes them who they are. Without having foreign relations, aid, investments, technological advancements, industrial policy, and trade openness, it would be impossible to reach the point they are at. Works Cited Gemici, Kurtulu? “South Korea during the Park Chung Hee Era: Explaining Korea’s Developmental Decades.” Asian Journal of Social Science, vol. 41, no.
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4, 2000, p. 1141.Price, Michelle.
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