Nov. 13, 2012

1. Economic Development under Park Chung Heeand 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 $) • 1965 $1,295 • 1968 1,615 • 1971 1,912 • 1974 2,279 • 1977 2,933 • 1980 3,221 • Growth of GDP: averaged 8.2%/yr between 1962 and 1980. • New Village Movement and village life

4. Annual Growth Rates • 1962. 2.1 1969 13.8 1976 14.1 • 1963. 9.1 1970 7.6 1977 12.7 • 1964 9.6 1971 8.8 1978 9.7 • 1965 5.8 1972 5.7 1979 6.5 • 1966 12.7 1973 14.1 1980 —5.2 • 1967 6.6 1974 7.7 • 1968 11.2 1975 6.9

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 1948-1994 • Kim Jung Il 1994-2011 • Kim Jung Un 2011---

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?