Politico-Economic Development of South Korea

South Koreas history is divided into phases that are characterized by alterations between military occupation, democratic rule, and authoritarian regimes. This paper will take a look at the various political and economic developments that were instituted by different regimes. These changes are important in improving ones understanding of how Korea, despite its tumultuous background, managed to become one of the worlds economic powerhouses.

The first republic

The first republic was marked with the formalization of the existence of the Republic of Korea in 1948. During the same year, Syngman Rhee was elected as the nations first leader, and the Peoples Republic of Korea was formed. Another development in 1948 was the formal recognition of South Korea as the legitimate government in the Korean region (Nahm and Hoare 203). The majority of the economic reforms that were carried out during this period touched on land ownership. In the years preceding independence, Japan had occupied large swaths of land in Korea. As such, the government undertook reforms to nationalize property and to distribute it among its citizens (Nahm and Hoare 2).

Moreover, during this period, the South Korean government was almost wholly funded by aid from the US government. Economic growth during that time was mostly stagnant and stifled due to the numerous conflicts that ensued between the two Koreas. South Korea was also highly reliant on subsistence agriculture, and mechanization was minimal (Kim 1). On top of that, the Rhee government was focused on quashing dissidents as well as forcefully unifying the north and south. Two years after the formation of North and South Korea, the two countries began to wage war against each other. This became a proxy war with the entry of the US and China.

The 1950 war between the two Koreas ended a year later with neither side making progress. The signing of an armistice in 1953 brought the conflict to an end and led to the formation of a demilitarized zone along the borders of the two countries (Nahm and Hoare 179-180). The iron fist approach of Syngman Rhee ensured that his government would not last. While the war between the North and South Koreas raged on in 1952, he took the opportunity to arrest all of his opponents and converted the presidency to an elected position (Hyon-hui, Pak, and Yun 15). In 1954, Rhee made use of his majority in parliament to ensure that he could vie for re-election without term limits. In 1960, the elections were held, and Rhee won by a significant margin. However, the election resulted in substantial public outcry and protests (Nahm and Hoare 16). When law enforcement agencies opened fire on protesters, the crowds grew angry. Later in the year, the president had to resign due to mounting pressure (Nahm and Hoare 16). This marked the end of the first republic in Korea

Second republic

During the start of the second republic, per capita income in Korea was 40 percent lower than that of nations such as Ethiopia, Haiti, and Yemen. Furthermore, over forty percent of the population lived in abject poverty (Kim 1). One of the political changes during this period was the brief occupation of power by Heo Jeong until the opposition won the elections that were later held in July. This led to the enactment of a parliamentary democracy (Yonhap 207). Parliament was in charge of running the government while the president, Chang Myon, assumed a supervisory position. This approach was aimed at promoting democracy in Korea (Cho and Kim 13).

The second republic did not last long, but it had a five-year plan to transform the economy. Even though the plan was never enacted, it formed the start of a significant economic transformation. Also, in 1960, many of the officials within the Rhee government were purged from the government (Hyon-hui et al. 592). Many were jailed. The failure of the Chang government to address some of the systemic issues within the society and in the government resulted in public outcry. Also, the country experienced a continued rise in inflation which in turn increased commodity prices aside from exacerbating the problem of unemployment (Hyon-hui et al. 592-593).

Military occupation

In 1961, a military coup ended the second Republic and ushered in a new era of military rule in South Korea. The military that was headed by Park Chung-hee was dissatisfied by governments progress (Hyon-hui et al. 594). A year after the coup, the people of Korea voted in a referendum to remove the parliamentary system of rule for a presidential rule. Also, in the same year, the country replaced its hwan currency for the won to curb inflation (A Concise History 153). The rule of the military government and subsequent periods were marked by a capitalist approach to development and economic growth (Cho and Kim 15). Despite the plans to develop the country by the military, the economy faced challenges obtaining capital for development. Furthermore, the country had very little domestic savings that would not assist in growth (Cho and Kim 15). The rapid development of the South Korean economy during the 1960s can be attributed to the shift in focus to an export-oriented economy (Cho and Kim 15). This approach is especially beneficial to South Korea because the economy was very small and the local population had a small spending power. During Parks tenure, there was a lot of focus on the development of large industries that were designed to boost economic growth and global competitiveness (Cho and Kim 16).

Due to the low influx of foreign loans, South Korea began to rely on currency controls to boost lending to industries. One of the techniques used during this period was over lending. Through over lending, banks could work in tandem with businesses to bring about growth. The process allowed firms that were willing to conform to the governments development agenda to get special loans. This allowed companies to borrow more than their actual worth and the central bank issued banks with overdrafts aside from guaranteeing these massive loans. (Cho and Kim 16). After the enactment of presidential rule, Park Chung-hee ran for office in 1963 and won.

Third republic

One of the main economic steps taken during the third republic was the enactment of the Five-Year Economic Development Plan (Hyon-hui et al. 595-599). This agenda had been developed by the Chang government, but due to its short stay in power, it never got to enact the plan. Park also continued on the developmental steps that he had initiated during the military rule. Furthermore, unlike Syngman Rhee, Park was less interested in the idea of a unified Korea (Hyon-hui et al. 595-599). Another program initiated by Park was the Saemaul Undong or New Village Movement which was borrowed from the Japanese technique of mobilizing the masses to improve their living standards through activities such as construction and farming (Cho and Kim 18).

Moreover, Park managed to reign in on lavish spending by business leaders, most of whom had obtained loans from the government. Another key pillar of the economic development under Park was his focus on self-reliance. Park hoped that such an approach would reduce Koreas reliance on aid from foreign governments (Cho and Kim 19). Also, it would allow South Korea to counter the Norths aggression. One of the lessons that South Korea learned from sanctions arising from its coup in 1961 was that reliance on imports left the nation vulnerable to external control (Cho and Kim 19). Thus, by shifting to an export-oriented economy, the nation would guarantee its survival.

In 1965, the Korean government sought help from the Japanese government to develop its industries. Additionally, the government offered subsidies to manufacturers to ensure that export-oriented industries would be competitive abroad (Cho and Kim 19). On top of that, the sale of goods designed for export was restricted in the local market. Other techniques to promote exports included currency devaluation. These reforms were target based, and in the year 1964, the country had sold a hundred million dollars worth of goods (Cho and Kim 21). Also, the government promoted a culture of saving among its citizens to remove capital from the black markets and to boost capital available from local sources (Cho and Kim 20-21).

In 1967, President Park expanded term limits to allow him to run for an unlimited number of terms and a year later, South Korean soldiers fought alongside their US counterparts in Vietnam (A Concise History 162). In 1968, the Korean Institute of Science and Technology (KIST) was developed to teach and disseminate information on technology and engineering to the public and the government. This was followed by the Korean Development Institute that was designed to bring together economic experts to help in the formulation of policies to help in growth (Cho and Kim 25).

Since Park had changed the constitution in 1967, he was eligible for elections in 1971, and he won with a narrow lead (A Concise History 182). Due to a rise in antigovernment sentiments, Park dissolved parliament and declared martial law. A year later he announced plans to unite the two Koreas aside from eliminating the use of popular vote to elect a president (A Concise History 182- 183).

Fourth republic

The enactment of the Yusin Constitution in 1972 marks the start of the Fourth Republic. This constitutional change was supported by a majority of South Koreans according to referendum results. Park felt that he had to keep the economic revolution on track and viewed any change to the status quo would derail the progress that he had made over the years. Thus, with the constitutional limitation out of the way, the president was free to proceed with his development agenda. In 1972, most of the companies within South Korea had grown to become large multinationals. However, the growth of this entities was largely financed by debt. As such, most of them had found themselves tied to a cycle of debt financing and refinancing (Cho and Kim 29).

During the same period, the won was experiencing devaluation. This increased the financial strain that businesses were experiencing. As such, the president issued a decree that all loans had to be renegotiated at lower rates (Cho and Kim 30). Further, companies were compelled to sell their shares in the secondary markets to prevent the concentration of power among a few elite individuals (Cho and Kim 30). In 1973, the South Korean government came up with a policy paper to promote the development of heavy engineering and chemical industries (Cho and Kim 310. The reasoning behind this development was that since US troops were about to withdraw from Korea, the country needed to develop its arms industry to deter the Norths aggression. Also, Korea needed to increase its product offerings to the rest of the world as well as value addition to increase revenue. However, the emphasis on heavy engineering and chemical businesses led to the decline in sectors such as agriculture (Cho and Kim 31).

Despite these economic developments, there were many protests in 1974 and 1975 where people expressed dissatisfaction at the Yusin Constitution which was viewed as an affront to democracy (Routledge Handbook 321-322). During 1973, the Middle East war had an adverse effect on the Korean economy. The government was forced to fund fuel subsidies using borrowed money which added to the nations debt burden and increased its balance of payment (Cho and Kim 33). However, growing demand for engineering services in Arabian services helped Korea to cushion some of the impacts. Later on, in 1978, Park won another term in office through selection. This led to nationwide protests against the leader. A year later in 1979, Parks rule was brought to an end after he was assassinated by Kim Jae-Gyu (Routledge...