South Korea miracle sets shining example
A sense of solemn determination filled the air while the South Korean president Park Chung-hee gave his speech at the reception.
It was the winter of 1964 and Mr Park was visiting West Germany at the invitation of the president Heinrich Lübke. As the leader of one of the poorest countries, Mr Park was looking to obtain loans to carry forward its first five-year economic development plan. Korean miners and nurses working in West Germany to earn foreign capital were gathered for a dinner ceremony.
Looking into the eyes of his people, Mr Park was overcome with emotion. Asking for their patience and perseverance, he promised to create a prosperous nation with "happy homes filled with bright smiles".
The Korean workers responded by offering their future wages as collateral for loans from West Germany. At that moment, a strong bond formed between the Korean president and the workers, igniting a desire to achieve economic development. Certainly, that was one of the most memorable moments in Korea's path to prosperity. Utilising such loans, foreign aid and cohesion among its people, Korea was able to fuel its determination for development.
"An economic miracle", "from rags to riches" and "the first-aid recipient turned donor" are some of the popular phrases that now describe South Korea. Such descriptions are quite a contrast from the phrases that depicted it only half a century ago, such as "the hellhole of foreign assistance", "a bottomless pit", and "a hopeless case".
Now ranked as the world's 15th-largest economy in terms of nominal GDP, Korea's rapid development has gathered attention from development specialists and policy practitioners the world over. It is often regarded as a textbook case for development as not many countries have achieved such dramatic growth coupled with political and social advancements.
During the past five decades, Korea's per capita income grew from US$82 (Dh301) in 1960 to $22,000 last year. In the same period, life expectancy rose from 52.4 years to 79.6 years. Democracy is now firmly rooted and functioning in place of its authoritarian past. Thus, the socio-economic achievements have often been described as a "miracle".
Both the market-friendly view, emphasising the primary role of the government in helping the market mechanism to flourish, and the development-state view, which claims prevalent market failures in the early years necessitated government intervention, offer plausible explanations on Korea's experience. Government intervention was extensive. Export promotion in the 1960s and the heavy-industry and chemicals-industry drive in the 1970s were based on severe financial repression.
The period up to the 1980s was characterised by high import barriers, restrictions on capital flows, widespread price controls and repressive labour practices. On the other hand, a relatively stable macroeconomic environment, well-established private property rights, and high public spending on education and infrastructure investment were market-friendly aspects of government policy often ignored by proponents of the development-state view.
Irma Adelman, an American development economist, has extracted six important lessons from Korea's case. She points to the importance of creating a "dynamic comparative advantage", including coordinated changes in various aspects of the society; tangible and intangible factors such as leadership, social capital and social resilience; the government role; the capability of the economy, society, institutions and policies to adapt to rapid change; and the input of global institutions.
Among them, the first and most important lesson Ms Adelman stresses is that Korea's experience is proof that "development is possible". Glistening buildings, vibrant traffic and a modern atmosphere now occupies Seoul, which was no more than a pile of ruins in the 1950s. In the 1960s, the Korean miners and nurses went to Germany to earn foreign currency.
Now Korea is a popular destination, receiving economic migrants from neighbouring states. An abundance of goods in local markets signifies the prosperous state of the economy. Korea's experience stands as proof that development is possible.
Aside from astonishing the world with its rapid and well balanced growth, Korea is assuming a growing role in international development. In attempts to share its experience with other countries, it is positioning itself as a bridge between developing and developed countries. Such efforts have made Korea a popular host for major international conferences.
It hosted the 2010 Group of 20 leading and emerging economies summit. Last November the fourth high-level forum on aid effectiveness took place in Busan, the second-largest city in Korea, and was attended by prominent figures such as the UN secretary general Ban Ki-moon, the US secretary of state Hillary Clinton, and Queen Rania of Jordan. As Ms Adelman states, the greatest asset Korea has to share is the hope for achieving prosperity.
Oh-Seok Hyun is the president of the Korea Development Institute
iPad users can follow our twitterfeed via Flipboard - just search for Ind_Insights on the app.
Published: June 14, 2012 04:00 AM