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DEVELOPMENT IN SOUTH KOREA & LATIN AMER.   Term Paper ID:23360 Click to get this paper

Essay Subject: Compares economic success in Korea with failure in Latin Amer. Govt. & politics, export-industrialization vs. import-substitution economies, leadership, foreign investment, dependency theory.... More...

27 Pages / 6075 Words 17 sources, 16 Citations, APA Format $100.00 Return to List of Papers

Paper Abstract: Compares economic success in Korea with failure in Latin Amer. Govt. & politics, export-industrialization vs. import-substitution economies, leadership, foreign investment, dependency theory. Paper Introduction: Much of the academic discussion about the political economy of development has turned upon the contrast between East Asia and Latin America. East Asian growth, embodied especially in the case of South Korea, has been dynamic and powerful and is seen largely as the result of the development of an export-industrialization economy. Latin American growth, on the other hand, has been sluggish and is seen largely as the result of the development of an import-substitution economy. Yet, both South Korea and the Latin American countries had begun as relatively undeveloped areas of the globe in the mid-1900s and were subject to many of.the same external influences--namely, American military and economic intervention--attempting to shape the future political and economic courses of these regions. The question that arises is why have South Korea and other East Asian Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. Thesereforms significantly reduced the gap between rich and poor, setting thestage for a relatively homogenous society. Thepolitical regime is popularly elected and a great deal of freedom ofexpression is now permitted. Ithaca: Cornell University Press, pp.2 3-226. (Eds.), Manufacturingmiracles. One was the development of a technological vanguard, generallypioneered by public-sector enterprises and later nurtured by governmentalinitiative in partnership with private firms. This is thestate of economic under-development throughout much of Latin America. The masses could then use the economic surplus, which was beingextracted to the center via an alliance between the bourgeoisie indeveloping countries and foreign capitalists, for purposes of socialistdevelopment. The Allies had agreed at wartime conferencesthat Korea should be free of the Japanese, but the transition toindependence proved complicated. (199 ). Equally important, Korean politics todaytends to be competitive between opposing political parties and specialinterest groups--a key component of a democratic and open political system. While schooled indemocratic ideals, Rhee could not trust his countrymen with such afreewheeling system because of his staunch anticommunism and rigidity.Thus during Rhee's term in office, and despite U.S. one of the latest projections is that the country'sgross national product is increasing by an average of 8.1 percent. In order to fully understand how these regions have developed alongdifferent lines, this research will first lay out the tensions andconflicts of Latin American development. Development economists began to offeralternative approaches that would take into account the welfare of thepoorest segments of society in developing countries. (199 ). Kim, H. Within five days of the North Korean invasion, PresidentHarry S. East Asian growth, embodied especially in the case of SouthKorea, has been dynamic and powerful and is seen largely as the result ofthe development of an export-industrialization economy. Demand forinvestment goods was significantly delayed as was demand for foreignconsumer goods, and a large industrial work force. While industrial developmentrequires substantial concentrations of wealth for investment purposes, inThird World countries, it also is promoted by a civil society which viewsindustrialization as a common interest. Themodel of dependent development will then be applied to the Latin Americanexperience and contrasted with the experience of South Korea. Labor intensive innovationsincluded new rices and multiple cropping. (Ed.),Dependency issues in Korean development: Comparative perspectives. andWyman, D. The first consequence was that the economy becamemore, rather than less, dependent on foreign imports. Mechanization, the large-scale use of agrochemicals anddiversification into new cash crops, required expertise and large capitalinvestments. (Ed.), The political economy of the newAsian industrialism. "Class, state and dependence in East Asia:Lessons for Latin Americanists." In Deyo, F. & Geisse, G. In South Korea especially, this systemwas associated with administrative complexity and corruption. Pathways from the periphery. This isnot an ordinary symptom of wear and tear. Dependent development. (Ed.), The political economy of thenew Asian industrialism. 51-55),. South Korea passed, in the years after the Second World War, throughan extended import-substituting phase (Koo, 1987, pp. In any capitalist society, thekey to economic growth is the capacity to enlarge the scale of capital.This cannot be achieved without the creation of new technologies and anongoing expansion of the production of capital goods--the machinery andequipment necessary to maintain growth of enterprise expansion and capitalaccumulation. This economic philosophy, which contributed considerably to the debtcrisis, is still widely accepted in Latin America, particularly amongintellectuals. Prior to theshift from an import-substitution economy to an export-oriented industrialeconomy, the South Korean governmental administration--a thoroughlyexpansive governmental bureaucracy in the tradition of Japanese colonialism--seized control over much of Korean agriculture. Villarreal, R. 292-32 .----------------------- 6 and South Korean praisefor his goals, there was scant political pluralism and even less democracy. Deyo, F., ed. Some scholars have argued that theconsumption habits of the ruling elite in peripheral countries deterredcapital investment, increased income inequalities, and created a dependenceon foreign technology. In theSouth an elderly Princeton graduate named Syngman Rhee emerged as theleader. South Korea has evolved bothpolitically and economically relatively independent of the capitalistdomination by the United States and other core countries--at least incomparison to Latin American countries. 212). The question that arises is why have South Korea andother East Asian nations developed in a far different fashion than LatinAmerican countries? Theclass formation that took nearly a century in Europe occurred over a matterof three decades in South Korea. Special rates established for new or marginal exportmarkets were fiscally costly, and often varied too much to be effective.over the long haul, exports tended to remain limited to previouslyestablished markets, usually cash crops. By the late 196 s foreign direct investment had risen substantially.Korea was on a course of significant employment growth and rising realwages; there were even labor shortages in Korea after the late 196 s. South Korea's historical experience with foreign occupation ingeneral, and the colonial administration of Japan in particular, led to theevolution of a strong state with limited class conflicts. Thus, making problems even worse, it became politically much moredifficult for the government to impose necessary adjustments anddepreciations in the value of currency than it had been in earlier decades. There were, however, two crucial differences. At thistime, its political economy resembled, in many respects, the Latin Americaneconomies in the heyday of autarchic industrialization and import-substitution. Criticism of the neo-Marxist school camefrom Marxists as well as non-Marxists. "Contrasts in the political economy ofdevelopment policy." In Gereffti, G. Most LatinAmerican leaders have little concern for the dangers of state power.Occasional market-oriented reforms are allowed for short-term, practicaleconomic reasons. One reason that SouthKorean products compete so effectively on the world market is that wages inSouth Korea are generally low and working conditions often bad. Nevertheless, the basic needs model has been, and continues to be,viewed as a radical approach to economic development in Latin America.Given the strong redistributive component of the basic needs approach, ithas been largely shunned by the dominant economic segments of most LatinAmerican countries as well as by most external sources of developmentcapital. 2 2-2 8. But this strong state structure eventually led to a restructuring ofsocial classes in South Korea (Evans, 1987, pp. Stallings, B. Economic Historical Development While South Korea evolved politically into a strong state society,South Korea evolved economically along a very unique course compared tomost other Third World countries. The reliance on import-substitution brought additional politicaldisasters. In South Korea, agricultural exportshelped to stabilize the balance of payments when reforms toward an export-oriented industrialism were initiated. Princeton: Princeton University Press, pp. Import-substitutionmeant the elimination of the import many consumer goods in favor of theimport of some raw materials that could be used by the local ruling classesfor domestic production. Much of the academic discussion about the political economy ofdevelopment has turned upon the contrast between East Asia and LatinAmerica. The gapbetween poor and rich widens again, and the lower middle class sinks intopoverty. At the same time, these ruling elites becamecommitted to the model of import substitution for economic development.This commitment was not made so much out of a vision of creating greaterprosperity throughout the region as out of self-interest of the rulingclasses. But South Korea had not yet found the path to democracy, despiteAmerica's intervention (Cumings, 1987, p. Development began to take off in the early 196 s, and several five-year plans later the nation has outgrown the developing category and (alongwith Taiwan and Singapore) is a prototype of the "newly industrializedcountries" (NICs). (1979). Latin American Development The Second World War left a permanent imprint on Latin Americaneconomies--an imprint that often had contradictory repercussions. The other was the use ofpublicsector banks to direct and often subsidize credit allocation.Through these activities, the partnership between bureaucratic andentrepreneurial elites began to develop. They contend that despite occasional American pressure inhigh profile cases--such as that of opposition leader Kim Dae Jung, who wasfinally released from prison in December of 1982 to obtain medicaltreatment in the United States--Washington has usually reacted withindifference while one South Korean military regime after another hasengaged in serious human rights abuses. As South Korea advances from a developing to a developed country,however, it may find necessary to change economic policies. The sameheld true for the region's modest degree of industrialization, which wasbased on the principle of import substitution. Another source of marketfailure lies in the lack of domestic entrepreneurship and technical skillsin developing countries. In place of importing goods, argued such theorists, developingcountries should produce their own products for their domestic markets.This strategy is known as "import substitution." Unfortunately, due largelyto the corrupted nature of many Latin American states, it turned out to bean extremely costly recipe for economic disaster. Analyses of economic development inSouth Korea place the stage of import substitution between 1953 and 196 for South Korea. In early ROK history, theSyngman Rhee government was noted for its political shortsightedness.Though a true patriot (unlike his North Korean counterpart, Kim Il-sung),Rhee--albeit sometimes rambunctious and stubborn--was a creature of theU.S. (1987). Technology, goods and financial markets are oftendistorted by the actions of business in industrial countries. 166168). This encouraged theearly development of off-farm rural activities and made relatively balancedurban development possible. This studyfinds that although dependency theory is a very useful model for explainingdevelopment, or more appropriately, the lack of development in LatinAmerica, it is not a useful model for explaining development in SouthKorea. Unlike the structuralists, however,these neo-Marxists focused on the world capitalist system and continued tocall for a socialist revolution. But the costs to small and mediumfirms was seen as worth the investment into large industrial enterprises. In fact, the governments of SouthKorea generally insisted upon national control of the "commanding heights"of its economy, carefully confining direct foreign investment to labor-intensive sectors of industry or to undertakings rich in the potential fortechnology transfers of strategic value. p. At the same time, traditional Western models of economicgrowth also fail to apply to South Korea. This led to complexregulation and control of prices of inputs and outputs which resulted inmany inefficiencies, but the bias against farmers was smaller in SouthKorea than in most other developing countries. Berkeley: University of California Press. Evans, P. Dependency and development inLatin America. Land reform occurred as part of the post-colonial settlement and thetotal devastation of the countryside during the civil war in Korea. Finally, amodel of economic development will be analyzed that provides a morecomprehensive explanation for the South Korean experience. The basic needs theory questioned whether given the increasedinequality in developing countries, growth in per capita income alone couldbe used to measure development. A reasonable definition of dependency is a conditioningsituation in which the economies of one group of countries are conditionedby the development and expansion of others. Ithaca: CornellUniversity Press. Development in South Korea, and several East Asian nations, hasbeen affected by numerous unique factors, such as a strong state, economicpolicies and culture, that have created very different results from theLatin American experience, despite the fact that both regions havestruggled to prosper under a similar American sphere of influence. In addition, the expansion of a capitalist economy requiresfinancial support through a sound system of investment and exchange.Peripheral societies, even when they grow beyond the production of simplecash crops for the international market, remain dependent in a veryspecific way: their capital goods production sectors are not strong enoughto maintain continued advances in financial as well as technological andproduction capacities (Cardoso and Faletto, 1979, pp. There is still dispute in some circles over just how the Korean Warbegan, but the version generally accepted in the West is that on June 25,195 , the People's Army of North Korea launched a surprise attack acrossthe 38th parallel. Next, the unique historicalexperience of South Korea will be examined, followed by a discussion of themany different factors that have affected development in that nation. Kim, D. Since this is accomplished byraising indirect taxes and fees, the poor must contribute adisproportionate share, and they are affected most directly by the curbs onspending in such areas as health, education and social welfare. The state in South Koreawas powerful and consolidated its dominance over the landed aristocracyearly in the century. In addition to stimulating domestic industrial development, statecontrol over the financial system helped limit foreign investments thatcould lead to dependency. Export revenue stagnated, or in some countries, even fell inthe second half of the 195 s and early 196 s, while import needs as aproportion of GDP did not fall quickly enough. The import-substitution model of development favored the entrenched ruling classes inLatin America all the while impoverishing the nations as a whole. Ithaca: Cornell University Press. With class conflicts minimal, the source of financial investment inSouth Korea necessary to make the transition to an industrial society hascome largely from the state itself; investments not coming from the statehave at least been well coordinated and protected by the state.Administrative domination of the state over the landed aristocracytransformed the state into the key controller of wealth for investmentpurposes. The SouthKorean government has managed to tread this difficult field of marketstabilization by providing off-setting influences in the market to ease theburden of economic transition and by limiting the distorting effects offoreign capital and monopolization that have overwhelmed most LatinAmerican countries. This greater dependence onimportant imports and the persistent concentration in primary exports meantthat when the terms of trade became unfavorable or a bad harvest dampenedagricultural exports, a negative balance-of-payments meant a loss of importcapacity and created industrial recession (Villarreal, 199 , pp. (1994). This rapid evolution can be explained bythe unique character of the state in South Korea and the abrupt anddiscontinuous process of industrialization. (1979). Secondly, the Latin American economies grew even more dependent on afew primary-commodity exports. The brutal Japanese occupation ended only in 1945, with Japan'sdefeat in the Pacific War. Dissatisfaction of a different sort has recently been growing on theKorean side of the relationship (Koo, 199 , p. Inthe 197 s and early 198 s, the productivity of export processing plants wasstrengthened and, along with new efforts at import substitution, Koreaventured into the production of automobiles and personal computers.Although the problems of the export-oriented industrial model of economicdevelopment became more evident in the late 198 s, the fact remains thatSouth Korea moved decisively from import-substitution industrialization toexport-oriented industrialization and prospered as a result. The reduction in class tensionshelped remove barriers to economic transition from an agricultural to anindustrial economy. Domesticmarket failures result from the actions of "middlemen" and money lenderswho charge excessive interest rates to farmers and businessmen. NewYork: Monthly Review Press. Yet, bothSouth Korea and the Latin American countries had begun as relativelyundeveloped areas of the globe in the mid-19 s and were subject to manyof.the same external influences--namely, American military and economicintervention--attempting to shape the future political and economic coursesof these regions. References Cardoso, F. 4). This reversal of the Latin American sequence of relations withforeign capital is significant because comparative analysis has repeatedlysuggested a correlation in the contemporary peripheral economies betweendegrees of economic inequality and levels of foreign direct investment.Just as revealing as these contrasts with the practices of dependency inLatin America is another device by which South Korea out-developed LatinAmerica. Ithaca: Cornell University Press, pp. Latin America has been left mostly in a dependent state ofdevelopment. In conclusion, the unique historical, cultural and politicalexperiences of South Korea have enabled it to pursue an industrial policythat led the nation into an export-oriented industrial economy. This new realizationof economic development in Latin America and elsewhere led to policieswhich called for increases in mass demand through land redistribution andcommunal development. This made Americanimports seem relatively cheap in terms of the value of domestic currency.As a result, conditions were ripe for several of the familiar problems ofpostwar Latin American economies: foreign exchange reserves would soonbecome quickly depleted, intense wage disputes were driven by spiralinginflation, and the economies were shaped according to the import-substitution model based heavily on trade protectionism and statesubsidies, rather than a reliance on relative price effects and marketmechanisms (Stallings, 199 . Similarly, even though poverty is widespreadin South Korea, it is widely distributed and thus not a major source ofsocial tension. The coup by Park Chung-hee, designed by Kim Jong-pil, ushered in anera of enforced stability and discipline. These factors range from unique historical, cultural andpolitical experiences to the role of external powers. The imbalanced reliance on foreign exchange soon became the guidingforce of economic policy in just about every Latin American country. South Korea severely repressed the financial system to be ableto borrow domestically to subsidize industrial investment. Kennedy's Alliance for Progress conditionedfinancial and technical assistance on national planning schemes. 3-31. Keeping firm control and ownership of both the agrarian andindustrial means of production, the ruling elites used the state apparatusas a vehicle to promote economic policies which would surely andimmediately enrich themselves. Princeton: PrincetonUniversity Press, pp. 44-83. An effective transition from an import-substitution economy, whichtends to be dependent on the core countries, to an export orientedindustrial economy (EOI) has never really taken place in Latin America. As the smallfarmers were proletarianized, the governments lost a stable class of peoplewho had generally supported them. The institution losingcredibility was not merely a government which could be replaced by anotherof a different party; it is the state and the democratic model itself.Many Latin American countries have not yet completed the process ofnational evolution. What isremarkable, in light of current policy debates, is that this shift tookplace under close governmental direction. Earlier, worried by the chaos of Korean politics and putoff by Rhee, Washington had denied the South Koreans tanks and other heavyweapons; and at a crucial moment in 195 , Secretary of State Dean Achesonhad given a speech defining vital American interests in a way that seemedto exclude Korea. In otherinstances, the government recruited the new exporters, equipped them, andcoached their first steps (Ranis, 199 , pp. 84-135. "The origins and development of the northeastAsian political economy." In Deyo, F. and Wyman, D. The differences depend upon an accumulation of uniquecircumstances: the singular history of these countries, including thedeeply rooted characteristics of veneration for learning and decisive, one-time upheavals such as the events leading up to the Japanese occupation,the Pacific War, and the American proconsulship, the unique effects of theAmerican and then the shared AmericanJapanese hegemony, and the state ofthe world economy when the industrialization of the East Asian region tookplace (a circumstance that, following the rise of labor costs in corenational economies, created special opportunities for low-cost producers ofstandardized commodities). The newly created wealthshowed no trickle-down effect; instead, it led to a hitherto unknownconcentration of the means of production in the hands of a few families.This was especially true of real estate. 55). At least two counter-productive and unfortunate outcomes of thisLatin American import-substitution industrialization model (ISI) wereparticularly disturbing. Gereffti, G. In the late 196 s, neo-Marxist theorists, particularly PaulBaran and Andre Gunder Frank, argued that "peripheral,, (developing)countries were stuck in a state of underdevelopment and unequal exchangewith the "center" (advanced capitalist countries). Unlike South Korea, class inequalities and, consequently,social resistance to change has been sharply evident in Latin Americancountries. South Korea has succeeded economically beyond its most ambitiousdreams. (1987). Even so, agricultural development owed more to the government'srecognition that high protection and incentives for exports needed to beoffset if agriculture was to thrive and that macroeconomic stability wascritical for efficient agriculture. Since many private businesses receive state subsidiesand trade protection, even businessmen often lack the incentive to changethe system. These factors haveinfluenced the nature of the South Korean state and the class structure ofsociety in such a way as to be particularly conducive to economic change. 1 8-1 9, 177). Ranis, G. Ithas succeeded in making the transition from an import substitutionindustrial economy to an exportoriented industrial economy, and thus SouthKorea has managed to avoid collapsing into dependency on core countries.Dependency theory is an appropriate explanatory model for Latin Americandevelopment--even though its suggested remedies may have contributed to theeconomic stagnation of the region--but dependency theory does notaccurately explain development in South Korea. "Korean economic development: Miracles and mirage?" World Summit for Social Development NGO Forum, Special Workshop onEconomics of Rapid Growth, March 7. (199 ). Despite Rhee's earlier aggressive talk, such as a boastthat the southern forces "could take Pyongyang the northern capital inthree days,, it was Seoul that fell within three days. Princeton: Princeton University Press, pp. The model of dependent development offers several remedies for theindependent development of Latin American countries. These models, however,share several common principles which form the heart of dependency theory.From an economic perspective, a nation is dependent on the core countriesof international capitalism when the accumulation and expansion of capitalcannot be achieved from within the system. Second,foreign direct investment remained low by Latin American standards; therewas, on the whole, a reversal of the characteristic Latin Americansequence, so that an emphasis on loan capital preceded rather than followeda heightening of direct investment. The nonlandowning classes had access to neither. An informalfinancial system was not permitted to develop, with the unfortunate effectof starving small and medium firms. Frank, A. Korea's economic progress, in fact, has emerged precisely fromits efforts to curtail foreign investment and private monopoly control overdomestic markets. Haggard, S. This enabled the government to administer ratherthorough land reform programs following World War II and thereby minimizeclass conflict (Evans, 1987, p. Seoul:Seoul National University, pp. A relationship ofinterdependence between two or more economies or between such economies andthe world trading system becomes a dependent relationship when somecountries can expand through self-impulsion while others, being in adependent position, can only expand as a reflection of the expansion of thedominant countries, which may have positive or negative effects on theirimmediate development (Cardoso and Faletto, 1979, pp. Clearly, dependency theoryis not applicable to the Korean experience. Forexample, President John F. By 1948, Korea hadbecome two separate countries, implacably hostile to each other (Cumings,1987, pp. AID teams operating in South Koreain the 196 s played a key role in these countries' agricultural developmentby supporting offsets to industrial protection. Political History of Korea Having served as a battleground for the Sino-Japanese and Russo-Japanese wars, the Confucian monarchy of Korea became a protectorate ofJapan in 19 5, and five years later was completely absorbed as a Japanesecolony. Consequently, many large Latin American countries establishedmultiple exchange rate systems intended to subsidize industrial-sectorimports at the expense of the traditional export sector. Private direct foreign investment in the form oftransnational corporations is a notable source of monopolistic disruptionof markets, but so are domestic monopolists. In addition, Korea's maturing economy is increasingly capableof moderating the influence of foreign investments and monopoly capitalwithout falling victim to counter-productive market distortions andeconomic dependency. The United States reacted not only with shock but also with somedegree of guilt. (Ed.), The political economy of the new Asian industrialism.Ithaca: Cornell University Press, pp. One cannot overlook the loss of confidence the Latin Americangovernments have suffered, especially among the middle classes. Classconflicts are beginning to emerge in Korean society and internationalcapitalism is growing increasingly frustrated about trade relations withSouth Korea. When LatinAmerican leaders sought advice from the industrialized world in the quartercentury after World War II, they were often told that state direction,economic planning, and redistribution of wealth were necessary. (Eds.), Manufacturing miracles. In many Third World countries, market failuredoes not occur as a result of distortions by industrial policy and stateintervention, but as a result of monopolistic behavior in domestic andforeign markets. (Ed.), The political economyof the new Asian industrialism. Generally, theseremedies involve statist policies. (1988). (1987). South Korea's unusually strong state has allowed for extensivegovernment intervention in production, referred to as "industrial" policy,following the "Japanese model," and has been the critical factor in therapid growth of the nation. During the late 196 s, a related theory emerged--the dependencyschool of development. Haggard, S. Instead, government borrowing was the only means toimport foreign capital. From the time of Spanish colonization to the present,a broad segment of the population has considered the state to be aninstrument of alien rule. The elimination of consumer goods imports infavor of imports of raw, intermediate, or capital goods, placed theprospects of economic growth at the mercy of the balance of payments.Instead of affecting only the consumption styles of the upper classes whobrought wares, now foreign exchange crises would send shock waves throughan entire industrial economy that depended on imported resources tomaintain industrial production. (1995). On top of it, foreigninvestments were often prohibited in order to protect domestic investmentsby the ruling classes. Partly in response to criticisms of the neo-Marxist paradigm, severalscholars such as De Santos, Frank, Amin, and Wallerstein began to focus onthe dependent nature of development. 26-56. 59). Under Park and his successors loyalties tocentralized institutions embodied in the state government was createdstructurally. Social welfare programs are not very advanced. aid to finance their imports (Kim, 1995, p. Artificially exchange rates held afloat bygovernment intervention intended to benefit domestically-oriented industrydevastated the export potential of the economies, especially for new ormarginal markets. The same foreign and oligarchic interests that comprised theold 'colonial' style of political and economic domination of Latin Americawere the ones to whom the region had to turn to seek relief from a poorbalance-of-payments. Individual initiative, freedom, and self-reliance are viewed as insufficient for economic growth. Most Latin Americans still see the state as the primary agent ofsocial and economic change. Although South Korean political history has been marked byauthoritarian regimes and the emergence of a strong state, it has moveddown the path of democracy, unlike most Latin American countries. mentors who installed and supported his regime. Two uses of the public sectorturned out to be of special importance in laying the basis for this secondstage. Others focused on the peripheral countries'dependence on transnational corporations and the deleterious social,economic, and cultural effects these corporations had on developingcountries (Frank, 1979). 165181. "State and foreign capital in theEast Asian NICs." In Deyo, F. Conservative economists argued thatthe neo-Marxist's call for autarky would lead to stagnation in developingcountries. Dependencytheory, while a worthwhile explanation of the problems that plague manyLatin American countries, offers little explanatory value for the Koreanmiracle. "The role of foreign capital in economicdevelopment." In Gereffti, G. As elsewhere, the United States and theSoviet Union shared the postwar occupation duties (the country beingdivided, in this case, along an arbitrary line on the map suggested by twoyoung American lieutenant colonels, one of them Dean Rusk, later secretaryof state), and totally different regimes emerged under the influence of thetwo great powers. (199 ). (Eds.), Manufacturingmiracles. This research examines the course of political and economicdevelopment in South Korea and select Latin American countries and analyzeswhy these two regions have pursued different paths to development.Specifically, the explanatory model of dependency theory, which has gainedprominence in accounting for the lack of development in Latin America, iscontrasted for its relevance to development in South Korea. During these years policies were a familiar mix ofsubsidies, overvalued exchange rates, import protection, and creditrationing marked also by the discretionary use of political power to favorselected borrowers or importers. The nationhad allowed domestic interest rates to rise, to help stabilize prices inthe wake of the devaluations (Kim, 1995, pp. (1987). "The interplay of state, social class, and worldsystem in East Asian development: The cases of South Korea and Taiwan."In Deyo, F. (1979). Unlike Marx, thesetheorists did not believe that developing countries had to (or could) passthrough capitalism to achieve a socialist society. Labor unions that have protested these conditions are accused ofstirring up social unrest; as a rule, the government charges them withsubversion and brutally represses them. Park and his clique were not fans of democraticprinciples. 294-296). But by the late195 s it became increasingly evident that this elaborate method of stateintervention and industrial subsidy did not solve the foreign tradeimbalance. Evans, P. The loss of popularity thus has signaled notmerely the failure of one president or one party, but the alienation of themasses of people from the state, the fatal opening of a chasm of mistrustbetween the "political class" and the governed. "The political economy of outwardliberalization: Chile and South Korea in comparative perspective." AsianPerspective, 12, 35-68. Assuch, most Latin American countries will remain dependent on the corecountries for economic survival until they can muster the strength to makethis transition. and Wyman, D. 22 -222). Park'smodel was a military one. Unlike many Latin Americancountries, the Korean political system is relatively open and competitive.Although a strong state still dominates political and economic life inSouth Korea, it is nevertheless a democratic state. 55-89. Thus, this political-economic evolution already disproves twoconnected illusions: first, that the overcoming of importsubstituting semi-autarchy is naturally associated with a. This background makes it easier to understand the nature of thepassage from the import-substituting to the export-oriented strategy--thepolitical economy for which South Korea is now chiefly known. In Latin America only the land-owning class could participate in theexport-oriented modernization of agriculture--the early foundation of thelocal economies. Despite the leaning toward statist policies offered by dependencytheory, it was poorly administered throughout much of Latin America.Disenchanted Latin American specialists noted that import-substitution hadresulted in a worsening of income distribution, multinational dominance,and balance-of-payment problems. Truman contradicted that definition and committed the war-wearyAmerican nation to what would become a symbolic struggle against communism. Partly Japanese, partly American, but mostly ahybridized Korean phenomenon, this military model appealed to Park and hisoriginal military elite because the armed forces were the only majorinstitution in South Korea in the late 195 s and early 196 s capable ofdoing a job and meeting a goal. 213-215).The politicaloppression of the intellectuals and the economic exploitation of theworking class began to fuse traditionally separated social classes. Farmers' organizations were usedto reduce credit costs to offset financial repression and for theinnovative marketing of new rural products, particularly for export.Infrastructural facilities, notably key roads, rail and rural power, hadbeen relatively well developed in colonial times. Both men talked of unifying the country, but their frames ofreference were so different as to be irreconcilable. Severe shortfalls inforeign exchange were addressed by focusing attention on the import side ofthe economy. "Rethinking development theory." In Kincaid,D. Princeton: Princeton UniversityPress, pp. Pushed by the chaebol interests, and also awareof the possibilities of exploitation of the highly protected domesticmarkets, the South Korean government restricted private direct foreigninvestment. Latin Americangrowth, on the other hand, has been sluggish and is seen largely as theresult of the development of an import-substitution economy. (1987). Cumings, B. Crises in the balance-of-payments equation became routine in many countries, especially inArgentina, Brazil, Chile, and Colombia during this early period (Stallings,199 , pp. Park pledged a better material and societal future to hispeople in exchange for the imposition of a new sense of discipline. 2 7-23 . Union activists, university faculty members and students, andChristian militants often blame the United States for these uncomfortablecircumstances. Inflation rates duringthe war had caused a decline in real wages in most Latin Americancountries, but many of these governments used war emergency powers torepress the demands of workers for better conditions and wage increases.In most major Latin American countries, except perhaps Argentina, priceinflation had far exceeded similar trends in the United States during thewar period, while exchange rates stayed nearly fixed. And unlike many LatinAmerican countries, the Korean economic system is robust and healthy. This development also had an adverse political impact. xx). Dependency Theory The development experiences of Latin American countries led to theemergence of a new school of thought in the field of foreign exchangerelationships. AlthoughSouth Korea's trade policies also included substantial fiscal subsidies andother legal advantages for exporters, they ended the 195 s still immenselydependent on U.S. Differences Between Regional Development Much of this East Asian experience of successful industrializationand integration into the world economy is very different from the LatinAmerican experience. Low wage earners and unskilled workers are also the chief victims whengovernment finances need to be tightened. Dependency theory warned that free trade led to impoverishment of theunderdeveloped world and its dependency on the industrialized world forgoods. By themid-194 s, the major Latin American countries had accumulated large foreignexchange reserves which were the largest they had ever held. Such statist "pro-business" policies are often perceived asthe essence of the "free market" and are rejected by many intellectuals andleaders in favor of more statist policies of state ownership. The result of these politico-economic developments in Latin Americaturned into an entrenched ruling class, forming authoritarian regimes withlittle popular support. The dependency school generally focused on theunequal relationship between the peripheral countries and the advancedcapitalist countries and the constraints placed upon the former as a resultof this relationship. Conclusion: Reasons Why Korean Development Is Unique Several factors help explain why political and economic developmentin South Korea has followed a different path than in Latin Americancountries. South Korea's domesticpolitical scene has been marked by distinct phases, their successiondenoting the process of political maturation. 5-6). Benefits Accrue to Latin America's Oligarchy Under these economic and social conditions, economic developmentbenefitted the propertied class in Latin America almost exclusively, whilethe great majority of the people found themselves even poorer than before.Economic power also enhanced the political power of the oligarchy, whichthrew its full weight against reform efforts that would lead to a greateregalitarian distribution of privilege and power. Gereffti, G. They advocated insteada socialist revolution to overthrow the ruling classes in developingcountries. Credit rateceilings led to credit rationing with subsidies to a favored dozenconglomerates--the chaebol--through the state owned banks. This usually meant a statist system ofprotecting domestic production of certain goods from foreign imports andstrictly regulating wages and the distribution of economic benefits amongthe domestic classes. The boom has been fueled by the South Korean government'sencouragement and funding of heavy industry, which has helped the countrycompete, often on cut-throat terms, in international trade. Most unions have now beendisbanded. The political economy of the new Asianindustrialism. (1987). South Korea inherited from the Japanese a formidable publicsector, which it preserved and developed until well into the export-oriented stage of their growth strategies. Koo, H. In summary, dependency theory is represented by a multitude ofdifferent models offered by different theorists. The Rhee years werehighly politicized, with the fractious political elites kept in linelargely by Rhee's corrupt cronyism and authoritarianism. In some instances, publicenterprises themselves spearheaded the export drive and the technologytransfers and commercial arrangements that made it possible. South Korea had undertaken largedevaluations (twice in early 1961, then a 95 per cent devaluation in 1964)and had simplified its foreign exchange systems to allow the market morepower in reducing imports and to increase incentives to export. Indeed, South Korea has one of the fastest growingeconomies in the world, with an annual per capita income approaching $1,7 (Gereffti, 199 , p. South Korean idealists played a major role in ousting the Rhee regime.AntiRhee, student-led protests, echoing an earlier generation'santiJapanese movements, overthrew the aging autocrat's ineffective cliquein 196 . Even though class tensions have eventually emerged inSouth Korea, particularly in the form of "minjung," class conflict has notoverwhelmed Korean society. Chapel Hill: North Carolina University Press, pp. Nevertheless, by 1965 South Korea had embarked on concerted programsto incorporate itself into the international economy through the promotionof labor-intensive manufactured exports. Economic development in SouthKorea is the product of state intervention, industrial policy, financialsector and market protection, and limited class conflict. First, import-substitution took place against the background of equalizing reforms, inparticular, agrarian reform and public investment in education. Industrialization through import substitution ironically resulted inincreased dependence on imports of intermediate goods from developedcountries, thereby creating balance of payment problems. In sectorslike textiles, South Korea has been a runaway success, taking its toll notonly in such obvious places as the United States and Great Britain but alsoin Japan, where perhaps a third of the jobs in textiles have been lost to"cheap imports" from Korea and Taiwan. Although the dependency school itself became the subject of criticalanalysis, the preoccupation in the 197 s with inequitable developmenteventually led other theorists to advance the "basic needs" model ofdevelopment. & Faletto, E. "Dependency and the state in recent Koreandevelopment: Some comparisons with Latin American NICS." In Kim, K. Since capital-intensivemanufacturing is practical only in large production facilities, not onlywas traditional agriculture displaced, but an entire class of subsistencefarmers were driven from their land and turned into an urban proletariat. withdrawal of government fromactive involvement in the economy; and second, more generally, that market-orientation is inversely related to government activism in the economy.The East Asian experience simply refuses to fit traditional westerneconomic models, according to which government leaves production to theproducers and limits itself to investing in the conditions of theprofitability of,private firms. Ithaca: Cornell University Press, pp. Dependent accumulation and underdevelopment. Park, an admirer of Japan'sMeiji era reforms and the Japanese-style esprit- and moral rectitudeinternalized during the colonial period, set South Korea on a newevolutionary track. This isquickly reflected in certain social indicators, such as increased childmortality and specific infectious diseases, as well as illiteracy. For amultitude of reasons, the many Latin American countries responded withsomewhat similar economic and political policies. 9). In a risky but brilliant piece of strategy,General Douglas MacArthur turned to sea and air power to make up fordisastrous losses on the ground; his landing at Inchon surprised the NorthKoreans behind their own lines, and within a few months he had liberatedSeoul and returned it to Rhee. It has spawned general mistrust of market principles, andhas focused Latin American development efforts on producing to minimizeimports rather than producing to maximize exports. Korea's remarkableindustrialization has not come about by open markets, private investmentand privatization of major economic sectors. Theimpressive per capita income figures conceal an uneven distribution ofwealth. But in many ways the experiences ofSouth Korea with import substitution in the 195 s were similar to those ofthe larger Latin American countries. 176). Princeton: PrincetonUniversity Press. The troops that came to South Korea's aid fought under the flag of theUnited Nations (and included soldiers from Europe, Asia, and Africa), butmost of them were American. "Paths of industrialization." In Gereffti, G.and Wyman, D. Not surprisinglyfor the ultimate free-enterprise society, South Korea is the home of a fewhundred multimillionaires and millions of extremely poor people--not poorby comparison with the populations of the least-developed nations, butabject by comparison with the new elite in their own society. At the same time, the East Asian experience refuses to fit withtraditional dependency models of development. Some companies, like the Hyundai conglomerate, have sought todeal with grievances through worker-management councils. & Cheng, T. "The Latin American strategy of importsubstitution: Failure or paradigm for the region?" In Gereffti, G. But the most daunting challenge toother economies comes from the gigantic new South Korean conglomerates,monolithic enterprises that do business around the world virtually free ofdomestic restriction. Evans, P. 1621). 61-64) . South Korea had the most distorted financial system in theregion, but the political pressures of relations with North Korea alsoimposed short lead times on capital earnings, a demand for highprofitability and high public and private savings and investment. The World Bank, forexample, recommended moderate income redistribution to the poorest percentof the population (Haggard, 199 , pp. Many statist policies prevalent inLatin America stem from European and American economists who saw theDepression of the 193 s as a failure of market capitalism. The assumption that import substitutionindustrialization could prosper I and liberate Latin American countriesfrom the domination of foreign investors or domestic oligarchs was provenwrong. (199 ). Kim Il Sung, a young man who had served in the SovietArmy, was installed by the Kremlin at the head of a government in theNorth, where Korea shares a short stretch of border with the USSR. Thesweatshops that turn out cheap Korean textiles are written off as part ofthe price of national development. (Ed.), Comparative national development: Society and economy in the newglobal order. (Eds.), Manufacturing miracles. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.