South Korean Economic Miracle: A Spectacular Rise

Waseef Hussain

12 August, 2020 12:00 AM printer

South Korean Economic Miracle: A Spectacular Rise

Waseef Hussain

South Korea stands as one of the world’s wealthiest nation today. Consumer electronics brands such as Samsung and LG are widely available around the world. Hyundai and Kia cars can be seen across the globe. These are all South Korean products. South Koreans enjoy very high standards of living while democracy thrives in their country. However, unlike almost every other developed nation, South Korea earned its elite position only in the recent past. One of the most remarkable occurrences of the 20th century was the “economic miracle” of South Korea, which is referred to as the “Miracle on the Han River.” The country is small in size and is poorly endowed with natural resources, making the economic rise even more remarkable. The story of South Korea is a tale about a weak, agriculture-dominated economy rising to become a global spearhead in technology, innovation, and industry within merely the span of three decades.

In 1948, the nation of the “Republic of Korea,” referred to as “South Korea,” emerged as an independent state. The Korean War broke out in 1950 as North Korean forces invaded South Korea to reunify the entire Korean peninsula. After three years of devastating conflict, the war ended in a stalemate. At the beginning of the 1960s, South Korea had a predominantly agriculture-based economy. In 1961, South Korea’s Per Capita Income was $93, less than that of Bangladesh at the time. Until 1968, the GDP of the Democratic Republic of Congo was higher than that of South Korea. A coup d'état led by General Park Chung-hee in 1961 saw the establishment of a military dictatorship in the country. South Korea subsequently experienced massive export-led economic growth in the three decades following the military takeover.

In the years following independence, South Korea relied heavily on technology imports and the construction of industrial facilities by foreign corporations. Chung-hee subsequently shifted the economy’s focus to the local textile industry which exported to foreign markets. As local demands were low, the textile companies had to rely on earnings from foreign markets to remain profitable. This compelled them to develop high quality products and increase efficiency in order to achieve global competitiveness. “Chaebols,” large, family-owned business conglomerates in South Korea, were one of the main reasons for the country’s swift and rapid economic growth. Such corporations were strongly favoured by the government as they were provided special loans, legal immunity for their hyper-exploitative system, tax breaks, protection from competition, and inexpensive or free financing. The state encouraged these chaebols to invest heavily in “Research and Development” with the goal of developing this sector substantially. Notable South Korean chaebols are Samsung, LG Electronics, Hyundai, and SK Group. The Chung-hee administration shifted the economy’s focus to heavy and chemical industries from agriculture. The threat of communism due to the Cold War along with North Korean efforts to take over South Korea also prompted the then South Korean government to achieve rapid industrialization and economic growth to negate any possibility of a communist takeover. The United States provided South Korea with large aid packages and ensured favourable trade policies to enable the latter to grow at a speedy pace.

While the South Korean economy grew at an extraordinary pace during the years of authoritarian military rule, basic human rights of South Korean citizens were severely abused simultaneously. Park Chung-hee remained President of the Republic until his assassination in 1979, suppressing opposition groups through illegitimate constitutional reforms, manipulation of the legal system, unlawful arrests, torture, surveillance, and violence. In the eight years following Chung-hee’s death, the military continued to rule in an authoritarian fashion as fundamental political rights were harshly suppressed. In June 1987, over a million South Koreans marched on the streets in protest of the army’s dictatorial reign. Unable to suppress the will of the people any longer, Roh Tae-woo, the then President and military dictator, gave in to the people’s demands and promised constitutional reforms. A declaration was soon made about holding direct presidential elections and the restoration of civil rights. The nation’s first free and fair elections were held in 1991, paving the way for a democratic future. Gradually, a proper democratic political system was successfully established, the military was sent back to the barracks, and citizens gained civil rights.

The real GDP of South Korea grew from a meager US$2.7 billion in 1962 to an astounding US$230 billion in 1989. In these 27 years, the national economy grew at an average rate of 8 per cent per year. The nationwide expressway system and the Seoul subway system were established during this period, substantially improving national infrastructure and communications. By the end of the 1980s, South Korea had successfully transitioned into an industrial powerhouse from a largely agrarian economy in a span of less than thirty years. In 1988, the world came to witness the Seoul Olympics, which was a reflection of the outstanding level of economic advancement the country had experienced in a relatively short length of time. By then, the economy was dominated by the petrochemicals, automobile-manufacturing, consumer electronics, and shipbuilding industries. The Asian Financial Crisis of 1997 initially had a strong negative impact on the South Korean economy, but the country recovered within a period of two years and ensured positive growth rates in the years that followed. In 2002, South Korea co-hosted the FIFA World Cup, which was another landmark moment in the country’s history. The economy reached the US$1 trillion mark in 2006. This is particularly impressive considering the nation’s total population. South Korea was also one of the few advanced economies to not fall into a recession during the Global Financial Crisis of 2008. From 2008 to 2010, the economy grew at a rate of over 6 percent.

In 2019, World Bank figures showed that the South Korean GDP Per Capita Income (PPP) was US$46,452. According to the IMF, South Korea is currently the 12th largest economy in the world by GDP (PPP). The GDP (PPP) is valued at $2.31 trillion. The country is a world leader in technology and innovation. The International Innovation Index ranks South Korea as the second-most innovative country in the world. South Korea is 22nd on the Human Development Index, and it is placed in the “Very High Human Development” category. This means that South Korean citizens are enjoying a high level of income along with quality education, and healthcare. The Democracy Index places the country in 23rd position, ahead of the likes of Japan, the USA, and Belgium. A total of sixteen South Korean companies find themselves on the Global Fortune 500 ranking. Samsung Electronics is the second largest technology company in the world; Hyundai Motors was the world’s third largest manufacturer of motor vehicles as of 2017. Furthermore, Samsung Heavy Industries is one of the largest shipbuilders in the world. This is indicative of how massive and dynamic the nation’s economy currently is. K-pop, a genre of popular music native to South Korea, has gained global popularity. South Korean soap operas have also garnered an international following. Hence, South Korean culture is effectively influencing other cultures across the globe.

South Korea is one of the incredible success stories among formerly colonised countries. Today, the country is flourishing economically, politically, and culturally. While the many successes ought to be celebrated, certain challenges must also be dealt with. South Korea should improve its overall distribution of income, further democratise their different institutions, adopt measures to tackle environmental problems, and find a viable solution to reunify with North Korea in the years to come. While we enjoy using numerous South Korean products, from electronics to semiconductors, automobiles to petrochemicals, ships to wireless communication equipment and flat displays, we can acknowledge and appreciate the exceptional achievements and accomplishments of the South Korean nation.

 

The writer is a freelance columnist


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