Miracle on the Han River
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The Miracle on the Han River (Hangul: 한강의 기적; hanja: 漢江의 奇蹟; RR: Hangangui Gijeok) is a term used to refer to South Korea's postwar export-fueled economic growth, including rapid industrialization, technological achievement, education boom, large rise in living standards, rapid urbanization, skyscraper boom, modernization, successful hosting of the 1988 Summer Olympics and co-hosting of the 2002 FIFA World Cup. This growth was accompanied by a democratization and globalization that transformed the country from the destruction of the Korean War to a wealthy and developed country with a globally influential economy and prominent multinational conglomerates such as Samsung, LG, and Hyundai-Kia.
More specifically, this phrase refers to the economic growth of Seoul, through which the Han River flows, although it is generally used in reference to the country. Also, the "miracle" generally refers to the period between 1961 and 1996. The phrase comes from the "Miracle on the Rhine", used to describe the economic rebirth of West Germany after World War II, resulting partially from the Marshall Plan. The "Miracle on the Han" is used to describe the growth of postwar South Korea into the world's 15th largest economy and a role model for many developing countries in Asia. Seoul's infrastructure was destroyed by the Korean War and millions lived in poverty at the time, with thousands of unemployed people struggling to fulfill basic needs.
When General Park Chung-hee seized power in 1961, South Korea had a per capita income of less than $80 per year. During that time, South Korea was mostly dependent on foreign aid, largely from the U.S.A. in exchange for South Korea's involvement in the Vietnam War. Government's Saemaeul movement focused on developing rural Korea. The strong leadership of the government, though criticized as repressive and heavy-handed, and the effective use of cheap labor, served as a catalyst for the South Korean economy.
In less than four decades, Seoul was transformed into a global city, a center of business and commerce in Northeast Asia and a highly developed economic hub, laying the grounds for an advanced technological and communications infrastructure. Koreans consider this rapid growth a symbol of national pride and self-sufficience. Besides the Saemaeul movement, the Korean government carried out another effective economic development plan called the Five-Year Plan. There were more than five plans created, and they were designed to revive the economy. Each of the plans contributed greatly to industrialization and enlarging the marketplaces of South Korea.
- 1 Development during postwar governments (1953-1961)
- 2 Development during Park Chung-hee rule (1961-1979)
- 3 Specific planned policies
- 4 Park's legacy and other factors
- 5 The dominance of chaebol in the Korean economy
- 6 Mechanisms for economic growth
- 7 Economic problems
- 8 The IMF Crisis
- 9 Challenges to the term "Miracle on the Han"
- 10 See also
- 11 References
- 12 External links
Development during postwar governments (1953-1961)
In the aftermath of the Korean War, South Korea became increasingly authoritarian as a result of militant anti-Communist policies enacted by President Syngman Rhee. Despite these issues, the Rhee administration is noted for at least two achievements that aided economic growth. First, Rhee's firm leadership in the aftermath of the war allowed South Korea to stabilize itself. Secondly, the Rhee administration implemented an important land reform that provided for the redistribution of land, averting a potentially explosive social issue. However, when Rhee and the Liberal Party rigged the presidential election of 1960 in an attempt to consolidate their power, nationwide demonstrations led by angry students brought about the end of Rhee's regime, to be succeeded democratically by Chang Myon, the leader of the Democratic Party. However, with factional and other differences, economic and social problems continued to mount and in 1961, a military coup led by General Park Chung Hee overthrew the Democratic Party, giving rise to a military junta.
Development during Park Chung-hee rule (1961-1979)
One of the most important contributors to the "Miracle on the Han River" was Park Chung-Hee. Under the rule of Park Chung-hee, South Korea began to make a successful recovery in its economy. Park Chung-hee announced the first 5-year Economic Development Plan to mobilize national resources in establishing a self-supporting industrial economy. This psychological boost gave Koreans confidence and motivation in its path to economic success. "Treat employees like family" was Park's new motto, which also led to Korea's economic success. With this motto, Korean workers were claimed to be 2.5 times more productive than American workers even though Korean workers were paid one-tenth of American wages.
Park's rule is remembered by Koreans with mixed emotions. Many praise him for the contributions he made to Korea's economy and its recovery, but contemporary opinions criticize him for systematically disregarding human rights and censoring the media as part of a brutal military dictatorship. Following a military coup in the 1960s Park established a strong authoritarian rule characterized by a one-party regime. In this authoritarian state, the leading party only had to appease a small constituency of the ruling or military elite.
During Park's tenure Korea suffered from censorship in the press and media. Because of strong antipathies toward communism, Korean journalism and free speech were tightly controlled. Disregarding human rights and violations, Park would utilize the abundant supply of cheap labor and place his foremost priority on Korea's economic restoration. Morality laws established mandatory curfews and regulations on attire and music. In his program of Yushin Kaehyuk (Revitalizing Reforms), he caused Korean cinema to enter into a moribund period considered by many to be the lowest periods in the history of Korean cinema.
Such enormous growth of economy came with costs to freedom. Although Park was successful in bringing economic recovery to Korea, he trampled on human rights and often imprisoned those who questioned his rule. Park had believed that South Korea was not ready to be a full democratic nation nor a free nation. As he stated, "Democracy cannot be realized without an economic revolution." Park argued that the poverty of the nation would make it vulnerable, and therefore an urgent task was to eliminate poverty rather than establish a democratic nation. During his presidency the Korean Central Intelligence Agency became a much feared institution and the government frequently imprisoned anyone who opposed them. Park Chung-hee's rule ended on October 26, 1979 when he was killed by his chief of security services, Kim Jaegyu.
Specific planned policies
Syngman Rhee enabled South Korea's first economic spurt, thanks to the implementation of an important land reform. This provided for the redistribution of land, thus removing a potentially problematic social issue.
Park Chung Hee also made significant contributions to the welfare of South Korea. South Korea began a strong economic recovery after this point and South Korea eventually became the 11th largest economy in the world with a per capita income exceeding $10,000 per year and more than 70% of its population claiming to be middle class.
Despite ongoing pressure from North Korea, President Park Chung Hee formulated a 5-year plan to boost the South Korea economy with several goals:
- develop energy industries (such as coal production and electric power)
- expand agricultural production and aimed at increasing farm income and correcting the structural imbalance of the national economy
- develop basic industries and the economic infrastructure
- utilize to the full extent of idle resource; increased employment; conservation and utilization of land
- improve the balance of payments through export promotion
- promote science and technology.
While this 5-year plan did not bring about an immediately self-reliant economy, there was a rapid period of growth out of this policy. The ambitious plan had simply looked for better policies in modernizing and preparing for long-term economic success. The government's efforts were designed to bring about policy reform.
Park's legacy and other factors
At the root of the rapid expansion of the Korean national economy were several factors, some societal and others political. One acclaimed building block of the "Miracle on the Han" was the importance placed on education. Aided by traditional Confucian ideals which celebrated literacy and scholarship, the state established a public compulsory education system. This allowed Korean labor to become highly skilled while labor expenses remained relatively low.
Three other key factors (known as “The Iron Triangle”) for the country's regeneration were state strength, strong bureaucracy, and the Korean Chaebol businesses. Park’s government combined national and private economic interests in a way that manipulated nationalistic sentiments, allowing the government to push through economic policies. These policies were incorporated in several ways, including policy loans, which were utilized to stimulate the struggling economy. The implementation of the policies resulted in state-sponsored industrialization and commercial expansion.
The dominance of chaebol in the Korean economy
Chaebol refers to corporate groups in South Korea, mainly run by families, that exercise monopolist or oligopolist control in product lines and industries. They can be compared with conglomerates of the United States and the Zaibatsu of Japan. Sometimes the Korean military itself is considered a chaebol. During the industrialization period of South Korea, President Park supported the rise of chaebol groups, facilitating the improvements of these groups for the benefit of economic growth. Inside the operations of chaebol groups, there are many branches that family members control and operate. Every Korean chaebol business was started by a family group and 70 percent of chaebol are still managed by family members, and in order for the power and standing of these groups to grow stronger, many chaebol form alliances through marriage, with examples including Samsung and Hyundai.
Many political affiliations are created within the chaebol. One-third of chaebol occupy high-ranking offices in three branches of the government. The chaebol, tired of new generals coming in and seizing their property or directing them to invest in favored industries, moved in the same direction as the middle class toward democratic elections and the rule of law. According to George Ogle, ten chaebol families managed 60 percent of the "Miracle on the Han". With the help of governmental help and associations, chaebols are still an enormous influence on the Korean economy, though they are also accused of inhibiting small businesses or independent entrepreneurship. The Kim Young Sam government (1993–98) attempted to assist small businesses by providing more loan money but this did not deter the chaebols from continuing to expand. In 1992, Korea was rated 100 out of 100 on wage rates and 100 on tax burden or lack thereof (with Spain the next highest at 71, and the United States third at 55). In other words, the Korean state still provides a relative capitalist heaven for their big business groups (Cumings, 330-331).
Mechanisms for economic growth
When the junta of Park Chung Hee came into power it had the advantage of seeing trends in the previous presidential terms. Not long before the junta had this authority the idea that the economic practice of import substitution was unable to help the economy was widely recognized. A lack of free trade enabled corrupt leaders of Syngman Rhee's administration to become rich. For this reason, action was required to stop corruption.
Having known about some sizable firms with growing markets, the government shifted focus from a self-sufficient economy toward the exportation of goods for the influx of foreign capital. That way, there would be enough capital in circulation. Civilians cooperated by investing in the markets and the business employers did their part making sure employees were loyal, improving labor cost savings. This continued to be the case even when the consequences of marginal utility seemed to be looming because of the overproduction of goods.
Another motivating factor in the industrial sector was the influence of a series of “policy loans” that were closely associated with negative interest rates. With the government backing heavy industries, electronics and steel industries flourished. Another benefit of industries promoted by the government was the freedom for leaders in the industrial sector to spend money without feeling constrained by a budget due to the government’s commitment to keep the business running. Therefore, the government expected positive results when they pressured businesses workers to perform well. Money subsequently came pouring into the economy as people became confident in investing in successful heavy industries whose rewards they were enjoying.
By the end of 1996, South Korea had established itself as the eleventh largest economy in the world after being in economic shambles at the end of the war. However, systemic problems remained with its political and financial systems. Earlier, whenever problems arose that hindered economic development, the junta harassed the wealthy for funding. The junta also gathered a group of high earners, who had attained their wealth due to their corrupt relations with Syngman Rhee. These people were known as the "illicit profiteers".
Financial troubles mounted as Korea received short term relief from the United States when Treasury Secretary Rubin and other senior officials agreed to a 57 billion dollar bailout package in exchange for drastic restructuring of Korea's markets. As the country came under pressure to restructure the financial sector and make it more transparent, market oriented, and better supervised, its firms were obliged to restructure in a way that would allow international organizations to audit them. Around December 1997, President Kim Young Sam had announced that South Korea had gained recognition for its economy by joining the Organization of Economic Cooperation and Development, consisting of top industrial nations. President Kim then created a new labor law which retained the Korean Federation of Trade Unions, a large, state-controlled trade union, as the only officially approved labor organization for five more years, leaving the independent Korean Confederation of Trade Unions out in the cold. This new law undercut workers' interests.
The IMF Crisis
In 1997, the "miracle" on the Han River temporarily ended. South Korea again encountered an economic disaster in the form of the 1997 Asian Financial Crisis. Korea's reserves were severely limited with a total of only $6 billion remaining. The majority of this money was allocated for spending in the upcoming term. Kim Yong-sam, the first nonmilitary person to become president in thirty years, failed to protect the economy. President Kim Dae-jung (1998-2003) took office after Kim Yong-sam with considerable damage to repair. Kim was openly opposed to the chaebol and the current system of finance and government, and with the efforts of the citizens, a new president, and 58 billion dollars put together by the International Monetary Fund, the country paid its debts and surmounted the problem. Through such actions South Korea's financial crisis was severe but relatively brief compared to other countries who experienced similar situations.
In 1999, the G20 was established out of a group of twenty finance ministers and central bank governors and 19 countries. This group was formed to bring together established industrial and emerging-market countries from all regions of the world. South Korea acceded to the G20 in November 2010, capping a successful sixty-some years of rebuilding and modernization.
Challenges to the term "Miracle on the Han"
The time between the years 1961-1996 was a period of economic boom for South Korea which few would have predicted before about 1960 (Cumings, 300). South Korea's leap from the destruction of the Korean War to become the eleventh largest economy in the world did not happen by supernatural might: "Koreans in the South have worked their fingers to the bone to create the industrial country that we now see” (Cumings, 341). The "Korean military... had swelled from 100,000 in 1950 to well over 600,000 by 1953" (Cumings, 302). In addition, the term "miracle" has been invoked for nationalistic purposes against Japan.
The South Korean government demanded from Japan a total of 364 million dollars in compensation for the 1.03 million Koreans conscripted into the workforce and the military during the colonial period, at a rate of 200 dollars per survivor, 1,650 dollars per death and 2,000 dollars per injured person. South Korea agreed to demand no further compensation, either at the government or individual level, after receiving $800 million in grants and soft loans from Japan as compensation for its 1910–45 colonial rule in the treaty.
However, the South Korean government used most of the grants for economic development, failing to provide adequate compensation to victims by paying only 300,000 won per death in compensating victims of forced labor between 1975 and 1977. Instead, the government spent most of the money establishing social infrastructures, founding POSCO, building Gyeongbu Expressway and the Soyang Dam with the technology transfer from Japanese companies. This investment was named Miracle on the Han River in South Korea.
- Economy of South Korea
- Korean Wave
- Tiger economy
- Four Asian Tigers (South Korea, Taiwan, Hong Kong, and Singapore)
- Tiger Cub Economies (Indonesia, Malaysia, Thailand, and the Philippines)
- Japanese post-war economic miracle
- Chinese economic reforms
- Đổi Mới (Vietnam)
- Wirtschaftswunder (West Germany)
- Park Chung-hee Admired for Making Something Out of Nothing The Korea Times, 2009-10-25
- S. Korea Is a Role Model for Africa: Obama The Korea Times, 2009-11-07
- Cumings, Bruce. Korea's Place in the Sun: a Modern History. New York: Norton, 2005. Print.
- Korea: A Century of Change By Jürgen Kleiner
- Ch'oe, Yong-ho, Peter H. Lee, and Wm. Theodore de Bary “Politics and Economy in South Korea” Sources of Korean Tradition Volume II: From the Sixteenth to the Twentieth Centuries. Columbia University Press, 2006. Pages 370–373.
- Lee, Peter H., and Bary William Theodore De, eds. Sources of Korean Tradition. Vol. 2. New York: Columbia UP, 2000. Print.
- Ogle, George E. South Korea: Dissent within the Economic Miracle. London [England: Zed, 1990. 35. Print.
- "Declassified Documents Could Trigger Avalanche of Lawsuits," Chosun Ilbo January 17, 2005
- "Seoul Demanded $364 Million for Japan's Victims Updated," Chosun Ilbo January 17, 2005
- "S.Korea discloses sensitive documents". UPI.com. 17 January 2005.
- "Seoul ready to launch panel on Korean victims of colonial rule," Koreaherald February 11, 2005
- Jong sik Kong Korea Was Most Efficient in Utilizing Japanese Reparation, Dong-a Ilbo, JANUARY 19, 2005.