Downtown Inchon, South Korea
President of South Korea
Park Chung-he, 1963-79
The rise of the South Korea we see today began in 1963 with the presidency of General Park Chung-hee who reoriented the nation from an isolated, autarchic economy to an export-led one, attractive to foreign capital. Though politically unfree, South Korea’s economy grew rapidly under Park, who enunciated a national resolve to modernize, and divided his development plans into seven 5-year phases, the first two of which in the 1960s set the foundation for even greater growth in the 1970s. He commissioned roads, harbors, hydroelectric dams, railroads, communication centers, textile and cement factories, and pursued a strategy of labor-intensive manufactured exports to utilize Korea’s surplus of workers. In 1965, Korea sent over a quarter of a million soldiers to Vietnam to join the American war effort there.Not only did this lead to the modernization of the Korean military, Korean soldiers’ pay contributed billions of hard dollar assets to the home economy. President Park’s normalizing relations with Japan that same year added more stimulus. By 1967 the Korean economy achieved 8% growth, lifting a country recently devastated by the Korean War, on the brink on starvation, and dependent on foreign aid organizations such as the World Bank, USAID, and the UNDP, to a sparkling national transformation.
In 1960, South Korea had a per capita income of just US$72.00 and was behind most nations in wealth – including its immediate neighbor to the north. Building on the basic infrastructure assembled in the 1960s, President Park moved the economy into steel, shipbuilding, electronics, and chemicals in the 1970s. Central to this growth was government cooperation with about ten family-controlled business conglomerates in the 1960s known as chaebols (jay-bol) which became the backbone of South Korea’s drive to modernize its economy. Park modeled the Korean arrangement on the zaibatsu system that developed in Japan during the Meiji period of the nineteenth century and which survived in its essence to become an engine of Japanese recovery after World War II. The two differed in structure since the zaibatsu conglomerates were organized around a bank, whereas the chaebol were not.
The chaebol grew by access to special privileges and for their ability to borrow vast sums domestically and in the international money markets since loans were backed directly by the Korean government without, for example, the intermediary banks of the zaibatsu. In turn, General Park and government leaders relied on the ideas and cooperation of the chaebol leaders in moving ahead with successive Five-Year Plans, as they channeled monies directly to the chaebol for the achievement of national objectives.
Today, Samsung, Daewoo, LG, and Hyundai are just four examples of firms known around the world as major industrial enterprises and exporters, but they are all chaebol with roots in the South Korean emergence in the 1960s. The giant, Samsung (meaning “three stars”), started as a trading firm with interests in sugar refining, real estate, and trucking. It was the earliest conglomerate favored by Park, and decided to try its hand at electronics in the late 1960s.
Today’s Lucky-Goldstar (“LG”) started as a producer of toothpaste face cream, and soap and was so successful that it purchased the last of the American television manufacturers, Zenith, in 1995. Top-ranked Hyandai surged to prominence in the mid-1960s when given the construction contract for the 260-mile highway from the capital, Seoul, to the second largest city of South Korea, Pusan. Hyandai built its credibility constructing highways throughout Southeast Asia and dredging harbors for the U.S. military in Vietnam after 1967.
The South Korean pattern of corporate-government collaboration appears closer to a centrally-planned socialist state than the capitalism it often purported to be. Nevertheless, the country has grown tremendously from the 1960s, and by 2017 World Bank estimates stands at an impressive per capita income of $28,380 based on leading positions in semi-conductors, cars, and worldwide construction services. South Koreans refer to the 1960s as the start of the “Miracle on the Han River,” and like other Asian Tigers, these changes were accomplished with few natural resources, with a large population; bereft of energy sources, and in a small geographical space.
By 2020 South Korea was still “tigerish” as Asia’s fourth-largest economy.