[Lee Byung-jong] President Park’s legacy

On this season of Nobel Prize awarding, South Koreans have been fortunately stunned twice. The largest information was in fact the profitable of the Nobel Prize in literature by the novelist Han Kang. Equally vital, however maybe much less observed information was the truth that the three winners of the Nobel Prize in economics revealed their work was largely impressed by the success of the Korean financial system. In learning why some international locations succeed economically, whereas others fail, they used Korea as a main instance of successful story. They significantly credited President Park Chung-hee’s export-led improvement insurance policies for Korea’s exceptional success.

In his seminary ebook titled “Why Nations Fail,” James Robinson of the College of Chicago, one of many three laureates, argued that Korea succeeded as a result of it had the fitting political and financial establishments. Whereas North Korea’s “extractive” financial insurance policies introduced impoverishment, South Korea’s “inclusive” insurance policies with a agency institutional base led to creativity and alternatives for its folks. Daron Acemoglu, one other laureate, additionally attributed the distinction between South and North Korea to their establishments. In interviews with the Korean press after profitable the prize, Robinson attributed Korea’s earlier success to Park who “had a undertaking to develop his nation.”

Robinson admits Park was a dictator, however one with a imaginative and prescient. He constructed sound financial and social establishments that lasted even after his dying. Believing that Korea’s future is in exports, Park established a robust paperwork machine solely devoted to the promotion of exports. The Financial Planning Board, specifically, labored as a management tower monitoring and mobilizing different ministries for that objective. To additional exports, numerous measures have been taken, together with export insurance coverage and normal buying and selling firms. The received forex was saved weak to assist exporters. A month-to-month assembly attended by Park himself and excessive officers was held to verify export targets have been met. The assembly was held 177 instances from 1963 till his assassination in 1979.

In that sense, President Park’s financial insurance policies weren’t purely capitalistic. It was a robust top-down command financial system the place all the selections have been made on the prime. His 5-12 months Financial Improvement Plan is certainly modeled after the Soviet Union’s deliberate financial system. But Park’s authorities motivated the personal sector with a sure diploma of incentives. In the event that they adopted authorities instructions, personal firms got low cost cash, tax breaks and different subsidies. Extra importantly, the labor motion was severely curtailed by Park’s repressive regime to ensure their steady development. It was a uniquely Korean-style hybrid financial system the place the federal government and the personal sector labored collectively to share dangers. A key instance of such risk-sharing was the event of the heavy chemical compounds business within the ’70s.

And the collaboration undertaking lastly took off, albeit after Park’s dying. From the ’80s, Korea’s exports started to maneuver upscale in its portfolio from easy labor-intensive to extra capital and technology-intensive areas. The early export gadgets of garments, plywood and wigs have been changed by electronics, cars, metal, ships and petrochemicals. Park’s legacy packages, such because the Financial Planning Board, continued to function an environment friendly commanding tower even because the personal sector grew quickly.

But the financial and social establishments Park constructed grew to become too out of date to handle the already developed, mature Korean financial system within the late Nineties. The system was additionally too inflexible to soak up unstable exterior shocks. Consequently, the Korean financial system was dealt a heavy blow through the 1997-1998 Asian monetary disaster. With an excessive amount of borrowing from abroad and extreme investments by the personal sector, Korea barely escaped nationwide chapter through an emergency bailout by the Worldwide Financial Fund.

However the Korean financial system bounced again as its expertise in addition to heavy and chemical compounds producers, the legacy of Park, regained their energy. Skilled bureaucrats skilled throughout Park’s administration additionally performed a key position in cleansing up the mess created by over-leveraged firms. Corporations have been compelled to streamline and restructure their portfolios and turn into leaner and meaner. Banks and different monetary establishments have been additionally required to reinforce their monetary well being to avert one other monetary disaster. Certainly, through the 2007-2008 international monetary disaster, triggered by the Wall Avenue meltdown, Korea was one among only a few international locations that weathered the storm efficiently.

Though Korea’s financial system right now stays robust, it’s not with out issues. And a few of these issues are additionally legacies of President Park. The broad hole between exporters and home sellers that continues to hang-out the Korean financial system was little question Park’s product. Park’s decades-long assist of enormous family-owned conglomerates led them to dominate the financial system on the expense of small and medium-sized enterprises. Financial inequalities threaten to undermine society’s cohesiveness.

But Park’s contribution to Korea’s financial vitality can’t be denied. To attest that, Korea is now discovering a brand new, completely surprising blue ocean that was additionally Park’s legacy — the protection and nuclear energy sector. His push to construct a heavy chemical compounds business for the twin objective of civil and protection is now paying off within the type of large quantities of weapons exports to Poland, Romania, Norway, Saudi Arabia and a bunch of different international locations. Park’s obsession with growing Korean expertise at any price additionally interprets into multi-billion-dollar nuclear energy crops within the United Arab Emirates and Czech Republic. Along with the nation’s conventional exports, protection and nuclear energy industries have gotten a brand new money cow. The Nobel Prize laureates have been fairly proper in linking Korea’s financial success to Park.

Lee Byung-jong

Lee Byung-jong is a former Seoul correspondent for Newsweek, The Related Press and Bloomberg Information. He’s a professor on the College of World Service at Sookmyung Ladies’s College in Seoul. The views expressed listed here are the author’s personal. — Ed.