south korea ecomomics

south korea ecomomics

South Korea’s Economic Growth and Development

1. Introduction

How did Korea achieve this unprecedented growth for its paradigm? How can we learn so many lessons from Korea? I will present three cases that I am curious about. First, rapid modernization and industrialization of education from the base is one of the obvious secrets of Korea. Since 1958, the government has consistently expanded the budget for education through the National and People’s Budget. The huge budget was distributed equitably to reduce the distinction between rich and poor across the country. The modernization of Korean education saw rapid progress, and the literacy rate quickly jumped as high as 90% in just 10 years later. In the age of war, the central and local governments in Korea collaborated to implement educational measures beyond political distinctions, and they were prepared for educational revival by putting off national salvation and school counselors in each school to protect the precious cash donated through the National and People’s aid during the October 2nd national mobilization.

South Korea is a country situated in Asia. The OECD’s economic survey reported that the South Korean economy grew at an annual average rate of 7 percent from the early 1960s to the late 1990s. Korea, until the mid-20th century, was a relatively hard-up society, becoming one of the poorest countries in the world. The military General Park Chung Hee, from the transformation perspective, is one example of a leader who introduced beneficial reforms that made South Korea the economic success it is today. In this essay, we will look at the factors that made Korea’s economic development an unquestionable success. The law of education and industrialization is Korea’s secret of success. Although it was just a rock down a well, this paradigm will help make us more successful. The world recognizes that South Korea is the world’s most competitive performing country. Successful industries are automobile and mobile. In particular, the overwhelming victories of Samsung Electronics and Hyundai Motors were included in the world’s best brand.

2. Factors Driving South Korea’s Economic Growth

Economic development refers to an increase in national economic production of final goods and services, which results in the improvement of the living standards of citizens. Economic growth refers to the increase in the Gross Domestic Product (GDP) per capita over a period of time. The key factors that have been driving South Korea’s rapid economic growth and development are related to: (1) the role of government, including the role of export politics, the role of government in fiscal spending and investment, the role of the Korean government in terms of globalization of the Korean economy, and the $291 trillion that South Korea will spend by 2030; (2) emphasis on human capital development and industrial policy; (3) economic success of Chaebols, large industrial conglomerates: rapid growth in South Korea’s large and small and medium enterprises (SMEs) and large companies; (4) South Korea’s focus on information and communications technology R&D; (5) rapid social change: first, South Korean women, who were confined to the household when the economy was developing, are increasingly becoming financial providers; second, North Korea has rich natural resources; (6) problems in South Korea – cost to the environment, aging population, and inevitable increase in the potential for money laundering; (7) beneficial cooperation between the European Union and South Korea (Chamber of Commerce and Industry: KOTRA), and the G20 as economic global governance in the South Korean economy.

South Korea has experienced one of the largest rates of economic growth in the last several decades compared to other countries in the Organization for Economic Cooperation and Development (OECD). In 1951, at the end of the Korean War, South Korea was a poor, unindustrialized, war-torn, and “underdeveloped” nation. Just forty years later, in 1991, South Koreans were in disbelief that their nation had become the number one developing country and had caught up to or exceeded most Western European nations in terms of wealth status. What factors account for the miracle on the Han River?

3. Challenges and Opportunities in South Korea’s Economy

Hong’s recent successful trade-facilitating dialogue with China, Japan, and South Korea and the finalization of the 2016 G-20 trade facilitation agreement will improve regional and global trade, boost demand in South Korea, and push South Korean import and export volume. Economic growth should be supported by the IMF’s estimation of the external demand contribution of 2.7% to South Korea’s GDP growth. Long-term prospects should also improve because of the conclusion of the first round of negotiations for the Regional Comprehensive Economic Partnership, importantly including China and South Korea. Later on, the implementation of the Services Development Plan could further steer the South Korean economy away from an overdependence on exports.

The economic outlook for South Korea remains robust, as activity will be supported by pent-up demand and public investment. The global economic recovery and South Korea’s reforms to address the country’s long-standing imbalances should have a short- and long-term positive impact. In the longer term, rising demand for South Korea’s services and tourists, together with the implementation of the Services Development Plan to meet the objectives of enhancing the economic development and increasing the South Korea’s non-manufacturing industries share in the economy, will help strengthen the country’s economic structure and capacity. More importantly, regional economic cooperation can be expanded, thereby boosting domestic demand and helping migrant workers from Southeast and South Asian countries, along with low-skilled South Koreans, successfully integrate into the South Korean society and labor market.

4. Government Policies and Initiatives for Economic Development

4. Land reform policy: Land reform increased agricultural productivity, reduced inequality, and improved the standard of living. South Korea has increased its production by building irrigation systems and infrastructure to help farmers cultivate better and use the law of agricultural cooperatives. Also, this is changing part of rural poverty as it made farming a more efficient business sector and increased the supply of labor to the industrial sector. Also, the free transfer of large land and housing has become a key source of savings for farmers. In the long run, housing reforms have led to the growth of private capital and have increased large private sector investments, etc.

3. Education policies: In order to provide skilled labor, South Korea has set up rigorous schooling, offered an education-based tax deduction, and created the World Federation of Education Associations. The country used compulsory education to ensure 100% literacy. It also formed industrial training policies with public and private relationships.

2. Export promotion policies: South Korea used export promotion to access foreign revenue and outpace imports. It undervalued the currency, offered tariffs on imported capital and intermediate goods, gave exchange rate guarantees, credit policies, and financial incentives. It also found external companies that could provide high-quality products at lower costs and subsidized them, as in the case of POSCO.

1. Industrial policies: South Korea used industrial policies to select which industries to promote. It also provided incentives to firms in these industries such as cheap loans, financial protection, and tax holidays.

South Korea has been adept at using government policies and initiatives to promote economic development. For example:

5. Conclusion

Based on such findings, Yao (2000) and Kiyotaki, Rupert, and Somanathan allow the possibility that a developing country eventually takes off to high growth even under the closed economy condition. In other words, structural change may allow the developing country to arrive at the first “buy-in” point. However, if a developing country has already reached this point, they will face the historical fact after this point. This paper examines the main physical manifestation of this weakened connection, the size distribution of agriculture producers, abstracting from the character of development in South Korea. In this paper, we generally revealed that the South Korean modern economic development was characterized by several important structural changes.

This paper has shown that historical and sectoral analysis of South Korea’s development has contributed to a significant revision in the traditional account of the country’s economic development. Improved analysis has shown that South Korea successfully developed by achieving structural change and a high level of savings and human capital acquisition boosted economic growth. Furthermore, we have confirmed the result of the Smithian growth model that creating a capital goods sector is important for the economic growth of a developing country. This conclusion has important implications for development policy. There is much more active structural change in developing than in developed countries. Landes (1969) writes “The Latin American economies suffered hyperindustrialization and push-oriented unfocused structural change”. Tomura, Yasumoto, and Benhabib (2006) and Hisano (2006) indicate that high growth in Japan and China comes from active structural change in which human capital has been accumulated.