Miracle on the Han River

For the historical context of this phrase, see Economy of South Korea.

The South Korean economy grew almost non-stop from near zero to over a trillion dollars in less than half a century.

Economy of South Korea

History

Miracle on the Han River 1997 financial crisis

Companies

List of companies · Chaebol Samsung (Chaebol) Hyundai (Chaebol) LG (Chaebol) · SK (Chaebol)

Industry

Currency · Communications Tourism · Transportation Real estate · Financial services Nuclear power

Rankings

Regions by GDP per capita International rankings

Related topics

Science and technology · Cities

Hangul: 한강의 기적 Hangangui Gijeok) refers to South Korea's highly accelerated export-fueled economic growth, including rapid industrialization, technological achievement, education boom, exponential rise in living standards, rapid urbanization, skyscraper boom, modernization, successful hosting of the 1988 Summer Olympics and 2002 FIFA World Cup, fast democratization and globalization that miraculously transformed the country from the ashes of the Korean war to a wealthy and highly developed country today with a globally influential trillion dollar economy and well-known multinational conglomerates such as Samsung, LG and Hyundai-Kia.[1] More specifically, this phrase refers to the economic growth of Seoul, through which the Han River flows. Also, the miracle generally refers to the period between 1953 and 1996. The phrase comes from the "Miracle on the Rhine", which is used to describe the economic rebirth of West Germany after World War II, resulting partially from the Marshall Plan. The word "miracle" is used to describe the growth of postwar South Korea into the world's 13th largest economy and a role model for many developing countries,[2] something considered to be impossible by many at the time. 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 per capita income of less than $100 per year. At this point, South Korea was mostly dependent on foreign aid, which mostly came from the United States of America in exchange for Korea's involvement in the Vietnam war. President Park Chung-hee's Saemaeul movement focused on developing rural Korea. The strong leadership of the Park government and the effective use of cheap labor started a spark in the South Korean economy. In less than four decades, this "hopeless" city was completely transformed into a world leading global city, a centre of business and commerce in Asia and a highly developed world city and economic hub, having among the most advanced technological infrastructure in the world. It is considered by many Koreans as a symbol of national pride and "can-do" spirit. Besides the Saemaeul movement, the Korean government carried out another effective economic development plan called Five-years plans. There were more than 5 plans created, and they were designed to revive the economy. Each of the plans contributed tremendously in industrialization and enlarging the marketplaces of South Korea. (See also:Five-year plans of South Korea) Park Chung-hee Rule (1963-1979) One of the most important people that contributed to the Miracle on the Han River was Park Chung-Hee. Under the rule of Park Chung-hee, South Korea began to make a dramatic recovery in its economy. Park Chung-hee announced the first 5-year Economic Development Plan to mobilize all of its resources in establishing a self-supporting industrial economy. Although he had many plans and contributions to Korea's economic revitalization, the most important thing that Park Chung-hee brought to Korea was self-confidence. This psychological boost gave Koreans hope and motivation in its path to economic success.[3] "Treat employees like family" was Park's new motto, which also led to Korea's economic success. With this motto, Korean workers were 2.5 times more productive than American workers even though Korean workers were paid one-tenth of American wages.[4] During Park's rule, Korea suffered a very authoritarian leadership. Under the Park government, there was a huge censorship in the press and media. In his program of Yushin Kaehyuk (Revitalizing Reforms), he caused Korea Cinema to enter into a depression period. Many consider this as one of the lowest periods in the history of Korean cinema. Because of his strong feelings towards anti-communism, he would censor all of media and restrict freedom of press. Disregarding human rights and violations, Park would utilize the abundant supply of cheap labor and place his foremost priority on Korea's economic restoration. Although he was successful in bringing economic recovery to Korea, he trampled on human's rights and often imprisoned anybody who would question his rule. There was no freedom of speech under Park Chung-hee's rule. He would often arrest and torture anyone who would rebel against his policies. Park Chung-hee's rule came to an end on October 26, 1979 when he was killed by his closest friend, Kim Jaegyu. Many praise him for the contributions he made to Korea's economy and its recovery. Some even give him the title as the greatest South Korean president for all the industrial and economical growth South Korea experienced in his rule, but many criticize him for his harsh and cruel dictatorship. But one thing is certain; Korea would not have gone through an economic revolution if it weren't for this man. Despite all of his harsh and cruel policies, he is to be credited for Korea's economic success.[3] Foundations of the “Miracle” At the root of the rapid expansion of the Korean national economy were several factors both societal and political. Experts agree that one of the fundamental building blocks of the Miracle on the Han was the stress placed on education. Aided by widely held 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. “The Iron Triangle” Following the unprecedented economic growth experienced by Korea beginning in the 1960s, experts began to speculate that the Miracle on the Han could be explained by three key factors: state strength, strong bureaucracy and the Korean Chaebol businesses. Authoritarian Rule Following a military coup in the 1960s Park Chung Hee established a strong authoritarian rule. Korean political life was characterized by a one party regime. State strength can be most simply defined as a state’s ability to ignore political pressure and stamp down social unrest. In an authoritarian state in which the leading party must only appease a small constituency of the ruling or military elite, there is an opportunity for strong, directed and unified policy to be put in place. Park’s government was able to conflate national and private economic interests in a way that manipulated nationalistic sentiments in order to push through economic policies. One way this was incorporated was through policy loans. These policy loans were utilized to stimulate the struggling economy. The loans were granted by the government to individuals who would abide by their wishes as to where to invest this money. With this strategic plan, the government had hopeful plans of growing and nurturing Korea's economic strength. The result was a state-sponsored industrialization and commercial expansion. Foreign Aid Majority of the foreign aid that provided the capital for the miracle came from the United States. Aid in the form of money and goods from the military PX (Postal Exchange) were constantly flowing into South Korea since World War II. Official sources indicate that $12 billion of the American treasury went to South Korea in the years 1945-1965. By 1960, South Korea had $100 per capita income or an estimate of $2 billion of national income.[5] A high point in the foreign aid came in 1957, where a whopping $383 million dollars were provided by the U.S. Money also sloshed in as military aid --- $400 million in the year 1957. Imports from the U.S were stunning as well. By the end of 1950, As much as five-sixths of all Korean imports came from the U.S. During the industrialization phase, Korea borrowed money from the world, most of which was from the United States. Towards the end of 1970s, Korea became one of the four biggest debtors in the world. Foreign aid and loans gave the needed capital to catalyze the heavy industrialization witnessed as the Miracle on the Han River. Cost of Freedom In the aftermath of the Korean War, South Korea became increasingly authoritarian as a result of militant anti-Communist policies enacted by President Syngman Lee. Despite these issues, the Lee administration is noted for at least two achievements which aided the economic growth. First, Lee's firm leadership in the aftermath of the war allowed South Korea to withstand the adversities that South Korea suffered during the War. Secondly, the Lee administration implemented an important land reform that provided for the redistribution of land which adverted a potentially explosive social issue. However, when Lee 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 the Lee 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 rise and in 1961, a military coup led by General Park Chung Hee overthrew the Democratic Party, giving rise to the military junta. Through strong leadership provided by President Park and his government, South Korea made an economic recovery through the effective utilization of the abundant supply of cheap labor.[4] By end of 1996, South Korea established itself as the eleventh largest economy in the world. However, such enormous growth of economy came with the cost of freedom. President Park 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." President Park believed that poverty of the nation will make it vulnerable, and therefore the most urgent task was to eliminate poverty rather than establish a democratic nation. During Presidency of Park era, the Korean Central Intelligence Agency became much feared institution and the government frequently imprisoned anyone that opposed them. Yet, his fierce leadership to save the South Korean economy led to enormous success. Junta During the Miracle Junta-Military dictatorship. Whenever problems arose that dealt with economic development which is ideally a rich nation with a strong army, the Junta harassed the wealthy for funding. The Junta also gathered a group of people who earned a lot of money due to Syngman Lee, who are known as the "illicit profiteers." They also had to arrest a man who ate in Syngman Lee's container where animals ate while stating bizarre remarks. The Junta definitely helped shape where Korea lies today. Strangely, even though they were harsh, they helped the economy to exponentially increase, which eventually was able to receive recognition globally. The different stages Korea went through due to the different Junta leaders, Korea was able to experience and learn how to control their country. Crisis and Reform After the Korean War, Korea was in shambles economically. The nation was practically bankrupt and the government did all it could to sustain their banks. However, they mostly tried to cover up their jaw dropping deficit by lying. The Bank of Korea governor said that short-term nonperforming loans totaled 20 billion; whereas private analysts were placing the figure as high as 80 billion dollars; he said foreign reserves were at 31 billion, when in fact Korea had but 6 billion in reserves left, and all of it was committed in the near term. However, 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 market. Korea had to restructure the financial sector and make it more transparent, market oriented, and better supervised. Korean firms had to restructure in a way that would allow international firms to audit them. Around December 1997 President Kim Young Sam had announced that South Korea had advanced its economy by joining the Organization of Economic Cooperation and Development (this group consisted 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. Korea's financial sector officially became westernized and United States was able to oversee Korea's economy. The President's of South Korea's success The Korean War had left everyone scrambling about, yet Korea needed a president, and the first of them was President Syngman Lee; he led Korea into the first of the economic booms because he fulfilled two big achievements. First of which was the fact that Korea could endure such hardship during the war was because of the President’s leadership. The second achievement was that an important land reform was implemented, which provided for redistribution of land, thus removing a potentially explosive social issue. Another president with a tremendous help to South Korea was President Park Chung Hee. He took control in Korea and while all others were against it, he firmly signed a diplomatic normalization treaty with Japan. This treaty stated that Japan promised to provide economic aid totaling 800 million dollars. After this South Korea started to make a blooming recovery. Due to President Park Chung Hee South Korea had become 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. One of the biggest concerns President Park Chung Hee had were the ongoing pressure from North Korea. However even though he had this concern he put that aside to make a 5-year plan to boost the South Korea economy. President Park Chung Hee planned to 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.[6] However, using this 5-year plan did not bring about an immediate self-reliant economy. There came a rapid period of growth out of this policy which is what they initially hoped for. 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.[6] The Kingdom of Chaebol and The Korean Economy Chaebol refers to corporate groups in South Korea, mainly ran by families, that exercised monopolistic or oligopolistic control in product lines and industries. Every Chaebol was started by a family group and can be compared with conglomerates of the United States and the Zaibatsu of Japan. Sometimes the Korean military itself is considered as chaebol. During the Industrialization period of South Korea, President Park Chung Hee supported the rise of Chaebol groups. The state facilitated the improvements of these groups for the benefit of Korean economical growth. Inside the operations of Chaebol groups, there are many branches that each of family members control and operate. The strong Korean family relationship is important to the chaebol because family members enter the market of business, not an individual. Every Korean chaebol business was started by a family group and 70 percent of chaebol business are still managed by family members. Also, in order for the power of status and standing of these groups to grow stronger, many Chaebols form alliances through marriage. For example, well known chaebol groups like Samsung and Hyundai have held hands together through marriage. Many political affiliations are created within the chaebols. One-third of chaebols occupy high-ranking offices in three branches of the government. Therefore, the existence of chaebols in Korean government can be described as significant. The Chaebol, tired of new generals coming in and seizing their property or telling them what industries to invest in, clearly moved in the same direction as the middle class, toward democratic elections and the rule of law. Their ideal was the Japanese model of stable one-party democracy.[4] According to George Ogle, ten chaebol families managed 60 percent of the miracle on the Han.[5] With the help of governmental help and associations, Chaebols are still great influence of the Korean economy today. There are some that say the chaebol groups will shrink over time. The Kim Young Sam government tried to help out the smaller businesses by providing more loan money but that 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 provide a relative capitalist heaven for the big business groups. (cumings, 330-331).[4] The Mechanism for Economic Growth When the junta of Park Chung Hee came into the 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 proved unable to help the economy was widely recognized. A lack of free trade enabled corrupt leaders of Syngman Lee’s administration to become rich. For this reason, it took action to stop corruption. Having known about some sizeable firms with growing markets, the government junta shifted the 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 very loyal. What made the growth even better was that the labor cost saving was 25 times greater than that of the U.S. Fortunately, this continued to be the case even when the consequences of marginal utility seemed to be looming because of the overproduction of goods. A motivating factor in the industrial sector that is difficult to ignore is the influence of a bunch of “policy loans” that were closely associated with negative interest rates. With the government backing the heavy industries, electronics and steel industries flourished. Employers didn’t let such a lucrative opportunity slip away. Another benefit of industries promoted by the government was the freedom for leaders in the industrial sector to ambitiously spend money without feeling constrained by a budget due to the government’s commitment to keep the business running. Even so, they were well educated on how to efficiently use resources to benefit the country while some of the smaller government-monitored industries became the business partners of the government which not only helped achieve the government’s goals but raised their incomes. Therefore, the government expected positive results when they pressured businesses workers to perform well. Sure enough, money came pouring into the economy as people became confident in investing in particularly successful heavy industries whose rewards they were enjoying.[4] Post Miracle on the Han River In 1997, the miracle on the Han River ended. Unfortunately, South Korea once again encountered an economic disaster called 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.[4] Kim Yongsam, first nonmilitary person to become president in thirty years, failed to protect and raise the economy. Because of the positive turn around of the economical growth after the Korean war, South Korea was on full force in keeping their economy strong. While South Korea had the best intentions for their economy, it was also their downfall. From the overwhelming expansions of companies by the chaebol and the growth of loans from the banks, South Korea was losing its miracle. Most people mark the 1997 crisis as the end of the miracle. President Kim Taejung took office after President Kim Yongsam and had quite a lot of damage to repair. Taejung was openly opposed to the chaebol and the current systems of finance and government. Because of President Kim Taejung's reforms and views on reconstructing the economy, Korea was saved and it slowly recovered. 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. During President Kim Taejung's time in office did Korea have the chance to be saved. South Korea amazed the world again because the time South Korea spent to overcome the financial crisis was relatively shorter compared to other countries who experienced similar situations. With the economic disaster of 1997 Asian Financial Crisis stumbling upon South Korea, it took a great toll on the economy and seemed to bring crisis again. However, in 1999, the G20 was established. G20, The group of twenty finance ministers and central bank governors, is made up of 19 countries. This group was formed to bring together important industrial and emerging-market countries from all regions of the world. Ever since its establishment, the G20 holds annual meetings and discuss to endorse the financial stability of the world and to attain a sustainable economic growth and development. Together, its members account for two-thirds of the world’s population, 80 percent of world trade and 90 percent of the world GDP (Gross domestic product). The G-20 has progressed a range of issues since 1999, including agreement about policies for growth, reducing abuse of the financial system, dealing with financial crises and combating terrorist. Thoughts on "The Miracle on the Han River" The time between the years 1961-1996 was a period of economic boom for South Korea. Its economy developed so rapidly that it is popularly referred to as the “Miracle on the Han River.” This kind of economic growth spurt seemed so unlikely and impossible to achieve that it was considered a “miracle.” As a matter of fact, no Japanese or American even predicted something like this could happen before about 1960 (Cumings, 300).[4] But Bruce Cumings brings up an interesting point that questions the assumptions that the term “Miracle on the Han River” is making. South Korea had made such an incredible leap from the destruction left by the Korean War to becoming the eleventh largest economy in the world. It did not happen by sheer supernatural or miraculous might however. “Koreans in the South have worked their fingers to the bone to create the industrial country that we now see” (Cumings, 341).[4] It costs the people struggle, hardship, and unceasing effort; even miracles take faith. This supposed "miracle" when closely speculated was inevitable judging from the fact that the "Korean military...had swelled from 100,000 in 1950 to well over 600,000 by 1953"(Cumings, 302); and as many people say with authority, power and wealth follow along. In other words, the economic boom was definitely predictable due to the preceding historical events. See also Economy of South Korea References ^ 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 ^ a b 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. ^ a b c d e f g h Cumings, Bruce. Korea's Place in the Sun: a Modern History. New York: Norton, 2005. Print. ^ a b Ogle, George E. South Korea: Dissent within the Economic Miracle. London [England: Zed, 1990. 35. Print. ^ a b Lee, Peter H., and Bary William Theodore De, eds. Sources of Korean Tradition. Vol. 2. New York: Columbia UP, 2000. Print. External links "Miracle on the Han" Lesson Plan for High School Students (PDF) An article on the post-industrial "Miracle on the Han" The G20 Takes a Step Back Wikimedia Foundation. 2010. Игры ⚽ Нужно сделать НИР? Goryeo–Khitan Wars Ellegarden Look at other dictionaries: Han River (Korea) — Han (한강/漢江) River The Han River in Seoul …   Wikipedia Economic miracle — The terms economic miracle , economic boom , tiger economy or simply miracle have come to refer to great periods of change, particularly periods of dramatic economic growth, in the recent histories of a number of countries: Post World War II See… …   Wikipedia Foreign policy of the United States — United States This article is part of the series: Politics and government of the United States …   Wikipedia Tibet during the Ming Dynasty — The exact nature of Sino Tibetan relations during the Ming Dynasty (1368–1644) of China is unclear. Some modern scholars living and working in the People s Republic of China assert that the Ming Dynasty had unquestioned sovereignty over Tibet,… …   Wikipedia Wirtschaftswunder — The term Audio|De Wirtschaftswunder.ogg|Wirtschaftswunder (German for economic miracle ) describes the rapid reconstruction and development of the economies of West Germany and Austria after World War II. The expression was used by The Times in… …   Wikipedia Comprehensive Economic Partnership Agreement — The Comprehensive Economic Partnership Agreement (CEPA) is a free trade agreement between India and South Korea.[1] The agreement was signed on August 7, 2009.[2] The signing ceremony took place in Seoul and the agreement was signed by Indian… …   Wikipedia Democratic Republican Party (South Korea) — The Democratic Republican Party (Korean: 민주공화당, hanja: 民主共和黨; DRP) was a conservative, authoritarian and broadly state corporatist[1] or fascistic[2] political party in South Korea, ruling from its formation in 1963 to its dissolution under Chun… …   Wikipedia South Korea — ROK redirects here. For other uses, see ROK (disambiguation). Republic of Korea 대한민국 大韓民國 Daehanminguk …   Wikipedia Guro-gu —   District   구로구 · 九老區 Guro Digital Complex …   Wikipedia Korea — This article is about the territory and civilization. For other uses, see Korea (disambiguation). Korea …   Wikipedia 18+ © Academic, 2000-2024 Contact us: Technical Support, Advertising Dictionaries export, created on PHP, Joomla, Drupal, WordPress, MODx. Mark and share Search through all dictionaries Translate… Search Internet Share the article and excerpts Direct link … Do a right-click on the link above and select “Copy Link”