Korea's Economic Miracle: Fading or Reviving?

Korea's Economic Miracle: Fading or Reviving?

Korea's Economic Miracle: Fading or Reviving?

Korea's Economic Miracle: Fading or Reviving?

Synopsis

Korea, one of the original 'Tiger Economies', experiences a traumatic and largely unanticipated economic crisis in 1997-98 from which the country is still recovering. Despite having achieved spectacular economic advances from the early 1960s, the crisis laid bare numerous structural, economic and policy weaknesses. Charles Harvie and Hyun-Hoon Lee chronicle and analyze the key factors behind Korea's economic miracle from 1962-1989 and the causes that contributed to the economic downturn and ensuing crisis of 1997-98. Is the Korean economy still fading or is its revival underway? As the country undertakes a series of recovery measures, the authors consider the importance of the ongoing restructuring efforts in the corporate and banking sectors, the development of the 'new economy; and the potential economic advantages to be derived from reunification with the North.

Excerpt

After the devastation of the Korean War and the partitioning of the country, South Korea was one of the poorest countries in the world. Economic recovery during the period 1953–61 was very slow and heavily dependent on us financial assistance. Recovery was based on an import substitution development policy, but by the early 1960s this was acknowledged to have failed and in 1962 emphasis shifted to the development of export-oriented industries. the country’s substantial investment in private and public education during the period after the war had provided a welleducated labour force and this formed the backbone of the new industries. the starting point for South Korea’s exported industrialisation was, however, inauspicious, with per capita gdp at only US$87 in current prices, much lower than those of most of its regional neighbours.

The country’s first five-year plan (1962–66) proved to be a catalyst for the remarkable transformation of the economy, enabling Korea to achieve the status of a newly industrialising country (NIC) in 1970. It continued its rapid growth during the 1970s despite the two oil crises, and by the late 1970s it had even overtaken Malaysia (then the second most advanced asean nation) on a per capita income basis. in the mid 1980s Korea overtook countries such as Mexico, Argentina, Brazil, Portugal, Poland, Yugoslavia and Hungary, and in 1989 it joined the highest-income developing-country group, consisting of Israel, Hong Kong, Singapore and Taiwan. Over the period 1962–89, which was characterised by rapid and sustained economic and trade growth, per capita income increased from $87 to $5199, gdp expanded from $2.3 billion to $220.7 billion, and exports increased from $55 million to $61.4 billion.

In the mid 1980s the economy entered a new phase with the onset of the so-called ‘three lows’ – low oil prices, a lower us dollar and low interest rates. For the first time in the economic history of Korea domestic savings began consistently to exceed investment, with the savings rate rising to . . .

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