South Korea is one of the real success stories of development post world war two, but what policies led to it rapid economic and social development?
NB – you might like to read part one of ‘Explaining South Korea’s Development‘ first!
During the early phases of its economic development, there were few vested interests In South Korea to oppose Import Substitution Industrialization: there was no landlord class (like in South America) and no foreign ownership of industry (like in much of Africa), so there were no vested ‘extractive’ interests to block the consumption of imports which was required to boost manufacturing.
During the 1980s South Korea also benefited from global political and economic trends: it gained an ally in America who wanted a stronghold in Asia to prove that a free-market economy was a viable alternative to communism; it was also able to benefit from the increasing global demand for cars and other industrial products – cheaper labour in South Korea meant it was eventually able to build a very successful automobile industry, spruing on the decline of manufacturing in places like Detroit.
The Hyundai factory in Ulsan is now the biggest automobile factory in the World, an honor which used to belong to the River Rouge Ford Factory in Detroit.
By the 1990s South Korea was being categorized as a Newly Industrialized Economy…however, the idea that this success was because of neoliberal policies is a myth. Rather, the strong economic growth post WW2 was because the authoritarian government (not beholden to either of the vested interests above) was able to protect industries, much in the same way as Britain and America did during their strong phases of economic growth.
In short, South Korea’s economic success is because the state played a highly interventionist role in steering, stimulating and constraining the market.