The Rise and Fall of Korea’s Economic Development: Lessons for Developing and Developed Economies

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A General Theory of Economic Development: A Capitalist Manifesto (June 2017 by Edward Elgar)
Saturday, November 18th, 2017
Dr.Jwa Sung-hee

Dr. Jwa Sung-hee, Chairman of Park Chung Hee Memorial Foundation

Dr. Jwa Sung- hee published the book in English version "The Rise and Fall of Korea’s Economic Development: Lessons for Developing and Developed Economies"

Korea IT Times has released Dr.Jwa's original text about Introduction by the author as follows.

A General Theory of Economic Development: A Capitalist Manifesto (June 2017 by Edward Elgar)

The world finds itself in turbulent times. For the past few decades, despite the good intentions of democratic leadership and policy-makers all over the world, not only economic, but also social, political and security problems have increasingly eroded humanity’s potential for future prosperity and peaceful coexistence. Regarding the economy, more and more people can be heard voicing their concerns about long-term stagnation of economic growth and worsening income distribution (economic polarization). Not only economic policy-making, but also economic theory seems to be in disarray. Market-centric views on the one hand, and proponents of government-led structural reforms on the other, seem constantly in conflict with one another.

Liberal democracy has been almost completely drowned out by ever-burgeoning egalitarian-leaning social democratic systems, which seem to have enthusiastically absorbed socialists’ traits despite the collapse of the socialist blocs in the 1990s. Despite having tried to reduce inequalities to create a ‘balanced’ world in the past several decades, we have become, on the contrary, even more unequal and imbalanced. This book takes on these important concerns and challenges to find a way out of the current conundrum.

The world finds itself in turbulent times. For the past few decades, despite the good intentions of democratic leadership and policy-makers all over the world, not only economic, but also social, political and security problems have increasingly eroded humanity’s potential for future prosperity and peaceful coexistence. Regarding the economy, more and more people can be heard voicing their concerns about long-term stagnation of economic growth and worsening income distribution (economic polarization). Not only economic policy-making, but also economic theory seems to be in disarray. Market-centric views on the one hand, and proponents of government-led structural reforms on the other, seem constantly in conflict with one another.

Liberal democracy has been almost completely drowned out by ever-burgeoning egalitarian-leaning social democratic systems, which seem to have enthusiastically absorbed socialists’ traits despite the collapse of the socialist blocs in the 1990s. Despite having tried to reduce inequalities to create a ‘balanced’ world in the past several decades, we have become, on the contrary, even more unequal and imbalanced. This book takes on these important concerns and challenges to find a way out of the current conundrum.

Like freedom and democracy, ‘development’ is a slippery concept.

In this book, development is viewed as an order-transformation process whereby an economy ‘upgrades’ in leaps and bounds from an agrarian wagon economy to the industrial and knowledge-based railway, automobile, aeroplane and spaceship economies, and so on. This view is in line of the eminent economist Joseph A. Schumpeter and with the complexity and evolutionary economics approaches.

I find that there is only very little in the economics literature that explains the process of economic development in a comprehensive and simple manner. Sometimes, as with the classical economists such as Adam Smith (1723–1790) and Friedrich A. Hayek (1899–1992), preconditions are provided such as secure property rights and economic freedom; and sometimes it is described merely in terms of gross domestic product and its components, largely influenced by the growth accounting school; but no really satisfactory single coherent explanation of the economic development process seems to exist in the literature.

Economic development is indeed complicated and many studies tend to focus on only a narrow aspect of the economy, which is sometimes unsatisfactory, especially when one would like a comprehensive overview of the economic development process. As such, I have for many years had the ambition to develop and provide a simple or general explanation of how economic development occurs. The result is the new General Theory of Economic Development provided in this book, which rather than merely describing what development is, tries to characterize and explain how economic development comes about; particularly, by better understanding how economic discrimination brings about the right incentives for development, that is, by reigniting the people’s ‘self-help’ spirit towards creating a better future for themselves and for their communities. Moreover the General Theory of Economic Development will emphatically demonstrate that economic development is impossible without capitalism, despite the criticisms by some authors that label the capitalist system as a failed, contradictory system unable to deliver on the promises of growth and prosperity.

As a last point, one of the main warnings presented in this book is that we should beware of the egalitarian ideas and ethos that so eagerly creep into our institutions and policy initiatives, as they are the primary cause of economic stagnation and decline. Complexity science, and even ancient Chinese philosophers as mentioned above, have appreciated the importance of diversity and ‘treating differences differently’. In fact, one of my ancestors, Zuo Qiu Ming (左丘明), who was a well-known contemporary of the Great Confucius, mentioned in his GuoYo (國語) that ‘harmonizing differences will create a new life order while equalizing differences will stop their creation’ (和實生物, 同則不繼).

That is, equal treatment or equalization can halt the process of creation and dry out the seeds of dynamism. Demanding equality without reference to contribution will definitely backfire by killing not only others’ but also one’s own incentives to grow and develop. ‘Treating differences the same way’, or what I refer to as ‘egalitarianism’, is the surest way to invite economic stagnation until eventually everyone will be equally worse off. Unless we tie our fate to economic discrimination, away from the ‘temptations’ of egalitarianism (as Odysseus in the face of the sirens was tied to the mast), there will be no hope for an economically just and prosperous society.

Being Korean has allowed me a unique opportunity to witness first-hand the dramatic economic changes in Korea and her neighbours, Japan and China. Born into a largely agrarian country at the time, I was raised in Korea as it transformed into an advanced country in record time. Korea now however faces challenging times with growth stagnation and worsening distribution, and often I wonder about how my country got here and what lies in the future. Trained as an economist in the neoclassical tradition, I have often felt that I was unable to provide a comprehensive explanation for the development trend of Korea and other developing and developed nations.

Whatever explanations I found in the literature were rather fragmented, touching on only a narrow aspect of the economy. So, for many years, this led me to think about what a general theory of economic development would look like. I went back to the basics, asking myself what economics really was. And in the process I focused on trying to better understand how development comes about, or does not. This book is the outcome of the turbulent adventure of my personal thinking and agonizing about economic development over the past 20 years or so.


The Rise and Fall of Korea’s Economic Development: Lessons for Developing and Developed Economies (September 2017 by Palgrave-Macmillan, UK)


The Korean economy has for a long time been a most interesting and controversial area for economic research. Beginning from the 1950s when South Korea was an underdeveloped, agrarian economy that depended heavily on foreign aid, the nation rose at remarkable speed to become a major international economic power, the fourth largest economy in Asia and the 13th largest in the world. Korea’s modernization was brought about by Park Chung-hee, who is widely regarded as almost single-handedly having initiated the transformation of the Korean economy through his economic management and policies which I characterize as development policy by “economic discrimination”: that is, a meritocratic system based on economic performance that by treating differences differently helps those who help themselves. This economic discrimination paradigm instilled in all Koreans, individuals, villages, and corporations, the “self-help” spirit that allowed them to grow and develop. Specifically, a conducive climate was created that encouraged small- and medium-sized firms to grow into large conglomerates to lead national economic growth through exports and industrialization.

As I write this book, the impeachment of Park Geun-Hye (daughter of Park Chung-hee) the 18th term President of South Korea who took office in 2013 has taken the country by storm. In between the regimes of father and daughter, Korea’s political landscape has changed drastically by which “economic egalitarianism” has substituted “economic discrimination” and has positioned itself at the center of social and political discussions. From “Park to Park”—father to daughter—and all the many episodes in between, this book takes a closer look at Korea through the new General Theory of Economic Development lens tracing its trials and tribulations for over the 60 or so years.

The study of the Korean economic development has so far failed to come under satisfactory scrutiny by mainstream economists largely because Korea during the miracle years adopted heterodox policies that are not fully supported by the mainstream economic schools, as well as world economic organizations like the World Bank and IMF, while the recent experience in the post-miracle years with the introduction of the market economy and political democracy with the hope to transform Korea into a developed economy has thus far turned out to be far less satisfactory than expected.
A central theme of this book is the interpretation of the Korean economy with my General Theory of Economic Development (published by Edward Elgar in 2017) that serves as the analytical framework to better understand the Korean economy. The theory I have proposed goes beyond the market-centric view as well as the contemporary neo-classical models that see Korea’s unprecedented rise more of an anomaly than something which can be explained in their model. My theory also goes beyond the pro-government school that looks at Korea’s economic miracle as a result of infant-industry protection. Neither interpretations, as I argue in the book, are satisfactory.

The Korean economic story is of course not all rosy, and I carefully dissect and provide reasons for the long-term economic stagnation of the recent decades that have seen a rise in inequality, a slowdown in economic growth, and an overall increasing dissatisfaction of the Korean people with life in general. Ironically, all these economic and social woes have coincided with increased extent of the market economy and political democracy. This book attempts to provide an explanation for this apparent paradox. And by tracing the rise and fall of Korea’s economic development, an important purpose of this book is to provide lessons for developing as well as developed countries. What would be the useful lessons that could be learned by developing countries in Africa, Southeast Asia, and Latin America? What are the things to be avoided? What can non-developing developed countries (including Korea) learn about the current economic stagnation? The book hopes to provide answers to these perennial and important questions.

About Author
Jwa, Sung Hee is a graduate of Seoul National University and has a Ph.D in Economics from UCLA. He currently serves as Chairman of Park Chung Hee Memorial Foundation and Chair professor of Park Chung Hee School of Policy and Saemaul, Yungnam University. He has also for many years taught courses on Korean Economy at Seoul National University and KDI school of Public Policy. He once served as President of Korea Economic Research Institute and Kyeonggi Research Institute.

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