Rapid Industrialisation under Strong Leadership

The Idea in Brief

South Korea’s spectacular economic rise was not an accident of geography or culture. It was a deliberate, state-driven project. A military-backed president, Park Chung-hee, seized control of the economy and pushed it through a series of planned transformations — from import substitution to export-led growth, from light industry to heavy industry — while using authoritarian rule to keep the process on track. The result was one of the fastest industrialisations in modern history, but it came at the cost of democratic freedoms and ended abruptly with Park’s assassination.

The Political Foundation: Park Chung-hee Takes Power

In October 1963, an election was held and Park Chung-hee, who had earlier led a military coup, was elected president. His administration adopted a state-led, export-oriented policy to achieve economic growth. The government drew up five-year economic plans that deliberately favoured large corporate firms, placed strong emphasis on expanding employment, and worked to increase Korea’s competitiveness in world markets.

The Shift from Import Substitution to Export Orientation

Korea’s unprecedented rate of economic growth began in the early 1960s, when state policy moved away from import substitution industrialisation (ISI) — the strategy of producing domestically what had previously been imported — and turned towards a focus on exports.

Under this new export-oriented policy, the government supported labour-intensive light industrial products, such as textiles and garments. Korea had a clear comparative advantage in these goods: a large, literate, low-wage workforce could produce them cheaply and sell them abroad.

From Light Industry to Heavy and Chemical Industry

During the late 1960s and 1970s, the focus shifted again — this time from light industries to value-added heavy and chemical industries. The government selected a set of industries as the most important in the race for economic growth:

• Steel
• Non-ferrous metals
• Machinery
• Shipbuilding
• Electronics
• Chemical production

These were capital-intensive, technologically demanding sectors, and the state channelled resources into building them up.

The Saemaul (New Village) Movement

In 1970, the government introduced the New Village (Saemaul) Movement to encourage and mobilise the rural population and modernise the agricultural sector. The campaign had a psychological as well as an economic aim: it sought to reform the spirit of the people, turning them from being passive and disheartened into being active and hopeful.

Rural people were empowered to help themselves — to develop their own villages and improve the living conditions of their respective communities. The movement was later expanded to assist neighbourhoods near industrial plants and in urban areas. Today, Korea shares the knowledge and experience of this movement with developing countries that wish to adopt its principles in their own development efforts.

Why the Growth Was So Rapid

Korea’s startling economic growth rested on a combination of several factors working together:

• Strong leaders who set clear direction
• Well-trained bureaucrats who implemented policy efficiently
• Aggressive industrialists who responded to government incentives to increase exports and develop new industries
• A capable labour force that could adapt quickly

Education played a crucial role. At the dawn of Korea’s industrialisation, almost all Korean workers were already literate and could easily acquire new skills. The country’s open economic policy also helped, allowing it to absorb more advanced institutions and technologies from other countries.

Capital for the heavy industrial sector came from two main sources: foreign investment and Korea’s high domestic savings rate. In addition, remittances from South Korean workers overseas contributed to overall economic development.

The Authoritarian Turn: The Yusin Constitution

Economic growth was the foundation of the Park administration’s long-term power. Park revised the constitution so that he could run for a third term, and was re-elected in 1971. Then, in October 1972, he declared and implemented the Yusin Constitution, which made a permanent presidency possible.

Under the Yusin Constitution, the president held complete authority over legislation, jurisdiction and administration, and had a constitutional right to repeal any law as an ‘emergency measure’. With the president invested with absolute authority, the progress of democracy was temporarily suspended in pursuit of economic development.

The Crisis and the End …