Korea's Approach to Economic Development

In order to analyze and understand Korea’s approach to economic development, some questions may need to be raised and answered: What has been regarded as the most important fundamental quality of an economy and how has the Korea’s economic development strategy nurtured it?; How has Korea’s economic development strategy been intertwined with other development approaches such as social and political development?; How could Korea have achieved rapid economic development?; How did it face the 1997 financial crisis?; How have shifts in the development approach occurred after the financial crisis?: How is the current global recession affecting the Korean economy?

For starters, one may need to understand the overriding theme of the Korean economy system: the statist economy. The statist economy has been the basis of the economic system as in other Asian Rim countries such as Japan and Singapore; private enterprises and individuals can flourish as long as they toe the line. Korea had to rebuild its economy from the devastated loss of Korean War. In the course of rapid economic development, Korea has adopted their development model and followed the Japan’s path since the early stages of economic development. The Korean government had adopted not just the concepts of development goal -- rich nation and strong army -- but also legal and institutional measures from Japan. The Korean government at the early days of industrialization seemed to admire and emulate the Japanese model which made the rapid economic recovery from the defeat of WWII.

Many questions can be raised regarding this approach. Given there are many ways to rebuild the economy, could Korea’s approach to economic development have taken a different path? If so, how?

The Park Chung-hee regime seemed to regard the building of solid manufacturing base as a political as well as an economic imperative. However, they did not seem to consider the building of finance and service as part of industrial base.

Later on, the Korean government has emulated the U.S. model, pursuing globalization and higher value-added activities.

Although Korea has adopted the market-friendly approach and a more liberalized stance at the later stage of industrialization, dissonance between the state-led economy and market-friendly approach has persisted.

There are some lingering questions: What have been the necessary fundamentals to grow and sustain the Korean economy?; How could policies have been nuanced and differentiated according to the needs and stages of economic development in Korea?; How could the efficacy of policy be assessed?

If Korea’s economic development strategy that once worked effectively in developing export-driven, hardware-centered, scale-intensive businesses may no longer work effectively in the future, which alternative strategy does Korea need to pursue? The fact that Korea has not come up with post-IT businesses may prove this concern.