The South Korean economic development experience: smart cities, green growth, public toilets, land and capital markets. Grigory Gerasimov
mind to lose some freedom in exchange for material prosperity, which economic development would provide. Even the President Park Chung-Hee was an authoritan leader, he did have some support from the citizens in general for what he was doing to promote economic growth. He was opposed and criticized by democracy fighters, opposition politicians as well as students at universities. However, President Park Chung-Hee has some public support for his approach the Korea development. But as economic prosperity increased as well as income level increased, the need for prosperity in relevant importance declined, while the peoples demand for freedoms and democracy intensified. The balance between prosperity and democracy was gradually changing in favor of democracy. And when by the 1980s Korean income level surpassed 5000 USD and economy has a high growth rate, and Korean society enjoyed a new prosperity, people begun to demand freedoms. The public opinions gradually shifted in order of more democracy. University students began to show a strong demand to allow free university bulletins at the Presidential elections to be held in the late 1987. And as result of this elections, Korea made a shift to a new democracy. Even before this Korea had a democratic forces and President Park Chung-Hee could not ignore the need to secure public understanding and support for what he was doing. This is Politics of Development as Competition for National Cause between Prosperity and Democracy.
Labor Rights were repressed, but that did mean that was no active labor market movement for labor rights. There was underground world of supporters of labor rights. Once the new democracy has come in, those labor activists became very powerful political force in Korea and they began to confront the employees of big businesses. That confrontation has become structurally impended in Korean economy society and it continues to these days. Korea has this Adversarial Labor Relations, which was consequence of the suppression of labor rights during authorian years.
Those many problems and structure weaknesses have emerged Korea to continue development in 20th century and accelerated transition to the knowledge economy. Korea had many problems and in order to ensure the sustainability of development, Korea have to address all those problematic elements in integrated way. Because all of them are functionally interdependent with others. Generally, Korean government had a selective and focus thinking. Every government as it comes in identify a few priorities and focuses on that. The focus itself may be necessary, but it should not happen at the expense of other objectives and problems. All the problems and goals for progress should be considered together and approached in interdependent way. Although, the focus on emphasis of political efforts could be on some of them. So, in that way sustainable development requirements balancing various elements.
Korean government until the mid 1990s didn’t consider an environmental consequence of economic growth very seriously. If the government make anything to protect the environment, the representatives did it rather reluctantly. Korean people began aware of these 2 faces of economic miracle. First face is prosperity and another face is environmental degradation. In 1962 Park, Chung-hee went down to the Ulsan and there he launched very first one industrial compound of Korea. Nowadays Korea has more than 1000 industrial compounds. Park, Chung-hee in his speech mentioned that Korea should eradicate the poverty and when Ulsan will become an industrial city with a black sky, it will mean that Korean dreams about successful economic development have been fulfilled. In the mid 1980s Ulsan had a black smoke filling the sky and some fish in the river near the city was dead. In Ulsan city at this time there were environmental refugees moving out of the city and the government provided subsidies in order to finance them. Ulsan city citizens began to understand that environment quality is as important as high income. And similar things happened across the country, because there were many factories in Korea. However, nowadays the river in Ulsan city is clean and many people participate in swimming competitions. The Green Ulsan city was reconstituted as a result of efforts of mid 1990s, which is coincided with local autonomy’s system. This environmental policy was supported by locally elected mayors and those efforts for environmental for a green growth. The Green Growth was formally launched as a national strategy in 2009. However, in substance green growth started much earlier, especially with introduction of local autonomy in 1995. Ulsan city was the leader in this regard.
Many other crises threaten economic development of Korea since early 2000s. Polarization of Economy and Society: Persistent youth unemployment, social inequalities rising, unhappiness and suicidal rates highest in OECD. Serious LT threats to economic prosperity: fast ageing, weak social welfare foundation, the 7th largest emitter of GHG, the contingency of inter-Korean unification as a threat. Environmental threats: air pollution, ecosystems degradation and climate disaster vulnerability. Governance failure worsening: corruption and increasing complacency among officials.
There are few important lessons from Korean Experience. First of all, Economic Development promoted with heavy-handed intervention in the market cannot be sustained. Economic Development cannot be sustained without parallel social development. The economic development strategy itself should be a socially inclusive strategy. Environmental Development should accompany economic and social development. The green growth strategy can help harmonize all three dimensions of development – environmental, economic and social. Economic Development can be enabled or expedited by authoritarian government, depending on what kind of the leader is in charge. However, development based on authoritarian leadership is unlikely to last, however good that the leadership may be.
Korea was one of the most miserable countries in the world after Second World War. Only two countries in Asia had lower GDP than South Korea during 1950s. Korea’s GDP per capita was near Ghana (75) and Mozambique (85). But after 30 years there was huge difference and the steps Korea made became larger and larger. The purpose of this chapter is to explain: What make that difference? How did Korea made such a jump while other countries stayed stagnant? What are the secrets behind that? Economic growth is determined by labor, capital and productivity. And Economic System fundamentally determined by market efficiency, property rights, corruption level, openness, economic and other policies. What was the role of economic system in Korea? Economic system is composed of four criteria: ownership (land, companies), decision-making mechanism (market or economic plan), objectives (individual freedom, growth versus equality), motivation scheme (monetary, moral, coercive).
In the past Korea had big landlords with many tenants (63% of household). In 1949 South Korean authorities carried out a very extensive land reform. 76% of farmers and 65% of farm land was covered under this land reform. Farmers paid 30% of crops during 5 years, then they were able to get the ownership. It was rather good condition for each household in Korea. And each household was able to have only 3 hectares. It’s a reason why Korean farmland households are very small and segmented. Because of this land reform process there were no big households. If country have an equally distributed land ownership such as in Korea, China or Japan, there is a tendancy of a faster economic growth. But unfortunately, many Latin American and Carribean countries are very unequal in land distribution and that is one of the reasons of the region slower economic growth. In order to compete with North Korea, a communist counterpart which was not necessarily friendly to South Korea, Seoul had a strong political pressure to enable this land reform
Another type of ownership is a company type. Whether a company is runned by Ministry, Separate Agency, SOE (State-owned Enterprise) or private one. In the past in Korea were different type of companies, but many of them are privatized nowadays.
The second aspect is planning. This is one of the way to prepare a decision. In Korea, especially during 1960 and 1970s, planning was very important. Of course, Korea had a market economy, but many of the major decisions were made according to government planning. One of growth model is a focus strategy: Korea was focused only on a few numbers of industries and with help of linkage effect, these focused industries benefited to other industries as well. But some of the industries remained not so developed, because Korea was focused on limited number of industries. In many other countries there is not such kind of a focus and their governments try to develop all kind of industries, what results in under-development of all industries. It is like