The Park Chung Hee Years (1961–1979)
Park had begun his career as a cadet in the Japanese Imperial Military Academy and upon his graduation in 1944 he served the Japanese as an officer in Manchuria, where some allege that he helped pursue anti-Japanese Korean guerrillas. Thus, Park developed much of his world-view by watching Japan at the height of its imperial expansion.
Having seen the might of the Japanese economy during the war years and the rebound of the economy after World War II, he wanted nothing more than to turn Korea into an economically powerful country. Economic development, and little else, was the goal of the Park administration, and his foreign policy supported those efforts.
After Japan fell from power at the end of World War II, Korea had no diplomatic relationship with its former colonizer. The diplomatic standoff continued through the early 1960s, but Park needed Japan for economic assistance, investments, and loans. It took him four years to prepare for diplomatic recognition.
Finally, in 1965 he was able to move Korean sentiment sufficiently to exchange diplomats and set up embas-sies in opposite capitals. As part of the treaty, South Korea received $300 million in grants, $2 billion in public loans, and $300 million in commercial credits (later raised to $500 million) over a 10-year period. Even then, however, Koreans launched huge demonstrations against the establishment of diplomatic ties with Japan.
Park’s economic plan worked. Korea received a tremendous boost in development from Japan. Prior to 1965 the United States was Korea’s biggest trading partner; within a year after the signing of the normalization agreement, Japan enjoyed this distinction, a situation that continued throughout the 1960s and 1970s.
Japan led all other countries in foreign investment in Korea, and later, as postwar Japan rose to become a world competitor in the electronics and automotive industry and subcontracted work to nearby Asian countries, Korea’s economy boomed in tandem with Japan’s.
Even so, the political costs for Park were great. Many critics emphasized his pro-Japanese past and called him sakura, a Japanese word literally meaning “cherry blos-soms,” implying that Park was pro-Japanese at best and a collaborator at worst.
Both to counter his critics and to foster nationalism, Park went on a monument-building campaign, commemorating heroes of Korea’s 16th- and 20th-century struggles with Japan. The chief beneficiary of the hagiography was the 16th-century naval commander Yi Sunsin. When Toyotomi Hideyoshi’s navy invaded Korea in the 1590s, Yi led the attack on Japanese supply ships, the only bright spot in that dark period.
The late 1960s saw huge monuments built along the southern coast, in Yi’s hometown just south of Seoul, and in Seoul. The most noteworthy of these is the impressive statue of Yi Sunsin overlooking the busy Kwanghwamun intersection in the heart of Seoul. In effect, Park was demonstrating that if he had to seek assistance from the Japanese with one hand, he could still thumb his nose at them with the other.
Park’s economic strategy was central planning, a strategy modeled on Japan’s and making use of an Economic Planning Board similar to Japan’s Ministry of Trade and Industry. As in Japan, direct government investment encouraged the growth of giant industrial conglomerates (in Japan called zaibatzu, in Korea chaebol).
This basic model of growth and investment was typical of countries lying within Japan’s sphere of influence—and, in fact, the roots of the South Korean economic sys-tem lay in the period of Japan’s colonial rule in Korea, when much of Korea’s development was led by subsidiaries of Japanese zaibatzu, such as Mitsui and Mitsubishi (Han Woo-keun 1970, 482).
It was continued past the time of Park and his authoritarian successors and into the era of democratic South Korea.There were and are about two dozen chaebol in the Republic of Korea; the ones whose names are most familiar to Americans are the automaker Hyundai and the electronics firm Samsung.
The most sig-nificant difference between Japan’s zaibatzu and South Korea’s chaebol were that chaebol could not own banks. Both were family owned and benefited from close ties between its members and members of the government.A 1998 report by Dick Nanto, a trade analyst for the U.S. Congressional Research Service (CRS), summed up this model and its contrast to European and American capitalism.
“Companies in Asia tend to rely more on bank borrowing to raise capital than on issuing bonds or stock,” said Nanto, noting that this system gives government more control over who has access to loans when funds are scarce. The gov-ernment directs funds toward favored industries at low rates of inter-est, while consumers pay higher rates for purchasing products that the government has considered to be undesirable (such as foreign cars).
While this capitalist model, which strongly favors production over consumption, proved its success in lifting Asians from poverty in the postwar period, its use also helps explain the corruption scandals that rocked the ROK as soon as its government became democratic enough and transparent enough for corruption to become visible. As the CRS report observed:A weakness of this system is that the business culture in Asia relies heavily on personal relationships.
The businesses which are well-connected (both with banks and with the government bureaucracy) tend to have the best access to financing. This leads to excess lending to the companies that are well-connected and who may have bought influence with government officials. . . . [South] Korean banks and large businesses borrow in interna-tional markets at sovereign (national) rates and re-lend the funds to domestic businesses. The government bureaucrats often can direct the lending to favored and well-connected com-panies.
The bureaucrats also write laws regulating businesses, receive approval from the parliament, write the implementing regulations, and then enforce those regulations. They have had great authority in the Korean economic system. The politicians receive legal (and sometimes illegal) contributions from busi-nesses. They approve legislation and use their influence with the bureaucrats to direct scarce capital toward favored companies. (Nanto 1998)
Within this central planning model Park launched a series of five-year plans, each loaded with goals that would lift South Korea to the next level of development. In the first five-year plan, 1962–66, he laid the groundwork by providing sufficient electricity, fertilizer, petroleum, and cement. In the second five-year plan, 1967–71, the emphasis was on steel, chemicals, and machinery.
In the third five-year plan, 1972–76, machinery and chemicals to help factories produce exports were fos-tered, as well as shipbuilding, transportation, and household electron-ics. Park’s fourth and last five-year plan, 1977–81, was also the last to emphasize heavy industry. In the end Park achieved his dream—Korea became an industrial powerhouse.Korea’s growth in this period exacted a high price from its industrial workers, thanks in part to the suppression of free labor unions by every South Korean regime since the colonial period.
From the early 1960s American companies were lured to establish factories in Korea by a savings in labor costs that sound almost impossible: Korean workers earned one-10th the wage of American workers but were two and a half times as productive.
Before 1971 Park’s economic development plans were aimed mostly at large industries in the Seoul area and in his home province, North Kyongsang. This changed after the presidential elec-tion of 1971.
Because the vote was so much closer than expected, many people spoke of it as a “near defeat” for Park. The surprising opposition candidate was Kim Dae Jung (1924–2009), who had the solid support of his home province of Cholla, an underdeveloped agricultural region in the southwest of the peninsula. Kim also received support from other rural areas in a vote described as split between the urban “haves” and the rural “have-nots.”
The outcome hit Park hard. The president’s roots were in the coun-tryside, and he regarded himself as a son of the soil, a farmer’s son. For pragmatic as well as personal reasons, he launched a series of reforms to improve the rural economy.
Like many of Park’s programs, his new rural program, called the “New Village Movement” or “New Community Movement” (Saemaeul Undong), was loved and hated for what it did and the heavy-handed manner in which it did it. Rural vil-lages that cooperated with the new program were rewarded with free surplus cement that could be used to pave village roads and build walls and community buildings.
A typical loved-but-hated policy of the New Village Movement called for removing the straw-thatched roofs of village homes. Park decreed that there would be no more thatched roofs—he disliked the under-developed appearance of the “little grass shacks.” Some poor farmers found it a financial burden to remove a perfectly good thatched roof and install a metal or corrugated-fiber roof that provided no insula-tion.
The appearance of the rural village changed almost overnight. Gradually, even those farmers who were not prepared to change and who opposed the Park policies found their standard of living improving as Park brought electricity and running water to farm homes, and new local industry boosted rural incomes.