Rise of Asian tigers (South Korea) Flashcards
Govt- extensive planning
Economic Planning Board estb. by govt in 1961, led to a series of five year plans from 1962. Allocated greater resources to those selected industries such as heavy and chemical industries. Allowing them to dev. And btr compete globally, as well as provide a major source of export revenue.
Stats on SK ec growth
By the 1970s, Seoul had become the world’s most productive ec., with the country seeing an annual industrial production growth of abt. 25% and a fivefold increase in GNP from 1965 to 1978
Govt- ability to pick winners
Despite the lack of technology, money, raw materials and a small domestic mkt, Park Chung Hee insisted on the building of the Pohang Iron and Steel Company (POSCO).
POSCO competed in 1971, laid the foundation of the cty’s road to industrialization.
POSCO’s steel mill in Pohang is now ranked 12th largest steelmaker in the world.
Govt- ability to adapt to changing circumstances
When Oil Crisis hit, General Park took the opp. To modify the heavy industry-this involved retreat from high energy consumption industries, effective cost-cutting.
Rapid export growth aided recovery from immediate impact of the crisis.
Stats on Chaebols
By 1984, the top 50 Chaebols accounted for 94% of SK’s GDP
By the late 1980s, these groupings of affiliated companies dominated the ec., and were res. for the expansion of SK’s export capacity. In 1987, It was estimated that the revenues of SK’s top 4 Chaebols were US$80.7billion.
Chaebols acquired foreign technology which shows their importance to SK economic growth
Instead of dev new areas through Research and Dev (R&D), Chaebols bought foreign patents and technology to produce goods at a lower cost. For Example, Hyundai Cars used an engine dev by the Mitsubishi Corporation of Japan.
Education
During the 1970s, one of the govts priorities was to strengthen vocational education. Vocational Junior colleges were set up to supply technicians for the heavy and chemical industries.
Exploitation and low wages sparked a cultural shift from one that obeys authority to one that rises up against oppression. -> manifested through disruptive labour movements
More than 1000 labour disputes in 1987 while there was only an annual avg of 200 in the preceding 10 years,
Koreans worked longer hours
The Korean work week since the 1970s is 35% longer than that in industrialized countries.
US ec aid
US aid to SK totaled $13 billion in the period 1945-1979
Geese formation w Jap
Due to rising labour costs in Jap in the 1970s and 1980s, labour-intensive regions relocated to within the region, such as to Korea. Thus this outflow of capital resulted in Korea taking over Jap’s Original Equipment manufacture (OEM) production arrangements. The outflow of capital often constituted a diffusion of prod processes that allowed Korean firms to innovate and at times, surpass Japan economically. This relocation of industries regionally and changes in comparative advantage allowed Sk to follow Jap up the value-added chain.
Shifting of industries- govt
For example in the 1970s, with the increase in labour costs and regional competition, the Park Administration shifted focus from light consumer goods to capital-intensive heavy and chemical industrialisation (e.g. steel, petro-chemicals, non-ferrous metals, refined oil). Towards the end of the decade, with rising oil costs as a result of the oil crises, the government again pivoted towards high tech, high value industries such as semi-conductors.
Exp on how Chaebols grew
As Chaebols grew, they expanded business activities and increased in horizontal diversification to produce more goods and services for the international economy. Not only generating greater demand for their products, but also ensuring greater economies of scale and lowering of their costs of production. This ensured their competitiveness in the global economy.
What are chaebols?
Chaebols were efficient producers that enabled them to meet economic targets and compete in domestic and foreign/global market. This was achieved primarily through investments of huge capitals in production and research and development to increase its competitive edge by reducing costs of production and increasing the quality of goods manufactured.
Relationship btw govt and Chaebols
Chaebols were given special discounts and exemptions such as being offered special rates for utilities and the state-owned rail system
.
They could also get massive low-interest loans easily from the govt and the commercial banks.
Chaebols were also protected by the govt.- the govt prevented their bankruptcy.
Chaebols worked closely with the govt, cooperated with them for economic planning.
