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Home , Developmentalism, Friedrich List, Lorenz von Stein, Werner Sombart

Genealogy of German Intellectual Impacts on Making of in South Korea

Young-Sue Han*

This paper aims to explore the path of the genealogy of German intellectuals in the making of economic planning. The Schools of criticised economic planning implements in communist states during the Cold War era. In spite of the hostile attitude of the liberalists to economic planning, American policy makers in South Korea consistently recommended introducing economic planning in the nation-making period of the last century. This paper will show that the American reliance on economic planning originates from German intellectuals’ influence by performing a three-fold task. First, this paper backgrounds the influx of the German Historical School into wartime economic planning in Imperial . Consequently, this papers explores American scholarship in in the early 20th century. Finally, this paper explores the roles of scholars in making theories on economic planning in Developmental State School.

Key words: Economic planning, The German Historical School, Developmental State, , Karl Mannheim,

* International Institute for Regional & Cultural Studies, Sogang University. 32 제9권 1집(통권 제16호, 2018년 3월)

Contents Ⅰ. Introduction Ⅳ. German intellectual influences on Ⅱ. Japanese reception of the German the theoreticalization of economic Historical School of planning Ⅲ. German intellectual influences on the Ⅴ. Conclusion formation of economic planning in the USA

I. Introduction

This paper aims to explore the path of the genealogy of German intellectuals in the making of economic planning. The purpose of this exploration arises from the lack of a considerable body of academic literature on economic development based on the economic planning of South Korea in the last century. Prior to the advent of the Developmental School in the late 1980s, the Neoclassical School had been dominant in explaining the extraordinary of East Asia. The School attributed the mechanism and to the success of East Asia arguing the role of as being limited.1) In the late 20th century, the economic development of non-communist states in East Asia outperformed that of communist rivals including mainland China and North Korea. South Korea witnessed this miraculous performance in economic growth in tandem with the unique feature of its active integration into international trade and heavy state-direction of the economy by economic planning (Johnson, 1982; Amsden, 1989; Wade, 1990; Evans, 1995; Woo-Cumings,

1) As to the economic performance in Northeast Asia, there are two schools in . First, the Neoclassical school in line with the emphasized the laissez-faire and (Balassa, 1981; The World Bank, 1993). Second, the Developmental School as a latecomer focused on a critical role of government in achieving the economic development through the economic planning and state intervention into the market (Woo-Cumings, 1999). Genealogy of German intellectual impacts on making of economic planning in South Korea 33

1999). Hence, I argue that the Neoclassical School, by any palpable purpose, neglected the extensive statist economic policies such as state intervention into markets and economic planning run by in this area. Considering the hefty conflicts against in the Cold War era, the success of South Korea confronts the problem of explaining strong state intervention and extensive economic planning in contrast to American economic doctrines like the -mechanism of the laissez-faire model. The Classical school of economics regards any sort of economic planning or other government intervention as being bound to worsen . Hence, the American economic recommendation of economic planning to South Korea seems contradictory. Moreover, it needs to be distinguished from the economic planning in socialist states. In the case of South Korea, it was the American military government from 1945 to 1948 that recommended adopting the along with land reform for South Korea (Lee, Sang-Min, 1991). In the 1950s, South Korea remained largely dependent on US aid in the aftermath of the Korean War (1950-53). Against this backdrop, the US wanted to introduce economic planning to make the South Korean economy self-reliant and alleviate the American economic burden in East Asia. In spite of this American effort, the incorporation of the planned economy was deterred due to President Rhee who rejected the planned economy as a socialist policy (Lee, Wanbeom, 2006). South Korea saw the first utilization of The Five-Year Plans of South Korea by a military junta under General Park Chung-hee who had seized political power through a military coup d'état in 1961. There are some accumulated literatures providing historical survey as to the formation of economic planning in South Korea. (Satterwhite, 1994; Lee, Wanbeom, 2006; Park, T’ae-gyun, 2007). However, most of the previous literature does not deal with a background of favourable attitudes of the American policy makers to the economic planning as to South Korea. It is commonly agreed that economic planning and state invention in South 34 제9권 1집(통권 제16호, 2018년 3월)

Korea was differentiated from non-statist models of the Anglo-Saxon prior to the advent of Neo-liberalism. In the formation of this statist of South Korea, Korea lies in the genealogy of the German statist thoughts. The German intellectual of the formation of the planned economy has been neglected and little known in spite of its significance. Against this backdrop, this paper aims to contribute to a better understanding of the rise of ‘economic planning’ by dwelling on the impact of German intellectuals on Imperial Japan and America in the early part of the 20th century. This paper is three-fold. First, as to the earliest exposure to economic planning in Korea, this paper backgrounds tutelage2) of the German Historical School to the wartime economy of Imperial Japan in the 1930 and 1940s. Subsequently, American scholarship on Germany in the early 20th century and its inflow to Korea via economic planning. Finally, this paper deals with roles of German impacts on theorizing the economic planning.

II. Japanese reception of the German Historical School of Economics

The German Historical School of Economics Historische Schule der Nationalökonomie refers to a branch of academic approach to the economics

2) Since the diplomatic relations established in the 1860s, German models exerted pivotal influences on modernization and nation-building in Japan. The German-Japanese relations could be divided into three periods: (1) inaugural models of Bismarckian Prussia in its ascendency and late modernization to the Meiji Japan in the late nineteenth century, (2) an ensuing cooling period during the Anglo-Japanese Alliance (1902-1923), and (3) tutelage of the German ‘total war’ military doctrines and wartime economy to the Japanese military during the First World War and the Nazi German economy’s ability to overcome limited resources in mobilizing for the Second World War in the 1940s. A team of leading Japanese and German scholars led by Erich Pauer (1999) conducted a comprehensive research on the Japanese wartime economy. Genealogy of German intellectual impacts on making of economic planning in South Korea 35

that emerged as being a ‘State Science Staatswissenschaften’ of late industrialization in the last half of the nineteenth century in Germany and maintained an influence on Germany and East Asia into the 20th century3). Establishing as a predecessor, the School consists of the Older including Wilhelm Roscher, , and . The Younger includes Gustav von Schmoller, Lujo Brentano, Etienne Laspeyres, Karl Bücher, , and . Finally, Werner Sombart and are regarded as members of the Youngest School. Over the course of the first German unification led by Prussia, the School had a leading role in underpinning the ascendency of the Prussian industry (Shionoya, 2005, p.1). In stark contrast to theoretical of the English Classical School, the Historical School regarded history as the elements to understand economic matters because they saw that economics was not proper to understand as a universal phenomenon but based on culture-specific events over space and time. They rejected the theoretical bases of laissez-faire doctrines and refrained from using the logical and mathematical method. They accentuated empirical observation and interpretation4). On the other hand, the Japanese embraced the German state science as their dominant state doctrine during the Meiji Restoration (Gao, 2002, p. 65). In the late nineteenth century, the English classical theories also prevailed in Japan. However, since the Prussian-style constitution was established after undergoing conflicts between the pro-Britain statesman and pro-German statesman, the prevailing model on political economy in Japan shifted from the pro-British party to the pro-Germany party. Japanese bureaucrats saw that the thoughts from Britain and France were dangerous because they can spark off a popular

3) Cumings, Bruce, “State building in Korea: continuity”, in Lange, Matthew and Dietrich Rueschemeye ed. States and development: historical antecedents of stagnation and advance. New York: Palgrave, 2005, pp.220-222. 4) Lindenfeld, David, “The myth of the Older Historical School of Economics”, Central European History, 26(4), 1993, pp.405. 36 제9권 1집(통권 제16호, 2018년 3월)

movement in a revolutionary spirit and liberal . The conservative statesman bureaucrats found that the doctrines of the German state science of the nineteenth century were more proper to foster allegiance and loyalty among people (Kumagai, 2001). In the early period of the Meiji Japan, Japanese statesmen learned the German state science of late industrializer from Germany. In particular, Ito Hirobumi (1841-1909) had learned the need for preventing class antagonism from Lorenz von Stein (1815-1890) a German scholar in . Stein argued that the rapid process of industrialization in Japan will produce a widening gap between the rich and the poor and the collapse of social harmony is inevitable. Therefore, they needed some theories to explain how the state becomes a neutral mediator between classes in the name of ‘social monarch soziales Königtum’ that controls the national economy focusing on welfare of the whole (Stein, 1964). The ideas of Stein had substantial influence on the formation of the German Historical School in Germany and the formation of constitution, education and the military reform of Meiji Japan. Along with the Japanese reception of the German state science of Stein, the economic thoughts of the German Historical School gained ground in Meiji Japan. As to this German boom, Kenneth B. Pyle commented that the German Historical School has become a rudiment for building up ‘social monarchy’ of Japan which aims for social welfare and prevention of class antagonism as follows:

From their study of German political institutions Japanese leaders already had a feeling for some of the ideas underlying . Ito, for example, had been greatly impressed with the ideas of Lorenz von Stein, whose works on French social theory had been a formative influence on the Younger Historical School. Hermann Roesler in his 1887 memorandum on the constitution to Inoue Kowashih (1844-1895) had articulated the concept of ‘social monarchy’, warning that industrialization would create acquisitive drives and class conflicts. Therefore, it was the most urgent task of the state to Genealogy of German intellectual impacts on making of economic planning in South Korea 37

maintain impartially the welfare of the whole and a harmonious social balance by means of social legislation and an active administrative policy that works for the physical and spiritual welfare of the lower classes... To overcome and to maintain an ethical political attitude that places the welfare of the whole above class , the institution of hereditary monarchy is of inestimable value5).

In addition, Japanese scholars like Kanai and Fukuda went to Germany to study under scholars of the Younger of the Historical School like Schmoller and Brentano. They were inspired by theories on social policy from their German teachers. The ‘Japan Social School’ surfaced to support the doctrine of state science in Japan that embraces the role of state as a mediator between classes in rejection of liberalism, , and . They were regarded as pioneers of social policy in Japan from their inspiration from Germany6). In 1882, the ‘Society for German Science (Doitsu Gaku Kyokai)’ was set up by prominent pro-German Japanese academics and politicians (Spang and Wippich, 2006, p.2). The society played a leading role in promoting the German state science by vigorous translation and publication and criticizing English economic thought (Kumagai, 2001). Subsequent to the sway of the Younger of the School in the nineteenth century, the thoughts of the Youngest of the school were mobilized as ideological background for the wartime economy of Imperial Japan in the early part of the twentieth century. Due to the global after , the Japanese intellectuals became interested in the concept of stages of capitalism inspired from the Younger of the School. In response to the global economic depression in the 1920s, the new debates on Japanese capitalism had emerged in

5) Pyle, Kenneth, “Advantages of followership: German economics and Japanese bureaucrats, 1890-1925”, Journal of Japanese Studies, (1), 1974, p.138. 6) Morris-Suzuki, Tessa, A history of Japanese economic thought. London: Routeldge, 1998. pp.51-59. 38 제9권 1집(통권 제16호, 2018년 3월)

the 1920s and continued in the 1930. At the same time, the Japanese military took advantage of the economic crisis to seize the political power. They suppressed throughout the 20th century. Based on this political backdrop, Werner Sombart’s theory of capitalism emerged as the most influential reference for providing support for the planned economy by the military in Japan. In the 1930s, translation of Werner Sombart’s Die Zukunft des Kapitalismus (1932) was the most important to provide ideological foundation (Kerder, 1999, p.35; Yanagisawa, 2001, p.175).7) Moreover, to confront the economic depression, the Japanese government began to introduce measures to control the economy. With expansion of war and the rise of the military, Japan stepped up to set up the government’s regulation of the economy (Yanagisawa, 2001). Sombart’s economic theory had influenced on formation of the Japanese wartime economy. He asserted that the current of capitalism, Wirtschaftsgesinnung, in particular, based on liberalism and has lost its supreme authority. It has experienced considerable changes of its properties like its mentality, order, and technology. He stated:

Now we can find that the current capitalism as a widespread economic system that it certainly has lost its supremacy as it once possessed... Since the capitalist economic system itself has undergone substantial changes, in which it proves the properties of an economic system to follow: as changes in the ‘economic mentality’, order and technology... The order which is in accordance with the capitalist economic system is free, maybe we call it individualistic, recently, it has established a decision of the Reich’s Supreme Court when it said8).

7) In contrast to early translation of Die Zukunft des Kapitalismus into Japanese, at the time of writing this paper, Sombart’s magnum opus is not still available in published translation in English. Furthermore, due to his relation to which is still debated today, Sombart is currently neglected to oblivion by the mainstream scholars. However, Sombart has always been very popular in Japan along with Max Weber (Schwentker, 2005). Genealogy of German intellectual impacts on making of economic planning in South Korea 39

Sombart stated that future capitalism could not go back to the liberal and individualistic model because of the increase of dominance of system, and development technology. He articulated the advanced technology is the most important factor for undermining liberal capitalism. Therefore, he was convinced that the incorporation of the ‘plan economy (Planwirtschaft)’ in opposition to free and individual , was inevitable in future capitalism. For Sombart, the plan economy should be ‘comprehensive (Umfassendheit)’, ‘unified (Einheitkeit)’, and ‘diverse (Mannigfaltigkeit)’ to all areas of economic life (Sombart, 2002, pp. 448; Han Youngsue, 2016, pp. 122-123). In sum, the plan economy of Sombart features efficiencies: (1) maximum efficiency and (2) minimum cost (3) optimum decision-making; and ‘rationality’ which pursues (1) planning, (2) precision in calculation, and (3) purpose-fittedness9). To sum the influence of the German Historical School in Japan, the school had consolidated the concept of ‘the state’ or ‘social monarchy’ as the public mediator in a conflict between classes. Aiming to close the gap between the rich and the poor, the state had a legitimate right to intervene in private economic activities. The Sombart’s discussion of the future of capitalism and promotion of the Planwirtschaft has also contributed to the rise of the wartime economy in Imperial Japan in the 1930s and the 1940s.

III. German intellectual influences on the formation of economic planning in the USA

From the late nineteenth century to early twentieth century, many American

8) Sombart, Werner, “Die Zukunft des Kapitalismus”, in Ebner, Alexander and Helge Peukert ed. Nationalokonomië als Kapitalismustheorie: ausgewahltë Schriften. Marburg: Metropolis-Verlag, 2002, pp.440-441. 9) Sombart, cited in Kim, Il Gon, 1995, p.257. 40 제9권 1집(통권 제16호, 2018년 3월)

intellectuals turned to German social models in response to social turbulences coming from industrialization and massive immigration from . American intellectuals saw an upsurge in boom of the German organic political and social theory, which caused a transient stampede of young scholars into Germany. This American scholarship of German social thoughts intellectually underpinned the Progressive Era and New Deal (Nagler, 1997, pp.143-143; Schäfer, 2000, pp. 11-13; Rosser, 2010). Based on the American pilgrimage to Germany, the introduction of economic planning in the USA goes back to the New Deal Era during the Progressive Era. To tackle the depression, President Roosevelt's experimented new economic policies which were different from the classical economic doctrines. Rexford Guy Tugwell (1891-1979), an adviser to President Roosevelt, promoted the planning as ‘Fourth Power’ of government alongside rise of the Keynesian economic principle (Friedman, 1987, p.106). The governmental planning became extensive from economic policy to urban planning and it spread widely to other countries. As to the planning, scholars from the German speaking countries in exile debated on planning between Karl Mannheim and . Resonating (method dispute)10) between the German Historical School and Austrian School, the debate remained influential from the 1930s to 1980s in America. In line with Rexford Tugwell (1891-1971) and Barbara Wootton (1897-1988), Karl Mannheim argued planning was necessary to free and open . Mannheim believed that planning could be democratic and save people from the threat of irrationality like Nazism in his book Mensch und Gesellschaft im Zeitalter des Umbaus (1935). The book was translated into English with the title Man and society in an

10) The Methodenstreit (German for ‘method dispute’) refers to a controversy of the nineteenth century economics between the Austrian School led by and the German Historical School led by Gustav Schmoller. The debate originates from Carl Menger's critique of the German historical economics as expounded in his Untersuchungen über die Methode der Sozialwissenschaften (1883) and Schmoller's response. Genealogy of German intellectual impacts on making of economic planning in South Korea 41

age of reconstruction in 1940. According to Mannheim, from ‘the psychological anarchy of liberal capitalism’, the following social and technical problem was created: “Our age is far too individualistic and far too strongly differentiated into groups and sects, each aiming at absolutism, to be reduced to a single common denominator” (Mannheim, 1940, p.345). Mannheim analyzed reasons of emergence of the irrationality of modern society in his book as follows:

The contemporary social order must collapse if rational social control and the individual’s mastery over his own impulses do not keep step with technological development... 2) the unfolding of reason, the ordering of impulses and the and the form taken by morality, are by no means an accident, nor do they involve primarily only single individuals and the characteristics they happen to have. On the contrary, it depends on the problems set by the existing order of society. 3) societies which existed in earlier epochs could afford a certain disproportion in the distribution of rationality and moral power, because they were themselves based on precisely this social disproportion between rational and moral elements11).

As to the emergence of the irrationality, he asserted that the rise of irrational behavior comes from the variations in participation and centralization under social structures. “Most symptoms of maladjustment in modern society can be traced to the fact a parochial world of small groups be expanded into a Great Society in a comparatively short time”12). Therefore, Mannheim asserted that “the end of laissez-faire and the necessity for planning are unavoidable consequences of the present situation and the nature of modern techniques... The alternatives are no longer ‘planning or laissez-faire’ but ‘planning for what’ and ‘what kind of planning” (Mannheim,

11) Mannheim, Karl, Man and society in age of reconstruction. London: Harcourt, Brace and Co, 1940. pp.43-44. 12) Mannheim, Karl, , power and democratic planning. London: Routledge & Kegan Paul PLC, 1951, p.4. 42 제9권 1집(통권 제16호, 2018년 3월)

1951, p.8). Mannheim’s arguments required the assumption that the planners know the goals of the plan so well and they want to achieve and that there is broad support for the plan in society. Mannheim cites instances of wartime or periods of (Mannheim, 1951, p.347). As to a question on who would plan, Mannheim distinguishes two types of rationality: ‘functional rationality’ and ‘substantial rationality’. Mannheim put more emphasis on ‘substantial rationality’ to ‘functional rationality’. For Mannheim, the substantial rationality implies the ability to know all related things comprehensively at some circumstances as follows:

We understand as substantially rational action of thought which reveals intelligent insight into the inter-relations of events in a given situation. Thus the intelligent act of thought itself will be described as ‘substantial rational’, whereas everything else which either is false or not an act of thought at all, (ad for example drives, impulses, wishes, and feelings, both conscious and unconscious) will be called ‘substantially irrational’13).

Mannheim talked about the procedural aspect of functional rationality as another sense of rationality when people say for instance “industry or administration staff has been rationalized.”

a person carries out acts if thinking and knowing, but rather that a series of actions is organized in such a way that it leads to previously defined goal, every element in this series of receiving a fundamental position and role. Such a functional organization of a series of actions will, moreover, be at its best when, in order to attain the given goal, it co-ordinates the means most efficiently14).

13) Mannheim, 1940, pp.52-53. 14) Ibid., p.53, Genealogy of German intellectual impacts on making of economic planning in South Korea 43

Mannheim asserted that the distinction between substantial and functional rationality by taking examples of a soldier:

The common soldier, for example, carries out an entire series of functionally rationally actions accurately without having any ideas as to the ultimate end of his actions or the functional role of each individual act within the framework of the whole... However, ... when the organization, as in army, depends un the last analysis of the plans of certain authorities far removed from the actors, but also when this organization and calculability can be traced back to traditionally inherited regulations (Mannheim, 1940, p.53).

In Mannheim’s framework, the functional rationality becomes criteria of some practice. The substantial rationality consists of concrete . Therefore, Mannheim asserts that “The more modern mass-society is functionally rationalized the more it tends to neutralize substantial morality or to sidetrack it into the ‘private’ sphere” (Mannheim, 1940, p.67). As a defender of comprehensive planning, Mannheim asserts that the functional rationality is not proper for holistic planning. For Mannheim, planners should be an intelligent group who has the ability of substantial rationality. Mannheim’s book was so influential in the USA as to trigger the ‘great debate’ of the 1930s and 1940s between German speaking scholars in exile like Karl Mannheim and , Karl Popper, and Ludwig von Mises (Klosterman, 1985, p.5). Popper responded to Mannheim’s arguments by manifesting his hostility towards the planning by stigmatizing it as ‘utopian engineering by Platonic approach’. He regarded it as being opposed to the rationality as follows:

Inherent in 's programme, there is a certain approach toward developmental state politics which is, I believe, most dangerous. Its analysis is of great practical importance from the point of view of rational social 44 제9권 1집(통권 제16호, 2018년 3월)

engineering. The Platonic approach I have in mind can be called Utopian engineering, as opposed to that kind of social engineering which alone I consider as rational, and which may be described by the name of piecemeal engineering. The Utopian approach is the more dangerous as it may seem to be the obvious alternative to a radical historicism which implies that we cannot alter the course of history; at the same time, it appears to be a necessary complement to a less radical historicism, like that of Plato, which permits human interference15).

Popper aimed at Mannheim’s advocacy of planning as a descendant of Hegel whom Popper criticized and whose views of teleological historicism of Hegel, Plato and Marx he saw as background for in an endnote 15 in his book The and its enemies (Popper, 1945).

‘Planning for freedom’ is also advocated by Mannheim, in his Man and Society in an Age of Reconstruction, 1941. But since his idea of ‘planning’ is emphatically collectivistic and holistic, I am convinced that it must lead to tyranny, and not to freedom; and, indeed, Mannheim’s ‘freedom’ is the offspring of Hegel's (Popper, 1947, p.319).

Popper criticized the planning under the name of utopian engineering in the ‘developmental state’ as difficult to calculate. He accented the knowledge based on practical experience:

What I criticize under the name Utopian engineering recommend developmental state the reconstruction of society as a whole, i.e. very sweeping changes whose practical consequences are hard to calculate, owing to our limited experiences. It claims to plan rationally for the whole of society, although we do not possess anything like the factual knowledge which would

15) Popper, Karl, The open society and its enemies; Volume One: The spell of Plato. London: Routledge, 1945, p.138. Genealogy of German intellectual impacts on making of economic planning in South Korea 45

be necessary to make good such an ambitious claim. We cannot possess such knowledge since we have insufficient practical experience in this kind of planning, and knowledge of facts must be based upon experience. At present, the sociological knowledge necessary for large-scale engineering is simply non-existent16).

Popper’s attack of planning revolves on the difficulty of calculating in social reconstruction. He drew on human psychology and consciousness. According to Popper, the social orders are implications of the interaction in the behavior of individuals. Due to the nature of the interdependence of individual behaviors, it is difficult to predict the social patterns:

This interaction of individuals, possessing different knowledge and different views, is what constitutes the life of thought. The growth of reason is a social process based on the existence of such differences. It is of its essence that its results cannot be predicted, that we cannot know which views will assist this growth and which will not-in short, that this growth cannot be governed by any views which we now possess without at the same time limiting it17).

For Popper, it is impossible to predict individual actions and it is even unachievable to predict a national economy. Therefore, a planned economy makes no sense. In spite of Popper’s repudiation, the planning had become a fundamental principle of macro economic policy from the 1960s to the 1970s until the orthodox position of Keynesian became undermined by the rise of the Monetarist and Supply-Side economics. German legacies in the USA survived among some American foreign policy makers to South Korea such as Arthur Bunce, W.W. Rostow, Gerhard Colm,

16) Popper, 1945, p.142. 17) Ibid., p.169. 46 제9권 1집(통권 제16호, 2018년 3월)

and Charles Wolf. Arthur Bunce (1898-1965) who obtained a PhD in at University of (Bunce, 1938). At the time of his study at Wisconsin, there was a strong influence of the German Historical School of Economics. In the early part of the 20th century, the ‘Wisconsin Idea’ a German styled- prevailed through the large population of German immigrants in Wisconsin University (Schäfer, 2000, p.38; Han Youngsue, 2016, p.132). Richard T. Ely (1854-1943) played a leading role in introducing German Historical Economics through establishing the Department of Agricultural Economics at Wisconsin in America. Rejecting capitalism and the natural right to property, he exerted a substantial influence in the rise of the Progressive Era in America. He obtained a PhD in economics under the supervision of Karl Knies (1821-1898), a German of the German Historical School of Economics at the University of in 1879. At the Department of Agricultural Economics, he taught his socialistic doctrines of teaching, based on his study in Germany to his students. Ely’s Wisconsin school had nurtured leading figures who pursued social policy against liberal and laissez-faire during the Progressive Era (1890s to 1920s) and the New Deal Program. Many of the Wisconsin economists were employed in New Deal agricultural policies (Rader, 1966, p.13; Bradizza, 2013, p.3; Han, Youngsue, 2016, pp.132-133). Bunce lies in the strong intellectual genealogy of the Wisconsin ideas. Professor Benjamin Horace Hibbard (1870-1955) was Bunce’s supervisor who obtained his PhD under Ely in 1902 (Hwang, Yun-hee., 2009, pp.148-166). During the American military occupation in South Korea, Bunce was invited to Korea as a leader of economic advisors. He recommended the socialist-styled land reform, economic planning and state-controlled economy in South Korea. Along with Bunce’s guidelines, later, the nation-wide land reform was adopted in 1950 (Lee, Sang-min, 1991, pp.46-91). Gerhard Colm (1897-1968) was a German-American economist. Before moving Genealogy of German intellectual impacts on making of economic planning in South Korea 47

to America in 1933, as a member of the socialist-styled ‘Kiel School’, he taught at the . Colm was a chief economist for the National Planning Association under the Roosevelt and Truman administrations (Fiorito and Vernego, 2011, p.91). Colm’s model of economic planning was employed by Charles Wolf18). Wolf was an economic advisor to South Korea who drafted a plan for introducing Five-Year Economic Planning in South Korea. Wolf stated that he turned to the Colm’s economic planning in writing the draft for South Korea as “The macroeconomic framework used in formulating the plan was a Colm-type model which had originally been developed in connection with growth and employment projections for the US economy”. Charles articulated that the Colm model was labor-oriented, concentrating on employment as the main objective (Wolf, 1962, p.23).

IV. German intellectual influences on the theoreticalization of economic planning

So far, I have provided the historical genealogy of the German influences on the birth of economic planning from America to South Korea. Subsequently, this paper deals with the roles of German scholars in theoreticalization of the economic planning. Ralf Dahrendorf (1929-2009), German-British came up with two types of ‘rationality’ in the economy: market and plan. Dahrendorf assumed that “a smoothly functioning market is to the greatest advantage of the greatest number”. For him, “market-rationality is politically passive, a hands-off attitude in matters of legislation and decision-making.” In a rational market, decisions are made to “safeguard the functioning of the market.” The ‘plan rationality’, by

18) Charles Wolf Jr. (1924 – 2018) was a senior economic advisor at the RAND Corporation. As to the role of Wolf in Korea, see Park, T’ae-gyun (2007). 48 제9권 1집(통권 제16호, 2018년 3월)

contrast, “has as its dominant feature precisely the setting of substantive social norms. Planners determine in advance who does what and who gets what” leaving “no room for individual decision or for conflicting decisions” (Dahrendorf, 1968, p.219). Following Dahrendorf, Chalmers Johnson (1982) broke the ice to pioneer theories on the planning in East Asia. Before Johnson, there had been a long silence on behalf of advocates of the classical theory that had failed explain the economic success of East Asian non-Communist states where there are extensive state-intervention and macro economic planning. Johnson contributed to understanding East Asian political economy by coining a concept of ‘developmental state’ in juxtaposition with ‘regulatory state’ of Europe and the USA in his pioneering publication of MITI (Ministry of International Trade and Industry) and the Japanese miracle. Based on his observation of Japanese by the MITI, he defined the ‘developmental state’ as the phenomenon of the state-lead ‘rational plan’ economy through strong state intervention. Johnson defined ‘developmental’ as the ‘plan rational’ by bureaucrats of the state (Johnson, 1982). The plan economy is a typical economic system of communism that stands in antithesis to the market economy of capitalism. The East Asian non-communist states are notorious for their anti-communism. Therefore, the prevailing of the plan economy in East Asia during the post-war period is bewildering. To cope with the confusion, Chalmers Johnson calls for adopting ‘plan-rational system’ for understanding Japan’s economy beyond the prevalent preference of ‘binary modes of thought’ in Western political economy like Weber’s distinction between a ‘market economy’ (Verkehrwirtschaft) and a ‘planned economy’ (Planwirtschaft):

Want satisfaction will be said to take place through a ‘market economy’ so far as it results from action oriented to advantages in exchange on the basis of self-interest and where co-operation takes place only through the exchange process. It results, on the other hand, from a ‘planned economy; so far as Genealogy of German intellectual impacts on making of economic planning in South Korea 49

economic actions is oriented systematically to an established substantive order, whether agreed or imposed, which is valid within an organization19).

Johnson observes that Japan’s developmental state is not understood as ‘market economy’ but as ‘plan economy’. For Johnson, “observers coming from market-rational systems often misunderstand the plan-rational system because they fail to appreciate that it has a political and not an economic basis.” Alternatively, he locates ‘plan rational’ in the Japanese economy in contrast with ‘plan ideological’ in the nature of the Soviet-type economy:

Economies of the Soviet type are not plan rational but plan ideological. In the Soviet Union and its dependencies and emulators, of the means of production, state planning, and bureaucratic goal-setting are not rational means to a developmental goal (even if they may once have been); they are fundamental values in themselves, not to be challenged by evidence of either inefficiency or ineffectiveness. In the sense I am using the term here, Japan is plan rational, and the command economies are not; in fact, the history of Japan since 1925 offers numerous illustrations of why the command economy is not plan rational, a lesson the Japanese learned well20).

In Johnson’s framework, incorporation of ‘plan rational’ by bureaucrats in the national economy becomes one of key properties for understanding ‘developmental state’. Historically, Johnson articulated that the developmental state originates from the Japanese response to the tumult of the financial crisis in the 1920s. The military emerged to overcome the crisis in rejection of and laissez-faire policy. The Japanese military seized political power by their superior ability to mobilize the people in overcoming the panic. In these

19) Weber, Max, Economy and society. Berkeley: University of California Press, 1978, p.219. 20) Johnson, Chalmers, MITI and the Japanese miracle: the growth of industrial policy, 1925-1975. Stanford: Stanford University Press, 1982, p.18. 50 제9권 1집(통권 제16호, 2018년 3월)

historical events, Johnson noted the international relations between Germany and East Asia as one of the key elements to understand the East Asian economy. In particular, Johnson stressed that Japan stands in the tradition of the German Historical School. As to the intellectual origin of developmental state, Johnson definitely but briefly drew on the German Historical School to explain the rise of and planned economy in Japan as follows:

What do I mean by the developmental state? This is not really a hard question, but it always seems to raise difficulties in the Anglo-American countries, where the existence of the developmental state in any form other than the communist state has largely been forgotten or ignored as a result of the years of disputation with Marxist-Leninists. Japan's political economy can be located precisely in the line of descent from the German Historical School sometimes labeled ‘economic ’, Handelspolitik, or ; but this school is not exactly in the mainstream of economic thought in the English-speaking countries. Japan is therefore always being studied as a “variant” of something other than what it is, and so a necessary prelude to any discussion of the developmental state must be the clarification of what it is not21).

In addition to the Historical nationalist economy, Johnson states that Weber’s rationality contributed to the acceptance of virtue of ‘plan rational’ that legitimizes economic planning. “Japan in the late nineteenth century adopted for its new political system a version of what Weber called ‘monarchic constitutionalism’, the form of government that Bismarck gave to imperial Germany”22). With regard to the emergence of developmental state, Bruce Cumings, an American leading scholar on Korean history also pinpointed that Johnson’s

21) Johnson, 1982, p.17. 22) Ibid., pp.36-37. Genealogy of German intellectual impacts on making of economic planning in South Korea 51

reference to the German historical school and Max Weber was right. Cumings played up more on the transformation of Japanese political institutes from that of Samurai warriors to the rationality of Weberian bureaucrats.

He [Johnson] rightly traces a German lineage in Japan’s success, but only to Handelspolitik or neomercantilsim in the first instance and with more emphasis on Japanese learning from Germany in the 1930s than 1880s... The virtue of this analysis is to suggest that planning can be ‘rational’ as market allocation, or more so. The vice is, once again, the aura of reification and righteousness surrounding the term ‘rational’. But that is nor surprising, because the real German lineage that Johnson asserts is from the Max Weber to MITI. Modern bureaucracy for Weber is “the most rational and impersonal from state administration”23).

Since the publication of Johnson’s book, the developmental state has established itself as one of the most formidable theories for explaining East Asia’s model of political economy in line with a statist of scholars like Skocpol(1985) and White(1988). Following the lead of Johnson, the developmental state expanded its scope from Japan to South Korean (Amsden, 1989) and Taiwan (Wade, 1990) followed by academic attempts to devise a universal and theoretic framework beyond the regional phenomena of East Asian states to African and Latin American states (Evans, 1995; Woo-Cumings, 1999). Moreover, Henderson (1993) proposed ‘market ideological’ from his inspiration from Johnson. Accepting that the plan rationality is more proper for the analysis of East Asian states, he articulated that it is necessary for developing more a conceptual distinction in the developmental state due to the rise of Thatcherism and Reaganism in 1980. Henderson provides a definition of four types of economy as follows:

23) Cumings, 1999, p.64. 52 제9권 1집(통권 제16호, 2018년 3월)

Market rational: political economies as those in which the state legislates the parameters in which private companies operate. While the state certainly regulates the economy in various ways, , production and distributional decisions are the preserve of private companies and their actions, if disciplined at all, are disciplined by the market”

Figure 1 Matrix of market economy and plan economy Source: Henderson, J., 1993, p.89.

Plan rational: political economy is one in which state regulation is supplemented by state direction of the economy... While the economy is largely and usually overwhelmingly in private hands and companies engage in competitive relations with one another and are disciplined by the market, the state also intervenes to discipline companies, where necessary, in order to achieve national goals Plan ideological: political economies the state owns and controls most, if not all, economic units. Resource allocations and investment decisions and the rest, are generally a state rather than a corporate or market function. Market ideological: political economy is one that seeks to revert to the state-civil society relation that pertained during the epoch of competitive capitalism (Henderson, 1993, pp.87-88). Genealogy of German intellectual impacts on making of economic planning in South Korea 53

In Henderson’s framework, the political economy of South Korea is an exemplar of ‘plan rational’ reflecting hybrid nature of non-liberalism in German intellectual tradition and liberalism along with commitment of American to South Korea under doctrine of anti-communism.

V. Conclusion

In this paper, I have attempted to explain the uncharted routes of the introduction of various roles of German intellectuals in the formation of economic planning in South Korea referring to the Japanese wartime economy, American scholarship on German thoughts, and theoreticalization of the economic planning in East Asia. First, Werner Sombart’s magnum opus translated into Japanese provided ideological support for economic planning during wartime under Imperial Japan in the early 20th century. Second, the American scholarship to German social thought came to Korea by American advisors to South Korea since the collapse of Imperial Japan. Finally, German scholars in English speaking countries proceeded to theorize the economic planning and devise a school of ‘Developmental State’. By doing so, this paper has contributed to understanding a lesser known genealogy of the influence of the German intellectuals’ in exile in English speaking countries over to the American foreign policies to South Korea. Along with this contribution, this paper comes up with agendas for further studies. First, this research confirmed the impacts of the during the period from Prussia to the Third Reich. Hence, it requires comparative research on the relations between the postwar German model to the East Asian models. Second, the current German legacies in American academics deserve further studying. With the collapse of the hegemony of the Neo-liberalism in 2008, it would be fruitful to find a better alternative to current liberal capitalism. 54 제9권 1집(통권 제16호, 2018년 3월)

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<국문초록>

대한민국 경제계획 형성에 미친 독일 지적 영향의 계보

한 영 수*24)

본 논문은 우리나 경제계획의 성립과정에서 독일 지식인의 계보를 탐색 하고자 한다. 자유주의학파는 냉전시기 공산주의 진영에서 시행되었던 계 획경제를 비난하였다. 자유주의자들이 계획경제에 대한 적대적인 태도를 가졌음에도 불구하고 미국의 한반도 정책담당자들은 지난 20세기 우리나 라의 국가 건국 시기동안 지속적으로 계획경제의 도입을 주장하였다. 본 논문은 이러한 계획경제 도입과정에서 독일지식인의 영향을 세 가지 경로 로 살펴보고자 한다. 첫째, 본고는 독일역사학파의가 일제 시기의 전시경 제에 미친 영향을 살핀다. 둘째, 20세기 전반기 미국의 지식인에 미친 독 일어권 지식을 다룬다. 마지막으로. 발전국가학파가 계획경제를 이론화의 과정을 다룬다,

주제어: 경제계획, 독일역사학파, 발전국가, 베르너 좀바르트, 카를 만하임, 로렌츠 폰 슈타인

* 서강대학교 국제지역문화원 60 제9권 1집(통권 제16호, 2018년 3월)

원고접수일: 2018. 2. 13. 심사마감일: 2018. 3. 10. 게재확정일: 2018. 3. 11.