Genealogy of German Intellectual Impacts on Making of Economic Planning in South Korea Young-Sue Han* <Abstract> This paper aims to explore the path of the genealogy of German intellectuals in the making of economic planning. The Schools of Liberalism 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 Japan. Consequently, this papers explores American scholarship in Germany 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, Werner Sombart, Karl Mannheim, Lorenz von Stein * 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 Economics 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 economic growth of East Asia. The School attributed the market mechanism and free trade to the success of East Asia arguing the role of government 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 competition. First, the Neoclassical school in line with the World Bank emphasized the laissez-faire and open economy (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 governments in this area. Considering the hefty conflicts against Communism 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 free market-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 society. 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 planned economy 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 capitalism prior to the advent of Neo-liberalism. In the formation of this statist political economy of South Korea, Korea lies in the genealogy of the German statist thoughts. The German intellectual history 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 Friedrich List as a predecessor, the School consists of the Older including Wilhelm Roscher, Karl Knies, and Bruno Hildebrand. The Younger includes Gustav von Schmoller, Lujo Brentano, Etienne Laspeyres, Karl Bücher, Adolph Wagner, and Georg Friedrich Knapp. Finally, Werner Sombart and Max Weber 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 economists 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,