HARVARD EAST ASIAN MONOGRAPHS 91 Studies i, the Modernizationof The Republic of Korea: 1945-1975 Government, Business, and Entrepreneurshipin Economic Development: The Korean Case for ievelop [cy ent %' , 3 '8 , , l _ I 1 1 1260 1270 1280 29* North Korea 0 ,IL. Kiimhwa Sokch'o East Sea KY6NGGI ,JCh'unch'Nn38 0 Uij~ngbu KANGWN Kagnng Mukho Pukp'y'6ii9 Sarnch'wk , In n Seoul o W nju Chngsgn­ Suw~n ,.. '" .. .€. " r ~Ans~wng..: b h'ungju .-. 7 _ 37 0 37 C CH'UNGCH'6NC Ch'nan ______ f, Ch'8ngJu-f-'6b Umsong :ou- NORTH KY6NGSANG CH'UNGCH'6NG. -- Tacj no!~ ChAngha g ° ". ,. .. iJKimch'5n 0 360 Ku san 1ri P..ang 36' Yellow Sea /---l(.S Taegu Kyongju NRTHCH6LLAI "j*.4"_ - Popsongp' c- SOUTH KY6NGSANG - " CChinhae 0oua 0 Kwangju Chinju SOUTH CH6LLA Samch--np o 350 _ S,nch,5no. -- Mo a, J _ angsungp'o sM j Sn'gum-ni ___... __ .. .. 128' 1290 340 THE REPUBLIC OF KOREA CHEJU ISLAND 0 20 40 60 80 100 120 140 160 S5p'o 0 2 KI!OMETERS 0 20 40 60 n0 100 126' 127o M _______I_____________I_____ MILES Studies in the Modernizationof The Republic of Korea: 1945-1975 Government, Business, and Entrepreneurshipin Economic Development: The Korean Case LEROY P. JONES AND IL SAKONG Development Information Center Room 105 SA-18 Washington, D.C. 20523-1RnI PUBLISHED BY COUNCIL ON EAST ASIAN STUDIES HARVARD UNIVERSITY Distributedby Harvard University Press Cambridge, Massachusettsand London, England 1980 © Copyright 1980 by The President and Fellows of Harvard College The Council on East Asian Studies at Harvard University publishes a monograph series and, through the Fairbank Center for East Asian Research, administers research projects designed to further scholarly understanding of China, Japan, Korea, Vietnam, Inner Asia, and adjacent are;.s. The Harvard Institute for International Development is Harvard University's center for interdisciplinary research, teaching, and technical assistance on the problems of modernization in less developed countries. The Korea Development Institute is an economic research center, supported in part by the Korean government, that undertakes studies of the critical development issues and prospects of Korea. Library of Congress Cataloging in Publication Data Jones, Leroy P. Government, business, and entrepreneurship in economic development. (Studies in the modernization of the Republic of Korea, 1945-1975) (Harvard East Asian monographs ; v. 91) Bibliography: p. Includes index. 1. Korea-Economic policy. 2. Korea-Economic conditions-1945- 3. Industry and state-Korea- History. 4. Entrepreneur. I. SaKong, 11,joint author. I1. Title. Ill. Series. IV. Series: Harvard East Asian Monographs ;v. 91. HC467.J65 338.9519'5 79-28671 ISBN 0-674-35791-4 Foreword This is one of the studies on the economic and social modern­ ization of Korea undertaken jointly by the Harvard Institute for 7nternational Development and the Korea Development Institute. The undertaking has twin objectives; to examine the elements underlying the remarkable growth of the Korean economy and ti,e distribution of the fruits of that growth, together with the associated changes in society and government; and to evaluate the importance of foreign economic assistance, particularly American assistance, in promoting these changes. The rapid rate of growth of the Korean economy, matched in the less developed world (apart from the oil exporters) only by similar rates of growth in the neighboring East Asian economies of Taiwan, Hong Kong, and Singapore, has not escaped the notice of economists and other observers. Indeed there has been fairly extensive analysis of the Korean case. This analysis, has V Foreword been mainly limited to macroeconomic phenomena; to the be­ havior of monetary, fiscal, and foreign-exchange magnitudes and to the underlying policies affecting these magnitudes. But thert are elements other than these that need to be taken into account to explain what has happened. The development of Korean entrepreneurship has been remarkable; Korea has an industrious and disciplined labor force; the contribution of agricultural development both to overall growth and to the dis­ tribution of income requires assessment; the level of literacy and the expansion of secondary and higher education have made their mark; and the combination and interdependence of government and private initiative and administration have been remarkably productive. These aspects together with the growth of urban areas, changes in the mortality and fertility of the population and in public health, are the primary objects of study. It is hoped that they will provide the building blocks from which an overall assessment of modernization in Korea can be constructed. Economic assistance from the United States and, to a lesser extent, from other countries, has made a sizable but as yet un­ evaluated contribution to Korean development. A desire to have an assessment undertaken of this contribution, with whatever successes or failures have accompanied the U.S. involvement, was one of the motives for these studies, which have been fi­ nanced in part by the U.S. Agency for International Develop­ ment and, in part, by the Korea Development Institute. From 1945 to date, U.S. AID has contiibuted more than $6 billion to the Korean economy. There has also been a substantial fallout from the $7 billion of U.S. military assistance. Most of the economic assistance was contributed during the period before 1965, and most of it was in the form of grants. In later years the amount of economic assistance has declined rapidly and most of it, though concessional, has been in the form of loans. Currently, except for a minor trickle, U.S. economic assistance has ceased. The period of rapid economic growth in Korea has been since 1963, and in Korea, as well as in other countries receiving foreign assistance, it is a commonplace that it is the receiving country that is overwhelmingly responsible for what vi Foreword growth, or absence of growth, takes place. Nevertheless. eco­ nomic assistance to Korea was exceptionally large, and what­ ever contribution was in fact made by outsiders needs to be assessed. One of the studies, The Developmental Role of the Foreign Sector and Aid, deals with foreign assistance in macro­ economic terms. The contribution of economic assistance to particular sectors is considered in the other studies. All the studies in this series have involved American and Korean collaboration. For some studies the collaboration has been close; for others less so. All the American participants have spent some time in Korea in the course of their research, and a number of Korean participants have visited the United States. Only a fcw of the American participants have been able to read and speak Korean and, in consequence, the collaboration of their colleagues in making Korean materials available has been invalu­ able. This has truly been a joint enterprise. The printed volumes in this series will include studies on the growth and structural transformation of the Korean economy, the foreign sector and aid, urbanization, rural development, the role of entrepreneurship, population policy and demographic transition, and education. Studies focusing on several other topics-the financial system, the fiscal system, labor economics and industrial relations, health and social development-will eventually be available either in printed or mimeographed form. The project will culminate in a final summary volume on the econcmic and social development of Korea. Edward S. Mason Harvard institute for International Development Mahn Je Kim President, Korea Development Institute vii A Note on Romanization In ronianizing Korean, we have used the McCune-Reischauer system and have generally followed the stylistic guidelines set forth by the Library of Congress. In romanizing the names of Koreans in the McCune-Reischauer system, we have put a hy­ phen between the two personal names, the second of which has not been capitalized. For the names of historical or political figures, well-known place names, and the trade names of com­ panies, we have tried to follow the most widely used romaniza­ tion. For works written in Korean, the author's name appears in McCune-Reischauer romanization, sometimes followed by the author's preferred romanization if he or she has published in English. For works by Korean authors in English, the author's name is written as it appears in the original publication, some­ times followed by the author's name in McCune-Reischauer romanization, especially if the author has published in Korean also. In ordering the elements of persons' names, we have adopted a Western sequence-family name first in all alphabet­ ized lists, but last elsewhere. This is a sequence used by some, but by no means all, Koreans who write in English. To avoid confusion, however, we have imposed an arbitrary consistency upon varying practices. Two notable exceptions occur in refer­ ences to President Park Chung Hee, and Chang Myon, for whom the use of the family name first seems to be established by cus­ tom and preference. Commonly recurring Korean words such as si (city) have not been italicized. Korean words in the plural are not followed by the letter "s." Finally, complete information on authors' names or companies' trade names was not always available; in these cases we have simply tried to be as accurate as possible. ix Con tents FOREWORD v ACKNOWLEDGMENTS xxiio PREFACE xxvii AFTERWORD xxxiii ONE bitroduction ISSUES IN KOREAN GROWTH 1 THEORETICAL PERSPECTIVES 5 METHODOLOGY AND OVERVIEW 13 TWO The Colonial IHeritawe 17 YI DYNASTY