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All rights reserved. 300 N. Zccb Rd. Ann Arbor, MI 48106 A NEW POLITICAL ECONOMY OF ECONOMIC POLICY CHANGE IN SOUTH KOREA, 1961-1963i CRISIS, UNCERTAINTY, AND CONTRADICTION DISSERTATION Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School of the Ohio State University By Ho-Yeol Paul Yoo, B.A., M.A. ***** The Ohio State University 1990 Dissertation Committee: Approved by R. William Liddle Bradley M. Richardson David Pion-Berlin Adviser Department of Political Science Copyright by Ho-Yeol Paul Yoo . 1990 To God ii ACKNOWLEDGMENTS I express sincere appreciation to Dr. R. William Liddle for his guidance and insight throughout the research. Thanks go to the other members of my advisory committee, Drs. Bradley M. Richardson and David Pion-Berlin, for their suggestion and comments. Gratitude is expressed to Drs. Norman Uphoff at Cornell University, and Chung-in Moon at the University of Kentucky, for their support and encouragement. The assistance of Mrs. LaVonne Raney in correcting my English is gratefully acknowledged. Also I express my appreciation to my colleagues at Ohio State, Chung-Mook Lee, Sang-Min Sohn, and Chang-Hon Oh, who had read my early draft and given me a number of suggestion. I also extend my gratitude both to my parents and Yeong-Ae's parents, without whose spiritual and financial support I could not finish this dissertation. To my wife, Yeong-Ae, X offer sincere thanks for her unshakable faith in me and her willingness to endure with me the vicissitudes of my endeavors. To my children, Jimin and Jae-Earn, I thank them for understanding my absences at so many nights in preparation of this dissertation. iii VITA November 21, 1955 ............. Born - Seoul, Korea 1978 ........................... B. A. (Political Science), Korea University, Seoul, Korea 1978-1981 ..................... Research Assistant, The Asiatic Research Center, Korea University 1981 ........................... M.A.(Political Science), Graduate School, Korea University 1983-1987 ..................... Teaching Assistant, The Ohio State University, Columbus, Ohio, U.S.A. FIELD OF STUDY Major Fields: Political Science, Comparative Politics, Politics of Developing Countries, Comparative Public Policy, and International Political Economy iv TABLE OP CONTENTS ACKNOWLEDGMENTS ......................................... iii VITA ..................................................... iv LIST OF TABLES .......................................... xi LIST OF FIGURES ........................................ xiv LIST OF ABBREVIATIONS .............................. xv NOTE ON ROMANIZATION ................................... xvi CHAPTER PAGE I. AN OVERTURE OF A NEW POLITICAL ECONOMY ........ 1 Research Problems ............................ 1 Contending Theories .......................... 5 Neo-Classical Economists ................. 7 Radicals ................................ 8 Historical Structuralists ................ 11 Institutionalists ......................... 14 Critique of the Literature .................. 17 Alternative Analytical Framework: A New Political Economy of Change ............. 20 Choice .................. 21 Exchange of Resources .................... 23 Stratification of the Political Community. 25 Research Framework and Hypotheses ........... 26 Methodology and Data ......................... 33 Dynamic Process of Factor Exchanges ..... 33 Theoretical Rigor ..... 34 Partial Analysis .......................... 34 Significance of the Research ................ 39 v II. ESTABLISHMENT OF THE MILITARY GOVERNMENT: GOAL, CHOICE, AND STRATIFICATION ............... 41 Variation of Resource Positions ............. 42 Rapid Growth of the Korean A r m y .......... 42 The Status of the Military in the Korean Society .................................... 44 Factional Strife within the Military .... 46 Institutional Structure of the Military Regime ........................................ 49 The Supreme Council for National Reconstruction ............................ 51 The Cabinet ............................... 53 The Korean Intelligence Agency(KCIA) .... 56 Resources of the Military Government ........ 57 Coersive Power.and Authority ............. 57 Industrial Production and Financial Flow . 59 Poor Resistance from Political Parties and Politicians ...................... 63 Social and Political Status and Legitimacy ................................ 67 Political Goals of the Coup Leaders ......... 69 Pledge of the Military Revolution ........ 70 Chang Do-Young and Senior Military Officers ................................... 73 Kim Jong-Pil and the Young Colonels ..... 76 Park Chung Hee on the Apex of the Revolution ....................... 80 Park's Political Choice and Stratification .. 83 Remain in Authority in the F u t u r e ........ 83 Induce Social and Economic Change ........ 85 Arrangement of the Major Sectors ..... 88 A Contradictory Exclusive Model .......... 91 III. RESOURCE EXCHANGE ONE: A COUNTER POLICY ON USURIOUS DEBTS IN RURAL COMMUNITIES ............ 94 Emergence of the Counter-Usury Policy in Rural Communities ....................... 95 Legacies of the Agricultural Credit Policy under Rhee and Chang Regimes ..... 96 Usurious Debts ............................ 98 The Counter-Usury Program ................ 100 Farmers and Fishermen ........................ 102 Lack of Resources within the Rural Communities ............................... 103 Government's Agricultural Policy ......... 105 The Land Reform ........................... 107 Productivity of the Counter-Usury Program ... 110 The Junta's Original Calculation ......... Ill Policy Implementation and Resource Change. 112 Termination of the P o l i c y ................ 114 Assessment of the Program and a New Distribution of Resources ................ 116 Stratification of the Sectors ............... 120 The Stratification of Major Sectors and the Counter-Usury Program ................ 121 Establishment of the National Agricultural Cooperative Federation ................... 123 New Civilian Ministers within the Military Government ....................... 125 A Structural Change within the SCNR ..... 127 Choice of Chairman Park Chung Hee ........... 130 Park's Peasant Background and Agricultural Policies ..................... 132 Park's Involvement in the Counter- Usury Program ............................. 134 Park's Political Choice to Save the Farmers .................................... 136 IV. RESOURCE EXCHANGE TWO: THE FIRST FIVE-YEAR ECONOMIC DEVELOPMENT P L A N ....................... 140 Legacies of Long-term Economic Plans under the Rhee and Chang Administrations and the First Five-Year Economic Plan ........... 141 The Nathan Plan ........................... 143 The Tasca Plan ............................ 145 The Three-Year Economic Plan ........... 148 vii The Five-Year Plan ........................ 152 The First Five-Year Economic Plan ........ 154 Productivity of the First Five-Year Economic Plan ................................ 157 Overall Economic Growth Rate ............. 158 Saving and Investment ........ 160 Government Saving and Inflation .......... 162 Export and Foreign Assistance ......... 165 Stratification of the Sectors ............... 168 Planners of the FFYEP .................... 170 Big Business and Illicit Profiteers ..... 172 Treatments of the Illicit Fortune-makers . 17 6 U.S. Economic Power in Korea ............. 178 U.S. Influence and South Korean Government ................................ 181 Return of the Old Powers and Revision of the FFYEP: Big Business ............... 184 Return of the Old Powers and Revision of the FFYEP: the United States .......... 187 Choice of Chairman Park Chung Hee .......... 191 A Planned-Economy or an