Learning from the South Korean Developmental Success

Effective Developmental Cooperation and Synergistic Institutions and Policies

Ilcheong Yi, Thandika Mkandawire

• Publisher: Palgrave Macmillan
• Year: 2014
• ISBN:
  9781137339485
• Topic: Business
• Subtopic: Business General
• Index: Business

This analysis of South Korea's development experience can present lessons for development in the 21st century. Situating the development experience of South Korea within the framework of the capability enhancing state, this volume examines the empowering institutions and policies of South Korea between 1945 and 2000.

1

Overview: Learning from Developmental Success

Thandika Mkandawire and Ilcheong Yi

In his seminal work, Economic Backwardness in Historical Perspective (1962), Alexander Gerschenkron pointed out that only in a loose sense could the less advanced countries be said to follow the path traced by the ‘pioneers’ or forerunners of development. There are, instead, a multitude of actual paths taken by the latecomers to development that are fundamentally different. There are many reasons for this. First, the nature and attributes of the ‘backwardnesss’ of the followers today are not the same as those of their forerunners; the ‘initial conditions’ are different. Secondly, and most significantly, the followers have at their disposal knowledge and lessons that were not available to the forerunners, so that the path followed to development may be based on the ‘advantage of backwardness’ derived from their exploitation of the knowledge and experience of forerunners. Thirdly, followers are driven by an entirely different ‘spirit’ or ideology, which includes the drive to ‘catch up’, a drive that did not exist for the pioneers. This nonlinear view of history and development suggests the importance of learning from others so as not to mechanically retrace the path traversed by the forerunners with the purpose of avoiding some of the errors that they may have made over certain periods, of discovering new possibilities and of ‘leapfrogging’ over various phases. For the late latecomers, the number of countries to catch up to may be daunting, but the vast range of lessons at their disposal provides great opportunities for learning, adaptation and innovation, and for forging paths of development appropriate to their circumstances and preferences. However, the exploitation of this advantage was conditional and contingent upon what Abramovitz (1995) referred to as the ‘social capability’ of the latecomers. For the learning process to be a useful exchange of experience, openness to new ideas and creative adaptation is essential. Clearly, the relevance of the lessons for each country will depend on its own history and current condition.

The spectacular performance of East Asia has, during the second half of the last century, added valuable development knowledge, which has attracted considerable interest and, not surprisingly, induced many writers to draw ‘policy lessons’ from them for other developing countries. Unfortunately, all too often the lessons drawn have been tendentious, tainted by the presuppositions of the observers or retrofitted to suit current policy exigencies, with the consequence that the East Asian experiences have been used to justify a whole range of contradictory positions. The great challenge is to see the Korean experience together with that of other East Asian countries through much less ideologically tainted lenses, and with a greater sense of context specificity. There also has been a tendency to treat the ‘developmental state’ as something omnipotent and omniscient, the consequence of which being that insufficient attention has been paid to the ‘trial and error’ nature of some of the ‘lessons’. Not all of the beneficial lessons learned through the development experience were intended. Indeed, many lessons we draw today only became known to be useful practice ex post facto.

Explaining economic and social development in South Korea

Perhaps the most widely acknowledged feature of the Korean experience is that a developmental state played a central role in the economic and structural transformation of the economy.¹ Yet, quite remarkably, until recently the welfare regimes associated with developmental states had received little attention. When social policy was considered, it was often subordinated to the exigencies of accumulation and structural change. Indeed, one of the most evoked features of the developmental state is that it instrumentalized social policy and denied or downplayed the intrinsic value of the goals of social policy. This thesis, that social policy was subordinated to economic growth, became a core element constituting the approaches labelled ‘productivist welfare regime’ or ‘developmental welfare state’ theories, which have many variants.² Studies based on the subordination thesis have mainly focused on the questions of what the defining characteristics of South Korean social policy are, and how they have served the achievement of the state’s overarching economic goals. For instance, it has been argued that for the three decades of the 1960s–1990s, the residual and minimalist social policies or ‘selective developmental welfare state’ had served rapid economic growth (Holliday 2000). As the change in the economic goal moved from ‘economic growth’ to ‘economic competitiveness’, the ‘selective developmental welfare state’ explanation transformed into the ‘inclusive welfare state’ (Kwon 2007).

Although the subordination thesis highlights the linkage between social policy and economic policy, it does not identify the diverse forms and nature of the subordination of social policy: whether it was solely productivist or if it also reduced poverty; whether it provided protection or was redistributive; during which phases of the process of industrialization it was implemented; and which relative weights were attached to these objectives over the different phases of industrialization. Therefore, little is still known about the role of social policy in different patterns of economic growth over time, such as import substitution industrialization (ISI) in the 1950s, export-oriented industrialization (EOI) based on light goods in the 1960s and EOI based on heavy and chemical goods in the 1970s and 1980s.

One of the puzzles of the East Asian development experience was the high social outcomes from authoritarian economic policy regimes that made policy unencumbered by pressures for welfare measures and presumably devoid of social policy. Although the expansion of education and the role of an educated and skilled labor force have been highlighted as the main causes of the economic success, most research has shared the assumption that social development is a consequence automatically generated from economic growth, and not the outcome of deliberate policies. And yet, it is clear that there are no automatic mechanisms for transforming economic growth into social welfare. The challenge then is to identify the implicit and explicit social policy measures behind what has been a virtuous circle of economic growth and human development (Ranis and Stewart 2001). This task has been occulted by the rather ‘Eurocentric’ view of what constitutes social policy, which often fails to address the question of how ‘surrogate social policies’ or ‘social protection by other means’ have played functionally equivalent roles in income transfers and services.³ Here, we include surrogate policies such as extensive regulatory measures for land reform, the expansion of educational opportunities, labor market and wage policies, housing schemes, food subsidies or employment policies that have been combined to protect and enhance the well-being and capabilities of citizens. Considering surrogate social policies highlights the importance of other policy instruments and measures compared to those deployed in the literature on comparative social policy in the Organisation for Economic Co-operation and Development (OECD) countries. When a broader conception of social policy is adopted, it becomes clear that social policy is more significant than is suggested by such indicators as the share of social expenditure to gross domestic product (GDP) or government expenditure.

In addition, conventional analysis of developmental states has exaggerated the degree of insulation from social pressures. The social transformation and the structural changes engendered by rapid economic growth brought to the forefront newly empowered social actors who insisted on a broader social and political agenda. It could be that social policy was introduced to pre-empt the more radical demands of these groups. Regardless of the authoritarianism, the state was not completely blind to the social demands of society and to the imperatives of legitimacy and ‘infrastructural power’. The quest for full employment was as much for labor mobilization as for poverty alleviation and social inclusion.

Finally, economic theories on growth, such as endogenous growth theories and new institutionalism, have contributed to an understanding of how various institutions affect the process of translating resources into products and services. Social policy, in particular education and health, plays a significant role in facilitating the translation of resources into human welfare. Empirical evidence based on cross-country statistics shows that lopsided development, either economic growth or human development, seldom persists, and is more likely to lapse into a vicious circle (Ramirez et al. 1997). The evidence indicates that institutions and policies for human development do not automatically result in economic growth, and vice versa, and that there should be facilitating institutions and policies to translate the gains from development of each dimension into one or the other.

In light of all these factors pointing to the social policy side of the developmental state, studies on social policy, welfare states or welfare regimes in East Asia, including South Korea, have increased rapidly and have made a valuable contribution to deepening the understanding of the developmental trajectory of South Korea.⁴ In particular, these studies complement the economic policy-focused understanding of the development of South Korea through analysis of the nature, content and role of social policy and the welfare regimes that were associated with it. It is through these studies that we are now able to understand the transformative role of social policy in Korean development experiences.

Issues and questions

The chapters in this volume bring out the complex bidirectional relationship between economic and social policy, in which it can be difficult to determine which was instrumental. Both social policy and economic growth were often justified in the language of alleviation of underdevelopment and poverty, nation building and equity. Proponents of development often saw both as an instrument to higher purposes of social well-being and national cohesion. The social policy of South Korea provides a good example of the transformative nature of social policy. Mkandawire interrogates South Korean development by paying special attention to the Schumpeterian, productivist and developmental characteristics of South Korean social policy through the lens of its transformative role in which multiple concerns and functions of social policy, namely production, distribution, protection and reproduction, are highlighted. M.-K. Chung as well as Yi, Cocoman, Y. Chung and Rhee identity functional equivalents to social policy that appeared in various forms and explain their roles in and impact on development. Several functional equivalents that have significantly impacted the transformation of Korean society, such as land reform in the 1940s and 1950s, have been analyzed in terms of their impact on social and economic development. However, the impacts on the processes, institutions and actors in addition to developmental outcomes have yet to be fully explained and thoroughly investigated. Douglass analyzes rural development and illustrates how agricultural policies have affected economic and social development. Although he does not use the terminologies of social policy, his historical analysis of the policies that have had a significant impact on rural development, such as land reform, provision of new varieties of rice and agricultural subsidies, shows how redistribution took place in rural areas under EOI in the 1960s and 1970s.

Jooha Lee, M.-K. Chung, and Yi pay particular attention to institutions and policies that have contributed to successfully translating human capital into productivity increase. Performance in terms of capability enhancement and translation of capability into productivity has been mainly determined, as Evans suggests, by the characteristics of state–society relationships, both with a broad cross-section of civil society groups and with capital. E. M. Kim enriches the discussion on state–society relationships with a concept of developmental alliance. Her argument for development goes beyond national boundaries, which closely relates to the emphasis in the following chapters on the international dimension. South Korea’s degree of openness and connection to the world, in particular its position in international production and trade chains, have significant implications for the country’s choice of a development pattern. Authors pay particular attention to the key institutions and policies mediating the impact of international production and trade systems on domestic social and economic development.

External aid to South Korea played a positive role in producing economic and social development outcomes in the periods both before and after industrialization, i.e. during the government of President Rhee Syngman of the First Republic (1948–60) and during the government of President Park Chung-hee of the Third and Fourth Republics (1961–79).⁵ Yi, Cocoman, Y Chung and Rhee as well as T. Kim address questions about the content of aid and the role of donors to both governments in both periods. They explain how aid resources and aid donors affected the developmental process, and how the governments responded differently to them. T. Kim focuses specifically on the transfer of knowledge through various channels of aid and non-aid relationships, with particular attention to domestic institutions and policies to facilitate the transfer of knowledge from abroad. Yang, Jinock Lee, and Pawar and Huh address the deficits and downsides of Korean development, namely democracy, environment and gender policies. As Mkandawire argues, social policy is not designed in a solipsistic manner, but reflects the reading by state actors of the balance of forces in society and the congruence of those policies with other processes in society.

Therefore, the question that needs to be answered is not which political regime has an affinity with a certain type of policy, but rather what policies were employed and why so under a certain regime. Yang discusses the different responses of authoritarian and democratic regimes to economic crisis, and explains how they differ in terms of development. Pawar and Huh as well as Jinock Lee have successfully taken up an interrogation of the content and nature of policies and institutions in the environment and gender policy fields. Rather than taking a normative view, they focus on the nature of the institutions and policies of environment and gender and their impact on development. The authors attempt to extract lessons from South Korea to assist developing countries in the twenty-first century. Acknowledging that there is no ‘one-size-fits-all’ prescription, they focus on what worked for South Korean development, rather than what might work for development in general. In particular, Amsden and Evans discuss what worked for South Korean development and for other developing countries based on empirical evidence across countries and time, and which institutions and policies have become more critical for development in the twenty-first century within different socio-economic and international contexts. Industrial policy, nationally owned enterprises (Amsden), and a capability-enhancing developmental state based on state–society relationships with both a broad cross-section of civil society groups and with capital (Evans), have been suggested as critical to development in the twenty-first century.

Structure of the book

The book is composed of four parts. Part I explains the overarching explanatory framework (Mkandawire), and places the South Korean development experience within comparative context to identify which institutions and policies worked for the development of South Korea and other developing countries (Evans; Amsden). Part II explores the linkage between social and economic aspects in terms of institutions, policies and development in both urban and rural areas (Jooha Lee; M.-K. Chung; Douglass; Yi). Part III explains the international dimensions of South Korean development, in particular aid and technology transfer (Yi, Cocoman, Y Chung and Rhee; T. Kim). E. M. Kim expands the role of developmental alliance from the domestic development to international development with a focus on the development of South Korea and its role in international development cooperation. Part IV (Yang; Jinook Lee; Pawar and Huh) deals with the nature and degree of deficits or the downside of South Korean development in the fields of democratic institutions, environment and gender, focusing on what impacts these deficits or downsides have had on South Korean social development rather than how much deficit was in the South Korean development process.

Notes

1. For an excellent summary of this strand of analysis, see Woo-Cumings (1999a: Introduction).

2. Holliday (2000); Gough (2001); Kwon (2005, 2007).

3. Chang H.-J. (2004); Mishra (2004); Estevez-Abe (2008); Kim P.H. (2010).

4. For an excellent summary of this strand of research, see Ku and Finer (2007).

5. Krueger (1982); Krueger et al. (1989); Cassen and Associates (1994); Fritz and Menocal (2007).

Part I

2

Lessons from the Social Policy and Development of South Korea: An Interrogation

Thandika Mkandawire

Introduction

This chapter is not about the social policies of South Korea. Rather, it is an attempt at interrogating the South Korean experience with social policy with the view of distilling some lessons for developing countries. The perspective is obviously developmentalist in the sense that it is concerned with the role of social policy in development trajectories such as that traversed by South Korea during the last half-century or so. The chapter does, of course, touch upon other issues of social policy in developing countries, hopefully in a way that does not suggest a subordinate status for those concerns. It is concerned not only with the state’s policies pursued consciously, but also with those pursued unconsciously albeit with consequential social and developmental outcomes. It thus looks at the effects of both omissions and commissions in policy. All this may account for the tentative and speculative nature...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Figures
• List of Tables
• Foreword by Sarah Cook
• Notes on the Contributors
• List of Acronyms
• 1 Overview: Learning from Developmental Success
• Part I
• Part II
• Part III
• Part IV
• Bibliography
• Index