Korean Brief Economic History and Government Policy

Brief Economic History and Government Policy

Korea was one of the poorest countries in world after experiencing two wars. World War II and Korean war (1950 ~ 1953). The country even experienced a food shortage so that it had to heavily rely on the foreign aid. Yearly per capita consumption was a mere $88 as late as 1965. However, since 1965, Korea has been transformed from its underdeveloped agricultural economy to a leading Newly Industrializing Country. Between 1965 and 1981, its gross national product GNP multiplied twenty times from $3 billion to $63 billion and per capita GNP increased sixteen times from $88 to $1,554. There have been many explanations for Korea's successful story. Among those, the strong role of government would be probably the most important one. At the same time, this would be also responsible for current recession. After Koran war, the government in fact had no sense of direction and also due to the unstable political situation, the country didn't have specific economic policy until 1961 when military government came to power and established the major institution guiding its economic planning called Economic Planing Board (EPB). This government set economic development as the top national priority and recognized the financial system in support of economic development plan. To achieve this purpose, it focused its policies mainly on export expansion moving its emphasis from import substitution. The result was considered quite successful for economic growth. Between 1965 and 1973, exports grew at average annual rate of 45%, from $175 million to $3,271 million. The success of the expansion was due primary to three factors (Kwack, 72). The first was a favorable international economic environment, which saw total world imports expand from $175 billion in 1965 to $536 billion by 1973. This boom in imports of the world reflected...