Economic Development in South Korea: Prospects and Problems

Abstract

In the twelve years since the armistice in the Korean War, Korea has scarcely lost its reputation as a cold, barren, and economically bleak country. Reports from U.S. servicemen still stationed along the lonely and near-isolated Demilitarized Zone, seem to confirm that reputation borne of the experiences of the war. And yet Korea has in fact undergone substantial change in the post-war period and is now-in the opinion of most close observers-on the verge of an economic break-through similar to that experienced on Taiwan and one which would make it along with Taiwan one of the more positive examples among developing countries. Speculating on the prospective economic success of any less developed country which, like Korea, has a standard of living still so grossly inferior to most Western or other industrialized nations, inevitably gives rise to some misunderstanding and misinterpretation-and not only between economic observers and the soldier on the DMZ. As the indicators of the Korean economy become more and more promising, Koreans themselves have been inclined to find outside observers, and particularly Americans, overly optimistic; such observers-in their opinion-fail to see some of the serious problems that persist in the economic and socio-economic scene. There is the feeling, moreover, that official American optimism at least may be colored by a desire to reduce the level of U.S. economic aid. On the other hand, it sometimes appears to Americans that Koreans are overly pessimistic: for every problem that is getting better, the Korean seems to find two that are getting worse. The difference in approach may be understandable, but it is important to try to narrow the gap of misunderstanding. The Korean economy has real strengths which have in the past often been discounted. At the same time, it contains real weaknesses, some of which touch upon deep and serious social and political problems. Since recent events in South Korea have generated so much optimism about its future, it seems timely to try to assess these strengths and weaknesses in some perspective. Throughout the period since the end of the Korean War, Korea has known substantial if uneven growth. A large part of the growth, however, was absorbed in the reconstruction and recovery of war damage. Another significant element went into the reestablishment of basic infrastructure that had been lost to South Korea with the division of the country: power,