Industrialization and the State: The Korean Heavy and Chemical Industry Drive (review)

Abstract

BOOK REVIEWS157 resented as news, but neither can they afford to disbelieve all, even manifest propaganda. Simons might well argue that some recent developments in South Korea provide further evidence of continuities with the "culture of its brutal past": the ongoing corruption scandals, the hard line taken toward student demonstrators sympathetic to the North, and upgraded security provisions in the wake of the submarine incursion from the North. The claim, though hard to refute, says nothing for claims to legitimacy made by the North, which can suppress a good deal more of the evidence regarding its version of this culture. In brief, this book offers little that is new besides an attitude of discontent with the received opinions of the pro-Western, pro-ROK variety. It is largely taken up with a historical overview covering traditional Korea, the Japanese period, the Korean War and so on, readable but dependent on widely available sources. The account of the 1994 crisis is clearly written and argued, but admirably skeptical accounts of the Clinton administration's handling of the crisis are not in fact all that hard to find. The ideal reader is probably the upper-level or graduate student who will benefit from a stubbornly independent perspective, but equipped with enough background to sort wheat from chaff. The inclusion of key texts like the Treaty on the Nonproliferation of Nuclear Weapons among its six appendices makes the volume a viable acquisition for research libraries. David Kelly University of New South Wales [Australian Defence Force Academy] Industrialization and the State: The Korean Heavy and Chemical Industry Drive, by Joseph J. Stern, Ji-hong Kim, Dwight H. Perkins, and Jung-ho Yoo. Cambridge, Mass.: Harvard Institute for International Development, 1995. 206 pp. $30.00. The book under review is a product of a project jointly carried out by the Korea Development Institute and the Harvard Institute for International Development to evaluate the Korean heavy and chemical industry (HCI) drive that was officially launched by President Park Chung Hee in 1973. It has a chapter on the history of the HCI program and a chapter on how it was implemented, and these two together provide succinct information on how the program was conceived and carried out. It also has a chapter on selected case histories, both failures and successes. The core of the book consists of two chapters, one taking a macroeconomic approach to analyzing the results of the HCI program and the other 158KOREAN STUDIES, VOL. 21 taking a project-specific approach. The latter evaluates three "unsuccessful" projects and three "successful" projects. The main thrust of the macroeconomic approach is based on the calculation of capital efficiency—the rate of return on capital employed in individual industries. This calculation is designed to test the hypothesis that the HCI program led to resource misallocation: given the assumption of diminishing returns to the factors of production, if capital efficiency was lower in the promoted HC group than in the nonpromoted group of light manufacturing industries (Light group), this would imply an overinvestment of capital in the former. The results of their estimation using three different methods for calculating capital efficiency show that capital efficiency was indeed higher in the Light group than the HC group, although the difference was less than 6 percentage points and disappeared by the early 1980s. A fundamental problem with this approach is that the estimation of an industry's capital efficiency is based only on that industry's internally added value, excluding any possible externality and linkage effects on other industries . Obviously, it is almost impossible to take all these effects into account in estimating capital efficiency, and I do not mention this point to disparage the many hours the authors must have spent to estimate capital efficiency. It is rather to point out how difficult it is to draw any firm conclusion about the effect of the HCI program on economic development on the basis of the evidence presented in this book. The chapter on selected projects reaches what appears to be an odd conclusion . On the basis of their evidence that the projects they studied all had at least marginally acceptable economic rates of return, the authors conclude that...