The Korean economic miracle (2)

At last, we meet again for the continuation of the article on the Korean economic miracle. Remember this? Yes, it’s been a long time. And just as in Part 1, we’re going back in time a little. Let’s take a look at how South Korea developed and how, in less than 50 years, it became a major world economic power.

Background

It was Park Chung-hee (박정희) who, following his coup d’état in 1961 and under the control of the military junta, set South Korea on the road to industrialization in 1960.
But let’s not forget that, at the time, South Korea was on the brink of the Cold War with its loyal friend in the North. The country’s infrastructure was badly damaged by the civil war with the North (1950-53).

Following Korea’s separation, the North inherited the vast majority of the country’s factories, mines and, above all, 80% of its power generation capacity. The South, on the other hand, was left with a largely pastoral, agrarian and comparatively underdeveloped economy. This was one of the reasons why, at the time, North Korea was richer and more developed than South Korea.

Of course, this is not without the invaluable intervention of the United States, which plays a central role in the “Korean economic miracle”.
Not only did the USA provide South Korea with technical and financial assistance – they literally “showered them with greenbacks”. But they also absorbed most of South Korea’s exports, enabling the country to develop a solid industrial base. In the context of the Vietnam War, the United States clearly awarded generous contracts to South Korean companies, enabling them to keep their industries running.

But even then, South Korea had one of the cheapest workforces in the world, and its small neighbor, Japan, took advantage of this and relocated its production to South Korea, which of course greatly benefited South Korean industry and economy.

Exports at all costs

Park Chung-hee’s government put in place a formidable export stimulation strategy, which worked very effectively. In fact, when the government of the day decided to target a product for export, it did so on a national scale.

It began by providing financial incentives to boost the development of selected industries (mainly interest rate rebates).
The South Korean economy grew at an impressive rate of 30% between 1962 and 1982.

South Korea is benefiting from the first oil boom thanks to the international breakthrough of its construction companies, as well as its investments in the Middle East, notably in the construction of the Burj Khalifa.

How did South Korea develop without a solid infrastructure for exporting manufactured goods? Well, the country soon acquired a fleet of container ports that are among the largest in the world. This strategy was put in place to ensure that the country could sell and export its low-cost products around the world. Samsung is one of the country’s development pioneers and role models.

The rise of the chaebols

Back then, the South Korean government allied itself with wealthy families and the entrepreneurial elite. It created major conglomerates, known as chaebols. Most of them started from nothing, and grew into mega-companies with a presence in every field. The three best known today are probably Samsung, Kia, Hyundai and LG.

What’s special about the Koreans is that the state will be taking charge of the heavy industries, which require a lot of capital, but which are still mostly operated by private companies (e.g. Pohang Steel Mill, better known as POSCO).

POSCO’s history dates back to the 1960s, when the Korean president, Park Chung-hee, wanted to develop a local steel industry, thus enabling the country to become more self-sufficient in steel, despite the shortage of raw materials. Today, POSCO is one of the world’s leading companies in the sector. POSCO is also present on every continent through its 23 subsidiaries, notably in Hong Kong, China, Vietnam, Thailand, Japan, the United States, Brazil, South Africa and, of course, New Caledonia through its 49% stake in NMC.

Since its creation 47 years ago, it’s fair to say that POSCO has fully lived up to the expectations of its former managers. Today, POSCO is at the heart of Korea’s economic development. Its history is inseparable from the country’s successful economic growth. The company’s CEO reaffirms that POSCO is a “Success Story Company”.

Soft power in its purest form

If I tell you Pororo (뽀로로), Larva, Molang (몰랑), or even Robocar Poli (로보카 폴리), you’re probably familiar with them? And with good reason: these are cartoons that we also see in our latitudes, and very much watched by our dear young heads, and with their respective newspapers, they could rival the very famous Journal de Mickey.

An export of cultural goods

When it comes to how South Korea developed after the war, the establishment of a strong internal soft power and theemergence of Korean dramas are among the first factors in its development. Subsequently, Korean soft power spread throughout Asia, then flooded the world, becoming a new international cultural standard.

South Korea has enjoyed strong development, thanks in large part to the South Korean government’s planning and organization of the majority of its cultural exports. Unlike Japan, which has long been a spectator of its own cultural influence, the Land of the Morning Calm has put in place a genuine strategy for exporting its culture.