Upward Social Mobility in South Korea, 1962-1997


Korean Minjok Leadership Academy
International Program
GMH



Chapter 2.2.2
Outline
List of References


Chapter 2.2.2 (as of Nov. 28th) . go to Teacher's Comment

II.2.2 Government Restructuring under Pres. Park Chung-hee (1962 ? 1972)

II.2.2.1 Focusing on overall economic development
            After the 5.16 coup d'etat the primary goal of the newly installed government was economic development. The nationwide average GDP per person amounted to only $ 87 in 1961 - the nation was in dire need of creating more wealth. In order to achieve this goal, government agencies and administrative divisions were drastically reformed.
            Before Park Chung-hee assumed power, the government had established a national budget plan and the economy plan. The Planning Office was installed to form the government budget. However, because the Korean economy then was ideologically tied to a totally free-market economy with no governmental regulation, the Planning Office had very little influence over the market. The Ministry of Revival, which existed throughout the Rhee Syngman and Jang Myeon administrations, attempted to develop the economy but had its limits as a multi-priority institution, first having to deal with recovering from the Korean war.
            One of the campaign promises of the 5.16 revolution had been saving the economy. In an array of bureau reforms, the first move was to rename the Ministry of Revival to the Ministry of Construction. The newly founded ministry was supposed to 'reconstruct'the economy. However, placing an administrative system, forming a development plan, and monitoring the overall market was too much workload. So the ministry was replaced - adding together the budget bureau of the treasury, the statistics bureau of the internal affairs ministry, the EPB (Economic Planning Board) was formed two months after 5.16
            The EPB was responsible for the first five-year plan. The director of the board was promoted to the rank of vice-prime minister, and therefore was granted power to control other economy-related agencies. The board planned the governmental budget, made investment plans and technology-development plans and also took responsibility for foreign economic cooperation. The role of the EPB was superior to all other administrative agencies.
            Many new services were formed and placed under the control of the EPB, such as the railroad service (1963), labor service (1963), national tax service (1966), and the fisheries agency (1966). The Ministry of Construction was relocated as a separate institution from the EPB and was put to more name-fitting responsibilities of road, port, housing construction and general management of national property. In 1963 the government enacted the General Land Development Law to support the ministry's work.
            Because the real 'trade and sell'economy was the foremost concern, the development of science and technology received comparably less attention. Following the first five-year plan, the government established a five-year technology development program, and created the new technology management bureau under the Economic Planning Board. However, this bureau was the smallest in budget & size among the many organs of the EPB - lacking a specialized and trained workforce, it failed to achieve outstanding results.
            Sensing the problem, the Economic Science Committee asked President Park to reorganize the administration. In January of 1967, the 'Science Technology Development Law'was enacted, which regulated how an agency, which plans and funds technology projects, should be established. Two months later, such an agency was established - the ministry of science and technology.

II.2.2.2 President Park's Adviser System
            The Office of the Secretary in the Blue House had only the role of a private secretary to the president before Park Chung-hee's presidency. Park, familiar with the military system of close and functional advisers, tailored this system to the Secretary's office, creating a large and effective organization of advisers from all sections of government. In the beginning of Park's presidency, there was a secretary/adviser in charge of economic planning and the state budget, a secretary from trade and construction, farming and forestry, and transportation management.
            In 1967 after winning re-election Park took the adviser system further to centralize decision-making within the Blue House. The Secretary's office of the economy split off on its own and had 3 separate office advisers, with each a team of his own. The line of advisers at the Blue House largely influenced public policy, developing a value added tax system, planning investments for heavy chemical industrial development, selecting land plots for building factories, and bringing in foreign capital. Informally called 'the government above government', the Office of the Secretary served a central and effective role in reaching national policy goals.

II.2.2.3 Government's role in Korean finance & banking (1962 - 1972)
            Compared with previous governments which advocated a laissez-faire free market policy, Park Chung-hee's military background did not provide a friendly perspective to the finance sector. Governmental intervention was seen as mandatory from the start, to align the apparently greedy, unwilling-to-take-risks type of finance workers with the long-term development view Park's government had in mind. The government sought from the start to actively propel the nation into economic prosperity, and this coupled with a mistrust of the finance sector led President Park to keep a tight control over financial organizations.
            The military regime moved quickly to prevent panic in the finance sector immediately after it had taken over the nation. On May 16 of 1961, the government restricted much of all financial transactions and froze prices for all commodities and products at the current value rate. The restriction was in effect until August 24.
            On May 25 of 1961, the government stopped indebted farmers to pay any more amounts to usurers. The creditors received government-issued special bonds instead.
            In early June of 1961, the government hiked the savings account interest rate by 50% and guaranteed the secrecy of all accounts, in order to channel valuable money hidden inside many a home's safe or closet to banks for creating capital.
            On July 1 of 1961, laws regulating the foundation of middle-size banks were enacted, and such banks began business the following month. Specialized banks for farmers (the agriculture bank) and other classes were created; the Korean bank law was amended to allow more domestic and foreign capital to be used by banks.
            Following the Oct. 29 law regarding people who accumulated unjust wealth, market banks which had been privatized in the 1950s were again nationalized. The government believed that selling of bank stocks to private citizens would result in an unequal preference for a minority of wealthy stock owners.
            Seeing the various policies undertaken in the short period of six months just after the government had taken control, it was possible to foresee that such drastic and special measures would continue to regulate the finance industry. President Park himself stressed the need for tight regulation.
            However, because of the rooted mistrust of experienced workers in the finance sector, the government sometimes pushed forward policies that were not entirely beneficial and sometimes worked to its own detriment. Ignoring the advice of skilled specialists led the government to have an ambiance of an amateur as it plowed through many reform policies. One such case is the currency reform and stock market maintenance plan, initiated about one year after the military coup.
            Former military generals endowed with the responsibility of developing the economy were suspicious of the banks'large bureaucracy and conservatism. Because of the complicated procedure regarding loans (which involved securities), they thought the system needed to be reformed to aid the economy's jump-start. The currency reform began with an ambitious plan to translate extra money into valuable capital for important national business ventures. 10 hwan was translated into 1 won, but there was a ceiling to the amount of money one person could exchange into the new won. Any extra money going over the ceiling was automatically funded towards the construction of factories and facilities. This plan failed after one month; there were not many people who had that much money in the first place, and the United States pressed the government to follow the basic rules of a free economy (one could not simply appropriate another's legitimate earnings).
            The stock market crisis in the spring of 1962 serves as another indicator of the government's gaffes in the financial sector. Although it is unclear what ultimately forced the stock market to unreasonably bubble in prices and crash, the government initially sought to vitalize the stock market. Agencies were strictly blocking land stock jobbing, so the stock market was the only legitimate medium to invest and reap big returns. However, because of inherent dangers of the stock market to be swayed by a number of big buyers, it was not stable - stock prices plummeted in May, August, and November of 1962, although the government sought to mediate its disastrous outcome. In the end, the stock market was closed on Feb. 25 1963 for 73 days. This incident further gave the image to many investors that the stock market was a gambling place. -to be continued-



Working Table of Contents (as of Nov. 28th) . go to Teacher's Comment


            This paper aims to provide the history of Korea's modern industrialization and economic surge, through the perspective of the lower-income working class (blue collar laborers). The main focus is to research the effects that Korean governmental policies had on this particular social level. The opportunities that were made accessible to them, such as education, industrial relations (forming of labor unions), and business incentives will be analyzed. The use of statistical data compared across different time periods will aid this analysis, of how difficult it was for lower classes to earn more and pursue higher life standards. 'Upward social mobility'in this paper means the ease by which lower working classes could live a higher quality of life, by earning more income or pursuing career education.
            This paper will cover the time period extending through eras of government, spanning from Park Chung Hee's regime (1962-1979) until the 1997 Asian monetary crisis. An interview with surviving Koreans who remember how their own lives were affected will come at the end of each time-period, in order to provide an up-close perspective of the South Korean modern history.

I. Introduction
II. Export-centered economy under President Park Chung-hee (1962 ? 1972)
     1.) Education
          1.) Facilities
          2.) Academics
     2.) Important government policies
          1.) demographic, labor, financial
          2.) government restructuring
          3.) building nationwide physical infrastructure
          4.) The 1st, 2nd five-year plans
     3.) Effects on the working class
          1.) short & long-term effects
          2.) interview
III. The Yushin system and heavy-chemical industry (1972 ? 1979)
     1.) Education
          1.) Facilities
          2.) Academics
     2.) Important government policies
          1.) financial
          2.) demographic, labor
          3.) national restructuring
               1.) The Saemaeul (New Village) movement
               2.) The KCIA
               3.) Other
          4.) The 3rd, 4th five-year plans
     3.) Effects on the working class
          1.) short & long-term effects
          2.) interview
     4.) Continued repression of labor (1980 ? 1987)
     1.) Education
          1.) Facilities
          2.) Academics
     2.) Important government policies
     3.) Effects on the working class
          1.) short & long-term effects
          2.) interview
IV. Lassez-faire policy to civilian government (1987 ? 1997)
     1.) Education
          1.) Facilities
          2.) Academics
     2.) Important government policies
     3.) Effects on the working class
          1.) short & long-term effects
          2.) interview
V. Conclusion
Notes
Bibliography



List of References (as of Nov. 28th) . go to Teacher's Comment

I. Books
1. Park, Se Il. Private Sector Development and Upward Mobility:The Case of Korea from 1962 to 2000. Korea Labor Institute, 2002
2. Mason, Edward S. The Economic and Social Modernization of the Republic of Korea: and others (Harvard East Asian Monographs), Harvard University Asia Center 1981
3. The Economic and Social Modernization of the Republic of Korea written with Mahn Je Kim, Dwight H. Perkins, Kwang Suk Kim, David C. Cole, Leroy Jones, Il Sakong, Donald R. Snodgrass amd Noel F. McGinn. Harvard University Press 1980
4. Kim, Eun Mee. Big Business, Strong State: Collusion and Conflict in South Korean Development, 1960-1990 (S U N Y Series in Korean Studies). State University of New York Press 1997
5. Cho, Lee Jay & Eckert, Carter J. Modernization of the Republic of Korea: A Miraculous Achievement. Monthly Chosun Press, 2005