politics

Reconstruction: Assessing ‘Demolition Man’ two decades after Deng Xiaoping’s death

/ Jim Sojourner / Leave a comment

In early 1997, Deng Xiaoping, the greatest of New China’s leaders, died. As Robert MacFarquhar wrote a month later in his definitive obituary of the diminutive man, while Deng’s colleagues would “eulogize him as the ‘chief architect’ of China’s reform program and it’s opening to the outside world,” the reality of Deng’s leadership was quite different. He was, MacFarquhar wrote, a “demolition man,” one who “deconstructed the China he took over: not the traditional China of Confucian values and Taoist cults”—for, indeed, he’d already helped Mao Zedong destroy that one—“but the China of Communist principles and practices.”[1] When Deng died, however, that demolition was incomplete; the remnant structures of Communist China that loomed over the Middle Kingdom still half intact seemed to MacFarquhar twisted, dangerous, and deep-rooted domestically as China entered a new age at the dawn of the 21st century. Now, more than 20 years after the death of MacFarquhar’s demolition man, it is worth revisiting the “myriad domestic problems” faced by the China Deng had left behind, problems MacFarquhar hinted might bring down the People’s Republic “dinosaur” as the country lurched toward “the end of history.”

1) Decentralization

MacFarquhar wrote that, if the central leadership was unable to maintain unity and authority, unrest in the periphery among minority groups might erupt. Erupt the peripheries have. Ethnic tensions have remained roiling in Xinjiang Province since the 1997 article, boiling over on occasion in the form of riots in the provincial capital Urumqi in 2009 and numerous terrorist attacks both inside and outside the province. The most infamous, a mass stabbing in Kunming Railway Station blamed on ethnic Ugyhur persons, left 35 dead and 143 wounded.[2] Decentralization, for the moment at least, is a word of the past, however, as the Chinese Communist Party’s response has shown. As of early 2020, some hundreds of thousands, if not more, ethnic Ughyurs have been detained in mass re-education prison camps throughout the region, draconian measures that seem to have their roots in the de-centralized experimentalist repression of Tibetans on the plateau.[3] Books that MacFarquhar said “celebrate localism or provincial chauvinism” have been replaced with Chairman Xi Jinping’s The Governance of China on the shelves of Beijing bookstores.[4]  The central authorities seem to have brought the restive provinces to heel, at least when it comes to national security, and the specter of decentralization has been banished, for now.

2) Cultural Anarchy

“China’s writers, artists, pop singers and film-makers are difficult to rein in,” MacFarquhar wrote. Alas, they have proven less resilient. The increasing sophistication and authoritarianism of China’s police state under Chairman Xi has seen the virtual—and sometimes literal—disappearance of cultural dissent, its tendrils reaching even so far these days as Hong Kong, where dissident booksellers were kidnapped by regime thugs in 2015.[5] Artists, filmmakers, and journalists face even more intense censorship and repression in the PRC proper. Christianity and religious cults, MacFarquhar’s other agents of cultural anarchy, have been met with a similar welcome in recent years.[6] While some still fret about the Party’s spiritual vacuum, Party leaders are attempting to fill it with a mix of neo-Confucianism, Xi Jinping’s “China Dream,” and a healthy dose of nationalism backed by authoritarianism.[7] Order has been imposed on anarchy.

3) Crime and migrant labor

MacFarquhar’s section on crime and migrant labor could very well be written today. And now, as in then, he would be overestimating their effects. China’s crime rate is notoriously difficult to gauge, untrustworthy are its official crime statistics.[8] Officially, the PRC’s murder rate, for example, is among the lowest in the world, less than 1 per 100,000 people.[9] Even if that rate were double, it would still rate lower than France; triple, about the same as Canada. Crime may be at levels that MacFarquar writes “earlier Communist governments would have considered unacceptable”—a strange metric by which to judge post-Deng China, anyway—but even if the actual crime rate is much, much higher than officially reported, most Chinese citizens have little to worry about, in reality. That crimes are blamed on migrant laborers—and that transient young men are responsible for some significant measure of crime in China—does however points to underlying fissures in Chinese society.[10]

In 1997, MacFarquhar noted that as much as 10 percent of China’s population worked as itinerant laborers in China’s massive cities; today that number is likely closer to 30 percent of the entire working population.[11] The increase in migrant labor is indicative of the uneven development that has occurred as China’s costal commercial cities have grown—and grown rich—while the much poorer interior and hinterlands languish and shrink. China has become a country of a few very rich and many still very poor.[12] That inequality may itself congeal into its own locus for discontent. But for now, the existence of migrant labor points instead to growing prosperity. Migrants are migrating for the economic opportunities that continue to develop in and around China’s eastern cities. The growth of illegal migrant communities is a challenge for municipal governance, and the occasional clearing efforts that take place on the margins of China’s biggest cities continue more than 20 years after MacFarquhar noted them. Migrant communities also create opportunities for civil unrest among a maligned, maltreated, and malcontented population being left behind by urban development. But the existence of migrant laborers in 2020 is more mere management challenge than a dire threat to the CCP.

4) Unemployment and unrest

If migrant workers are not a major problem, MacFarquar is right to argue that migrant non-workers very well could be. China’s economy continued to enjoy astounding growth in the decades following MacFarquhar’s article, but that growth is slowing. Due to the coronavirus outbreak this year, for first time in half a century China’s economy shrank in the first quarter.[13] While the pandemic is an anomaly, the slowing economy is not, and there could be difficulties ahead for the CCP if China’s economy stalls.

Although official numbers out of Beijing have put unemployment between 4 and 5 percent over the last few decades, just as in1997, those numbers are likely at least double according to many estimates.[14] Labor protests have also been on the rise as workers feel Xi’s “China Dream” slipping out of their grasps.[15] China Labour Bulletin, a Hong Kong-based labor advocacy group, recorded nearly 1,400 labor disputes in 2019, less than the at least 1,700 of 2018, but the numbers have persistently remained above 1,300 per year since they spiked in 2015.[16] The titanic efforts of the Chinese government to keep workers employed during the coronavirus shutdown, meanwhile, should be an indication of just how seriously party leadership takes the threat of unemployment.[17] Widespread unemployment would likely shake the foundations of China’s party-state, which has implicitly promised economic growth and stability in return for power. Although China has made some progress reforming its hulking State-Owned Enterprises,[18] unless China can find other ways to re-rev its economic engine, the potentially existential challenges of unemployment and unrest will only grow in scale. MacFarquhar’s forecast was postponed in 1997 by economic growth, but instability caused by unemployment and economic inefficiency may return with a vengeance.

5) Corruption

When Xi took leadership of China in 2012, he would have agreed with MacFarquhar’s diagnosis that in China “corruption is now prevalent at all levels, and to an extraordinary degree.” Eight years later, that may no longer be so true; millions of “tigers and flies” have been snapped up by Xi’s anti-corruption campaign. Although it remains difficult to untangle the targeting of political rivals from real anti-corruption efforts, more than 1.5 million party officials have been disciplined by Wang Qishan and the CCP’s Central Commission for Discipline Inspection.[19] The result has been wide public praise, a less corrupt party-bureaucracy-business apparatus, and consolidated central control for Xi. While the longer-term effects of the anti-corruption drive remain to be seen (they have not, after all, much targeted Xi’s friends and allies), prosecutions of top officials and oligarchs continue. It seems likely that the party has cleaned out a least some of the rot that settled into the party infrastructure as China grew richer.

6) The military

The entrenched People’s Liberation Army has not escaped the anti-corrupt drive unscathed. Dozens of top generals and even some as high as Fang Fenghui, former military chief of staff, are now behind bars—something that seemed unthinkable in past administrations.[20] Corruption investigations have only been one piece of a sustained effort by Xi to reorganize the PLA and consolidate his control over it. Parallel to the anti-corruption drive, Xi also set out to reshuffle the PLA’s structure, to make it leaner, more responsive, and perhaps most importantly, more his own.[21] MacFarquhar noted that in any power struggle, the PLA chiefs would be decisive. Those chiefs now belong to Xi.

7) The secession

Secession issues never publicly materialized as Deng handed the party over to Jiang Zemin. Nor did they as Jiang handed it to Hu Jintao or Hu to Xi. For two decades after Deng, China was ruled by committee and consensus. That is no longer the case. The CCP abolished term limits in 2018, clearing the way for Xi Jinping to remain in power for life.[22] Whether that will happen—and what will come after— remain to be seen. Succession was not a problem in 1997, but it may be in 2022 or beyond.[23]

Conclusion:

“Is the People’s Republic a dinosaur—large, powerful, but destined for extinction in some enormous catastrophe? Or can its leaders surf the democratic ‘third wave,’ bypass ‘the end of history,’ and avert the ‘grand failure.’ Is there something invincible about a twenty-century-old “oriental despotism,” which transformed itself into arguably the most thoroughly totalitarian system of the twentieth century, the nation of so-called ‘blue ants?’ Or was the Tiananmen massacre only a Pyrrhic victory as China’s convulsive process of modernization lurches toward the democratic denouement sought by Sun Yat-sen?” MacFaquhar asks these questions to close his essay. Given the challenges he poses at the end of “Demolition Man,” in the heady days of the end of history, it seems MacFaquhar thought he could guess the answer.

As it turns out, there may indeed be something invincible—at least in the near term—about the nation that has now certainly transformed itself into the most thoroughly totalitarian system of the 21st century. Worries of instability seem destined to plague the CCP, but it has, by any measure, taken firm hold of the domestic challenges MacFarquar thought might bring it down. In many ways, China seems to have learned lessons from the 1989 Tiananmen massacre, and not the ones MacFarquar thought it would. Xi Jinping’s China now rules the hinterlands, the artistic commons, the party infrastructure, and the military. Its economy is slowing, to be sure, but if there is anything that has been true about Deng’s China and the China that came after, it has been China’s ability to defy predictions.

History has returned, and the People’s Republic of China has not yet gone the way of the dinosaurs.

[1] Roderick MacFarquhar, “Demolition Man,” The New York Review of Books (Vol. 44, No. 5, March 27, 1997).
[2] Reuters, “China launches campaign to promote ethnic unity in violence-torn Xinjiang region,” (March 31, 2016).
[3] The Economist, “China’s successful repression in Tibet provides a model for Xinjiang,” (December 10, 2019).
[4] The Economist, “Xi Jinping’s new blockbuster is getting a hard sell,” (April 26, 2018).
[5] Alex Palmer, “The Case of Hong Kong’s Missing Booksellers: As Xi Jinping consolidates power, owners of Hong Kong bookstores trafficking in banned books find themselves playing a very dangerous game,” The New York Times (April 3, 2018).
[6] Nectar Gan, “Beijing plans to continue tightening grip on Christianity and Islam as China pushes ahead with the ‘Sinicisation of religion,’” The South China Morning Post (March 6, 2019).
[7] Amy Qin and Javier C. Hernandez, “How China’s Rulers Control Society: Opportunity, Nationalism, Fear,” The New York Times (November 25, 2018).
[8] Christopher Giles, “Reality Check: How safe is it to live in China,” BBC (January 13, 2019).
[9] The United Nations Office on Drugs and Crime, “Global Study on Homicide” (2013).
[10] Wang Huazhong, “Young migrants cause crime wave,” China Daily (Feb. 25, 2011).
[11] China Labour Bulletin “Migrant workers and their children,” (May 2019).
[12] Thomas Piketty, Li Yang, and Gabriel Zucman, “Income inequality is growing fast in China and making it look more like the US,” LSE Business Review (April 1, 2019).
[13] BBC, “China’s virus-hit economy shrinks for first time in decades,” (April 17, 2020).
[14] Christopher Balding, “Bad Jobs Data Could Bite China,” Bloomberg Opinion (Feb. 19, 2019).
[15] Javier C. Hernandez, “Workers’ Activism Rising as Economy Slows. Xi Aims to Rein them In,” The New York Times (Feb. 6, 2019)
[16] China Labour Bulletin, Strike Map (https://maps.clb.org.hk/?i18n_language=en_US&map=1&startDate=2012-01&endDate=2012-12&eventId=).
[17] Laura He “China is really worried about unemployment. Here’s what it’s doing to avoid mass layoffs,” CNN Business (Jan. 13, 2020).
[18] Xi li and Kjeld Erik BrØdsgaard, “SOE Reform in China: Past, Present, and Future”, The Copenhagen Journal of East Asian Studies (Vol. 31, No. 2, May 2014).
[19] Andrew Gilholm, “Xi Jinping’s New Watchdog: An Ever More Powerful Anti-Corruption Tool,” Foreign Affairs (March 6, 2018).
[20] Chris Buckley and Steven Lee Myers, “Xi Jinping Presses Military Overhaul and Two Generals Disappear,” The New York Times (Oct. 11, 2017).
[21] Kenneth W. Allen, Dennis J. Blasko, John F. Corbett, Jr., “The PLA’s New Organizational Structure: What is known, unknown and speculation,” China Brief (Vol. 16, Issue 3, Feb. 2016).
[22] James Doubek, “China Removes Presidential Term Limits, Enabling Xi to Rule Indefinitely,” National Public Radio (March 11, 2018).
[23] Johnathon Brookfield, “China has New Leaders: What now?” The Diplomat (Oct. 31, 2017).

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Domestic Divisions: The strait is not the only dividing line in Taiwan’s politics

/ Jim Sojourner / Leave a comment

It is tempting, from the vantage point of the United States, to view Taiwanese politics solely through the lens of cross-strait relations with mainland China. The tension between the island polity and its much larger sibling to across the narrow ocean, is, after all, one of Asia’s critical inheritances from history—one that has enmeshed the United States in regional geopolitics. “Free China,” although not so free until the 1990s, served as an “unsinkable aircraft carrier” for American geostrategic positioning in its decades-long battle with global communism from the end of World War Two onward.[1] Although that political landscape has shifted ceaselessly following the rapprochement with Red China beginning in the 1970s, Taiwan has remained, with some fluctuation, a key ally of American policy makers and erstwhile Cold Warriors in the Pacific.[2] Taiwan remains a thorn in People’s Republic of China even as the Republic of China has evolved into an important and successful democratic partner for the United States and its allies.

But to grant overwhelming centrality to cross-strait relations is to slip into solipsism. Relations with the mainland—and thus with the United States—undoubtedly remain an important factor in Taiwan’s domestic politics, and the heft of the cross-strait relationship has a gravitational pull that affects many of the Taiwan’s internal political issues, especially economic ones. Still, in order to gain a full picture of Taiwanese politics and Taiwanese elections like the recent re-election of President Tsai Ing-wen and her Democratic People’s Party (DPP) over the more conservative and China-friendly Kuomintang (KMT), it’s important to grapple with the other local issues at stake in Taiwan’s flourishing democracy and to understand just what drives Taiwan’s citizens when they turn up to the polls or out into the streets. While these issues interact with mainland and greater Pacific Asian international relations, at heart they are Taiwan’s own issues. And they will continue to play an outsized role in the future of Asia’s political geography.

Some of these issues are economic: Although Taiwan grew at more 3 percent through most of 2018,[3] its growth rate has since dropped, and Taiwanese remain dissatisfied in the face of aging population pressure and greater technological competition with mainland and other foreign companies, as well as with the quality-of-life consequences of recent attempts to improve domestic competitiveness.[4] Others are societal: Taiwanese have been divided by social issues, of which same-sex equality, indigenous rights, and a restart of Taiwan’s nuclear power program are salient and representative.[5] Although the probable death knell of any “one-country, two-systems” unification sounded by the mass protests in Hong Kong throughout 2019 played a major role in incumbent Tsai’s re-election earlier this year, as the impact of the repression in Hong Kong recedes, domestic issues will affect Taiwanese politics and thus ultimately Taiwan’s orientation toward the PRC.[6] In turn, they will reverberate across Pacific Asia to the shores of the United States.

Economic Issues

With its greater than 3 percent growth in the first quarter of 2018, it looked as if Taiwan may finally have begun to shake the slump that had dragged its economy into negative growth through 2016 and 2017.[7] That growth dropped back below 2 percent in 2019, but it is expected to remain at or above 3 percent for much of 2020, still a far cry from the 5-10 percent growth it experienced in the decades before the 2008 economic crisis.[8] Although better growth should ease some of the pressure on Taiwan’s leaders, dissatisfaction with Taiwan’s economic situation remains high. Two factors, one internal and one external, will continue to put downward pressure on Taiwan’s economy, namely increasing competition from mainland Chinese companies (some of them backed by Taiwanese money) and a rapidly aging population.

President Tsai, first elected in 2016, has attempted to diversify Taiwan’s international relations in order to reduce its reliance on Chinese connections for economic growth. To that end, her DPP has tried to tighten relations with the United States, but more significantly, Tsai’s government has worked to strengthen diplomatic and economic ties to South and Southeast Asia as part of her New Southbound Policy. That strategy has been accelerated because of the China-USA trade war that has put clamps on global supply chains targeted by American President Donald Trump’s tariffs.[9] The New Southbound Policy is more than merely supply-chain and trade diversification; it also aims to strengthen cultural ties with Asia’s southern region to boost tourism and academic exchange to add fuel to Taiwan’s domestic economy.[10]

These internationalist economic changes are taking place against a background of domestic financial crisis. Taiwan’s rapidly aging population means a burgeoning retired population and an extreme financial burden on Taiwan’s government, especially if Taiwan’s low economic growth cannot be brought to an end.[11] To cope with the rising deficit required to maintain its pension program, Tsai has promised to take on a reform of the financial system. Those efforts began with two major reforms in 2016, first the introduction of amendments to Labor Standards Act aimed at making seven Taiwanese industries more competitive in the global market and boosting growth.[12] The Labor Standards reforms reduced the amount of mandatory time off and increased the amount of allowable overtime work.[13]  Those amendments have been accompanied by a set of reforms to the pension system, including reduction of pensions for Taiwan’s military, civil servants, and public school teachers.[14] Although the reductions were coupled with an increase in the monthly minimum wage by 10 percent and civil servant pay by 3 percent, despite significant public support, both reforms efforts have been deeply unpopular in some quarters, leading to mass protests, some of which turned violent.[15] It remains to be seen what effect the reforms will have on Taiwan’s economic situation, but these twin issues—competitiveness and a near-bankrupt pension system—will continue to be significant in Taiwanese politics as the population grows older.

Social Issues

Tsai was first elected upon a upswell of social activism that has continued to pressure her government to enact sweeping social reforms.[16] Although not fully onboard with many of the activist demands, Tsai’s DPP found itself in a de facto alliance with activist organizations in order to defeat the opposition nationalist Kuomintang party in 2016.[17] Tsai has made progress on some of these issues, but they are a deeply divisive in Taiwanese society, and she’s been met with anger from both activists, who say her administration has moved too tentatively on social reforms. Conservatives, meanwhile, vigorously oppose many of the changes she has promised in her campaigns.

First among them is same-sex marriage equality. During her 2016 election, Tsai became the first Taiwan presidential candidate to support same-sex marriage equality.[18] A May 2017 ruling by Taiwan’s Constitutional Court that existing laws banning same-sex equality were unconstitutional demanded a marriage equality law. Tsai’s subsequent proposed constitutional change to enshrine marriage equality, however, was pilloried from all sides.[19] The social activists who helped bring her into office decried the proposal as too slow and too conservative, while conservatives in the polity resisted the move as too radical. As the deadline for a new law approached in 2019, the DPP expedited legislation to legalize marriage equality, and Taiwan became the first Asian administration to legalize same-sex marriage. [20] Although the law’s passage won praise from activists, the fight over it demonstrates the deep fault lines through Taiwanese society regarding social issues, fault lines that will not disappear in the years ahead as activists push for new, progressive frontiers and conservatives resist.

Another such issue will be transitional justice for Taiwan’s indigenous peoples, who have suffered inequity at the hands of successive administrations including imperial Japan and the KMT-aligned mainlanders fleeing the communist consolidation of the mainland. Tsai’s DPP has made transitional justice a key theme of its political alignment. In 2016, it passed legislation to deal with KMT party assets built upon indigenous property, and in August of that year Tsai became the first Taiwanese president to offer an apology for the historical treatment of the islands’ indigenous peoples. [21] Still, like marriage equality, many social activists believe Tsai’s administration is less than interested in material progress, and some of the largest protests against her administration have come from activist quarters that supported her 2016 election.[22] Land reform to compensate indigenous communities is likely to continue to be a hot and dividing issue between activists, governments, and the conservatives in the KMT.

Finally, in response to blackouts in 2017, Tsai’s administration restarted nuclear reactors after promising on the campaign trail to phase out nuclear power.[23] Anti-nuclear activism has been a key component of Taiwan’s social activism since Japan’s Fukushima disaster.[24] And so, while the go-ahead to restart won support from Taiwan’s business community, it outraged activists.[25] With climate change looming and energy solutions limited, the fight over nuclear will grow in importance in Taiwanese politics. It illustrates the fissures not just between progressives and conservatives, but environmentalists and the business community.

Conclusion

Despite Tsai Ing-wen’s 2020 electoral victory and its repudiation of China’s heavy-handed tactics in its ethnic borderlands, Taiwanese politics do not revolve solely around cross-strait relations. Taiwan’s economic and financial situation, while tightly tied up with mainland businesses, comes with its own set of difficult domestic problems that will be central challenges—and campaign issues—for Tsai, her successor and her competitors. Economics are further complicated by energy and environmental issues such as nuclear power development that divide society along environmental- and business-biased lines. Those spheres are further fractured by divisive social faults—faults that divide progressives from conservatives, young from old, and put pressure on politicians and governments, DPP and KMT alike. Although the PRC-ROC situation dominates United States foreign policy thinking when it comes to Taiwan, these inward-facing issues will continue play an important role in Taiwanese politics. They will play a part in determining the fate of relations across the strait.

[1] Robert Green, “The Unsinkable Aircraft Carrier,” The Taiwan Review (May 1, 2005).
[2] Shelly Rigger, Why Taiwan Matters.
[3] Republic of China, Bureau of National Statistics.
[4] Pengqiao Lu, “Taiwan’s Biggest Problems are at Home (Not Across the Strait)”, The Diplomat (November 17, 2016).
[5] Sheryn Lee, “Taiwanese Democracy Powers On,” The East Asia Forum (December 25, 2018).
[6] The Economist Explains, “What’s at Stake in the Taiwan Election,” The Economist (January 10, 2020).
[7] Republic of China, Bureau of National Statistics.
[8] Republic of China, Bureau of National Statistics.
[9] Paul Huang, “‘New Southbound Policy’ Insulates Taiwan from US-China Trade War,” The Epoch Times (July 15, 2018).
[10] Dafydd Fell, “History: Taiwan,” Europa World Online (London: Routledge, 2020).
[11] Chien-Tsun Chen, “Taiwan’s Pension Crisis,” Economic and Political Weekly (Vol. LIII, No. 50: December 22, 2018).
[12] Lee, “Taiwanese Democracy Powers On.”
[13] Keoni Everington, “Changes to Taiwan’s labor law go into effect today,” Taiwan News (March 01, 2018).
[14] Agence France-Presse “Taiwan Passes Bill to Cut Veterans Pensions that Sparked Violent Protests,” The South China Morning Post (June 21, 2018).
[15] Lee, “Taiwanese Democracy Powers On.”
[16] Fell, “History: Taiwan.”
[17] Ibid.
[18] Ibid.
[19] Ben Wescott and Angus Watson, “‘A great divide’: Inside the battle to stop same-sex marriage in Taiwan,” CNN (November 24, 2018).
[20] Julia Hollingsworth, “Taiwan legalizes same-sex marriage in historic first for Asia,” CNN (May 17, 2019).
[21] Fell, “History: Taiwan.”
[22] Thomas Reuters Foundation, “Taiwan’s indigenous people take land rights fight to the heart of the capital,” South China Morning Post (June 11, 2018).
[23] “In the Dark: A massive blackout prompts questions about Taiwan’s energy policy,” The Economist (August 17, 2017).
[24] Lee, “Taiwanese Democracy Powers On.”
[25] Ibid.

Explaining Korea’s Economic Miracle

/ Jim Sojourner / Leave a comment

To the American advisors stationed in Seoul in the late 1950s, the South Korea that limped out of the Korean War was strategically vital and otherwise hopeless. That South Korea was shattered and poor, its workforce reputedly lazy and its leadership corrupt. Development was an afterthought, content as it was to slurp from the turgid flows of American dollars that sloshed through the upper ranks of Syngman Rhee’s government. But today, the neon lights of Seoul advertise a different reality. Korean-made technology is renowned across the globe—things given shape by Korean steel, infused with Korean microprocessors, and delivered to market on Korean ships.

Korea is becoming a rich country. Its approximately $31,000 USD per capita GDP is about equal to that of Spain or Italy.[1] In the span of 50 years, Korea has gone from one of the world’s dimmest to one of the its shining stars. Its purchasing power parity of $280 USD in 1960 grew to $28,384 in 2010, riding a 50-year average GDP per capita growth rate of 9.52 percent.[2] In 1960, foreign trade amounted to $377 million; in 2013, it was $1,068 trillion, making little Korea the 11th largest trading nation in the world.[3] How can we explain that tremendous development? And might it have lessons for other developing countries mired in poverty and corruption as South Korea itself once was?

Maybe … and probably not. The set of policies pursued by South Korea from 1962 through the early 1980s first set up Korea for its developmental run and then enabled that growth. Those policies might be carefully replicated by developing nations hoping to follow in the footsteps of the Asian tiger. But blazing those policy paths required a set of unique circumstances both internally and externally that created the conditions for Korean growth and, often, supported it. Those circumstances owe their existence to Korea’s particular niche in the history of the 20th century.

So how did Korea get rich? The centerpiece of its developmental model was a concerted effort to create an export-driven economy under military junta Park Chung-Hee, who wrested control of Korea from the notoriously corrupt Rhee government in a nearly bloodless military coup in May of 1961. Park immediately got to work weening South Korea from American developmental aid. In the first decade of Park’s rule, South Korea prioritized light industry with an eye toward foreign exports.[4] The Park government shifted the Korean economy away from the import substitution model that bogged down in Latin American countries and toward an export-based structure. Under a system of five-year plans, the first of which called for a transformation from aid-dependent to independent, a central economic planning board unified national budgeting, planning, and review and directed money into diversified manufacturing industries.[5] By the middle of the 1960s, Korea was exporting everything from radios and batteries to steel products and textiles to rice and fish.[6] The value of Korea’s manufacturing exports grew from $41 million to $81 million from 1961 to 1963 alone, and it multiplied 24 times between 1961 and 1975, from $41 million dollars to $2 billion.[7] The emphasis on exports was accompanied by financial sector reforms, including nimble monetary policy to counteract  the inflation endemic during the Rhee days, as well as deregulation of investment and import restrictions. In this reformist environment, savings grew from 2 percent of GDP in 1961 to 14 percent in the 1970s.[8]

Park’s mercantilist government did not let the market decide where those savings went. By offering negative interest rates on loans guaranteed by the government, the bureaucracy monopolized investment decisions and directed those savings out of the informal banking sector and into certain productive channels—not for short term returns on investment but to serve long-term national goals.[9] Park’s government directed investment first into those light industries and later into steel, chemicals, and electronics, especially during Park’s Heavy-Chemical Industry Drive (HCI) in the early 1970s, which emphasized heavy industries such as steel, ship building and especially chemical production, a counter to its scarce natural resources.[10] These industries, many of which did not even exist at the beginning of the drive, fed off each other in interlocking supply chains, the steel industry feeding the machine tools industry feeding the shipping industry as Korea climbed up the value chain, defying American economic advisors and the International Monetary Fund.[11] Park’s government told those industries what to produce, and it built the infrastructure for those industries, provided them property and preferential treatment, and secured buyers in foreign countries, especially the United States.[12] These industries congealed into Korea’s famed and giant chaebol conglomerates. And slowly, under government-directed development, Korea got rich.

Salient internal realities made these policies possible. Park himself deserves much of the credit for the transformation of the Korean economy. Park learned many lessons as an officer in the Japanese Imperial Army. Key among them was its strategy of forced industrialization in Manchuria. Park, who admired what Japan had done during the Meiji Restoration and after, borrowed much from Japan’s own development, including its economic structure, corporate culture, and five-year plans.[13] That experience gelled with Park’s personal proclivities and fed his hopes for a different kind of Korean nation. Another lesson Park learned was the utility of political repression. Park ruthlessly quashed worker and social resistance to his economic program and his regime.[14] Park was a man with a vision and an iron fist. He kept that fist gripped on the tiller, despite resistance from his American backers and international financial authorities. Park believed that “steel is national power.” He dragged his country toward that particular brand of hard power by instilling a “can do” spirt among Korea’s people, as well as by building national infrastructure, much of which at the time seemed imprudent.[15] It is difficult to believe Korea’s astounding development would have happened as it did without that kind of leadership. Despite his dictatorial excesses, Park remains South Korea’s most popular leader.[16]

Park was aided by other characteristics inherent to Korean social culture. As a model Confucian polity for thousands of years, meritocratic, scholar-official leadership was not alien to the Korea people. Park drew on Confucian ideals of filial piety, obedience, and loyalty to secure his technocratic government’s position, and he deployed Confucian reverence for education to develop an educated, trainable, and still-cheap labor force. Drawing on the Confucian belief in the “perfectibility” of people, Rhee and Park’s South Korea implemented a stringent compulsory education requirement.[17] Literacy rates shot up from 20 percent to 80 percent in 20 years,[18] achieving a level above 90 percent by 1964.[19] The educated workforce provided the basis of the economic growth. Korea had a homegrown, abundant supply of educated workers—workers that were 2.5 times as productive as American workers at 1/10th of the cost.[20] The Korean people, working in concert with Park’s leadership, were a critical piece of its economic miracle.[21]

Those internal factors—strong leadership for government-directed growth and an emphasis on abundant, educated labor—could (and should) be replicated by developing countries today. The external factors that were also critical to Korea’s success, however, are more difficult to replicate. Korea, like Japan, began its industrial rise from a nearly blank slate; the Korean War had wiped out existing infrastructure and leveled social hierarchies.[22] During wartime, this meant opportunities for a new class of entrepreneur who seeded businesses that served the omnipresent American military.[23] Those individuals and businesses were then “fertilized by the inconceivable amounts of American cash that flowed into the country.”[24]  After the war, the destruction of existing infrastructure also allowed state planners to build power and industry infrastructure that served the goals of the development plans rather than having to work with existing inefficiencies.

The United States continued to be a critical piece of Korean success. Aside from providing for the defense that kept South Korea in existence—no small thing—the USA poured aid dollars into South Korea in the years after the Korean War. Although these aid dollars—which reached $12 billion between 1945 and 1975, according to official sources that exclude private American expenditures and black-market transactions—created in Korea a dependent and deficient state under Rhee, they also helped pay for the infrastructure that would prove critical for Korean industrial development.[25]

Finally, the international situation in 1965 proved momentous for Korea. In May 1965, Korea got help from its old enemy Japan. Under pressure from Washington and facilitated by the American involvement in both countries, the normalization of relations between Korea and Japan in the spring 1965 injected $800 million into the Korean economy (a mix of loans, grants, and credit) at a time when Korean exports amounted to only $200 million.[26] That financing provided the basis for significant sectors of industrial development, including Korea’s indigenous steel industry.[27] Korean manufactures energized by that “Japanese Marshall Plan” quickly found an outlet for their products, too: another American war in Asia. By the middle of the 1960s, increasing American involvement in Vietnam required equivalent investment. Korea provided it in both people and stuff. In exchange for what would amount to more than 300,000 South Korean combat troops, the United States paid more than $1 billion in foreign exchange to Park’s government by 1970, close to 10 percent of its total GDP.[28] That foreign exchange facilitated purchases of the raw materials needed for Korea’s fledgling industry to pump out products. Those products then returned to the American effort in Vietnam. As much as 94 percent of Korean steel production and 52 percent of its transportation equipment exports went to Vietnam during the war.[29] These flows of foreign capital into domestic industry provided the energy behind Park’s HCI in the early 1970s and launched Korea on the trajectory to developed nation. In the background to all of this, American and Japanese light industries were declining just as Korean manufacturing began to take off.

There are lessons to be taken from the Korean economic model. Through a combination of leadership and culture, Korea embarked on a successful, long-term, state-led project of export-driven development. That, at least, is a path other developing nations could try to follow. Korean development did not happen in a domestic vacuum, however, and significant external factors contributed to the environment in which Korea succeeded. Most notably was its connection to the United States, which not only supplied Korea with money and markets but also facilitated its rapprochement with Japan as well as its lucrative involvement in the Vietnam War. Korea’s unique historical position, then, makes the Korean economic miracle a difficult one to fully replicate.

[1] International Monetary Fund data (imf.org, accessed December 11, 2019).
[2] Hayam Kim and Uk Heo, “Comparative Analysis of Economic Development in South Korea and Taiwan,” Asian Perspective (Volume 41, Number 1, January-March 2017).
[3] Ibid.
[4] Princeton Lyman, “Economic Development in South Korea: A Retrospective view of the 1960s,” in Edward Reynolds, ed., Korean Politics in Transition (Seattle: University of Washington Press, 1975), 244.
[5] Kim and Heo, “Comparative Analysis of Economic Development in South Korea and Taiwan.”
[6] Lyman, “Economic Development in South Korea,” 248.
[7] Ibid, 246-248.
[8]Ibid, 247-248
[9] Cumings, Korea’s Place in the Sun: A Modern History (New York: WW Norton, 1997), 314-331.
[10] Ibid, 320-324.
[11] Ibid, 320-324.
[12] Ibid, 314.
[13] Sung-Yoon Lee, “Korea Under Park Chung Hee” (lecture at The Fletcher School at Tufts University, October 28, 2019).
[14] Cumings, Korea’s Place in the Sun, 314.
[15] The RoK’s Seoul to Busan highway, built before many Koreas even owned cars, is one example. Sung-Yoon Lee, “Korea Under Park Chung Hee” (lecture at The Fletcher School at Tufts University, October 28, 2019).
[16] Ibid.
[17] Cumings, Korea’s Place in the Sun, 300.
[18] Lyman, 255
[19] Kim and Heo, “Comparative Analysis of Economic Development in South Korea and Taiwan.”
[20] Cumings, Korea’s Place in the Sun, 313.
[21] Lyman, 247.
[22] Cumings, Korea’s Place in the Sun, 300.
[23] The Chairman of Hyundai is one such individual who began his business career moving supplies for American military bases, according to Cumings, Korea’s Place in the Sun.
[24] Cumings, Korea’s Place in the Sun, 306.
[25] Cumings, Korea’s place in the Sun, 301.
[26] Lee, “Korea Under Park Chung Hee.”
[27] Cumings, Korea’s Place in the Sun, 320-322.
[28] Lee, “Korea Under Park Chung Hee.”
[29] Cumings, Korea’s Place in the Sun, 320-321.