What was the economic situation of South Korea in the 1960s?

In the early 60s, South Korea was comparable to the poorer regions of Africa.

What is 'export discipline'?

Export discipline means businesses were supported but expected to succeed in exporting to the global market.

How did South Korea's industrial policy differ from North Korea's?

South Korea adopted market-friendly policies that encouraged exports, while North Korea struggled due to inefficient policies.

What role did education play in South Korea's economic growth?

South Korea focused on educating its population, leading to a disciplined work ethic contributing to economic success.

How did South Korea's government support industries?

The government provided low-interest loans for exports and promoted businesses that succeeded internationally.

What was the impact of Japan's economic rise on South Korea?

South Korea benefitted from Japan's growth by becoming a lower-cost manufacturing partner.

Chaebol refers to large conglomerate corporations in South Korea crucial for its economy.

What key reforms preceded South Korea's economic growth?

Extensive land reform contributed to a more egalitarian economy, supporting middle-class growth.

South Korea and Industrial Policy

00:06:50

https://www.youtube.com/watch?v=xr1TAvLqLI0

Zusammenfassung

TLDRThe video explores the factors leading to South Korea's remarkable economic success from the 1960s onwards, emphasizing the role of industrial policy alongside strong property rights, market incentives, and educational efforts. Unlike North Korea, South Korea adopted a pro-trade industrial policy that focused on boosting exports through 'export discipline.' This meant that businesses were supported only if they could compete in international markets. The government provided low-interest loans to exporting firms, promoting economic development while keeping market distortions minimal. Through education and structural reforms, South Korea positioned itself as a competitive player in the global economy, ultimately evolving into an economically advanced nation.

Mitbringsel

📈 South Korea saw rapid economic growth after the 1960s.
🏭 The country transformed from a poor nation to a developed economy.
💼 Industrial policy was one of several factors behind this success.
🇯🇵 South Korea benefitted from Japan's economic rise through manufacturing partnerships.
📚 Education played a crucial role in shaping a disciplined work ethic.
🌐 Export discipline ensured businesses had to compete internationally.
💵 Low-interest loans for exporters fueled economic growth.
🏙️ Land reforms contributed to a more egalitarian economy.
⚖️ South Korea maintained relative price stability in comparison to other Asian nations.
📝 The success of industrial policy in South Korea contrasts with that of North Korea.

Zeitleiste

00:00:00 - 00:06:50
The narrative discusses the factors that led to South Korea's economic success starting in the early 1960s, emphasizing its transition from poverty to being one of the world's economic powerhouses. Factors identified include the establishment of property rights, market incentives, educational reforms, extensive land reform that fostered a middle class, and a coherent political economy during a time of military rule. The role of industrial policy, particularly in promoting exports, is also highlighted as a crucial element in their economic strategy. South Korea's shift from import substitution to an export-oriented economic model is characterized by enforced 'export discipline,' whereby businesses needed to prove their viability in the global market to receive government support. Despite the presence of corruption, it is noted that the government managed to maintain a focus on consistent economic development. The summary concludes by mentioning that South Korea's experience with industrial policy serves as a successful case study, distinct from other nations where similar policies have led to corruption.

Mind Map

Video-Fragen und Antworten

What was the economic situation of South Korea in the 1960s?
In the early 60s, South Korea was comparable to the poorer regions of Africa.
What is 'export discipline'?
Export discipline means businesses were supported but expected to succeed in exporting to the global market.
How did South Korea's industrial policy differ from North Korea's?
South Korea adopted market-friendly policies that encouraged exports, while North Korea struggled due to inefficient policies.
What role did education play in South Korea's economic growth?
South Korea focused on educating its population, leading to a disciplined work ethic contributing to economic success.
How did South Korea's government support industries?
The government provided low-interest loans for exports and promoted businesses that succeeded internationally.
What was the impact of Japan's economic rise on South Korea?
South Korea benefitted from Japan's growth by becoming a lower-cost manufacturing partner.
What is the chaebol?
Chaebol refers to large conglomerate corporations in South Korea crucial for its economy.
What key reforms preceded South Korea's economic growth?
Extensive land reform contributed to a more egalitarian economy, supporting middle-class growth.

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Untertitel

Automatisches Blättern:

00:00:01
Now let's consider the extent to which undustrial policy
00:00:04
was a factor behind the economic success of South Korea.
00:00:10
In general, since the early 1960's
00:00:13
South Korea has been one the world's biggest economic success stories.
00:00:19
The communist North Korea was originally wealthier than the South,
00:00:22
but North Korea today still has problems with famine
00:00:25
and South Korea has become an economically advanced nation.
00:00:31
After its turnaround in the early 1960's,
00:00:34
South Korea had many years of rapid economic growth,
00:00:37
sometimes double-digit growth.
00:00:39
So South Korea in the early 60's
00:00:41
was about as poor as many poor parts of Africa.
00:00:45
Today it's nearly as wealthy as Japan,
00:00:47
and it is universally considered
00:00:49
a completely economically developed nation.
00:00:53
What's especially striking is the very rapid growth
00:00:56
in South Korean exports.
00:00:58
So, for instance, over the course of a decade,
00:01:00
from 1963 to 1973, South Korean exports went up by almost a factor of 20.
00:01:07
Pictured here is shipbuilding,
00:01:09
which was one of the areas of their greatest success.
00:01:14
The obvious question of course is why South Korea saw so much success.
00:01:18
And it will turn out that industrial policy is one reason,
00:01:21
but it's one reason of many.
00:01:24
The most basic reason for South Korean success
00:01:27
is simply that over time, they moved to a regime
00:01:30
based on property rights and market incentives.
00:01:33
And the contrast here with North Korea is indeed striking.
00:01:38
But it's much more than that, over the 1960's and 1970's
00:01:42
South Korea also was able to ride the economic rise of Japan.
00:01:47
Japan itself was growing very rapidly,
00:01:49
and it was seeking a lower-cost, lower-wage partner
00:01:53
for a lot of assembly and manufacturing.
00:01:55
And in part because of earlier cultural and colonial ties
00:01:58
South Korea stepped into that role.
00:02:02
South Korea also has done a wonderful job
00:02:05
educating its population, especially at the primary level.
00:02:09
The number of hours that South Korean schoolchildren put in each day into study
00:02:14
really is striking and stands out by international standards.
00:02:20
In general, there has been and there has evolved
00:02:22
an ethic of discipline and an ethic of hard work
00:02:25
which has been a very real boost for the South Korean economy.
00:02:30
South Korea also did extensive land reform
00:02:33
before the time of its rapid economic growth.
00:02:36
And it's believed by many commentators that this set the ground
00:02:39
for a more egalitarian economy based on the middle class and ultimately
00:02:44
it made South Korea's later democracy more possible and more stable.
00:02:50
South Korea also managed to develop a workable political economy.
00:02:54
Starting in the early 60's you don't at all have democracy in South Korea.
00:02:58
You have a kind of military rule, and there is indeed a lot of corruption.
00:03:02
But for whatever reason the corruption
00:03:05
managed to be turned in the direction of supporting
00:03:08
an overall consistent and coherent approach to economic development,
00:03:12
rather than having corruption
00:03:14
which sets up a lot of roadblocks to development.
00:03:16
So, in this case you can think of the corruption or at least some of it
00:03:20
as relatively trade-supporting,
00:03:22
growth-supporting, and also export-supporting.
00:03:27
So given all these questions we now turn to the issue
00:03:29
of how much did industrial policy really matter.
00:03:32
Note that again, starting in the early 1960's,
00:03:36
the government of South Korea undertook a very systematic attempt
00:03:40
to promote South Korean businesses and to promote South Korean exports.
00:03:46
The nature of South Korean industrial policy is sometimes misunderstood.
00:03:50
During this period the South Koreans actually moved away
00:03:53
from what is called import substitution,
00:03:56
or the doctoring of the domestic industry,
00:03:58
to try to make up for what you might otherwise be importing.
00:04:02
Instead, during the 1960's and later, it was realized
00:04:05
that simply boosting exports was the key,
00:04:08
and that should be the obsession of policy.
00:04:11
So policy became more pro-trade.
00:04:13
It was indeed a kind of industrial policy,
00:04:16
but it was not based on choking off contact with the outside world,
00:04:19
but rather stimulating it.
00:04:22
A truly key feature of the South Korean approach
00:04:25
is something called export discipline:
00:04:27
That is, businesses would be supported,
00:04:30
but they would be expected to successfully export
00:04:32
what they were doing to the rest of the world.
00:04:35
That's a kind of do-or-die market test.
00:04:37
And if businesses could not pass that export test,
00:04:40
over time they wouldn't actually receive
00:04:42
comparable aid from the South Korean government.
00:04:46
As part of this export discipline,
00:04:48
it was the case that the chaebol, the large conglomerate corporations,
00:04:52
which play such a large role in the South Korean economy,
00:04:55
that over time, if they failed in international markets,
00:04:58
they would actually be allowed to fail.
00:05:01
So you did have an industrial policy, and it was largely successful,
00:05:04
but it also was combined with this market test,
00:05:07
and with this, export discipline.
00:05:11
A big part of South Korean industrial policy, by the way,
00:05:14
was simply low-interest loans for exports.
00:05:17
That is, a significant portion of the capital of South Korea
00:05:20
and capital markets were really oriented toward the dominant firms
00:05:24
and firms which were exporting using the medium of politics.
00:05:28
We do know from the histories of other nations
00:05:31
that these policies often don't work well,
00:05:33
they end up in very bad forms of corruption,
00:05:35
but I think it is correct to think of South Korea
00:05:38
as one of the cases, as one of the countries,
00:05:40
that has made a success of these policies.
00:05:44
When you put all of these pieces of South Korean policy together,
00:05:48
what you find, overall, is an approach of following the market
00:05:52
and to some extent supporting it, but not distorting the market.
00:05:56
So, for instance, if you look at relative prices in South Korea
00:05:59
and you compare them to relative prices outside of South Korea,
00:06:03
in comparable Asian nations, we find that those relative prices
00:06:06
were not so different.
00:06:08
So the industrial policy here,
00:06:10
what it was doing was giving firms a chance to succeed.
00:06:13
But it was not really trying fundamentally to override market prices.
00:06:19
This is just a brief introduction to a very complex topic.
00:06:22
Unfortunately, a lot of the best readings are not available online.
00:06:26
But if you would like my picks for the best place to go
00:06:29
to read about the industrial policy of South Korea,
00:06:32
I would recommend the works and the books on this screen here.