A History of Korea (94 page)

In the 1970s the South Korean economy endured the trials arising from adverse developments in the international economy. The oil shock, in which the price of oil increased fourfold at the end of 1973, struck a severe blow to the South Korean economy which depended heavily on oil imports for energy supply. Specifically the Heavy and Chemical Industries Promotion Plan had to be significantly modified, as the country’s industrial emphasis now turned to low-energy consumption industries such as steel, shipbuilding, heavy machinery, electronics, and automobiles. After surviving the crisis, particularly the deep recession and steep inflation, from 1975 on the South Korean economy recovered its earlier momentum, with the annual
GDP
increasing by 12.3 percent between 1975 and 1979.

In the late 1970s the South Korean economy once again experienced hardships. The economy was hard hit by the second oil shock after the Iranian Revolution in early 1979. Growth in exports and the
GNP
suddenly slowed. The year 1980 saw its first actual decline in real
GDP
since 1956.
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It would take two years for South Korea to emerge from this economic downturn, and the setback contributed in part to the eventual downfall of Park Chung-hee’s Yushin regime.

By the early 1980s the South Korean economy had spiraled downward, sparked by the 1979 oil shock, high inflation, large and growing foreign debts, and a poor rice harvest, all resulting in a modest decline in
GDP
in 1980. In 1981 the South Korean economy slowly began to recover from its worst performance. In the
mid-1980s, in an improving economic situation, foreign debt emerged as the most contentious issue, as it was widely seen as a threat to South Korea’s political independence and sovereignty. The South Korean government had intentionally undertaken the huge debt to reduce direct foreign investment. The debt became particularly problematic when, between 1980 and 1984, it nearly doubled because of the continuing development of heavy and chemical industries, as well as a vigorous nuclear power program, expansion of the Seoul subway, and construction of a new subway in Pusan.
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As foreign debt soared to $40.1 billion in mid-1984, South Korea became the fourth largest foreign borrower in the world, only behind Argentina, Brazil, and Mexico. The skyrocketing debt was criticized both by the opposition in the National Assembly and dissident activists, and it was a major campaign issue in the 1985 National Assembly elections.

In late 1985 the South Korean economy began a sharp upturn, as exports rapidly increased. Foreign debt was no longer a major political liability for the Chun Doo-hwan government. Beginning in 1986 South Korea was blessed with the “three lows,” three international economic factors that contributed to the rising South Korean economy. The first was the weak U.S. dollar against most major international currencies, particularly a related appreciation of the Japanese yen that raised the prices of Japanese exports. South Korea’s enhanced international competitiveness caused an unprecedented boom in exports to the United States. The falling dollar allowed South Korea’s new generation of export industries, including automobiles, consumer electronics, ships, and steel, to wrest market shares in the United States from Japanese and European competitors. At the same time strong consumer spending in the United States caused a record-breaking increase in exports of traditional products, notably textiles and clothes. The second factor enhancing the South Korean economy was the falling price of oil, which sharply declined from an average price of $28 a barrel during 1983–1985 to an average of about $16 during 1986–1988, mainly because of overproduction. This substantially reduced South Korea’s energy import costs. The third factor was a fall in interest rates, especially the relatively low U.S. prime lending rate, which helped South Korea redeem its foreign debt. These “three lows,” or blessings, boosted the South Korean economy and provided a solution to the country’s two chronic economic problems—the current account deficit and foreign debt, as the enormous trade surplus that resulted was used to pay off the debt.

Between 1986 and 1988 South Korea experienced an economic boom of unprecedented magnitude. Its
GDP
grew more than 12 percent annually for three
consecutive years. In 1988, as noted, South Korea successfully hosted the biggest Olympics ever, and during this period South Korea emerged as the most powerful of the Asian developing economies, on a par with the other East Asian dynamos, Taiwan, Hong Kong, and Singapore, to form the “Four Dragons of Asia.”

As a result of its emphasis on exports, South Korea increased its exports from $17.5 billion to $30.3 billion between 1980 and 1985. In the next three years, from 1986 to 1988, exports doubled to $60.7 billion. The increase in exports in 1988 alone amounted to $13.4 billion, or almost equal to the total exports of $14.7 billion in 1979. South Korea showed its first trade surplus ever in 1986 and achieved an average annual balance of payments surplus of $7.7 billion during 1986–1988.
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Since 1988 the situation began to decline. As the Roh Tae-woo administration loosened government control on labor, a steep wage increase followed, causing a considerable loss of international competitiveness. Moreover, South Korea’s growing trade surpluses with the United States triggered protectionist responses in the latter nation, on the one hand, and U.S. pressure on South Korea to open its protected domestic markets to U.S. goods, on the other. Under heavy U.S. pressure to liberalize its imports, South Korea instituted sweeping changes that loosened restrictions on imports. As a result, South Korea’s trade surpluses with the United States rapidly fell in 1989. The abruptness and magnitude of the changes in exports and the rapid import growth once again plunged South Korea’s trade balance into a deficit beginning in the 1990s. Meanwhile, South Korea entered a “bubble” economy, with overheated speculation in real estate and stocks. As the 1990s dawned, the double-digit
GDP
growth figures of the mid-1980s slowed, and in 1992 the annual
GDP
growth fell to 4.5 percent.

The Korean War permanently enhanced the role of the military in South Korean society and politics as well as in national security matters. After Park’s coup in May 1961, the military elite tried to create a disciplined, military-style society that was both economically advanced and politically efficient. Later, however, economic modernization caused profound social changes, including the promotion of education and rapid urbanization, all of which corroded the military’s authoritarian view of society and encouraged a trend to a more contentious, pluralistic society that displeased many in the military.

The Park Chung-hee regime, as discussed earlier, imposed a nationalistic, militaristic order on every segment of South Korean society that included the mandatory reading of the National Education Charter at every educational rally. The charter, proclaimed on 5 December 1968, was designed to inspire strong national consciousness in the hearts of the populace. Park argued that development of the nation depended on the development of individual citizens and that national revitalization was essential. To inspire nationalism and patriotism, the Park government stressed education in Korean history, and a new subject, “national ethics,” became a requirement for a college degree. In 1969 Park required high school and university students to complete the subject “military drills,” which, with the downfall of the Park regime, was fated to disappear from the curriculum. After the fall of South Vietnam in April 1975, he further accelerated the militarization of Korean society, transforming the existing student body into the paramilitary Student Defense Corps. First introduced in September 1949 by President Syngman Rhee and dissolved in the aftermath of the April 1960 Student Revolution, the National Student Defense Corps was reorganized by Park in September 1975, and each high school or university was required to establish a unit of the Corps which was organized like the military. With the appearance of these units, campuses were transformed into military camps and students into soldiers. The Corps was abolished in universities in 1980 and in high schools in 1985.

As a result of the prolonged military-oriented rule under Park Chung-hee, military culture pervaded every part of South Korean society. Above all, more than 75 percent of South Korean males served in the regular army and the reserve, and were subjected to harsh military discipline. After establishing the Homeland Reserve Force in April 1968, Park initiated, in September 1975, the Civil Defense Corps system, the South Korean version of North Korea’s Worker and Peasant Red Guard, made up of almost all males between the ages of 17 and 50. Already in 1972 civil defense drills had begun on the 15th day of every month. As the topmost elite of South Korean society in the Third and Fourth Republics, the military occupied positions mainly in powerful organizations such as the Presidential Secretariat, the
KCIA
, and other military-security offices of the government. Many senior officers retired to go into politics or government service. During the 1970s and the early 1980s nearly half of all senior government officials had a substantial military background. Climbing on the bandwagon, many excellent high school students were admitted to the Korean Military Academy, and although civilians resented the military’s ubiquitous presence in
every important area of national life, they still gravitated into military life. Civilians were increasingly accustomed to speaking in military parlance and often organized themselves on the model of military organization. Park’s efforts to establish uniformity and discipline in society, and discourage free spirits, were represented by his crackdown on men’s long hair and women’s miniskirts. Long hair, in fact, emerged as a symbol of resistance to the Park regime. In drinking as well, South Koreans enjoyed the “
p’okt’anju,
” or boilermaker, which was in vogue among military officers. Designed to get one drunk quickly, which typified Koreans’
ppalli ppalli,
or “hurry hurry” culture, the boilermaker was comprised of a shot glass filled with whiskey floating in a mug of beer, the whole lot downed in one long swallow, a potent brew that was appropriate for the heavy-drinking Koreans.

In a rapidly growing economy, technocrats were a distinguished group and became part of the newly emerged elite of South Korean society. Mainly positioned in economics ministries, particularly the Economic Planning Board, they were responsible for the workings of the national economy. Although Park appointed some of them to senior cabinet posts, they were not allowed into the inner circle of Park’s regime, which was dominated by the military elite.

In a close government-business nexus, leading businessmen, especially chaeb
ŏ
l, were allowed access to the topmost people in power, including the president, and formed part of the most powerful elite in the nation. They were always subject to firm government control, however; by removing their special benefits given, the government could drive them into bankruptcy. Despite their enormous wealth, the chaeb
ŏ
l were not well received and were even disdained by the general population, because of their corruption and greed, harsh attitude toward labor, and insensitivity to social justice and environmental protection.Rapid economic growth increased the size of the middle class, which was comprised of salaried white-collar workers in large private companies and professionals with specialized training such as engineers. This burgeoning strata of society was largely indifferent to politics and exchanged political repression for material prosperity. In the mid-1980s the South Korean middle class was active in politics, but only a small number of dissident groups had opposed Park’s autocratic, personal rule in the 1970s.

As South Korea experienced sustained urbanization, many rural residents migrated to expanding cities. Along with the “old” urban poor, they formed
the urban lower class, leading subsistence lives as industrial workers, petty merchants, self-employed craftsmen, and service people. Nevertheless, they were materially better off than those who lived in rural areas, and their number was constantly increasing.
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Park Chung-hee’s “developmental dictatorship” succeeded in achieving remarkable economic development and produced a sense among South Koreans of
hamy
ŏ
n toenda,
or “We can do anything.” Although this attitude made people strongly self-assertive, it also encouraged the “ppalli ppalli disease,” noted above, a syndrome that later earned South Korea the label “Republic of Accidents.”

Following Park’s precedent, the Fifth Republic under the Chun Doo-hwan presidency preferentially placed retired senior military officers in the civil service or in state-run corporations. The news media remained strictly restrained in its coverage of political-military issues. Key student antigovernment demonstrators were frequently punished by being forcibly drafted into military service, and, while serving in the army, some died under mysterious circumstances. After the June Resistance of 1987, in the course of democratization, South Koreans demanded complete reformation of these practices.

As industrialization and urbanization continued to grow in the 1980s, South Korea’s agricultural sector drifted into a stepchild status, and serious problems arose in rural life. The migration of young people to the cities for education and jobs left behind a smaller and increasingly older farm population. This, along with the accompanying low productivity, irreparably destroyed the farming economy and rural communities.

Meanwhile, in the cities, South Koreans grew increasingly accustomed to urban life, particularly apartment living and the lifestyle of the Western nuclear family. In Seoul and other larger cities, including Pusan, Taegu, and Inch’
ŏ
n, towering high-rise apartments began to replace single homes. In 1990, to solve the extreme housing shortage, President Roh Tae-woo embarked on an ambitious project to build two million new housing units, 75 percent of them apartments. The new program raised the housing supply rate to 79.1 percent by 1993.
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