article by walter klitz

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June 8th, 2010

https://www.koreatimes.co.kr/www/news/biz/2010/06/291_67232.html

Koreans setting example for development

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By Walter KlitzDirector of German Friedrich Naumann Foundation for Liberty in Korea

Yes, in 2009 the Republic of Korea became the 24th member nation of the Organization for EconomicCooperation and Development's (OECD) Development Assistance Committee (DAC) and therefore the firstnation ever to go from an aid recipient to a donor state. There are currently quite a few key figures that fillKorean hearts with pride, demonstrating the "Miracle on the Han River", which was also a unique successstory for the nation.

In order to understand Korea's astounding ascent to world power status, we need to identify the factors thathave made such accomplishments possible and take a closer look at the correlations among developmentaid, economic and social progress and the establishment of the rule of law. That latter principle, along witha market economy, free trade and the linking up to world markets appear to be the secrets to Korea'samazing success. The fact that South Korea has always been in charge and "owned" the process of itsdevelopment is a crucial contribution to the country's prosperity today.



Economic development

Only half a century ago, as many older Koreans can vividly recall, the ROK was oneof the world's least developed countries. In 1962 i ts per capita income measured onlya slender $82! From the early 1960's until the late 1990's, the economy of the largestof the "Four Asian Tigers" emerged as one of the fastest growers. In 2007 the percapita income reached just past the $20,000 mark for the first time, falling again in thewake of the global financial crisis. Today, the World Bank classifies the Republic of

Korea as a "high-income economy", ranking among the ten strongest export nations.It will be the first Asian country to host and chair the summit in November 2010 of theGroup of Twenty (G-20).

Today the Republic of Korea is widely regarded as a dynamic and telling example ofeconomic and democratic development in Asia. Regional factionalism, the legacy ofits authoritarian past, and deeply- rooted Confucianism are among the factorsrequiring further attention in order to fully consolidate the country's democracy.Further socio-political reforms are needed to foster transparency and accountability.However, in general the vital dimensions of political life, the state, the media and civilsociety, are imbued with a democratic spirit.

Democratic development

The relationship between political democracy and economic growth has for decadesbeen subject to heated debates. Even assuming the absence of a direct link, therehas been proof of significant indirect effects. On the other hand, a high level of percapita GDP has always been favourable for democratic stability. In our understandingtoday a "constitutional -" or "liberal democracy" implies majority rule as expressed infree and fair elections. But democracy should guarantee freedom for not merely formembers of the majority group. Its crucial challenge is the freedom it guarantees tominorities. These democratic requirements are safeguarded by the rule of law andusually a written constitution.

When talking about democracy in Asia it is important to acknowledge cultural andhistorical differences. Democracy, an emerging healthy civil society and the growth ofcivic participation take their time to mature. Hence, we should refrain from imposingthe benchmarks of past Western democracies upon Korea.

Within the 20th century Korea's political system underwent continual change.Following the end of the Joseon dynasty (1392-1910), Korea became a Japanese

protectorate forced into colonial status. After liberation from gruesome colonial rule in1945 the country was ruled by a U.S. military administration. While Korea's FirstRepublic was a semi-democratic presidential democracy, the second was an unstableparliamentary democracy that was finally toppled by a military coup in 1961. In 1963Park Chung-hee introduced a special kind of military rule, appointing civil ministers,before he established his authoritarian Yushin regime of the Fourth Republic. After hisdeath Chun Doo-hwan's coup d'?tat in 1979, the Gwangju democratization movementaroused public outrage, so that civil society was able to pave the way for the firstdemocratic elections in 1987.

The constitution of 1987 broke away from the authoritarian past. It was only with theadvent of the Sixth Republic of Korea in 1987 that the nation gained stability andgradually came close to what we call "liberal democracy". Korea saw a substantialdevelopment in culture, economy and education. In 1992, Kim Young-sam waselected, the first civilian president since Yun Po-sun (1960). When Kim Dae-jungfinally assumed office in 1997, the f irst change of governmental power between the

opposing political parties was achieved by peaceful means. In 2004 the partisanattempt at impeaching President Roh Moo-hyun failed within the National Assemblyand received its democratic comeuppance in the following elections. Finally theprinciples of democratic rule gained stability. Korea's route to liberal democracy wasnot always straightforward, but it led to a high degree of consolidation in the long run.It allowed opposition leaders and dissidents to participate actively and finally tobecome stakeholders in the system. Today rival parties take turns in governing thecountry. The public system's political order has matured into a sound legitimacy.



Development aid

For over two centuries liberalism has demonstrated in theory and practice that it iscapable of overcoming poverty, dependence and immaturity. Those problems are notGod-given but mainly the result of human action and omission. Poverty - at least tothe extent it still exists today - would not be inevitable if the lessons of classicalliberalism were taken seriously.

Between 1953 and 1960 South Korea received $23 billion in foreign aid, the annualaverage being US $ 1.8 billion. Since the first President Syngman Rhee (1948-1960)followed a rather domestically- oriented strategy of industrialization favoring thereduction of imports the results in terms of economic growth were rather modest. Hissuccessor, President Park Chung-hee, received the same amount of foreign aidthroughout the 1960s, although US economic assistance dropped to US $ 1.3 billion,per annum owing to developments in US domestic politics.

Park actively solicited abroad for international loans and was dedicated to using themto substitute foreign aid. By doing so he created new incentives and an economy-friendly environment. Thanks to his outward-look and export-oriented economicpolicy, he succeeded in fostering dynamic growth, laying the foundation for Korea'seconomic upturn.

It is probably correct to say that in some cases development aid aggravatesdestitution and misery. In most cases it fails to remove the causes. Development aidhas to do so, otherwise it is useless. Eventually development aid has to come to anend. The recipient of help must "develop" - or something has gone wrong. The aim ofall development aid and development policy should be to become superfluous asearly as possible.

In our globalized world we have proof that liberalization has lifted millions of peopleout of poverty. Free trade and free markets are the prescription for the developingcountries in the world. Foreign aid has no impact on economic growth. On the otherhand, liberalizing trade and payments and fostering private property generates agrowing prosperity. Its precondition is the free circulation of goods, services, capital,and people. Without these freedoms it seems impossible to attract foreign directinvestments. They ensure greater choice for consumers, gains in efficiency,specialization, and international technology transfer. On the other hand, we alwaysneed to be aware of each country's uniqueness and manifold differences in tradition,history and politics. We should not look for a uniform solution, a panacea for each and

every case. Korea has demonstrated that "owning the process of development" is ofoutmost importance.

Our analysis arrives at a general observation: a measure of economic liberalization,that integrates a country into the global market, is independent of the respectivepolitical system. Focusing on the indicators of foreign direct investment flows we cansee that the safety and the return of investments are of outstanding importance. Thisis exactly the reason why North Korea should follow the path of China or Vietnam.The DPRK, one of the poorest countries, suffering from isolation, has nothing to losebut a lot to win.

There are two assumptions about development which have been disproved by SouthKorea's case. First, the idea that development can be bought. For decades thisassumption has been the basis for development policy. The purchasing price hasbeen stable: Since the 70s it remains at 0.7% of the OECD states' gross nationalproduct. The doctrine is that if rich countries transfer this amount of money,

development will occur. But people cannot be developed like films or cars. It ispossible to buy a refrigerator or a loaf of bread, but not development. People have todevelop themselves. Second the Korean case proves that development does nothave to come from outside. Development happens invariably when people recognizeincentives and are given opportunities to produce or trade something. Incentives areprovided in situations where producers and traders can be confident that the benefitsof their efforts will end up in their pockets. Opportunities exist when people have thechance to engage in enterprise. That is to say that incentives and opportunities arecreated in countries which respect personal freedom, protect private property,implement the rule of law and open up markets with equal access for all.



Who is Walter Klitz?

The author Walter Klitz is the Director of the GermanFriedrich Naumann Foundation for Liberty in Korea.The main partner of the foundation in Korea is theResearch Center for Local Autonomy (CLA) ofHanyang University.

The foundation also holds civic educational programswith the Institute for Far Eastern Studies (IFES), theKorean Institute for Public Administration (KIPA) ,theJeju Peace Institute (JPI) and some organizations inthe DPRK.

article by walter klitz

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