When Max Sawicky argued that there were capitalist successes in the third world as well as failures, he mentioned South Korea as an example. Hadn't the free market had produced a steadily improving standard of living in recent decades? I replied that it is impossible to abstract a country's economic development from the entire spectrum of relationships it has to the outside world. Countries are not self-contained units like an aquarium. For example, if you don't replace the water in your fish tank on a regular basis, the fish will die. But there are no simple, monocausal explanations for a country's economic success no matter how tempting it is to look at the free market or government intervention--for that matter--as keys to South Korea's success. What you have to do is understand the full dialectical relationship of the given country to international capital as well as the political and military conditions that accompany such matters as credit, technical aid, barters, etc. For a good discussion of the South Korean "success", I recommend Martin Hart-Landsberg brand-new "Korea: Division, Reunification, and U.S. Foreign Policy." It is a Monthly Review publication and ordering information is available at [EMAIL PROTECTED] The following is a representative passage (pp. 181-182): After an initial unsuccessful attempt to create a "self-reliant" economy based on import-substitution industrialization, Park adopted a growth strategy based on the production and export of manufactures. As Byong Nak Song, a South Korean economist who worked with the government, explained: "Under the government export promotion strategy, 'survival of the fittest' among competing firms was not determined in the marketplaces but through discretionary government actions. 'Fitness' was judged in terms of the ability to expand exports, rather than based on profitability. If determined 'unfit,' firms were likely to face bankruptcy. Such firms were under constant threat of tax investigation and other punitive sanctions. On the other hand, firms that efficiently used their government-backed loans to expand exports were implicitly considered fit and favored with even further support." The results of this strategy were dramatic. Real export growth went from approximately 9 percent in 1963 to more than 35 percent in 1965, and remained above 30 percent in each of the next four years. The ratio of exports to GNP more than tripled from 1965 to 1975. Moreover, the composition of exports also changed dramatically. In 1961, the top six exports in order of dollar value were basic ores, iron ore, fish, raw silk, vegetables, and swine. In 1971 they were clothing, plywood, other manufactures (which included wigs and toys), electrical machinery, raw silk, and basic ores. By 1976, they were clothing, footwear, fabrics, electrical machinery, plywood, and telecommunications equipment. Powered by this rapid increase in the production and export of manufactured goods, the country's annual GNP growth rate averaged 8.3 percent between 1962 and 1967 and 12.6 percent between 1967 and 1971. Economic conditions were far from stable, however. Among the most important problems generated by the country's economic expansion was a growing trade deficit. Economic growth, especially when produced by a rapid expansion of exports, was supposed to solve the country's balance of payments problem. In South Korea's case, the problem worsened; the trade deficit grew from $240 million in 1965 to more than $1 billion in 1971. One of the main reasons was that South Korea's new manufacturing industries were structurally dependent on imports of technology, machinery, and components from Japan. Park was able to finance this trade imbalance and maintain growth only because he was able to secure funds from Japan and the United States. As part of the 1965 Japan-ROK normalization treaty, Japan agreed to give South Korea $200 million in loans, $300 million in grants, and at least $300 million in commercial credits. Park received money from the United States by agreeing to send South Korean troops to fight in Vietnam. Some 300,000 went, and, according to the terms of a secret arrangement, the U.S. government paid a bonus in dollars for each of them. The United States also agreed to purchase war supplies in South Korea, allow South Korean firms to act as subcontractors for construction and service work in Vietnam, and modernize the South Korean military. All together, from 1965 to 1973, South Korea earned almost $1 billion from the combination of military and civilian activities carried out in Vietnam. South Korea made an additional $1.1 billion from U.S. military activities in the country itself. The $2.1 billion represented approximately 30 percent of South Korea's total foreign exchange earnings over the period 1966 to l969. Louis Proyect (http://www.panix.com/~lnp3/marxism.html)
