[Once Upon a Time] The Miracle on the Han River

A World Bank report contains the following passage: “In 1965, Ghana’s national income was far higher than South Korea’s. Why is it that, 40 years later, Korea has become a country that cannot even be compared with Ghana?” Simply put, the answer is property rights, openness, and the adoption of a market economy.

As is the case in many African countries today, the officials of our country in the past were severely corrupt. To civil servants, citizens were not people to be served, but rather objects of exploitation. There were also many regulations, and property rights were not guaranteed. As a result, as Kim Gu and Jaepil Seo both lamented, our people developed a tendency to rely on others rather than work for themselves.

Then, from the 1960s onward, as corruption among public officials gradually declined, the people’s property rights began to be protected. The Saemaul Movement became an opportunity to inspire people with the motivation to improve their lives through their own efforts.

Opening up trade was, above all, a great blessing. Until the 1960s, our borders were tightly closed. Neither exports nor imports were welcomed. The overvaluation of the won, which ignored market realities, made exports difficult even under those conditions. But from the 1960s onward, exports came to be recognized as something beneficial the more they increased. And imports, which had been completely shut off, were freely allowed so long as they were for the sake of exports. Bringing the won closer to the market exchange rate through devaluation also helped facilitate our exports. In this way, both exports and imports were effectively opened. That made Korea a member of the global economy, and jobs and income were created through mass production in factories.

Contrary to common belief, the economic development plans actually had a harmful effect on economic growth. In particular, the heavy and chemical industry investments of the late 1970s had broad adverse effects on both the economy and politics.

If economic development plans were the driving force behind economic growth, then all the newly independent countries that gained independence after World War II should be prosperous, since most of them carried out economic development plans. Yet the fact that only four countries—Korea, Hong Kong, Singapore, and Taiwan—which actively chose open-door policies, were able to escape poverty shows that the answer to success lies not in economic development plans but in integration with the global market and in the market economy alone. What created the Miracle on the Han River was the adoption of a market economy system.

Original title: [옛날옛적에 ] 한강의 기적

Author: Center for Free Enterprise (CFE)

Date: 2006-06-22

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=21&idx=10677