[Smart Economics] Entrepreneurship: The Driving Force Behind Korea’s Economic Growth

The Economy Thrives When Entrepreneurship Is Encouraged

The process of Korea’s economic growth and industrial development went hand in hand with the emergence of entrepreneurship. After liberation in 1945 and the outbreak of the Korean War in 1950, Korea was an impoverished country so destitute that it could fairly be called one of the poorest in the world. The words of General MacArthur, then commander of the UN forces during the Korean War, vividly captured the country’s devastating condition.

“It will take at least 100 years for the Republic of Korea to recover from the war.”

Not only General MacArthur, but virtually everyone who saw Korea at the time thought the same. A British Time magazine correspondent who visited Korea as a war reporter also viewed the country’s future with despair.

“To hope that the flower of democracy will bloom in the Republic of Korea is like hoping a rose will bloom in a garbage can.”

In the 1960s, Korea’s economic level ranked near the bottom even within Asia, to the point that the Philippines was regarded as a country to admire. At the time, the Philippines had a per capita gross domestic product (GDP) of $260.2, while Korea’s stood at $91.6. By per capita GDP alone, the Philippines was about three times wealthier than Korea. In 1961, the Philippines was, in effect, a developed country in our eyes.

Overcoming Every Hardship Through a Spirit of Challenge and Innovative Thinking

But what about now, 50 years later? The economic positions of Korea and the Philippines have completely reversed. Today, Korea’s per capita GDP is about ten times higher than that of the Philippines. Now it is the Philippines that envies Korea. Just 50 years ago, the small nation of Korea was nothing more than an underdeveloped agricultural country with no industrial infrastructure, capital, technology, or experience. Yet in just half a century, it rose to global levels across most manufacturing sectors—including steel, oil refining and petrochemicals, machinery, automobiles, shipbuilding, and electrical and electronics—and was reborn as an advanced industrial country.

There is a reason Korea was able to achieve such explosive economic growth in such a short period, to a degree unprecedented in the world. It was because state administration that promoted competition in line with the principles of the market economy improved the economic environment. Added to this was the entrepreneurship of the first generation of founders, producing a tremendous synergistic effect. Thanks to that, Korea, which possessed virtually nothing except human resources, was able to build powerful international competitiveness and leap into the ranks of advanced industrial nations.

In fact, the history of Korea’s leading conglomerates is, for all intents and purposes, a history of entrepreneurship. The first generation of founders boldly undertook large-scale investments with a spirit of challenge so daring it seemed almost reckless—investments that even global companies equipped with powerful industrial infrastructure, capital, and technology would not have made lightly. Today’s large Korean corporations are the result of founders who, even in economic conditions that were nearly barren, refused to give up and overcame every hardship through innovative thinking and indomitable will. The driving force that enabled Samsung, Hyundai, LG, SK, POSCO, and others to grow into today’s global giants was the entrepreneurship of their first-generation founders. Business scholars in Korea and abroad also hold the entrepreneurship of Korea’s first-generation founders in high regard and continue to study it closely.

The Shared Belief That “We Can Prosper” Supported Success

After the entrepreneurship of the first generation of founders emerged, Korea’s economy came to possess a certain level of productive capacity, and this led to rapid economic growth. Then second-generation entrepreneurs, including Samsung Chairman Lee Kun-hee, carried that legacy forward, and in the latter half of the 20th century Korea’s economy began catching up with advanced countries, led by its large corporations. The result was a great success: Korea grew into one of the world’s top 10 economies.

Another background factor behind Korea’s sustained and rapid economic growth was a socioeconomic ecosystem characterized by positive thinking and friendliness toward capitalism. In the immediate aftermath of the war, survival was the only intense desire people had amid the ruins. What transformed that desire for survival into a desire for achievement was the policy incentives of the 1960s. Under the slogan commonly summed up as “Let’s live well,” a universal belief took root throughout society: that with hard work, people could improve their current circumstances and achieve a better future. In other words, an environment was created in which entrepreneurship could emerge through a virtuous cycle of aspiration and experiences of success. Strong achievement motivation gave rise to entrepreneurship, and as people took bold risks based on that entrepreneurship and achieved successful outcomes, a positive feedback cycle accelerated. The result was Korea’s dazzling economic growth process, which astonished the world.

Even now, society is changing rapidly, new industries are emerging, and a wide range of opportunities is being created. Now is the time for entrepreneurship to emerge anew. If we fail to generate a new wave of economic development, Korea will inevitably fall behind. As I have emphasized time and again, the driving force of economic growth is the emergence of entrepreneurship suited to the times. Therefore, if we fail to seize the opportunities before us, we can never promise ourselves a rosy future. After all, how could anyone who never takes on a challenge ever reap the fruits of success?

△ Please remember

Korea was able to achieve explosive economic growth in a short period, to a degree unprecedented in the world, because state administration that promoted competition in line with market-economy principles combined with the entrepreneurship of the first generation of founders to produce a powerful synergistic effect. Today, society is changing rapidly, new industries are emerging, and diverse opportunities are being created. Now is the time for entrepreneurship to emerge anew.

Sung-no Choi, President, Center for Free Enterprise (CFE)

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Original title: [스마트 경제 읽기] 우리나라 경제성장의 원동력, 기업가정신

Author: Sung-no Choi

Date: 2021-01-04

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=5&idx=23390