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Economy of South Korea
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===Rapid growth from 1960s to 1980s=== [[File:Historical GDP growth of South Korea.png|thumb|upright=1.2|Growth of the South Korean economy 1961–2015]] [[File:TwoKoreasGDPPerCapita.svg|thumb|upright=1.2|Economy of South Korea, compared to North Korea. North Korea began to lose the economic competition after its adoption of ''[[Juche]]'' in 1974.]] Following [[May 16 coup|the coup]] that brought General [[Park Chung Hee]] to power in 1961, which at first caused political instability and an economic crisis, a [[protectionist]] economic policy began, pushing a bourgeoisie that developed in the shadow of the State to reactivate the internal market. To promote development, a policy of [[export-oriented industrialization|export-oriented industrialisation]] was applied, closing the entry into the country of all kinds of foreign products, except raw materials. Agrarian reforms were carried out and Park nationalised the financial system to swell the powerful state arm, whose intervention in the economy was through five-year plans.<ref>{{Cite web |url=https://www.pagina12.com.ar/104906-corea-del-sur-no-es-un-milagro |title=Corea del Sur no es un milagro | Un Estado muy fuerte, industrialización, extrema flexibilización laboral y conglomerados familiares. El papel de EE.UU. |date=30 March 2018 |access-date=5 March 2019 |archive-date=29 January 2019 |archive-url=https://web.archive.org/web/20190129064108/https://www.pagina12.com.ar/104906-corea-del-sur-no-es-un-milagro |url-status=live }}</ref> The spearhead was the [[chaebol]]s, diversified family conglomerates such as [[Hyundai Group|Hyundai]], [[Samsung]], and [[LG|LG Corporation]], which received state incentives such as tax breaks, legality for their exploitation system and cheap or free financing: the state bank facilitated the planning of concentrated loans by item according to each five-year plan, and by economic group selected to lead it. South Korea received donations from the United States due to the Cold War, and foreign economic and military support continued for some years. Chaebols started to dominate the domestic economy and, eventually, began to become internationally competitive. Under these chaebols, workers began to see their wages and working conditions improve, which increased domestic consumption. By the 1980s, the country rose from low income to middle income.<ref>{{Cite web |url=http://documents.worldbank.org/curated/en/975081468244550798/pdf/multi-page.pdf |title=Archived copy |access-date=30 July 2019 |archive-date=10 February 2020 |archive-url=https://web.archive.org/web/20200210154516/http://documents.worldbank.org/curated/en/975081468244550798/pdf/multi-page.pdf |url-status=live }}</ref> South Korea's real GDP expanded by an average of more than 8 percent per year,<ref name=loc/> from US$2.7 billion in 1962<ref>{{cite web|url=http://www.nationmaster.com/graph/eco_gdp-economy-gdp&date=1962|title=Countries Compared by Economy > GDP. International Statistics at NationMaster.com|work=nationmaster.com|access-date=4 March 2021|archive-date=19 May 2011|archive-url=https://web.archive.org/web/20110519125735/http://www.nationmaster.com/graph/eco_gdp-economy-gdp%26date%3D1962|url-status=live}}</ref> to US$230 billion in 1989,<ref>{{cite web |url=http://www.nationmaster.com/graph/eco_gdp-economy-gdp&date=1989 |title=Countries Compared by Economy > GDP. International Statistics at NationMaster.com |work=nationmaster.com |access-date=4 March 2021 |archive-date=11 February 2011 |archive-url=https://web.archive.org/web/20110211194900/http://www.nationmaster.com/graph/eco_gdp-economy-gdp%26date%3D1989 |url-status=live }}</ref> breaking the trillion dollar mark in the early 2000s. Nominal GDP per capita grew from $103.88 in 1962<ref>{{cite web| url=http://www.nationmaster.com/graph/eco_gdp_percap-economy-gdp-per-capita&date=1962| title=Countries Compared by Economy > GDP > Per capita. International Statistics at NationMaster.com| work=nationmaster.com| access-date=4 March 2021| archive-date=18 December 2010| archive-url=https://web.archive.org/web/20101218175831/http://www.nationmaster.com/graph/eco_gdp_percap-economy-gdp-per-capita%26date%3D1962| url-status=live}}</ref> to $5,438.24 in 1989,<ref>{{cite web|url=http://www.nationmaster.com/graph/eco_gdp_percap-economy-gdp-per-capita&date=1989|title=Countries Compared by Economy > GDP > Per capita. International Statistics at NationMaster.com|work=nationmaster.com|access-date=4 March 2021|archive-date=6 April 2011|archive-url=https://web.archive.org/web/20110406112658/http://www.nationmaster.com/graph/eco_gdp_percap-economy-gdp-per-capita%26date%3D1989|url-status=live}}</ref> reaching the $20,000 milestone in 2006. The manufacturing sector grew from 14.3 percent of the [[Gross national income|GNP]] in 1962 to 30.3 percent in 1987. Commodity trade volume rose from US$480 million in 1962 to a projected US$127.9 billion in 1990. The ratio of [[Saving|domestic savings]] to GNP grew from 3.3 percent in 1962 to 35.8 percent in 1989.<ref name=loc/> In the early 1960s, South Korea's rate of growth exceeded North Korea's rate of growth in most industrial areas.<ref name=foia-19670921>{{cite report |page=4 |url=http://www.foia.cia.gov/sites/default/files/document_conversions/89801/DOC_0001218147.pdf |title=North Korean Intentions and Capabilities With Respect to South Korea |id=SNIE 14.2–67 |publisher=[[CIA]] |date=21 September 1967 |access-date=13 March 2017 |archive-date=15 November 2017 |archive-url=https://web.archive.org/web/20171115201410/https://www.cia.gov/library/readingroom/docs/DOC_0001218147.pdf |url-status=dead }}</ref> The most significant factor in rapid industrialisation was the adoption of an outward-looking strategy in the early 1960s.<ref>Koh, Jae Myong (2018) ''Green Infrastructure Financing: Institutional Investors, PPPs and Bankable Projects'', Palgrave Macmillan, pp.37–39.</ref><ref name=loc/> This strategy was particularly well-suited to that time because of South Korea's low savings rate and small domestic market. The strategy promoted economic growth through labour-intensive manufactured exports, in which South Korea could develop a competitive advantage. Government initiatives played an important role in this process.<ref name=loc/> Through the model of export-led industrialisation, the South Korean government incentivised corporations to develop new technology and upgrade productive efficiency to compete the global market.<ref name=":0">{{Cite book| chapter=The Developmental State in Retrospect and Prospect: Lessons from India and South Korea|last=Chibber |first=Vivek| title=The End of the Developmental State?|publisher=Routledge|year=2014|editor-last=Williams|editor-first=Michelle|pages=30–53}}</ref> By adhering to state regulations and demands, firms were awarded subsidisation and investment support to develop their export markets in the evolving international arena.<ref name=":0" /> In addition, the inflow of foreign capital was encouraged to supplement the shortage of domestic savings. These efforts enabled South Korea to achieve growth in exports and subsequent increases in income.<ref name=loc/> Beginning in 1973, South Korea's government used its National Investment Fund and the [[Korea Development Bank]] to invest large amounts of money into what Park Chung Hee's government viewed as the six strategic industries: steel, non-ferrous metals, shipbuilding, industrial machinery, electronics, and petrochemicals.<ref name=":62">{{Cite book |last=Lan |first=Xiaohuan |title=How China Works: An Introduction to China's State-led Economic Development |publisher=[[Palgrave Macmillan]] |year=2024 |isbn=978-981-97-0079-0 |translator-last=Topp |translator-first=Gary |doi=10.1007/978-981-97-0080-6}}</ref>{{Rp|page=136}} This developmental approach was frequently criticized at the time from outside Korea, including by the World Bank.<ref name=":62" />{{Rp|page=136}} The strategy was successful and ultimately also helped develop companies like Samsung and [[POSCO]] and reduced input costs for production in downstream industries as well.<ref name=":62" />{{Rp|page=136}} By emphasising the industrial sector, Seoul's export-oriented development strategy left the rural sector barely touched. The steel and shipbuilding industries in particular played key roles in developing South Korea's economy during this time.<ref>{{Cite journal|url=http://jwsr.pitt.edu/ojs/jwsr/article/view/316|archiveurl=https://web.archive.org/web/20200730234453/http://jwsr.pitt.edu/ojs/index.php/jwsr/article/view/316/328|title=The Steel and Shipbuilding Industries of South Korea: Rising East Asia and Globalization|first1=Kyoung-ho|last1=Shin|first2=Paul S.|last2=Ciccantell|date=26 August 2009|archivedate=30 July 2020|journal=Journal of World-Systems Research|pages=167–192|via=jwsr.pitt.edu|doi=10.5195/jwsr.2009.316}}</ref> Except for mining, most industries were located in the urban areas of the northwest and southeast. Heavy industries were located in the south of the country. Factories in Seoul contributed over 25 percent of all manufacturing value-added in 1978; taken together with factories in the surrounding Gyeonggi Province, factories in the Seoul area produced 46 percent of all manufacturing that year. Factories in Seoul and Gyeonggi Province employed 48 percent of the nation's 2.1 million factory workers. Increased income disparity between the industrial and agricultural sectors became a problem by the 1970s despite government efforts to raise farm income and improve rural areas <ref name=loc/> [[File:South Korean inflation.webp|thumb|upright=1.2|South Korean inflation {{legend-line|#000000 solid 3px|M2 [[money supply]] increases}} {{legend|#FF644E|Inflation}} {{legend-line|#00A2FF solid 3px|Inflation ex food and energy}} ]] In the early 1980s, in order to control inflation, a conservative [[monetary policy]] and tight fiscal measures were adopted. Growth of the [[money supply]] was reduced from the 30 percent level of the 1970s to 15 percent. During this time, Seoul froze its budget for a short while. Government intervention in the economy was greatly reduced and policies on imports and foreign investment were liberalised to promote competition. To reduce the imbalance between rural and urban sectors, Seoul expanded investments in public projects, such as roads and communications facilities, while further promoting farm [[mechanization|mechanisation]].<ref name=loc/> The measures implemented early in the decade, coupled with significant improvements in the world economy, helped South Korea regain its lost momentum. South Korea achieved an average of 9.2 percent real growth between 1982 and 1987 and 12.5 percent between 1986 and 1988. The double-digit inflation of the 1970s was brought under control. Wholesale price inflation averaged 2.1 percent per year from 1980 through 1988; consumer prices increased by an average of 4.7 percent annually. Seoul achieved its first significant surplus in its balance of payments in 1986 and recorded a US$7.7 billion and a US$11.4 billion surplus in 1987 and 1988 respectively. This development permitted South Korea to begin reducing its level of [[foreign debt]]. The trade surplus for 1989, however, was only US$4.6 billion, and a small negative balance was projected for 1990.<ref name=loc>{{Country study|url=http://countrystudies.us/south-korea/45.htm|article=South Korea: The Economy}}</ref>
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