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Chomsky: "Korea grew because it ignored West"
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eskeemo

Joined: 04 Jan 2009

Posted: Thu Sep 20, 2012 4:27 pm Post subject:

Kuros wrote:

Privateer wrote:

He doesn't address the fact that South Korea benefited from the economic effects of very large amounts of military aid, and having a very significant U.S. military base here. He would, however, point out that the U.S. military-industrial complex accounts in no small way for the dynamism of the American economy itself.

It wasn't just military aid. The Kennedy administration gave straight-up economic aid. From the 1960s until the mid 1970s, America gave Korea $600 per Korean in direct economic assistance. That figure is NOT adjusted for inflation. Source.

Chomsky is not contending about the act of receiving aid, but what is done with the aid once it is received. Important difference. He underscores that in the video section on economic policy.

Fox

Joined: 04 Mar 2009

Posted: Thu Sep 20, 2012 4:40 pm Post subject:

Speaking of South Korea and aid:

Quote:

During the 1950s, U.S. economic assistance represented 69 percent of imports and 77 percent of all saving in South Korea. Food aid was particularly important insustaining the Rhee government. One study estimated that without all that assistance, Korea's living standards would have been 10 percent to 15 percent lower.39

Nevertheless, the inward-looking, import-substitution policies of the Rhee government were constricting the economy, regardless of the size of aid flows. U.S. officials fully recognized that fact and tried to persuade the Korean government to make reforms. Although Rhee made a few concessions along those lines, such as a devaluation of the currency and an attempt at greater fiscal discipline, "the overall strategy of the Rhee government was to maximize the gap between domestic resources and expenditures for foreign aid to fill. Because the United States was politically committed to the maintenance of the South Korean government, U.S. bargaining power was relatively weak."40

In fact, Rhee's aid strategy included a measure of deception. For example, the Rhee government counseled its ministries to understate Korea's harvests "to try to maximize the inputs of United States agricultural products under the aid program .. ."41 He apparently succeeded in that effort. In some years during the 1950s, the United States provided a third or more of the total budget for the government. In 1956, U.S. support for the Korean government's budget reached 58 percent of total expenditures.42 One study has called that a policy of "coercive deficiency."43

Arguably, aid's most significant contribution to Korea's future economic growth was in providing infrastructure investment and technical assistance. U.S. assistance also helped Korea to recover from the war and rebuild as quickly as it did. The large amount of infrastructure construction�power systems, railroads, and port capacity�that the United States financed probably permitted faster economic growth in future years than otherwise would have been possible. In addition, Krueger and Ruttan have argued that "the experience gained in infrastructure construction in the 1950s and 1960s enabled Korea to become a major exporter of construction services to the Middle East in the 1970s and early 1980s."44

Many lower-level officials within the Rhee government received training in economics in the United States. They argued for economic reforms in the 1950s but were resisted at the upper echelons of the government. In the 1960s under the reform-minded Park government, however, their skills and expertise were put to good use in designing and implementing the outward-looking, export-oriented economic strategy that launched Korea on the path of rapid economic growth. According to one analyst, "one may sum up the pre-Park era on overall aid effectiveness as one in which foreign assistance was essential to the survival of the state but poorly used and unimaginatively planned and administered. Some preconditions for growth were created: excess industrial capacity, an educated population, and foreign, modern specialized training in skills needed for development. The results, however, did not seem equal to the effort."45

In the late 1950s, U.S. officials began to place more emphasis on development. They warned the Rhee government that aid flows would gradually decline and eventually end. That warning, and the realization on the part of many Koreans that the United States actually meant it, stimulated efforts to put Korea's economic house in order. General Park justified his military coup in 1961 in part because the Rhee government had "frittered away" large quantities of foreign assistance.46 The Park government began to reform economic policies in the early 1960s. Those reforms were crucial factors in Korea's successful development.

According to an AID study, by 1964 that agency was playing an extremely important role in planning, supporting, and sometimes even directing South Korea's export strategy�the key to its industrialization. AID personnel and advisers provided most of the expertise necessary to create the institutions, laws, and procedures to promote South Korean exports. AID personnel staffed the South Korean government entities that were making policy for the export drive, identified and encouraged foreign buyers of Korean exports, provided technical advice on improving Korean export products, funded trips by Korean business representatives to examine methods of promoting exports, and provided technical advice on almost every conceivable aspect of reorienting the South Korean economy toward exports. President Park provided the political will to reform and export, and AID provided the technical expertise for the first few years.47

The foreign aid South Korea received in the late 1960s and 1970s was important to its development in other ways. Primarily, that aid increased the pool of available investment capital. The period between 1965 and 1975 illustrates what a developing country can accomplish when it adopts sound economic policies, has favorable background conditions such as a well-educated labor force, and has extra capital provided by international sources and uses it for investment. Foreign transfers declined as a share of total domestic investment over that period, from an average of 75 percent in the 1960-1962 period to 5.1 percent in the 1973-1974 period (see Table 4). By the 1970s, South Korea was sufficiently creditworthy to borrow the capital it needed on the international market.48

Could South Korea have developed just as quickly if it had not received such high levels of foreign assistance in the 1960s and 1970s? Some critics of foreign aid argue that South Korea began to make reforms only after the United States threatened to stop providing aid and that South Korea's growth trajectory soared only after U.S. aid ended. That argument, however, is somewhat misleading. On the one hand, the Rhee government was finally motivated to make some reforms when the United States informed it that aid flows would decline in the future. On the other hand, it is not clear that the Park government, which made the most important reforms, was motivated by the impending end of aid resources. Park wanted to reform the economy to make it grow in order to gain legitimacy for his government. Moreover, he did so with AID's help, particularly in promoting exports. Finally, South Korea continued to receive aid from multilateral institutions, war reparations from Japan, and credits from the Export-Import Bank.

The positive economic policies Korea adopted in the early 1960s and its strong base of human capital probably would have fostered significant economic growth in the succeeding 10 years regardless of the amount of foreign assistance it received. But growth would probably have been slower simply because the investment pool would have been smaller or, if Korea could have obtained the funds from the international capital markets, more government revenues would have been needed for servicing the debt.49

Even within South Korea's history we can see the difference between aid used wisely, and aid used poorly. Aid is only a part of the story, with governmental policy playing a much larger role. A well-managed country can grow faster with aid; a poorly-managed country can stay afloat with aid. But aid on its own cannot adequately explain why some countries succeed and others fail. No amount of aid, for example, would transform North Korea's economy into one on par with South Korea's. North Korea is poorly managed, so aid keeps it afloat. South Korea, after it began to be reasonably well managed, would have grown anyway, but aid certainly accelerated this process. The greatest benefit South Korea received from the U.S. was probably being pushed in the right direction in this regard (well, that and being provided a broad market for their exports, but taking advantage of a market requires diligent work, and the South Koreans success on that account really ought not be belittled).

young_clinton

Joined: 09 Sep 2009

Posted: Wed Sep 26, 2012 5:43 am Post subject:

In one of the countries in Africa, as the aid increased the amount of useable roads decreased. Aid is not always that good. Humanitarian aid maybe, like food and drinking water.

Fox

Joined: 04 Mar 2009

Posted: Wed Sep 26, 2012 2:38 pm Post subject:

young_clinton wrote:

In one of the countries in Africa, as the aid increased the amount of useable roads decreased. Aid is not always that good. Humanitarian aid maybe, like food and drinking water.

Water is probably difficult to fault but even food aid, if not carefully managed, can both distort domestic farming markets for the worse and can be potentially abused by dictators.

The best aid is knowledge and training.

GENO123

Joined: 28 Jan 2010

Posted: Fri Sep 28, 2012 1:34 am Post subject:

Titus wrote:

Korea had a military dictator (see problems in India) a very energetic high IQ population, American engineering (nobody ever talks about engineering and development) and free and not reciprocated access to American markets.

Regarding Japan's "crony capitalism":

http://www.paecon.net/PAEReview/issue23/Locke23.htm

Everybody stop what you're doing and read the above. Japan is not "crony capitalist". It's not even capitalist. It is, forgive my bluntness, fascistic. And it works.

So I guess Chomsky is right. Korea didn't use free trade, didn't allow Goldman to rape the population, and so on. How's our system working out for us?

Japan's economic system works?

Rolling Eyes

Two lost decades and counting. There was once a time where SONY was the number one consumer electronics company in the world. How's that working out? Indeed Japan is even worse off now than it was when the article was written Japan is in terrible economic condition for now and beyond.

Kuros

Joined: 27 Apr 2004

Posted: Fri Sep 28, 2012 4:06 am Post subject:

Let's not hang Japan for low GDP. In fact, let's not hang them at all: they will go extinct.

Japan Demographics

Quote:

Total fertility rate

1.39 children born/woman (2011 est.)

bucheon bum

Joined: 16 Jan 2003

Posted: Fri Sep 28, 2012 5:32 am Post subject:

GENO123 wrote:

Titus wrote:

Japan's economic system works?

Rolling Eyes

1. Japan in 2012 is a lot better off than Japan in the 50s and 60s.
2. I'd much rather live in Japan than probably over 100 other countries in the world.

Terrible economic condition? Not really. It doesn't have massive unemployment like a lot of Europe currently is seeing. It has better infrastructure than the USA. It's still one of the largest economies in the world.

Not to say it has some big problems that don't bode well for the country (such as its demographic problem that Kuros posted about), but Japan DID develop very well. It just hasn't been able to reform and adjust.

Kuros

Joined: 27 Apr 2004

Posted: Sun Sep 30, 2012 5:54 pm Post subject:

I feel somehow obligated to post this. No more Japan from me for this thread. I don't like Chomsky and no amount of him talking sense is going to cure that. I'll try to be open about my biases, but even as I grow more amenable to his ideology, his rock star (I'm thinking Bono) approach sickens me.

visitorq

Joined: 11 Jan 2008

Posted: Sun Sep 30, 2012 6:35 pm Post subject: