Reprinted by permission of The New Republic, March 9, 1998
Korea's Place in the Sun: A Modern History
by Bruce Cumings (Norton, 527 pp., $35)
The Two Koreas: A Contemporary History
by Don Oberdorfer (Addison Wesley, 472 pp., $30)
At the dawn of this century, Henry Adams, dazzled and humbled by "the acceleration of history," by the advances in science that were transforming his age, predicted that "every American who lived into the year 2000 would know how to control unlimited power. He would think in complexities unimaginable to an earlier mind. He would deal with problems altogether beyond the range of earlier society." Today we flatter ourselves that Adams was right. Our particular conceit as we enter the twenty-first century is that we know how things work. About new issues, such as the machinations of international financial markets and the revolutionary effect of computer technologies, and about old ones, such as questions of politics and international conflict, we tend to believe that, with enough information and the right methods, these can be measured, mapped, and manipulated. This is still the age of the social sciences, and we are particularly enamored of models. We have models for everything -- for how economies grow, for how nations democratize, for how wars start. The Enlightenment dream of mastering nature and the complex interactions of mankind has been realized. Mr. Adams, meet Messrs. Rubin, Greenspan, and Camdessus.
Or so we would like to imagine. But sometimes our confidence in our knowledge is matched only by the disorientation that overwhelms us when what we know one year turns out to be wrong the next. Last year, the common wisdom held that the twenty-first century would be the "Asian century." Last month, the director of the International Monetary Fund warned that the most salient issue of the next century would be the Asian financial crisis. Our trusty models turn out to be almost comically useless. They have proven unable to predict or to explain the most consequential events of our time, whether it is the collapse of Soviet communism or of Asian economies. They are like the flamingo mallets and the hedgehog balls of Alice's croquet game, which unfurl and pad away from us just when we feel confident enough to use them.
For more than a decade we were told that the "Asian model" of "guided capitalism," in which the state intervened heavily and strategically to support and to steer industry in the most promising directions, was probably superior to the American model, according to which the national economy unfolded without clear direction or sense of national strategy. Apostles of the Asian model, such as James Fallows and Chalmers Johnson, took evident pleasure in the way the Asian miracle, which seemed to depend on the limitation of individual freedoms in favor of the collective interest, pointed up the deficiencies of the American system. Rather than look for ways to remake other cultures in their own image, Fallows chided, "Western societies should first concentrate on whether and how to remake themselves." Many Americans, and their political leaders, took these warnings to heart and supported various forms of what was once known as "industrial policy."
For Samuel P. Huntington, the stunning success of the Asian model was the central pillar upholding the dubious thesis of The Clash of Civilizations, that the West was in decline relative to the rising power of the "Sinic" civilization of East Asia. Confidently projecting Asian growth rates in a straight line into the future, Huntington predicted that by 2020 Asia would contain "four of the five largest and seven of the ten largest economies," and would account for more than 40 percent of the world's economic output. And this astounding growth would have enormous geopolitical, cultural, and ideological ramifications – all of them bad from the standpoint of American power and Western principles. It would mean an ineluctable shift in the balance of international power away from an American-dominated West and toward a China-dominated East. It would mean that the "liberal" model of political and economic development -- which assumed that economic growth had to be accompanied by political liberalization -- could be challenged and even replaced by a new model, represented by the capitalist authoritarianism of China or Lee Kuan Yew's Singapore. "The mounting self-confidence of East Asia," Huntington argued, had given rise "to an emerging Asian universalism comparable to that which has been characteristic of the West."
Those fashionable theories had some important things in common: a tendency to deny the universality of such "Western" ideals as freedom, individual rights, and democracy; economicism, or the tendency to view political and social matters as determined by economic matters; and a tendency to dismiss as futile, arrogant, and undesirable any attempt by the United States to try to shape the direction of history.
For many years South Korea served as a showcase for these notions. In the 1970s it was among the first of the Asian "miracles," an improbable economic success story that convinced many in the East and the West that extensive government involvement in guiding and subsidizing industries -- the so-called "Asian model" -- was a sound and even a critical ingredient for achieving rapid economic growth in developing nations. For three decades South Korea's GDP grew at an average rate of nine percent a year, despite periods of economic failure in the late 1960s and the early 1980s. Fulfilling the dream of General Park Chung Hee, who ruled South Korea with an increasingly strong hand from 1961 to 1979, South Korea became one of the world's leading exporters of steel, cement, electronics, automobiles, and ships. It managed to produce internationally-known brand names such as Daewoo, Samsung, and Hyundai. By the mid-'90s, South Korea boasted the eleventh largest economy in the world. It was a featured exhibit in the World Bank's publication, The East Asian Miracle. And nobody expected the miracle to end, in Korea or in any of the other exemplars of the Asian model. As recently as last fall, the International Monetary Fund declared the South Korean economy sound as a bell.
That was last year's wisdom. This year we know that the Korean model contained a flaw at birth, a flaw that was destined to bring the economy down in the absence of radical corrective surgery. It seems that precisely what made the South Korean economy great in the early stage of its economic development -- state-directed lending at subsidized interest rates to favored industries undertaking high-risk ventures -- is what most contributed to its collapse. "Suddenly it is clear," The Washington Post reported in December, that South Korea's huge conglomerates, the chaebol, "had run amok, relentlessly seeking bigger market shares and borrowing money without regard to profits, cash flow or potential failure." Suddenly, that is, they were doing what they had always been doing, ever since the 1970s. And suddenly this was a big mistake.
Now we know better. We know that the keys to economic success in the modern, globalized world are greater "transparency," better-regulated lending practices, and more market-driven investment, which is to say, less corruption, less cronyism, less backroom dealing between government and business, less "guided capitalism." We know this, of course, with as much confidence as we knew that the old Korean model was invincible. In newspapers and in journals around the world, commentators now note, as if it has always been perfectly obvious, that the chaebol system was all along riding for a fall, that the cozy relationship between government and industry had to be broken up, that what the South Korean economic system needed was more -- would you believe it? -- democracy. The model is dead, long live the model.
Several weeks ago, South Korea's president-elect Kim Dae Jung declared that "if we had true democracy in Korea, then the collusive intimacy between business and government and corruption would not have been as great here." (For Kim, of course, this was not instant wisdom. It was not necessary for the scales to drop from this former dissident's eyes.) He even had the temerity to claim that South Korea's current problems were the result of a long tradition of placing economic development ahead of democracy. And he made a direct attack on those "leaders of Asian society who have been saying that military dictatorship was the way and democracy was not good for their nations."
Asian leaders have not been the only ones making such arguments, of course. Until recently, South Korea's utility as a model for economic development was matched only by the rather remarkable extent to which it seemed to illustrate the most popular theory of political development: call it the not-ready-for-prime-time theory of democratic development. Since South Korea had grown wealthy under Park's authoritarian regime, and had become democratic only after it became wealthy, many observers assumed that this sequence was not accidental. South Korea had passed through predictable and appropriate stages of development, and each of these stages was necessary for building the present happy outcome.
In South Korea, the authoritarian stage was necessary for two reasons: because it provided a period of stability and the firm dirigisme that made an economic take-off possible; and because, in the absence of that economic take-off the Korean people, lacking the strong middle class upon which successful democracies are presumed to rest, were not "ready" to sustain a popular form of government. Indeed, according to this general theory, if democracy had come to South Korea before economic development, it would have been premature, unstable, chaotic, unproductive. It would have been an "illiberal" democracy, and therefore a dangerous democracy. In this evolutionary view of political and economic development, nations are a little like people. They need to crawl before they can walk.
The sunnier side of this theory was that once a nation like South Korea did achieve a certain level of economic growth, it would be almost impossible for it not to become democratic. The most prominent spokesman for this have-a-nice-day economicism is Thomas L. Friedman. It was also the view of many conservatives both during and after the Cold War, who argued that capitalism was not only a necessary condition for democracy but also a sufficient condition. Political scientists today believe that they can demonstrate a direct link between a nation's average income levels and its form of government. Writing in The National Interest in 1996, Henry Rowen noted that "the transition to stable democracy correlates with mean incomes between $5, 000 and $6,000, and becomes impregnable at the $7,000 level." On the basis of such calculations, Rowen predicted that China would be a democracy by 2015, for that was when China's per capita GNP could be projected, given current growth rates, to cross the magic threshold. Or rather, that was the date as of the 1996 projections, before last year's Asian economic collapse forced so many recalculations and invited speculations about many different possible Asian futures. Now, presumably, China's emergence as a full-blown democracy will have to wait until 2019 or so.
This developmental model has also another important use. It serves as a weapon in the debate over American policy toward such Asian dictatorships as China and Indonesia. To those who have recommended that the United States use economic sanctions or other forms of pressure on these countries to compel a change in governance, the proponents of the "Korean model" have responded that, on the contrary, such intervention would only interrupt the natural evolution toward democracy. If you want freer governments in China or Indonesia, you need only to increase trade and thereby hasten the day when economic growth compels those nations to shed their authoritarian fins and gills, which no longer serve any useful purpose, and leave the water of dictatorship for the land of democracy. Eventually, growing wealth in the hands of an increasing number of people will naturally create the conditions for democracy. It will, in fact, necessitate democracy. After all, look at South Korea.
Well, let's look at South Korea. Did it evolve from traditional authoritarianism to modern democracy, as a consequence of economic growth? Did Korea's authoritarian governments prior to the late 1980s serve their teleological purpose of providing the stability to allow economic growth to proceed, a stability that would have been absent had democracy emerged too soon? And was it this economic growth, producing the necessary social conditions, such as a middle class, that finally compelled South Korea's traditional rulers to give up their hold on the political system and let democracy flower?
Two new books help to answer these questions. In Korea's Place in the Sun: A Modern History, Bruce Cumings, one of the last of the red-hot revisionist historians, has written a lively, contrarian, occasionally dyspeptic account of Korean history that ought to shake up some conventional thinking about the Korean "model." Don Oberdorfer, the retired reporter for The Washington Post, has written The Two Koreas: A Contemporary History, a less contentious but highly informative account of the past fifty years. Both books are well worth reading for the background to South Korea's current crisis, and for what it may portend in a part of the world where the United States has repeatedly, if unexpectedly, found itself entangled.
Reading Cumings's and Oberdorfer's accounts of the last half-century in Korean history, one is hard-pressed to find evidence that things unfolded in the smooth, organic evolution suggested by the popular models of development. Both the Korean economy and the course of Korean politics were shaped less by the broad, impersonal forces of economic growth or social and institutional change than by powerful individuals and unpredictable events. As Cumings notes, Korea "presents the Westerner not with a smooth narrative of progress ... but with a fractured, shattered twentieth-century history," a history filled with accidents and miscalculations that defy political science modeling. And then there was that rather large external factor that shaped, often but not always for the better, the course of South Korean life: the United States.
What were the essential ingredients of South Korea's economic success? As Cumings points out, they are not to be found among the usual list of capitalist building blocks. In Korea before the "miracle," there were "no capitalists, no Protestants, no merchants, no money, no market, no resources, no get-up-and-go, ... no discernible history of commerce, foreign trade, or industrial development." Koreans did possess a high level of general education and a long tradition of bureaucratic governance by scholar-officials, which provided a pool of technocrats adept at managing a state-led development program. Average Koreans after World War II applied to most of the problems they encountered, at home and in the American diaspora, a remarkable willingness to work long and hard. But the work ethic that we associate with Koreans today may not always have been a notable national trait. The Japanese, who occupied Korea from 1910 to 1945, considered the Koreans lazy. In Cumings's view, "Confucianism" and other ingrained cultural traits "neither hindered nor helped" the economic progress of South Korea.
Far from being determined by any existing cultural, social, political, or economic preconditions, Korea's economic success came as a consequence of events that were (as the political scientists like to say) exogenous: world wars that had nothing to do with Korea; foreign occupations, first by Japan and then by the United States; a Cold War that divided the country and sparked a civil war in which huge foreign and Korean armies devastated Korean soil and society. In one of history's terrible but familiar ironies, these wars and occupations blazed the trail for South Korea's march to prosperity, by burning away institutional, social, and cultural obstacles that might have slowed or prevented economic growth.
For Koreans, war was a great equalizer and, in its awful way, a great liberator. Before its twentieth-century disasters, Korea was characterized by an indolent aristocracy, the yangban, sitting atop an immobile population. After two wars and two foreign occupations, Cumings writes, the aristocracy's "capacity to control the people ‘below them,’ ... and their continuous tendency to control markets and stifle enterprise, was blasted to smithereens." A people that for centuries had been "frozen in place in rural settings" was suddenly and brutally thrust into a new age of social and spatial mobility. "What the Japanese had begun with their massive shifts of Korean population in 1935-45, what the national division after World War II had intensified, the Korean War completed: Koreans of all classes were now thoroughly displaced from their local roots. Everyone was jostled or pushed or thrown bodily out of his or her social niche."
War and occupation not only opened Korean society, it also provided the opportunity and the financial capital to fuel its development. During the long Japanese occupation, and during the American occupation that followed World War II, Koreans made their money almost entirely from the occupiers. Many a future tycoon who would later command one of Korea's powerful corporate conglomerates got his start serving the needs of occupying forces. As Cumings points out, these were hardly archetypal capitalist entrepreneurs looking for "the main chance." For the Kim Song-su group, Korea's first chaebol, "the main chance had been the Japanese regime and the opportunities that close alliance with it brought." Under the American occupation, Cumings argues, the true "creative enterprise" of South Korea in the 1950s "consisted of sucking the American teat for all it was worth." Chong Chu-yong, the chairman of the Hyundai Corporation, started on his path to billionaire status by carrying supplies to American bases on half-ton trucks. Cho Chong-hun, later to become the head of Korean Airlines, amassed his early fortune through lucrative American transport contracts.
South Korea's economic miracle, in short, could not have occurred without the American occupation and the billions of dollars it brought to a destitute people. After World War II, and even more so after the Korean war, American dollars poured into the Korean economy in an unimaginable deluge. Between 1945 and 1965, $12 billion from the treasury of the United States was transferred to South Korea in the form of aid, and in the 1950s, according to Cumings, this aid accounted for 100 percent of Seoul's budget. By the end of that decade, direct grants from the United States accounted for five-sixths of all South Korea's imports. This does not include the money spent by Americans living in South Korea, or the dollars that flowed in through the underground economy.
Every stratum of the otherwise barren Korean economy was "fertilized," as Cumings puts it, "by the inconceivable amounts of American cash that flowed into the country, down from the presidential mansion, through the bureaucracies civil and military, coursing through the PXs and onto the black market, into the pockets of a horde of people who serviced the foreign presence: drivers, guards, runners, valets, maids, houseboys, black-market operators, money changers, prostitutes, and beggars." In describing the Korean "miracle," analysts usually start from a base of about $100 per capita income in 1960 and marvel at its rise to more than $10,000 over three decades. But Cumings, for good reason, considers the low estimates of South Korea's per capita income in the early decades after World War II "grossly uninformative." After all, according to one estimate that Cummings cites, American aid to South Korea between 1945 and 1976 added up to as much as $600 every year for every Korean.
The Korean economy also benefited, if that word is not too obscene, from the utter devastation meted out during the Korean War. As in Japan during World War II, obsolete industrial plants were destroyed, making room for an otherwise impossible modernization of technology. In both North and South, "the war renovated plant and industry in the flash of phosphorus." According to Cumings, the war and its aftermath also had a big effect on the South Korean character by increasing the size and the influence of the South Korean military, which from the rubble of war emerged as the "strongest, most cohesive, best-organized institution in Korean life." Since just about every Korean male had to go through the military's vigorous form of education and training, Cumings speculates that the military may have provided a "school for industrial discipline" that served the burgeoning industries of postwar Korea well.
Korea's devastation also affected the culture in another important way. The stunning success of South Korean businessmen in the '60s, '70s, and '80s owed much to their unusually high propensity to take risks, a propensity that was born in the desperate circumstances of the wars of the mid-century. As the Harvard business economist Michael E. Porter has pointed out, "everyone had to start from scratch, motivated by a sense of crisis, a lingering resentment of the Japanese, and the feeling that there was nothing to lose. The competitive spirit that has resulted is perhaps the single greatest source of advantage that Korean companies have possessed."
From the Japanese occupation, then, Koreans got "foreign" investment and learned the style of state-directed capitalism that later made the chaebol famous, benefiting from what Cumings calls Japan's "developmental" colonialism. From the American occupation, the South Koreans got money-making opportunities and steady flows of financial sustenance and seed capital to see them through the early phases of industrialization. In between, awful wars wiped out stultifying social hierarchies and a flaccid aristocracy, creating mobility, fluidity, and a hard-scrabble style of individual entrepreneurship. Some model!
These were all essential preconditions for the glory years of South Korea's economy under the direction of President Park Chung Hee, who presided over astonishing growth from the 1960s until his assassination in 1979. It was Park who single-handedly created the Korean economic model that we know today, ordering the establishment practically overnight of new export industries in steel, electronics, chemicals, shipbuilding, automobiles, and machine tools, and subsidizing them with special low-interest loans in what became known as the "big push."
Still, looking back on Park's success from the perspective of today's economic calamity, one gets the sense of a man -- and a nation -- on a long winning streak that depended, as such streaks usually do, on a fair amount of luck. At the time, American advisers and economists at the IMF believed that Park's grand plans made no economic sense. The heavy industries that Park wanted Korea to compete in suffered from overcapacity. Korea's domestic market was too small to absorb the new goods he wanted to produce, and there was no demand in the world market for most of these products. The American advisers in their wisdom had always envisioned South Korea as best suited to light industry.
But Park ignored the economists' advice. The reason was that he had his sight on more than economics. A serious country, he believed, engaged in heavy industry. "Steel," he once declared, "is national power." Park's demand for rapid development of a machine-tool industry was especially reckless, but "like Stalin," Park believed (according to Cumings) that "an industrial sovereign did not rely on foreigners for the guts of an industrial base." Thus many risky investment decisions were made by Park chiefly for reasons of national honor and national strategy.
Those decisions wound up scoring huge economic successes. As Cumings writes, "The Western economists' estimates of future demand should have been multiplied by the hairs on their legs." Over the course of the 1970s, Korea's steel capacity grew fourteenfold. "Who bought all this steel? Korean shipbuilders who had no factories in 1970, Korean automakers who weren't supposed to be needed by the world market, American manufacturers who bought Korean steel delivered to the Midwest well below the posted price in Pittsburgh or Gary." Although some of the new export industries launched by Park failed, enough of them succeeded to transform the South Korean economy.
It is amusing to read, these days, in The Economist that the big problem in the Korean economy these past few years has been the propensity of state-directed banks to throw "free money at the chaebol, which has allowed the chaebol to build recklessly huge factories, and to diversify into businesses in which they have no expertise." This was precisely Park's formula for success. Korean industries had no expertise in shipbuilding when Park thrust them into it, and the machine-tool industry was a wild venture at which he threw enormous quantities of "free money." He just rolled the dice and they kept coming up natural.
Even during the Park years, however, economic success depended to a substantial degree on non-economic factors, such as war. At Lyndon Johnson's request, South Korea contributed some 300,000 troops to the American war in Vietnam and, according to Cumings, received as much as $7.5 million per division in compensation. Between 1965 and 1970, Seoul earned about a billion dollars this way, accounting for between seven and eight percent of its GDP, and for as much as 19 percent of its total foreign earnings. Korean industry also benefited enormously from the war. Vietnam, Cumings writes, "became a frontier for Korean enterprise, as many firms, especially construction companies, got contracts to support the American effort." For several years the war absorbed more than 90 percent of South Korea's steel exports and more than 50 percent of all exports of transportation equipment. "Warfare in East Asia," Cumings notes, "was handmaiden to economic growth."
To note this fact is not to deny Park's achievements nor those of his successors, but it does place them in a larger context. And it raises a number of questions, some of which are especially pertinent now that the Korean "model" has come a cropper. There is the question raised by Kim Dae Jung, for instance, of whether Korea's economy would have been healthier all along had it expanded in a freer political atmosphere. Indeed, the collapse of the Korean economy, coinciding as it did with the third consecutive free election held in South Korea since 1987, provides an opportunity to reflect once more on the complex relationship between economic development and political development.
As with economic development, South Korea has for many years been the model for a host of theories about political development. Since South Korea became democratic in the late 1980s, it has provided a showcase for those who claim that economic growth and industrial and technological modernization lead inexorably to democracy. Since South Korea's most stunning economic growth occurred under authoritarian rule, however, it has also been a useful example for those (most recently Robert D. Kaplan and Fareed Zakaria) who maintain that, at a certain stage in the development of most nations, a "traditional" authoritarian government may be preferable to a "premature" transition to democracy. These theories take as their assumption that some nations are "ready" for democracy and some nations are not.
The problem with applying Korean histo