Korea Briefing, 1992 by Donald N. Clark

Author:Donald N. Clark [Clark, Donald N.]
Language: eng
Format: epub
Tags: History, General, Asia
ISBN: 9780813314990
Google: vfopAAAACAAJ
Publisher: Avalon Publishing
Published: 1992-10-29T10:32:25+00:00

Toward the Seventh Five-Year Plan

The year 1991 represented the final stretch of Korea's Sixth Five-Year Plan. A central tenet of the sixth plan was decreased government involvement in the economy. Preparations for the Seventh Five Year Plan (1992-96) have been under way for some time now, and it is likely that a commitment to loosening the government's grip over the economy will continue. Nevertheless, before the seventh plan is implemented, it is worth reassessing the wisdom of a reliance on freer markets generally, and "business-led growth" in particular, from the experience gained during the tenure of the sixth plan. The foregoing survey made a preliminary attempt to do this, and to set what Korea has accomplished in a global context.

Events in Eastern Europe suggest that too much government intervention stifles entrepreneurship and discourages technological change. On the other hand, the industrial decline of the United States (and a fortiori of England) suggests that too little government intervention renders bursts of inventiveness on the part of the private sector insufficient to sustain global competitiveness. The competitiveness of the European Community and Japan—and Korea itself throughout most of its rapid industrial development—seems to rest on a judicious blend of government intervention and private-sector initiative. This combination departs from both the central-planning model and the Anglo-Saxon one.

Where along this spectrum of market intervention is Korea now relocating itself? Has it been tending toward laissez-faire more as a matter of ideological conviction than economic sense? Certainly the reassessment of the pervasive role of the government in the Korean economy that began in the early 1980s was welcome. Equally warranted, however, would be a reassessment of how the Korean economy has fared in the absence of heavy-handed government intervention, to see whether business leadership has succeeded in reanimating the economy or has gone too far in another direction.

A reassessment in the United States of the 1980s is just beginning, but already there are mixed reviews of the effects of liberalization and deregulation on both efficiency and equality. As noted earlier, a reassessment of the World Bank's policies in the 1980s also suggests that they went overboard in proselytizing for liberalization and deregulation. In Eastern Europe the market mechanism has succeeded in deconstructing the old centrally planned system but has been much less successful in reconstructing a new economic base. What, then, does an assessment of Korea itself reveal?

In the case of import liberalization, the evidence seems to suggest that the anticipated economic gains from a freeing up of imports have not materialized. Generally the removal of import controls has had little, if any, effect on productivity. In the case of financial liberalization, neither has greater equality been achieved: if anything, the distribution of capital has worsened as the big business groups have gained control of major financial institutions that used to be publicly owned. The general lesson from liberalization seems to be that the freeing of markets may be a necessary condition for sustaining industrial competitiveness, but it is not a sufficient one. Freer markets cannot be expected to solve major problems related to competitiveness and social inequality.

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