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Development Overview

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Overview of Korea’s development experience

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Development Overview
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General

International settings for development cooperation and Korea

Birth of International Development Cooperation in the 1950s
 
The end of World War II ushered in a multilateral international security regime headed by the United Nations (UN).[1] In addition, diverse international economic organizations, such as the International Monetary Fund (IMF) and the International Bank of Reconstruction and Development (IBRD)[2] were created as the General Agreement on Trade and Tariffs (GATT)[3] emerged, thus forming an international atmosphere emphasizing reconciliation, cooperation, and free trade.

The actual world order that emerged in the aftermath of World War II was, however, more bipolar than anything else, as the so-called Cold War escalated between the East (the Soviet Union) and the West (the United States). For the half century or so that followed, the world was subject to the ideological and economic competition between the two camps, and the emergence and solidification of a system wherein the United States and the Soviet Union formed the two opposing poles fundamentally shaped the way in which international cooperation evolved.

 At end of the war dozens of newly decolonized countries set upon the task of rebuilding their nations, with rising expectations regarding autonomy and economic development. The conclusion of the war not only freed states that had been colonized by the Allies and the Axis, but also inspired a tide of self-determination among weak and vulnerable states. The birth and development of these decolonized states marked political and economic developments worldwide from the late 1940s to the early 1950s.

 The emerging new world order and structure demanded new forms and methods of international exchange and cooperation, prompting nations globally to explore new ways and platforms for building international relations.

 The most pressing task facing the postwar international community was the need to gather and coordinate global efforts to aid the reconstruction and economic growth of countries that had been ravaged by the war. The American initiative in this regard, the so-called “Marshall Plan,”[4] with generosity and good will on an unprecedented scale, spearheaded and boosted such efforts.

The United States, which was the major player that decisively turned the tide of the war in the Allies’ favor and which emerged as the only powerful, unscathed state in Western civilization after the war, settled upon a plan, based on a proposal from the then Secretary of State George C. Marshall, that envisioned economic reconstruction for Europe on a sweeping scale. As various European states welcomed the implementation of the Marshall Plan, the foundation was set for economic reconstruction and new growth. The US aid provided even for defeated states, including Germany and Italy, pioneered new concepts in international relations and cooperation, including development aid. Such aid also led to the creation of a new international body of consultation called the Organization for European Economic Cooperation (OEEC).[5] In response to this rise of close cooperation between the United States and Western Europe, the socialist states in the Eastern Bloc, headed by the Soviet Union, organized the Council for Mutual Economic Assistance (COMECON)[6] to pursue economic cooperation among themselves.

 The Marshall Plan and the international development cooperation it heralded successfully restored the grounds for stability and prosperity in Western European states, and naturally led those countries to turn their attention to the development of developing countries elsewhere. The ideological conflict between liberal democracy, spearheaded by the United States, and communism, championed by the Soviet Union, also fuelled the rush between the two camps to secure as many allies in the developing world as possible by providing military and economic assistance.

As the Cold War escalated to new heights due to the removal of French colonialists from Indochina, the establishment of a communist government in Vietnam, and the Korean War of the 1950s, both the United States and the Soviet Union began to provide increasingly more development aid not only for humanitarian, political, and economic purposes, but also for the purpose of ensuring international security. As the developing Asian and African member-states of the Non-Aligned Group[7] began to increase their voices in the international arena, aid and assistance for these countries became a serious issue of debate in political, military, and economic circles.

Particularly problematic was the fact that, compared to their counterparts in the northern hemisphere that had achieved reconstruction and economic development relatively quickly in the postwar period, these southern countries were still struggling to end the vicious cycle of poverty despite strenuous efforts for economic growth. The economic and social backwardness of these developing countries became a key topic of international discourse. The “North-South problem”[8] thus became a major international task.

The international aid that Korea began to receive in the aftermath of World War II closely reflected these changing paradigms in international relations. The three years of Korean history under the United States Army Military Government in Korea (USAMGIK) marked a pivotal period of transition from a colonial order to a completely new structure of government and nation-building. The establishment of a republican government in Korea in 1948 marked the extension of the Marshall Plan by Washington from Europe to elsewhere around the world, and prefigured the massive amounts of international aid planned for Korea’s economic and social development.

However, the sudden outbreak of the Korean War presented a major setback to this plan, and complicated the nature of foreign aid Korea received during and immediately after the war: aid was not only for emergency relief, but also for facilitating the resurrection of war-torn facilities and national reconstruction. The ceasefire in 1953 not only left Korea scrambling to restore its war-ravaged infrastructure and industrial bases, but also put it in a vulnerable position in terms of security and strategic concerns raised by the escalation of the Cold War.

 Whereas the majority of newly decolonized countries were able to pursue the project of nation-building without the problems of civil war and national partitioning, Korea was forced to begin its modernization project amid extreme ideological conflicts and hostilities. As the rivalry between the two Koreas began to rise steeply against the general backdrop of the Cold War, Korea became a key focal point for international cooperation and support.

Until the late 1950s or so, Korea suffered the similar run of problems that had affected almost all developing and newly decolonized nations worldwide: namely, obsolete social and industrial infrastructure, shortages in financial and technical resources, a vicious cycle of poverty, chronically high unemployment rates, uncontrollable increases in population size, chronic international trade deficits, and a dearth of foreign reserves.[9] Korea was not exempt from the problem of pervasive poverty or from the developmental divide between the advanced economies of the West (North) and the East (South).
 
 
[1] The international community reached the official consensus on creating the UN at the UN Conference on International Organization, held in San Francisco from April to June, 1944. The UN headquarters went up in New York City, and the organization began its official career in October 1945.
[2] The international decision to create the IMF and the IBRD was made at the UN Monetary Financial Conference held in Bretton Woods, New Hampshire, in July 1944. The two organizations began their careers in Washington D.C. in 1946.
[3] This international and multilateral agreement, signed in 1947, promoted the lowering of tariffs and other barriers to free trade, and led to the launching of the multilateral consultations known as the Uruguay Round. The agreement became the basis for the World Trade Organization (WTO), established in 1995, and continues to evolve and expand its functions and roles.
[4] Although the official name of the plan for American aid was the European Recovery Program, it is better known as the “Marshall Plan,” since Secretary Marshall disclosed the plan for the first time to the public via his address to a group of students at Harvard College on June 5, 1947. In his address, Marshall emphasized that the new aid policy “targeted not specific states or ideologies, but famine, poverty, despair, and disorder.” The United States provided USD 13.3 billion in total for the economic reconstruction of 16 European states, including England, France, Germany, and Italy, from 1948 to 1952 according to this plan.
[5] The OEEC was set up in June 1947 to organize and coordinate the policy discussions among the recipient countries of the Marshall Plan, and counted 16 states as its members, including Austria, Belgium, Denmark, France, West Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Sweden, Turkey, and England. The organization gave way to the Organization for Economic Cooperation and Development (OECD), established in 1961 with the participation of the United States and Canada.
[6] The COMECON represented Soviet Union-led efforts by the Eastern Bloc to counter the OEEC backed by Washington and the Marshall Plan. The organization, established in 1949, included as its members the Soviet Union, Czechoslovakia, Hungary, Poland, Romania, East Germany, Albania, Cuba (1972), Mongolia (1962), and Vietnam (1978), before its dissolution in 1991 amid the collapse of the Socialist Bloc.
[7] The group, bringing together developing countries of the southern hemisphere, originates from the Bandung Conference of Africa and Asian Countries in 1955. The group includes the so-called “Third World” countries aligned with neither the “First World” of the West nor the “Second World” of the Eastern Bloc. The 77 developing countries that officially formed the group at the first UN Conference on Trade and Development (UNCTAD) in Geneva in 1964 actively supported and spread the Non-Aligned Movement (NAM) worldwide, and thus also became known as the Group of 77. The group includes 116 states as members today.
[8] First mentioned by Franks, then the president of Lloyds Bank of England.
[9] Kim Kihwan, The Korean Economy: Past Performance, Current Reforms and Future Prospects, KDI, June 1985, p. 3.

Source: Korea International Cooperation Agency. 2004. Study on Development Aid and Cooperation for South Korea: Size, Scope and Exemplary Effects. Seoul.