This research seeks to identify the factors of rapid growth continuously achieved by the Korean economy from the early 1960s to the mid-1970s. In particular, the study endeavors to identify various approaches in examining the direct and indirect reasons to growth, thus enabling forecasts of future prospects of growth.
The Korean economy has been achieving a high level of growth with its abundant workforce since 1963. The annual growth rate at the time of the Korean War was as low as 4%, but it made a drastic rise to more than 11% from 1963 until 1977. Meanwhile, the annual GNP between 1962 and 1975 increased to 10.2%. Even during the economic depression, which was globally rampant between 1974 and 1975, Korea still achieved a GNP growth rate of 8.7% and 8.3% respectively, still marking a relatively high rate of growth. However, high growth led to chronic inflation and the economy’s dependency on foreign capital.
During this time, the wage-income percentage was low compared to the gross national income while the income percentage in the non-agricultural industry was high. These rates, however, became stable as inflation rate decreased and settled. The rate of employment of the labor supply, the biggest contributing factor behind the development of the Korean economy, was around 3.44% in the early 60s, but decreased to 2.90% during the 70s. Meanwhile, wages increased along with the changing working population between 1966 and 1971, as GNP in the non-agricultural sector marked a rapid increase, while consequently, the rate of unemployment dropped as a result of this increase.
The influence of inflation on finance and savings due to the higher interest policy that began in 1955 was relieved. But this also increased the gap between local and foreign interest rates, leading to an increase in foreign loans. Inflation during the period brought a decrease in exports and an increase in imports at the same time, which as a consequence, led to a rise in the trade deficit and the demand for loan acquisition. At the end of the day, there was a negative impact on the international balance of payments.
Korea has devised and carried out various plans in an aim to stabilize its public finance, but to no avail. As specific sectors such as the non-agricultural sector received a negative impact on its GNP, the results have not been promising. The Korean economy must stabilize its prices with a yearly rate higher than 3% in order for it to achieve continuous growth. Average growth was indeed high in the past, but the scope of growth seems to decreasing, raising the need for sustainable growth. Policies created by the country must not lean towards a specific side as it must attain stable policies and prices along with the goal of rapid growth. For this, there is a need for a wide array of policies to be simultaneously coordinated.
한국경제의 고도성장요인(Study on the factors of rapid economic growth of the Korean economy)
|Series Title; No||연구총서|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Economic Administration|
|Holding||KDI; KDI School|