What Is Pushing Korean Industrialization?

Review Artide What Is Pushing Korean Industrialization? Foreign Trade Regimes and Economic Development: South Korea. A Special Conference Series on Foreign Trade Regimes and Economic Development, vol. 7. By Charles R. Frank, Jr., Kwang Suk Kim, and Larry Westphal. New York: National Bureau of Economic Research, 1975; distributed by Columbia University Press, xxii, 264 pp. Graphs, bibliography, index. $15.00. Trade and Development in Korea: Proceedings of a Conference Held by the Korea Development Institute. Edited by Wontack Hong and Anne O. Krueger. Seoul: Korea Development Institute, 1975. 253 pp. Tables, charts. $10.00. Economic Growth and Structure in the Republic of Korea. By Paul W. Kuznets. New Haven, Conn.: Yale University Press, 1977. xv, 238 pp. Tables, charts, appendix, bibliography, index. $16.50. The books under review appear at a time when there is mounting interest in the Korean experience among scholars and policy makers. The books raise important questions and suggest answers with varying degrees of success, and in their coverage they complement each other. Foreign Trade Regimes and Economic Development investigates the details of exchange-rate policies, liberalization episodes, export incentives , and the effects of these on allocative efficiency. Trade and Development in Korea covers the same trade aspect of development, but the nine conference papers in the volume analyze different items, including the balance of payments, comparative advantage, exportinduced employment, productivity trends, dependence issues, and a costbenefit analysis of a free trade zone. In contrast, Paul Kuznets' Economic Growth and Structure in the Republic ofKorea focuses on the 184LIM changes in the internal structure brought about by industrialization. Dealing with such topics as five-year plans, monetary policy, manufactures , agriculture, and labor absorption, Kuznets discusses "causes and consequences" of accelerated growth. In general, these are well-documented empirical studies, though the methods of analysis and styles of presentation differ substantially. The work by Frank, Kim, and Westphal presents an econometric analysis plus a detailed history of the exchange rate, tariffs, and quantitativerestriction policies. The papers in the Hong-Krueger volume present analyses of statistical series with estimation of indices. In contrast, Kuznets uses mainly verbal logic, citing trends in national-income components and aggregates along with ample doses of insight, speculation, and anecdotal illustration. Notwithstanding the differences, reading the three together helps one to perceive the general picture of what is happening in the Korean economy. They are recommended for anyone interested not only in the Korean scene but also in economic development in general. One is readily convinced that the phenomenal growth of exports of manufactured goods constituted a major component in the rapid industrialization of Korea and that the drastic shift from an importsubstitution toward an export-promotion policy was an effective means to bring about the acceleration of the past fifteen years. However, it is felt that the role of import substitution received less than due credit. Import substitution seems to have been neglected because of the overwhelming impact of export promotion and because of the fad in development literature of condemning import-substitution policies.1 Nevertheless, a perusal of the Korean experience points to the continuing contribution of import-substitution activities, not only during the 1950s and 1960s but also during the 1970s. It is impressive to me that industrial production grew at an annual rate of 14.3 percent during 1954-1962 when the import-substitution policy was dominant. This is not far below the annual rate of 16.6 percent recorded during 1962-1972, when the export-promotion policy dominated (see Kuznets, p. 150). It seems fair to say, therefore, that the industrialization process started in the 1950s rather than in the early 1960s. It is also noteworthy that, since 1962, the output of import substitutes, including woolen yarns, chemical fertilizers, refined oil, assembled autos, cement, steel, and petrochemicals , has grown at an above average rate. The number of commodities that changed from noncompetitive imports to competitive imports increased vigorously during the 1960s. According to unpublished data given to me by the research department of the Bank of Korea, 189 items changed from noncompetitive to competitive status between 1963 and WHAT IS PUSHING KOREAN INDUSTRIALIZATION? 185 1966, as did 172 items between 1966 and 1970, all in six-digit commodity...