The Dynamics of Korean Economic Development
By Cho Soon
Institute for International Economics, 1994, 216 pp.
A professional economist who has served as a deputy prime minister and as governor of the Bank of Korea offers a critical appraisal of South Korea's postwar development strategy. The author agrees with the conventional wisdom that the South Korean economy has achieved extraordinary growth rates, but he warns that a number of structural imbalances, unless corrected, will impede South Korea's entry into the ranks of the advanced industrial countries. These include excessive concentration of economic and political power in large industrial conglomerates, retarded development of small and medium-sized enterprises essential for technological innovation, excessive government control of the financial services sector, and costly labor strife. The author concludes that South Korea must now undertake a great transition in order to sustain growth and democratization. He recommends policies to address the problems he identifies, and generally calls for a much more liberal approach to international trade and investment.
In a sobering concluding section, Cho warns that Korea has not yet established a firm institutional basis on which capitalism can soundly flourish. Mercantilist institutions persist. Resources are allocated through arbitrary decision. There is still an unbalanced industrial structure and a rigged price system. And there is a glut of bank loans for highly leveraged firms, while there is only anemic help for new businesses.