Who runs the economy? Intervention by the government lessens
Who is really running the Korean economy? In neighboring Japan, the postwar tradition has been for business to dictate and government to follow. In less developed Korea the opposite was true, certainly throughout the long reign of the late President Park Chung Hee from his 1961 military coup to assassination in October 1979.Skip to next paragraph
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With the change of government last year and the emergence of yet another national leader from the military ranks, the initial impression was that this systemn would not only continue but was being strengthened.
The new leadership energetically began a complete reorganization of industry, ordering some companies to close, others to merge.
But government officials and some of the businessmen involved insist that the initiative for this came from the private sector and was dictated by public opinion.
And, they also maintain that Korea is moving steadily toward a free market economy, even if it wasn't so already.
Korea's first postwar president, Syngman Rhee, was an independence leader who devoted his attention to politics and national integration while largely ignoring economics. The productive heritage left by the Japanese occupiers was dissipated by a combination of administrative chaos and the Korean war.
The Korean economy was like a ship without a tiller until Park chung Hee assumed power and began the government's heavy interventionist role in the economy either through direct participation in public enterprices or through stimulating, cajoling, and forcing private enterprises to comply.
Opinion on the effectiveness of this is divided. Undoubtedly Korea sustained the most amazing growth rates throughout the 1960s and 1970s. But there are some who say: "Imagine what these people could do if the government didn't stick its nose into everything."
Il Sa kong, research director of the Korea Development Institute, argues that in the 1960s "firms didn't have the capital or the managerial experience, so the government had to lead. In general it worked well, although there were bad side effects. Still, we are where we are now because of it."
"The economy, of course, was much smaller then and therefore more manageable. Now it is much more complicated and open, and the government is trying to leave more to private initiative.
"I don't think last year's government measures show any change in official attitude toward developing a free economy. Left alone, the market would have sorted things out eventually . . . all the government did was to speed things up."
Yes, agrees Kim Ip Sam, vice-president of the Korean Federation of industries , the initial impression was that the government was going to dictate the terms of an industrial reorganization.
"But then they discovered how complicated a job it was going to be, so they decided to let industry do the job."
Last September the industries federation was asked to work out an overall program, now nearly complete. The basic idea is that big trading groups like Hyundai and Daewoo should consolidate in their main lines and not spread themselves over too many industrial sectors. Secondly, there should be less companies involved in each main line -- competition but not duplicating overcapacity.