Capitalist Industrialization in Korea

South Korea's rapid industrialization has often been cited as a development success story, but there is strong disagreement and controversy over the factors and policies that lie behind that spectacular growth. In order to explain how industrial capital became the dominant economic and social force in South Korea, Dr. Hamilton assesses the effects of Japanese colonialism on an economic system that was based primarily on tenant agriculture. He then traces the impact of government policies implemented by the strong centralized Korean state that, bolstered by U.S. aid, emerged after World War II. Using a computable general equilibrium model, he analyzes the relation between struct structural change and accumulation in the Korean economy in the 1960s and 1970s. Because the full empirical application of the model, which is derived from East European planning techniques, has not been attempted before, Dr. Hamilton also examines the model's usefulness, its drawbacks, and its applicability to market economies.

He finds that several factors were critical for sustained growth-the transfer of surplus from the agricultural and service sectors to manufacturing: technical innovations; and especially imports. Exporting, claims Dr. Hamilton, was not an end in itself and in fact was often unprofitable. However, the Korean government strongly encouraged the export sector in order to gain the foreign exchange needed to buy the imports on which growth depended. The state used the price system to validate investment decisions based on criteria other than private profitability. The book concludes with an evaluation of the implications of the Korean experience for other developing nations.