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BIS 397: US-Asia Relations
Winter 2018
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Worksheet # 6: Nation-Building, Free Trade, and International Economics in US-Asia relations
Answer the following questions. Do not exceed front and back of this paper.
1. Ha-Joon Chang is a prominent economist; according to him, today’s “Free Trade” acolytes have got it all wrong when it comes to economic development and aid in the developing world. In your words, what is his basic argument? Do you think his argument applies to the United States, too, as Trump is trying to implement it? Why or why not?
2. Do a little bit of Internet research, and write here a basic definition of nation-building. What is it? What are some examples of successful, and failed, nation-building? How are “economic” issues involved?
3. Gregg Brazinsky offers a case study of one of America’s “success stories” in nation-building. This story is usually told as a case of successful East Asian “culture” (one of the great Asian tigers!), and of American aid/enterprise (“Free Trade”!) helping an economically “closed” Asian people and culture. His article challenges this myth by showing how South Korean officials had a very different economic view of how South Korea should develop—and did this successfully without simply following US formulas. How did South Koreans and Americans view the ROK economy differently, and how does this complicate any simplistic, stereotypical pro-“Free Trade” view of how the ROK developed with US aid and advice?
4. Identify at least two concepts or quotes from the readings that you would like elaborated in class and why.
g r e g g a n d r e w b r a z i n s k y*
From Pupil to Model: South Korea and
American Development Policy during the Early Park
Chung Hee Era
In 1983 President Ronald Reagan spoke before the South Korean National
Assembly. He told Koreans in attendance that “the rapid progress of your
economy—and the stagnation of the North—has demonstrated perhaps more
clearly than anywhere else on earth, the value of a free economic system.”1
Reagan was invoking what has now become the standard post-Cold War tri-
umphalist narrative of Korean development. The narrative proclaims South
Korea as a successful model of the virtues of liberal capitalism and free enter-
prise, while using North Korea to demonstrate the unworkability of commu-
nism. But Americans did not always boast of South Korea as a developmental
model. In 1961 the Republic of Korea’s economy had fallen significantly behind
that of its northern rival, and American policymakers were coming to look at
the country as a major policy failure. Moreover, the South Korean leaders who
engineered the ROK’s dramatic rise to economic prosperity did not necessarily
aspire to follow “Free World” models of development. At times, they resisted
American efforts to make them do just that.
American angst about South Korea’s economy was perhaps never more
prevalent than during the early 1960s, when the American and ROK govern-
ments became involved in an ambitious effort to accelerate the process of eco-
nomic growth in the country. At the start of the decade, new governments
determined to bring an end to the economic stagnation that had prevailed in
South Korea since the end of the Korean War in 1953 came to power in both
the United States and the ROK. The administration of John F. Kennedy
attached a high priority to South Korea in its well-documented efforts to bring
83
Diplomatic History, Vol. 29, No. 1 ( January 2005). © 2005 The Society for Historians of
American Foreign Relations (SHAFR). Published by Blackwell Publishing, Inc., 350 Main
Street, Malden, MA, 02148, USA and 9600 Garsington Road, Oxford OX4 2DQ, UK.
*The author wishes to thank Tim Borstelmann, William Stueck, and James Matray
for their useful comments on earlier drafts of this article. Most names are romanized accord-
ing to the McCune-Reischauer system. I did not follow the system for names such as
Park Chung Hee that are widely known in the United States according to a different
romanization.
1. “Address of President Ronald Reagan before the Korean National Assembly,” 12
November 1983, Oberdorfer Papers, Box 1, National Security Archives, George Washington
University, Washington, D.C.
the benefits of development to the peoples of Asia, Africa, and Latin America.2
One official report called the Republic of Korea “a symbol of the determina-
tion of the United States to assist the nations of free Asia to defend themselves
against communist aggression.”3 In South Korea, a military junta led by Park
Chung Hee gained power on 16 May 1961. Having overthrown what had been
the most freely elected government in South Korean history, the new regime
was determined to achieve rapid economic growth and industrialization as a way
of securing its popular legitimacy. American officials doubted the capacity of
the new regime to promote economic development on its own, however. They
believed that the new government required American tutelage and, through an
elaborate pedagogical project, sought to introduce its leaders to American con-
ceptions of economic development. But the Park government proved both
selective in accepting American tutelage and creative in finding ways to disre-
gard unwanted advice.
The story of South Korea’s so-called economic miracle has already been told
in other places. As the ROK emerged as an “Asian tiger” economy during the
seventies and eighties, a substantial literature on the origins of Korean economic
development appeared.4 The majority of this literature focused primarily on
either the structure of the South Korean economy or the ways that the South
Korean state sought to promote economic development. Some of these studies
have touched on the role played by American grants and loans in accelerating
South Korean growth and the significance of American demands in prompting
certain reforms.5 They have paid less attention to American policy and the
mechanisms Americans used to exert their influence on South Koreans. This is
worth looking at, not only for what it can tell us about the United States’
relations with South Korea, but also because it can help shed light on the way
American economic assistance programs functioned during the “decade of
development”—the 1960s. The purpose of this essay, therefore, is to neither
84 : d i p l o m a t i c h i s t o r y
2. On the Kennedy administration’s commitment to promoting economic development in
non-European countries see Michael Latham, Modernization as Ideology: American Social Science
and “Nation Building” in the Kennedy Era (Chapel Hill, NC, 2000).
3. United States Agency for International Development (hereafter USAID), “Field Pro-
posed Program for 1963: Korea,” USAID Library and Learning Resource Center, Washing-
ton, D.C. (hereafter USAIDL).
4. Among the most widely read accounts are Jung-en Woo, Race to the Swift: State and
Finance in Korean Industrialization (New York, 1991); Alice Amsden, Asia’s Next Giant: South
Korea and Late Industrialization (New York, 1989); Lee-Jay Cho and Yun-Hyung Kim, eds.,
Economic Development in the Republic of Korea: A Policy Perspective (Honolulu, HI, 1991).
5. Woo, Race to the Swift, discusses some of the American policies that will be analyzed
here, but her argument remains focused on the policies of the South Korean state. See espe-
cially 73–117. Anne O. Krueger, The Developmental Role of the Foreign Sector and Aid (Cam-
bridge, 1982), talks about the impact of economic assistance on the South Korean economy
but pays significantly less attention to the ways that American officials sought to influence the
development process in South Korea. Stephan Hagard, Pathways from the Periphery: The Poli-
tics of Growth in the Newly Industrializing Countries (Ithaca, NY, 1990) discusses the relevance
of American demands in prompting South Korean policy makers to switch their developmen-
tal strategy to what he calls “export-led growth.”
confirm nor refute existing interpretations of South Korean economic
development, but rather to examine how Americans tried to influence the
development process, and how Koreans adapted to and resisted American
influence.
Even before the 1960s, the United States’ economic influence in South
Korea loomed large. Korea’s liberation from Japan in 1945 had led to the divi-
sion of the Korean peninsula into two separate occupied zones and eventually
to North and South Korean states. These events had a devastating economic
impact on both halves of the Korean peninsula, which had been thoroughly
integrated into Japan’s colonial economy before the war ended. The Korean
War wrought tremendous damage to the infrastructures of both these two new
states, immeasurably exacerbating the situation. Faced with the task of building
a self-contained economic unit from what had once been a part of a well-
integrated system, the Truman and Eisenhower administrations spent billions
of dollars to assure South Korea’s survival as a separate political entity. Despite
this assistance, however, economic growth remained modest. Irreconcilable
conflicts existed between American officials, who wanted to link South Korea’s
economy with Japan, and ROK president Syngman Rhee, who wanted to make
sure that American assistance went to building up Korean industries, not
helping Korea’s former colonizer.6 Until his regime was overthrown in 1960,
Rhee managed to utilize the ROK’s vital strategic position to ignore American
advice.
With the start of the Kennedy administration in 1961, the United States dra-
matically shifted its approach to economic assistance to the Republic of Korea.
At the time, development experts were beginning to place a new emphasis on
the idea that economic growth in countries such as South Korea required not
just the input of new physical capital but also the development of human capital.
Economists such as H.W. Singer argued that the key obstacle to development
in many parts of the world was not that underdeveloped countries lacked money,
but that their populations lacked the capacity to create wealth. Increasing the
capacity to create wealth was the most effective means of stimulating economic
growth, Singer believed, because “additions to the capacity to create wealth
mutually fructify support and stimulate each other.”7 In the international com-
munity at large, a new emphasis was placed on technical assistance programs as
a mechanism for economic development. Such programs were meant to create
new groups and institutions in the developing countries themselves that could
accelerate economic growth. The Kennedy administration billed this as “aid to
end aid” or “helping people to help themselves.”8
From Pupil to Model : 85
6. Woo, Race to the Swift, 50–54.
7. H.W. Singer, International Development: Growth and Change (New York, 1964), 19–20.
8. For a summary of this transition in international development thinking see H.W. Arndt,
Economic Development: The History of an Idea (Chicago, 1987), 49–72. The specific quotes from
the Kennedy Administration are on p. 66.
In seeking to develop this so-called “human capital,” many American
development economists argued that the transformation of what they called
traditional societies could best be accelerated through the emergence of a
modernizing elite that could serve as an agent of change. Walt Whitman
Rostow, perhaps the leading American development guru of the 1960s, argued
in his well-known book The Stages of Economic Growth that in order to prepare
a “traditional society for regular growth . . . a new elite—a new leadership—
must emerge and be given scope to begin the building of a modern industrial
society.”9 While such elites could potentially be found in all segments of a
given society, Rostow tended to emphasize the significance of the role that
political leaders needed to play in the modernization process. He contended
that the government of a developing country needed to “lead the way through
the whole spectrum of national policy—from tariffs to education and public
health—toward the modernization of the economy and the society of which it
is a part.”10
When Park Chung Hee seized power in May 1961 and established the
Supreme Council for National Reconstruction (SCNR), his junta seemed to
some Americans to fit squarely into the mold of the modernizing elite that
Rostow and others had described. Park’s junta had supplanted a freely elected
government that had gained power in the wake of what is commonly called the
19 April revolution. On 19 April 1960 dramatic nationwide student demon-
strations had erupted against the increasingly despotic rule of Syngman Rhee,
who had dominated ROK politics since 1948. By the end of April, these demon-
strations had become irrepressible, and Rhee had finally agreed to step down.
During the year that followed, a democratic government comprised mainly of
what had been the opposition party during the Rhee period gained power.
Despite the existence of a more democratic polity, however, new student
demonstrations in favor of reunification with North Korea began to spring up,
and the country’s economic situation deteriorated rapidly. Park Chung Hee’s
military junta overthrew the ROK’s civilian government on 16 May 1961, charg-
ing that the government had allowed the country to fall into chaos. The new
leaders vowed to usher in an era of economic development.11
Despite some initial hesitance about supporting the junta because of its
authoritarian character, key members of the Kennedy administration soon came
86 : d i p l o m a t i c h i s t o r y
9. W.W. Rostow, The Stages of Economic Growth: A Non-Communist Manifesto (London,
1961), 26.
10. Ibid., 30.
11. Several works in English and Korean offer relatively detailed accounts of these events.
Despite a somewhat dated theoretical perspective, the best work in English is still contained
in Gregory Henderson, Korea: The Politics of the Vortex (Cambridge, 1968). See also Bruce
Cumings, Korea’s Place in the Sun: A Modern History (New York, 1997), 337–93; Se-Jin Kim,
The Politics of Military Revolution in Korea (Chapel Hill, NC, 1971). On the Korean side, O
My ng-ho, Han’guk hy ndae ch ngch’isa i ihae [Understanding Modern Korean Political
History] (Seoul, 1999) provides a good summary of South Korea’s political history during these
years.
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to argue that the Park regime was exactly what South Korea needed. American
officials tended to view South Korea as a country full of cultural deficiencies
that impeded its progress toward economic growth and modernization. One
USAID country review of Korea prepared during the first few months of
the Kennedy administration called Korea “the sick man of Asia” and claimed
that the country’s “political and cultural history of colonial or quasi-colonial
domination” had hindered Koreans from developing “the sense of national
self-responsibility without which growth and development is impossible.” The
review also claimed that Korea possessed “out moded, archaic socio-economic
institutions and a sense of civic and public morality which, by Western stan-
dards, is bankrupt.”12 Yet they believed that the junta’s leadership had charac-
teristics that distinguished it from South Korean society as a whole. U.S.
policymakers liked the fact that the junta emerged from the American-trained
military, which one official had recently called an “institution that is struggling
for integrity in a society that is otherwise thoroughly decadent.”13 They were
also impressed by Park’s apparent devotion to restoring order and accelerating
economic growth. Samuel Berger, who had been newly appointed as the U.S.
ambassador to South Korea by the Kennedy administration, noted in October
1961 that the military government had “taken hold with energy, earnestness,
determination and imagination albeit with certain authoritarian and military
characteristics which have hampered its public image.”14 Two months later he
was less ambivalent about his approval, noting that the members of the junta
had “established themselves as a group of capable, energetic, and dedicated men
determined to make genuine reforms.”15 Occasional frictions over the usurpa-
tion of democracy in South Korea did persist between the United States and
the Park government until 1963. But during that year, when Park agreed to
establish a quasi-democratic system of government and was elected president
in a relatively free election, such criticisms began to evaporate.
The Park regime’s espousal of a high-modernist rhetoric that bore many
similarities to that of the Kennedy administration served to reinforce such per-
ceptions in the minds of U.S. officials. The Country, the Revolution, and I, one of
several books that were published under Park’s name but probably written by
intellectuals with ties to his regime, called for breaking with the past and
enhancing the country’s prosperity.16 The book argued that the military revo-
From Pupil to Model : 87
12. “Country Review—Korea,” Records of Government Agencies, AID Reel 8, John F.
Kennedy Library, Boston Massachusetts (hereafter JFKL).
13. “The Situation in Korea, February 1961,” 15 March 1961, National Security Files
(hereafter NSF) Box 127, JFKL.
14. Seoul to secretary of state, 28 October 1961, NSF Box 128, JFKL.
15. “Letter from the Ambassador to Korea (Berger) to Secretary of State Rusk,” 15
December 1961, FRUS 1961–1963, Volume XXII: China; Korea; Japan, 542.
16. In a telegram entitled “The State, Revolution and I—A Revealing Book by Pak Chong-
hui,” 1 September 1963, the American ambassador to South Korea Phillip Habib refers to
widespread doubts about the authorship of the book. But he nevertheless argues that because
it was published in Park’s name it was too important to be ignored as an expression of the
lution “marked the end of the 500 years of stagnation of the Yi dynasty,” and
that the revolution would “establish our self respect, . . . modernize our society,”
and “industrialize our nation.”17 While the book also contained criticisms of the
United States, Park’s announced determination to modernize South Korea was
music to the ears of American policymakers.
Even as American officials saw the Park regime as a potential agent of
change, however, they nevertheless worried that it was not quite modern. They
believed that the regime had flaws that could serve as barriers to progress in the
country. Praise for the modernizing zeal of the Park government was tempered
by concerns about its competence. A draft of one policy paper noted that the
government’s new leaders were “nationalistic, impulsive and unsophisticated in
the complicated problems of modern government.”18 Some American officials
were outright pessimistic about the Park government’s ability to modernize
South Korea. One report claimed that the new leaders’ “capacity to make much
real or lasting progress” was “limited both by the magnitude of the problems
they face[d] and their incompetence in civil administration.”19 Similarly, an
intelligence report prepared two weeks after the coup had occurred argued
that in “view of the magnitude of the problems the new leaders are inheriting
and are themselves creating,” they would, in all likelihood, “not make much
progress.” Moreover, the report cautioned, these leaders might not be amenable
to American guidance. It predicted that leading members of the regime would
be “tough, determined, and difficult to deal with.”20
American officials looked for ways to reconcile their respect for the Park
regime’s desire for progress and their anxiety about its capacities to implement
a sound economic development program. They drew on the ideas of figures
such as Singer and Rostow about the significance of human capital and institu-
tion-building for long-term development as they designed solutions to this
dilemma. They believed that although the Park regime lacked the knowledge
and skills necessary to manage a modern economy, it could acquire them
through American tutelage and guidance. With the emergence of the Park
government, U.S. officials began to implement in earnest a plan that they had
started contemplating two months prior to the coup. Among other things, the
plan had called for:
88 : d i p l o m a t i c h i s t o r y
regime’s sentiment. In this particular telegram, Habib was more concerned with the neutral-
ist tendencies expressed in the book than he was with praising Park’s commitment to
modernization, a tendency that was more prevalent in American policy texts of the time.
The telegram may be found in NA/RG 84, Records of the Foreign Service Posts of the
Department of State: Korea, Box 39.
17. Chung Hee Park, The Country, the Revolution, and I (Seoul, 1970), 22–23.
18. “Guidelines for U.S. Policy and Operations in Korea,” 23 July 1962, NA/RG 84, Box
31.
19. “Report of the Korea Task Force,” 5 June 1961, NSF Box 127, JFKL.
20. “Special National Intelligence Estimate,” 31 May 1961, FRUS 1961–1963, Volume
XXII: China; Korea; Japan, 468–469.
Much more vigorous, imaginative U.S. action in directing and supervising
ROK economic development. In addition to basic long-term projects, the
undertaking as well of a number of high-impact, short-term projects for
political effect. Closer and more active instruction and supervision of ROK
government, in such projects, but also more attribution to ROK government
of their benefits.21
American officials believed that offering this kind of supervision to the ROK
government would enable it to become the kind of institution that could oversee
the modern transformation of the South Korean state.
Coupled with this increased supervision of South Korean officials would be
a decline in the actual amount of American assistance. The United States Oper-
ations Mission (USOM), which bore primary responsibility for administering
American financial assistance in South Korea, slashed economic development
grants to the ROK from $177.5 million in 1961 to $92.5 million in 1962. The
amount of American grant aid continued to dwindle in subsequent years,
although less generous forms of assistance such as loans increased.22 Such cuts
in grant assistance reflected American faith that supplying the appropriate forms
of instruction to South Korean bureaucrats would make them more self-reliant.
The aid that was offered was to be used to force Korean officials to accept
American guidance. A “Task Force Report on Korea” prepared in June 1961
recommended that U.S. influence in South Korea be reinforced by “making
economic development assistance available in increments which can be with-
held in the event of Korean failure to carry out agreed programs.”23 From the
perspective of American officials, these new policies held out the prospect of
freeing the ROK government from American aid and influence. But this could
only occur after ROK government officials were molded into agents of mod-
ernization who would seek to emulate American standards and practices out of
their own volition.
The USOM maintained an unusually large advisory presence in South Korea
for the purpose of educating South Korean officials. The United States Agency
for International Development (USAID) had missions stationed in dozens of
developing countries during the sixties, but the extensiveness of the organiza-
tion’s presence in South Korea was somewhat extraordinary.24 When Robert
Nathan, the director of a consulting firm that assisted USAID missions in a
range of underdeveloped countries including Burma, Ghana, and Vietnam,
visited South Korea in 1966, he was struck by how “AID people work[ed] right
in the government branches, welcome or not,” and by the ways that the AID
From Pupil to Model : 89
21. Robert Komer to Rostow, 15 March 1961, NSF Box 127 JFKL.
22. “United States Economic Assistance to the Republic of Korea, 1954–1973: Fact Book,”
USAIDL.
23. “Report of the Korea Task Force,” 5 June 1961, NSF Box 127, JFKL.
24. The USAID was formally part of the USOM, but the two terms were used inter-
changeably in South Korea, and I have generally used them interchangeably below.
mission “worked hand in hand with the Korean government in running
the economy in a kind of joint venture.” Nathan had “never encountered
this in any other place irrespective of the amount of money that AID pro-
vided.”25 Nathan’s comments were pretty much on the mark; the USAID’s
“Country Assistance Program” for Korea for the fiscal year 1966 planned
to fund advisors for, among others, the Ministry of Finance, the Taxation
Bureau, the Economic Planning Board, and the Ministry of Government
Administration.26
The purpose of this vast advisory presence was to elevate the managerial
capacities of South Korean officials and introduce them to ideas that would
enable them to accelerate their country’s economic growth. According to the
1966 Country Assistance Program, stimulating economic development in the
ROK would require
not only a comprehension by the policy makers—both Korean and
American—of the structure of the economy, the interrelationship among key
sectors, the institutions and policies which influence economic activity, but
also the ability to bring this knowledge to bear on the day to day decisions
affecting economic policies.27
The USOM therefore made the primary emphasis of its technical assistance
programs “getting the ROKG[overnment] to recognize the existence and nature
of the problems, to analyze the causes thereof, and to bring to bear all of its
capabilities in the solution of such problems.”28 American officials believed that
such programs could instill in their South Korean counterparts new habits of
analysis and greater efficiency in solving economic problems. These were the
kinds of traits that they believed a governing elite in a modernizing state needed
to acquire.
When the Park junta first seized power, however, differences between the
new government and the United States over the appropriate economic strategy
limited the influence of American guidance. Members of the junta were initially
determined to pursue a strategy of import-substituting industrialization, and
implemented a variety of measures in support of such a strategy. Import sub-
stitution essentially attempted to stimulate the growth of domestic industries
by restraining imports of goods that were to be produced at home. Such a strat-
egy was not without its advocates among development economists working in
international financial institutions. After seizing power, Park allotted responsi-
bility for economic development to his military colleague Yu W n-sik and Seoul
National University economics professor Pak H i-b m, who favored import
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25. “Robert R. Nathan, Trip to Korea, June, 1966,” Robert Nathan Papers, Cornell
University, Ithaca, New York (hereafter RNP). In South Korea, the USAID and USOM were
often used interchangeably during the sixties.
26. “Country Assistance Program: Korea FY 1966,” USAIDL.
27. Ibid.
28. Ibid.
substitution as a strategy and was critical of American development experts such
as Rostow.29
Americans, however, saw the junta’s efforts to implement this strategy as evi-
dence of its immaturity and need for American guidance. American officials
wanted South Korea to pursue a strategy that emphasized the mobilization of
domestic savings and the manufacture of labor-intensive goods such as textiles
for exports.30 Initial tutelary efforts made by American officials sought to steer
Park and some other ROK officials away from the strategies advocated by key
economic advisors and to improve their understanding of the precepts of eco-
nomic development. An American position paper stressed the need for the
United States to “keep the new leaders’ energies and attention focused on intel-
ligent programs and actions for economic and social development.”31 This effort
encompassed both standard diplomatic pressure and the dispatch of special advi-
sors to the ROK, assigned the task of monitoring and advising Park and his
close associates.
When Park visited the United States for the first time in November 1961,
American officials cautioned him against proceeding too swiftly with industri-
alization programs and advised him to stimulate the growth of South Korea’s
economy by increasing the productivity of agriculture. At an informal recep-
tion, Park met with Walt Rostow, who Kennedy had appointed National
Security Advisor. After asking Park to list his goals for economic development,
Rostow advised that “Korea’s foremost requirement was to increase the pro-
ductivity of the Korean farmer” and pointed out the interrelationship between
industry and agriculture.32 In a subsequent meeting with Secretary of Com-
merce Luther Hodges, some of the same themes were stressed. When one of
Park’s subordinates asked Hodges what the keys to his success at promoting
economic development as governor of North Carolina had been, Hodges
replied with some homespun advice that reemphasized the strategies that the
United States wanted South Korea to pursue. He explained that “North
Carolina had started down with the man on the farm and moved step by step,”
and added that developing countries sometimes made the mistake of “trying to
jump from one century to another too quickly.” Hodges added that “of course
it was necessary to build up certain basic industries such as power, fertilizer and
cement” that could support economic development, but he also thought that
“by starting with certain small industries (e.g. handicrafts) it might be possible
to develop a small export business to build up reserves.”33
From Pupil to Model : 91
29. For Pak’s views on economic development see Pak H ib m, “Py nhy k wihan sae
pangan [A Plan for Reform],” Ch’ ngmaek (November, 1965), 18–33.
30. Woo, Race to the Swift, 77–79.
31. “Park Briefing Book,” NSF Box 128, JFKL.
32. “Memorandum of Conversation,” 16 November 1961, NSF Box 127, JFKL.
33. “Chairman Park’s Call on the Secretary of Commerce,” 15 November 1961, NA/RG
59, Central Decimal File, 1960–1963, 795B.00/ 11–261, Box 2183.
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If Park listened to American advice, it was not evident in the First Five Year
Economic Plan that his government promulgated in January 1962. Both the
new South Korean regime and the United States had been eager to see new
economic development plans put into effect in the ROK. From the beginning,
American officials envisioned economic plans as a means of training their South
Korean counterparts to focus on and manage economic issues. The “Task Force
Report on Korea” explained that
Korean plans should be the focus of American influence, and the basic deter-
minant of the U.S. aid program. U.S. representatives should insure close
consultation in the development of plans including annual budgets and their
acceptability to the United States as a condition for granting developmental
assistance. The plans should be sufficiently detailed to provide a clear
and verifiable program of Korean undertakings for which Koreans would
bear the basic responsibility and against which actions can be measured.
American influence would be applied to make sure that the agreed plans,
policies and programs were carried out.34
Thus, American policymakers viewed assisting South Koreans in the prepara-
tion of development plans as a way of simultaneously getting them to take up
new ideas and habits and measuring their progress.
The plan initially promulgated by the Park government, however, was
devised more or less autonomously and often premised on strategies that
American officials considered dangerous or unrealistic. A designated Korean
advisory group drawn from academic circles, some of the country’s leading
banks, and government agencies had assumed responsibility for drafting the
First Five Year Plan.35 The plan itself described the economic system under
which it would be implemented as “guided capitalism”; such a system observed
the principle of free enterprise but enabled the government to directly partici-
pate in managing the economy and provide guidance to basic industries. The
“expansion or creation of such import-substitute industries as cement, chemi-
cal, fertilizer and synthetic fibers” was listed as an important component of the
plan as well.36 The plan ambitiously called for substantial increases in the pro-
duction of metals and machines, for which it assumed there would be greater
domestic demand.37
American advisors were at best ambivalent and at worst hostile in their reac-
tion to the release of the plan. They argued that the plan reflected not only the
regime’s desire to stimulate modernization and economic growth, but also its
inability to successfully pursue these goals in the absence of American guidance.
92 : d i p l o m a t i c h i s t o r y
34. “Report of the Korea Task Force,” 5 June 1961, NSF Box 127, JFKL.
35. Cole and Nam, “The Pattern and Significance of Economic Planning in Korea,”
17–19.
36. Republic of Korea, Summary of the First Five-Year Economic Plan 1962–1966 (Seoul,
1962), 24–29.
37. Ibid., 48–49.
USOM officials praised the initiative that the Park government had taken in
drawing up the plan as well as the vision that had fueled it. One USOM offi-
cial wrote that the Park government’s Five Year Plan was a “serious effort by
the ROKG to devise a systematic scheme for marshalling the public and private
resources of the country to promote economic growth.” Yet at the same time,
American officials believed that the plan reflected some of the limitations of
Park and his cohorts that needed to be overcome through American tutelage.
The same official noted that “the special circumstances under which the Plan
was prepared and the immaturity of the ‘planners’ did not permit the develop-
ment of a comprehensive economic strategy.”38 American officials drew con-
nections between the defects of the plan and broader deficiencies in the
economic thinking of ROK officials and planners. They claimed that the plan
had been “based on political expediency rather than on economic reality” and
was “better described as a collection of goals rather than as a plan for achiev-
ing established goals.” This, it claimed, was indicative of a broader tendency
among ROK officials to “focus on the immediate problems, the short run
studies and partial solutions” rather than on the “longer run and the whole
economy.”39
The USOM swiftly came to the conclusion that the First Five Year Plan
would have to be revised. During the revision process, however, South Korean
planners were to work closely with American advisors who could improve their
knowledge about the fundamentals of economic planning. In 1962 the USOM
initiated an extensive program geared at providing “guidance and advice to the
Economic Planning Board of the ROK.” This guidance was intended to culti-
vate new ways of thinking in South Korean bureaucrats. The key goals that the
USOM listed for providing technical assistance in economic planning were
promoting “the improvement of ROK managerial practices in government, in
government corporations and the private sector” and enabling South Korean
bureaucrats to master “proper procedures and practices in developing and exe-
cuting an economic development plan.”40 Since the United States was unwill-
ing to provide capital for any of the projects detailed in the government
authored plan, the Park regime had little choice but to accept the USOM’s
demands that the plan be revised with American assistance.
In forcing the revision of the First Five Year Plan, American officials made
sure that the second version more closely reflected American ideas about eco-
nomic development. Americans did not object to the idea of “guided capital-
ism” that was described in the plan. USOM officials focused instead on revising
From Pupil to Model : 93
38. “Country Assistance Program, Korea FY 1964,” USAIDL.
39. “Country Assistance Program, Korea FY 1966, Part III,” USAIDL. On American
ambivalence toward the plan and their disagreement with the Park regime’s emphasis on heavy
industries see also Pak T’ae-gyun, “1956–1964 ny n han’guk ky ngje kaebal kyehw ek i s ngnip
kwaj ng [The Formation of Korean Economic Development Plans, 1956–1964],” Ph.D.
dissertation, Seoul National University, 2000.
40. “Country Assistance Program: Korea, Part III, FY 1964–1965,” USAIDL.
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what they deemed to be the plan’s lack of realism. They thought that the levels
of economic growth and investment that the Korean version of the plan had
called for were unattainable and that the rapid industrialization envisioned by
Korean planners was unrealistic. The planned level of economic growth was
reduced from 7.1 percent to 5.4 percent, while the planned level of investment
was slashed, from 51 percent to 32 percent. The revision also forced the aban-
donment of Park’s plan to build factories for the domestic manufacture of steel
and machine goods.41
The Park regime’s decision to enact a major currency reform without alert-
ing the United States provoked an even more hostile reaction from American
officials than the contents of the First Five Year Plan did. According to the
reform law all units of the old currency, the hwan, had to be turned into the
new currency, the won, at an exchange rate of ten to one. But only a small
amount of the new currency was made available for living expenses; the rest was
frozen and used to finance industrial investment.42 The currency reform was
brainchild of Yu W n-sik, who some American officials suspected of Commu-
nist inclinations. Yu had envisioned the reform as a means of providing capital
to domestic industries. Americans, however, rightfully worried that the reform
would lead to inflation. Once American officials finally became privy to the
reform’s sudden implementation, James Killen, the director of the USOM in
Korea, demanded an immediate meeting with Yu. At the meeting Killen accused
Yu and the ROK government of violating the terms of economic assistance
agreements that it had signed with the United States. As had been the case with
the revision of the First Five Year Plan, American advisors ultimately got their
way, and the currency reform was abandoned. In the aftermath of the clash, Yu
was asked to resign from the SCNR.43
The junta’s decisions to bow to American demands that it revise its economic
plan and abandon the currency reform were products of the fact that it had little
choice. The Park regime’s own efforts to stimulate economic growth during the
two years after it gained power were a far cry from the dramatic success that
Park had envisioned. Extremely poor harvests struck the ROK, which was still
primarily an agricultural nation, in both 1962 and 1963, leading to an increase
in food imports and food prices. The currency reform exacerbated the ROK’s
economic difficulties, much as American advisors had predicted that it would.
The reform had failed to turn up money that could finance investment, while
many enterprises had difficulty acquiring loans. This led to a drop in output
and even greater inflation.44
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41. P.W. Kuznets, “Korea’s Five-Year Plans,” in Adelman, ed., Practical Approaches to
Development Planning, 40–57
42. Kuznets, “Korea’s Five-Year Plans,” 47–48; Woo, Race to the Swift, 81–83.
43. Yu W n-sik, “Hy ngmy ng ch ngbu wa ky lby lhada [My Departure from the Rev-
olutionary Government],” Ch nggy ng munhwa [Political Economic Culture] (October 1983),
127–130.
44. Kuznets, “Korea’s Five-Year Plans,” 47–48; Woo, Race to the Swift, 81–83.
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Early efforts by the Park government to seek other sources of support had
also had a limited impact. Officials in the Park government understood that
replacing American assistance with grants and loans from other industrialized
nations would weaken the linkage mechanism that the United States used to
compel South Koreans to accept its advice. In meetings held shortly after Park
gained power, Yu W n-sik raised the possibility of turning to West Germany
to counterbalance American assistance. He reasoned that if “our industries were
built by German capital and Korea’s economy became more dependent on the
West German economy then our political relations with West Germany might
surpass our political relations with the United States.” If this occurred, he
believed, the United States, which had already invested vast quantities of its
human and material resources in Korea, “would not be able to look on as a
spectator.”45
German plans for investment in South Korea did briefly become a cause
of concern for American officials, much as Yu had argued that they would.
Americans became anxious when a German consortium of industrial organiza-
tions visited South Korea in early 1962 and established credit facilities of $35
million in loans. In addition to establishing these credit facilities the Germans
talked about making much larger investments in subsequent years. An Ameri-
can group of private investors soon followed and noted that “the German credits
may, if successful, absorb a great deal of the possibilities of investment in Korea,
and the American wish to participate.”46 American officials feared that by
drawing private investment from both countries, the ROK government would
be able to carry out precisely the types of projects that they were warning
against. One memorandum warned that it was
possible to imagine the Koreans in their enthusiasm for a short-term indus-
trial achievement as a political objective involving German and American
private industry in a vast project that may not be sensible and give them a
debt servicing obligation beyond their means that might be added to our aid
burden in the future.47
Such plans ultimately yielded very limited dividends, however. Because of
the ROK’s precarious geostrategic position and lack of natural resources, it gen-
erally had a great deal of difficulty attracting foreign investment.48 Yu’s schem-
ing never produced the rapid influx of capital and competition between major
powers for influence in South Korea that had been envisioned.
By the time Park had secured a victory in the 1963 presidential election, he
had also become somewhat reconciled to the fact that his government was going
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45. Yu, “Hy ngmy ng ch ngbu wa ky lby lhada,” 125–126.
46. “General Van Fleet Private Industry Group Visiting Korea on May 11, 1962,” 3 May
1962, NA/RG 59, Central Decimal Files, 1960–1963, Box 2905.
47. Ibid.
48. Woo, Race to the Swift, 100–101.
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to have to follow American advice on certain issues. The next few years were
marked by a high degree of cooperation between the Park government and its
American advisors, in which ROK officials submitted themselves to American
guidance and tutelage. But at the same time, South Korean bureaucrats became
increasingly adept at following American guidance selectively, and constantly
sought to utilize American assistance to insure future autonomy.
As USOM advisors began seeking to improve the sophistication of Korean
thinking on issues of economic development, they often made some of the
highest-ranking figures in the ROK government the focus of their efforts. One
of the key targets of American influence was Park Chung Hee himself. Impor-
tant American policymakers enjoyed a great degree of access to Park, and they
saw their interactions with the Korean leader as an opportunity to transmit
American ideas about economic and national development to the highest circles
of the ROK government. Park often accepted and at times even requested
different forms of American tutelage. Samuel D. Berger, who served as am-
bassador to South Korea between 1961 and 1965, has written candidly about
American efforts to promote economic development in South Korea by explain-
ing its principles to Park. He later recounted that “we sized up [Park Chung
Hee] as a man of unusual depth of feeling about the sickness of his country and
we sought to educate him in the fundamentals of governing.”49
Even during the months after Park’s junta had seized power, when disagree-
ments over questions of economic development frequently flared between
Korean and American officials, Park was not unwilling to accept the presence
of American tutors. In July 1961, Park told American diplomats that he
“urgently desire[d]” to have an American personal advisor in the economic field.
The USOM responded with the appointment of Albert Boucher, a senior U.S.
economic advisor, to work with Park on an individual basis. Park hoped that
Boucher “would occupy [an] office close to his and that he could be [a] direct,
personal consultant on economic matters.”50 In addition, the USOM recruited
a team of “top flight” economists to work with other members of the Supreme
Council for National Reconstruction (SCNR), the organization through which
Park governed South Korea until 1963.51 Park’s relationship with American
advisors seemed to grow more dynamic in the mid-sixties. During these years
Park frequently sought out Joel Bernstein, an economist who became the AID
director for South Korea in 1965, for economic advice on specific issues.
Discussions between Park and Bernstein focused on both the details of specific
economic projects and the relationship of these projects to economic activity in
96 : d i p l o m a t i c h i s t o r y
49. “The Transformation of Korea—1961–1965,” NA/RG 59, General Records of the
Department of State, Central Foreign Policy File, 1964–1966, Box 306.
50. Samuel Berger to Secretary of State, 14 July 1961, NA/RG 59, Central Decimal File,
1960–1963, Box 2905.
51. “Revised Progress Report on Follow Up Actions Responding to Recommendations of
Korea Task Force Report,” NSF Box 127, JFKL.
South Korea as a whole. Richard A. Ericson, who served as political counselor
to the US embassy in Korea between 1965 and 1968, recalled that during his
meetings with the AID director, Park would say things like “I am going
down to such and such place next week for such and such project. Now let’s
go over where this fits into the scheme of things,” and “what do your people
say—is it really worthwhile? What are its deficiencies? What are its strong
points?”52
But Park’s occasional enthusiasm for American advice was far from an indi-
cation that he followed unquestioningly. One characteristic of Park’s style of
managing the economy was a tendency to seek advice widely, drawing on both
domestic experts and foreign models. Park received special tutoring on eco-
nomic issues not only from Americans but also from Korean businessmen and
economic experts. He met regularly with Lee Py ng-ch l, the head of Samsung,
to receive economic advice.53 Park also regularly received advice and reports
from the “Modernization Research Group” [k ndaehwa y n’guhoe], which con-
sisted of eminent Korean scholars and journalists who assembled at the request
of Park’s special secretary, Kim Ch ngsin. The group’s discussions and reports
to Park sometimes focused on the ideas of development experts that could
provide noncommunist alternatives to those advocated by the United States.
Kim Ch ngsin recalled that a report on the work of the Swedish economist
Gunnar Myrdal left a particularly strong impression on Park.54 Myrdal had
shared the concern of American development experts with raising the standard
of living in underdeveloped countries but had advocated some ideas that were
anathema to the liberal capitalist emphasis of figures such as Rostow. He had,
for instance, contended that international trade was a mechanism of interna-
tional inequality that strengthened the industrialized countries at the expense
of the less developed ones.55 Access to such ideas enabled Park to pick and
choose between competing perspectives rather than simply assimilating those
of his American tutors.
Although Park’s private sentiments remain somewhat opaque, in part because
neither the ROK government nor Park’s family members have made what
remains of his personal papers available to scholars, Park’s public pronounce-
ments often pointed to nations other than the United States that could serve as
models for South Korea’s modernization. The first book published by the
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From Pupil to Model : 97
52. Richard A. Ericson, Oral History Interview, Foreign Affairs Oral History Project,
Lauinger Library, Georgetown University.
53. Cho Kap-che, Nae mud m e ch’im ul paet’ ra, Volume V: Kim Jong-p’il i p’ungun [Spit
on My Grave Volume V: Kim Jong-pil’s Ambition] (Seoul, 1999), 68–72. Cho’s work originally
appeared as a serialized newspaper column for the Korean newspaper, the Chos n Ilbo. The
column was based on the author’s often unique access to Park’s relatives and officials who had
served in his government.
54. Kim, Pak Ch ng-h i taet’ongny ng kwa chuby n saramd l, 30–31.
55. Arndt, Economic Development, 73–74; See also Gunnar Myrdal, The International
Economy (New York, 1956) and his Economic Theory and Underdeveloped Regions (London, 1957).
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regime, The Country, The Revolution, and I, praised West Germany and Japan as
countries that Korea needed to learn from. The book’s fifth chapter offered a
virtual encomium of West Germany’s economic recovery in the years after
World War II. It claimed that the “economic reconstruction which the German
people have achieved offers a great lesson to our people.”56 Park had to be more
cautious about praising twentieth-century Japan in public because of the legacy
of Japanese colonialism in Korea. But he nevertheless cited the Meiji Restora-
tion, the nineteenth-century political revolution that had occurred in Japan as
a historical example that would “be of great help to the performance of our own
revolution.”57
For understandable reasons, Park never publicly praised the model of eco-
nomic development that Japan had imposed upon Korea when it governed the
peninsula during the four decades before World War II. But the model never-
theless seemed to influence many of the policy choices that he made. Under
Japanese rule, the colonial state apparatus had sought to develop Korea in the
interest of the colonizer by playing a commanding role in the economy and
establishing close, reciprocal links with businesses. Whether Park sought to
emulate the colonial model deliberately or did so at a more subconscious level
is difficult to determine in the absence of his personal papers and diaries. But
Park’s preferences for a powerful state that dominated the economy through its
control over powerful economic conglomerates hewed much closer to the
Japanese colonial model than it did to those envisioned by American econo-
mists.58 These preferences would become manifest in many of the policy deci-
sions made by Park’s government during the mid and late 1960s.
USOM efforts to tutor and influence high-level South Korean officials on
economic affairs were by no means limited to Park. The USOM formed a
variety of special committees through which American guidance could be
brought to bear on a wide range of Korean officials. As a prerequisite for
American economic assistance, the United States forced the ROK to sign a sta-
bilization agreement in April 1963, which led to the creation of several special
committees and teams. The agreement gave the USOM broad powers to
observe and correct actions undertaken by their South Korean counterparts.59
It made the USAID a “full partner” with the ROK government in program-
ming South Korea’s resources, monitoring the government’s collection of
domestic revenue, and determining the relative emphasis between development
and consumer spending. The agreement emphasized increased savings through
98 : d i p l o m a t i c h i s t o r y
56. Park, The Country, The Revolution and I, 142.
57. Ibid, 120.
58. On this point see Woo, Race to the Swift, 41–42 and Carter Eckert, Offspring of Empire:
The Koch’ang Kims and the Origins of Korean Capitalism (Seattle, WA, 1991), 252–59. Eckert also
notes the difficulty of pinpointing Park’s exact intentions, presumably because of the lack of
source materials. He writes that “perhaps we shall never know what model, if any, Park had
in mind for Korean development in the early 1960’s.”
59. Vincent W. Brown, Oral History Interview, Foreign Affairs Oral History Project.
tax collection and reform of the monetary and fiscal structure by tightening the
monetary supply and floating the exchange rate.60 This effort to force South
Korea to mobilize its own resources was also meant to enable reductions in
American financial assistance. USOM officials used the stabilization agreement
not only as a means of forcing corrections in South Korean policy, however, but
also as a mechanism for improving the knowledge and capabilities of ROK offi-
cials. David Cole, a Harvard University economist, was brought to South Korea
as part of the stabilization agreement. He supervised a team of American and
Korean economists who monitored the ROK economy and reported to the
USOM director when ROK government policy violated the terms of the agree-
ment. The presence of both American and Korean economists on Cole’s team
made it a potential vehicle for exposing select groups of Koreans to American
ideas about development. Furthermore, the USAID’s Program Offices section
met every month with the South Korean planning commission to review sta-
tistics as well as allocations of foreign exchange. At meetings of the commis-
sion, Joel Bernstein, the director of the USOM, frequently lectured his South
Korean counterparts on key issues and pressed them to implement what he
deemed appropriate policies. Vincent Brown, who served as assistant director
for program and economic policy in the ROK between 1964 and 1967, recalled
that “the needed economic discipline was supplied by the USAID during these
meetings.” Without the USAID presence, he argued, the South Korean gov-
ernment might have yielded to short-term pressures to increase government
subsidies or consumer spending.61 Brown claimed that South Korean officials
were generally tolerant of, if not enthusiastic about, American tutelage. He
recalled that, “psychologically, this joint programming was palatable to Koreans
because their U.S. colleagues were considered blood brothers.”62
The USOM helped to create another important committee to encourage the
ROK government to promote exports. The Joint Export Development Com-
mittee, established in March 1965, was comprised of a combination of USAID
officials and representatives from various South Korean ministries and the
private sector. The committee was empowered only to make recommendations,
but because it enjoyed high-level political support its recommendations were
frequently adopted.63 Like the committees formed to implement the stabiliza-
tion agreement, the Joint Export Development Committee likely served as a
forum for the exchange of ideas between American and ROK officials.
From Pupil to Model : 99
60. U.S. Congress, House Committee on International Relations, Investigation of Korean-
American Relations: Hearings Before a Subcommittee on International Organizations, 95th Cong.,
2nd sess., 1978, 166.
61. Vincent W. Brown, Oral History Interview, Foreign Affairs Oral History Project;
Robert Nathan observed and read the minutes of some of these meetings (which can not be
found in the records of the USAID) and described Bernstein’s lecturing. See Robert Nathan,
“Saipan and Korea, April-May 1965,” RNP.
62. Ibid.
63. Stephan Haggard, Pathways from the Periphery, 70–71.
The export strategy that the Park government ultimately adopted, however,
demonstrated the ways that his regime could accommodate American advice on
issues such as exports while structuring the economic development in ways that
meshed with its own nationalistic, state-centered vision of Korean development.
It is doubtful that American advisors on the export promotion committee an-
ticipated anything like the nationalistic frenzy that eventually went into export
promotion in the ROK. Americans had advised countries throughout the devel-
oping world to increase their exports, but few developing economies became as
export-driven as South Korea’s. Along with statistics for economic growth,
statistics for exports became a major symbol of South Korean development and
a source of political legitimacy for Park. The Park government strove to impress
upon Korean companies that exporting was their patriotic obligation. Pak
Ch’ung-hun, the minister of commerce and industry during the mid-1960s,
explained that “as the President strongly advocated exports we at the ministry
emphasized that that these were our means of survival and that workers were
doing their patriotic duty by manufacturing them.”64
The strategy of export-led growth that the Park regime had engineered by
1965 was premised in part on close collaboration between business and the state
to serve the common national goal of industrial development. Businesses were
not without influence in this arrangement, but the state retained a powerful
capacity to reward and punish firms. Pak Ch’ung-hun designed a system of
incentives that rewarded businesses that achieved success at exporting their
products, and sought to facilitate their task. The ROK government exempted
companies that manufactured goods for export from paying taxes on raw mate-
rials that they imported. If companies made efficient use of the raw materials
that they imported and produced more goods than they could export, they
were allowed to sell surplus goods in the domestic market. The Park govern-
ment also offered diplomatic assistance and special rates on rail transportation
to export-producing companies. Finally, the regime loaned foreign capital
that it acquired to export-producing businesses at low interest rates.65 Under
such a system, the regime’s fortunes were tied to those of the companies that it
supported, but by dispensing different types of assistance the government
retained the power to make or break individual firms. Dependent on the
government, businesses often showed their gratitude by donating a portion of
the capital they received from the government to Park’s political party.66 Thus
the strategy of export-led development that eventually emerged in South Korea
served to strengthen not only Park’s grip over businesses but also over national
politics.
100 : d i p l o m a t i c h i s t o r y
64. Cho, Nae mud m e ch’im ul paet’ ra, Volume VI, maenghon n kanda! [Spit on My Grave
Volume VI: The Fierce Tiger Goes!], 226–229.
65. O, Han’guk hy ng ky ngje k ns l, Volume 1, 230–232; Cho, Nae mud m e ch’im ul paet’
ra, Vol. 6, maenghon n kanda!, 28–31.
66. Woo, Race to the Swift, 107–109.
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Americans attempted to influence not only South Korea’s economic policies
but also its economic plans. South Korea’s leading economic planners became
another key target of American influence during the mid-sixties. Although the
fiasco that had ensued after the junta released the First Five Year Plan rendered
the plan virtually useless as a basis of economic policy, both American and South
Korean officials continued to believe in the significance of planning to national
development. During these years, an institution known as the Economic Plan-
ning Board (EPB) bore chief responsibility for economic planning in South
Korea. Park had created the EPB in July 1961 and after 1963 entrusted it with
broad powers over economic development planning in South Korea. Its direc-
tor, Chang Ki-y ng, also occupied the post of deputy prime minister and was
therefore in a strong position to influence government policy-making. More-
over, by the time Park managed a successful transition to civilian rule EPB was
becoming a center for many of the most talented and educated young Korean
economists, some of whom had already studied in the United States and spoke
excellent English. The EPB’s building was located across the street from the
USOM in downtown Seoul, and the geographical proximity of the two institu-
tions facilitated the growing interactions between their personnel.67
In the cozy atmosphere that prevailed between the USOM and the EPB
during these years, many South Korean officials seemed eager to learn from
American advisors, some of whom sought to introduce their Korean counter-
parts to cutting-edge economic development theories. Ch’oe Kak-kyu, a former
assistant director of the EPB, recalled that in “in the process of conferring” with
Americans who worked in different branches of the ROK government, Koreans
“could study and absorb many things.” Ch’oe credited the USOM with intro-
ducing EPB planners to new concepts such as “present value” and the floating
exchange system. He wrote that “to the extent that we were adept and skilled
it was from the beginning because we were next to our family teacher the
USOM.”68
After its rejection of the First Five Year Plan, the USOM began financing
teams of American consultants to assist the EPB in the creation of the Second
Five Year Plan. The USOM eventually selected the consulting firm Robert R.
Nathan Associates, which had been responsible for drawing up a plan for South
Korean economic reconstruction immediately after the Korean War, to render
this assistance. The views of the firm’s director about the aspirations and capa-
bilities of South Korean officials mirrored those of USOM officials in many
regards. Nathan explained (in a journal that he kept when the USOM invited
him to South Korea in 1962) that the country would be “a fruitful environment
for a top level team who would not only review and check and suggest policies
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From Pupil to Model : 101
67. Kim H ng-ki, Pisa ky ngje kih ekw n 33ny n: y ngyok i han’guk ky ngje [The 33 Year
Secret History of the Economic Planning Board: The Glory and Shame of the Korean
Economy] (Seoul, 1999), 101–103.
68. Cited in Kim, Pisa ky ngje kih ekw n 33ny n: y ngyok i han’guk ky ngje, 103.
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but also . . . serve in a very meaningful way to transmit maturity balance and
practical sense and judgment to the technicians in the government.”69 Nathan
himself tried to follow through on this belief in his interactions with some
leading ROK government officials, and in at least some instances these officials
seemed eager for his advice. In one conversation that he had with Chang
Ki-y ng, the director of the EPB, Nathan recounted that:
I did talk in some detail about some of the very practical and real problems
of what planning and programming and policy and prosecution meant and
gave him all kinds of ideas and thoughts and little examples which he really
ate up. As a matter of fact he kept taking pieces of paper on which I had
jotted down sort of word topics in front of him and then he would write in
Korean characters all over the page and often he would write down little
phrases that I would give him.70
This type of conversation seemed to be exactly what USOM officials had been
hoping for when they brought Nathan’s team to the ROK.
But while Nathan himself seemed to have developed a good working rela-
tionship with key Korean officials, the EPB often evaded or ignored advice from
members of his team. Since Nathan visited Korea intermittently while his team
remained there for several years, this limited the policy impact of his mission.
When he visited Korea in 1965 he wrote, “we don’t really get into policy dis-
cussions and we really aren’t engaged in policy activities.” Members of his team
complained that they had been “pushed down to the lower levels [of the EPB]”
and that they were unable to gain access to appropriate ministers. One of
Nathan’s team member claimed that this was because Korea “had never wanted
a planning advisor group from the beginning” and had accepted one “only to
appease AID.”71
Ultimately, Nathan himself ended up taking a rather heavy-handed role in
producing the Second Five Year Plan. He paid a visit to South Korea in June
1966 where, according to his diary, chapters of the plan were “practically rewrit-
ten” by him and his staff.72 Given the domineering role that Nathan and his
team ultimately played, it is not surprising that the actual text of the Second
Five Year Plan seemed in large part more a product of American thinking than
of the objectives that the Park government wanted to pursue. The plan stated
that the ROK would seek to achieve its objective of “an efficient and active
national economy” by “adhering to the principles of a competitive market
economy” and “exploiting the advantages which accrue from such an economy.”
The plan called for increases in agricultural production and manufacturing, but
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69. Robert R. Nathan, “Korea December 1962,” RNP.
70. Robert R. Nathan, “Korea August 1964,” RNP.
71. Robert Nathan, “Saipan and Korea, April–May 1965,” RNP.
72. Robert Nathan, “Trip to Korea, June, 1966,” RNP.
the targets that it set on the production of some goods were far lower than Park
government officials believed possible.73
Although American officials and consultants played a determining role in
shaping the contents of the Second Five Year Plan, their influence over the plan
did not necessarily translate into influence over economic policy-making or the
course of South Korean development. Often key South Korean officials, includ-
ing those who had worked together on the plan with American advisors, did
not accept the plan as a strict set of guidelines for policy measures. They tended
to have a flexible view of both the manner and timeframe in which the plan
would actually be implemented. Chang Ki-y ng expressed the approach ROK
policymakers took to implementing the plan when he said that instead of the
“Five Year Plan” Koreans should simply use the term “the second plan.” He
thought that “we can accomplish it all in three years if we work harder. If
we are lax it could take seven years.”74 Along similar lines Yang Yun-se recalled
that South Korean bureaucrats conceptualized the Second Five Year Plan as a
“rolling plan” that policymakers could diverge from if they thought circum-
stances demanded it.75 During subsequent years, as the ROK’s economic
growth rates exceeded those forecast by the plan, the original targets set by the
plan were adjusted and objectives not originally prescribed by the plan were
pursued.
While the brunt of the USOM’s pedagogical efforts focused on high-level
ROK bureaucrats such as those in the EPB, at least some of its programs
targeted lower-level South Korean officials. The development loan program
became a particularly effective means of reaching public corporations, regional
governments, and in a few instances private companies in South Korea. Devel-
opment loans supported agencies and institutions that needed capital to under-
take significant infrastructure projects, especially but not exclusively in areas
such as transportation, communication, public utilities, and mineral resource
development. Individual loans ranged from $3 million to $40 million per year
and totaled over $300 million for the years between 1962 and 1968 (see table
below).76 The U.S. government collected no interest on the loans, but recipi-
ents were expected to carry out their projects in compliance with specific
American stipulations.77
The official objective of the development loan program was to “promote the
creation of the conditions which will make sustained economic advancement
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73. Government of the Republic of Korea, The Second Five-Year Economic Development Plan,
1967–1971 (Seoul, 1966), 33. See 86–112 for the targets set by the plan for increases in
manufacturing and agricultural production.
74. “Speech Delivered by the Deputy Prime Minister of the Republic of Korea,” 12
December, 1966, given to author by Yang Yun-se, a former assistant to Chang.
75. Interview with Yang Yun-se, Seoul, August, 2003.
76. USOM/Korea, Country Briefing Book: Korea (Seoul, 1968), 31.
77. “U.S. Aid to Korea: What It Is, How It Works, What It Means To Korea,” USAIDL.
possible.” USOM officials defined this objective as a mandate for both trying
to improve objective economic conditions in South Korea and bringing about
broader changes in the scope of managerial knowledge in the country. One
USAID report explained that the development loan program’s primary purpose
was to develop those “facilities that form the base of modern economic
activity.” Closely connected to this was a “corollary objective” of introducing
“modern techniques and attitudes to fiscal and managerial practices which will
lead to efficient and businesslike operations.”78
The USOM believed that the best way of achieving this corollary objective
was making the loans contingent upon the recipient adopting certain specific
behavioral changes. One USOM official summarized this strategy, explaining
that in South Korea “economic traditions and institutions, business attitudes
and practices, levels of technical and managerial competence and fiscal and eco-
nomic systems” were “insufficiently developed to respond to the usual stimuli
of western economic systems.” The development loan program sought to
remedy such “institutional deficiencies” by “attaching to each loan conditions
which encourage the improvement of financial practices for public and private
enterprise, improvement of facilities for technical and managerial training and
creation of an atmosphere that will stimulate growth mechanisms.” Moreover,
conditions on individual loans were “carefully tailored to meet the requirements
of the particular entity for which it is designed.” Such a strategy assured that
the loans would be used “for specific productive purposes and behavioral
changes.” The conditions of loans almost always stipulated that Americans
would be able to monitor the performance of their South Korean beneficiar-
ies.79 USOM officials hoped that the transformation of consciousness effected
in a few businesses and government agencies through the skillful use of devel-
opment loans could induce a much broader transformation in the outlook and
status of South Korean bureaucratic and business elites. The same country plan
even boasted that development loans were “being used to create a vigorous class
104 : d i p l o m a t i c h i s t o r y
78. “Country Assistance Program: Korea, Part III, FY 1964–1965,” USAIDL. While
development loan programs for South Korea did not really begin until the 1960s, the use of
loans as a mechanism for eliciting financial reforms in less developed countries was actually a
very longstanding component of American foreign policy. On this point see Emily Rosenberg,
Financial Missionaries to the World: The Politics and Culture of Dollar Diplomacy (Cambridge,
1999).
79. “Country Assistance Program: Korea, Part III, FY 1964–1965,” USAIDL.
Table 1: American Development Loans to Korea
Year 1961 1962 1963 1964 1965 1966 1967
Number of New Loans 1 2 2 4 7 8 6
Total of Loans in $million 3.1 23.1 28.4 29.3 48.8 80.0 60.7
Source: USOM Korea, Country Briefing Book: Korea
of local entrepreneurs and efficient administrators” and that they could also
provide a “training ground for professional personnel such as engineers, econ-
omists, accountants and managers.”80
In the process of negotiating and implementing development loan agree-
ments the USOM used a variety of different techniques for transmitting man-
agerial practices and ideas about economic governance to their South Korean
counterparts. American efforts to influence Korean thinking were evident in the
loan application process established by the USAID, negotiations over the terms
of specific loans, and the requirements for American technical assistance that
were usually part of completed loan agreements. In all of these exchanges, U.S.
officials made it clear that receiving American money required the ability to
mimic American ideas and practices.
The process of applying for and receiving development loan funds was
designed explicitly to force South Koreans to reproduce particular forms of
American economic rationalism and expose them to greater American guidance.
When applications went awry of American expectations, USOM officials could
demand that they be revised to reflect American goals and ideas. In negotia-
tions that took place in 1963 over loans to the Ministry of Communication for
the development of broadcasting facilities, the use of such techniques was par-
ticularly salient. The Ministry of Communication and the EPB produced a
detailed statement explaining the project’s potential contribution to the national
economy and commercial profitability. John Withers, a USOM official,
responded that the application was encouraging because it reflected “the sin-
cerity and determination of authorities to explain the problems and justify the
objectives upon which the loan application is predicated.” At the same time,
however, he pointed to a number of deficiencies in the proposal that he urged
the ministry to correct. Withers claimed, for instance, that the “applicant’s
indication of the self-help measures he is able to undertake in implementing
this project are not imaginatively examined,” and criticized his Korean coun-
terparts for assuming in the application that economic growth required only
an increase in capital assistance and overlooking the fact that it also required
“the efficient use of existing capital” and “the best possible allocation of new
investment.”81
Withers attempted to utilize these criticisms on specific issues to spur
broader changes in South Korean thought and behavior. He criticized the
From Pupil to Model : 105
80. Ibid.
81. “Comments on Telecommunications DL Application,” AID pansong mich’
muj nsis l ch’agwan kwan’gyech’ l, Chaemubu chaemu ch ngch’aek kuk chag m sijanggwa
[Ministry of Finance, Bureau of Financial Policy, Department of the Director of Capital Funds]
(hereafter CMB), Ch ngbu Kirok Pojonso [National Archives, Pusan Branch], Pusan, Korea
(hereafter KNA). I have used these documents in the following discussion of development
loans. Like most Korean archival materials, they seldom provide much insight into the high-
level policy considerations of key Korean officials. In this case they proved useful, however,
because the records of the USAID and of the State Department in the National Archives had
surprisingly little information about these development loans.
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Ministry of Communications in particular for not including adequate reference
to its “institutional defects” in the application. Withers believed that it was
“likely that intense nationalism, lack of tradition in objective analysis and fear
of weakening the case for the desired loan” contributed to this failing. He then
complained about the applicants’ penchant to “hide behind the old reasons
and/or excuses of lack of data, and defective accounting procedures.” Koreans,
he continued, “would rather not bring forth even such information as they may
have, for this, after all, is said to be the traditional Korean way of doing busi-
ness.”82 Through such complaints, Withers sought to confront South Koreans
with perceived weaknesses and motivate them to begin the process of
self-improvement.
To make sure that the funds provided would be used properly, the USOM
often required South Korean companies or public corporations that received
development loans to sign technical assistance agreements with American
consulting firms. American consulting firms often instructed South Korean
public corporations and ministries in effective methods of gathering informa-
tion about and micromanaging their operations. Taehan Coal Corporation, for
instance, received technical assistance from the American consulting firm
Booz, Allen, and Hamilton in improving its accounting and budgeting systems.
The firm’s consultants evaluated the “adequacy, accuracy and timeliness with
which financial data required for effective management are provided” and
sought to demonstrate to Taehan’s management “the manner in which it should
use the financial data provided in order to achieve more effective financial
management.”83
The Park government recognized the potential benefits that development
loans could have for the South Korean economy, and it pursued them as a source
of funding in at least some instances. As early as 1961, the EPB began making
efforts to convince USAID officers to reward loans to Korean corporations and
to mobilize South Korean diplomats to secure important loans through nego-
tiation with American officials. In October 1961, the director of the EPB wrote
to James Killen, the director of the USOM in Korea, to announce its plan to
overhaul pending development loan applications in order to make them more
acceptable to the USAID’s standards. The EPB requested Killen to “do [his]
best for getting favorable consideration of AID” on two particular applications
during an upcoming trip to the United States.84 The EPB also instructed the
106 : d i p l o m a t i c h i s t o r y
82. Ibid.
83. “Agreement Between the Government of the Republic of Korea and the Dai-Han Coal
Corporation,” AID Changs ng kwang kaebal ch’agwan kwan’gyech’ l [Documents relating to
an AID Loan for the Development of Changs ng Mines], CMB, KNA.
84. Chung P. Sung (Deputy Chairman of EPB) to James Killen, October 31, 1961, AID
Pusan hwary k k ns l ch’agwan kwan’gyech’ l [Documents Relating to the AID loan to the
Pusan Thermal Power Plant], Chaemubu chaemu ch ngch’aek kuk chag m sijanggwa [Min-
istry of Finance, Bureau of Financial Policy, Department of the Director of Capital Funds],
CMB, KNA.
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ROK ambassador to the United States to try to cooperate with Killen and to
“make all efforts to acquire” a loan pending for the construction of a thermal
power plant in Pusan, a city in southeastern Korea that would become one of
the hubs of the ROK’s economic development.85
But at times the Park government feared that the conditions attached to the
loans would give the USOM too much control over dimensions of the ROK
economy. Such concerns led to frictions between American and South Korean
officials in negotiations over one particularly important loan for the construc-
tion of the Y ngnam Chemical Plant in 1965. The USOM arranged for a part-
nership between the ROK government and the American firm Swift Chemicals.
According to the terms of the agreement, the ROK government and Swift
Chemicals would each invest $1 million in the construction of the plant, while
the remaining cost would be financed by a USAID development loan. In
exchange for participating in the project, however, Swift Chemicals demanded
control over the management of the plant until it received 150 percent of the
sum that it had contributed. The profitability of the plant was guaranteed by
the ROK government, which agreed to buy all of the fertilizer produced at
prices determined by Swift Chemicals. O W n-ch’ l, a bureau chief in the com-
merce department, strongly opposed the deal, which he argued was represen-
tative of America’s policy of “putting its own benefit first” and its tendency to
“look down on Koreans.” Park resented the terms imposed by the agreement
as well, but accepted them after EPB officials explained that there was no other
way for South Korea to become self-sufficient in fertilizer production. Even as
he did so, however, he had the “sad expression of a president of a small weak
country,” according to O.86
Although the ROK government surrendered, the American firm had a great
deal of difficulty in imposing its brand of management on the plant whose con-
struction it helped to fund. The advisor dispatched by Swift Chemicals sought
to foster an open atmosphere in the plant that enabled him to closely monitor
its operations. He did not allow “even one penny” to be spent freely, and insisted
that Koreans working at the plant keep their doors open to allow visitation. But
the appointed advisor’s insistence that Koreans adopt American practices ulti-
mately produced frictions. His refusal to award bonuses on the Korean Thanks-
giving, a practice common in many South Korean firms, led the plant’s Korean
employees to stage a strike in 1968. The South Korean manager of the plant
became so frustrated with the managerial techniques that were being imposed
that he frequently called the advisor, whose last name was Hopewell, “Hope-
less” behind his back. Hopewell remained in charge of the plant for six years,
but was finally replaced in 1971 by another advisor from Swift Chemicals who
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85. Director of the EPB to the ROK Ambassador in the United States, 31 October 1961,
AID Pusan hwary k k ns l ch’agwan kwan’gyech’ l, CMB, KNA.
86. O W nch’ l, Han’guk hy ng ky ngje k ns l: enjini ring p’ roch’i [Korean Style
Economic Development: An Engineering Approach] (Seoul, 1995), 1:169–77.
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adopted a somewhat more flexible attitude toward South Korean employees at
the plant.87
Spurred by resentments over the way that the United States wielded its influ-
ence on economic planning development loans and other key issues, the Park
regime began to abandon its tendency to adapt to American guidance, and by
the end of 1965 often chose to outright ignore American advice. After 1965,
American influence over economic policy-making in South Korea declined pre-
cipitously. In this brief span of time since Park had seized power, the Korean
economy had begun the meteoric rise that would put South Korea among the
world’s most industrialized nations within a few decades. Buoyed by a sense
of confidence in their achievements and a determination to achieve greater
autonomy, Korean officials became increasingly inclined to avoid or ignore
American advice. The Park regime found itself increasingly able to follow
through on these inclinations because its own diplomatic maneuvering had
made it less dependent on American assistance.
The normalization of relations between Japan and South Korea in June 1965
played an especially significant role in enhancing the autonomy of the ROK.
The normalization agreement had been achieved only after constant pressure
from the United States on both the South Korean and Japanese governments.
For the United States, this represented a way of transferring some of the enor-
mous costs of containing communism in the Pacific to its allies. Ironically, the
establishment of official relations between the two nations ultimately worked
to undermine American influence in South Korea. Under the terms of the
normalization treaty, the Japanese government agreed to grant the ROK $300
million in unconditional grants, $200 million in low interest loans, and $100
million in commercial credit as reparations for Japanese colonialism. This
money would play a pivotal role in enabling the ROK government to evade
American guidance.
Although the United States itself had been a major driving force behind the
conclusion of this agreement, the influx of Japanese capital complicated the
efforts of American officials to steer the South Korean government toward what
they considered good decisions. Moreover, Japanese views of what was in the
best interests of the ROK economy did not necessarily correspond with Amer-
ican views. Within a few months of the normalization agreement, the Japanese
government was already proposing investment projects in South Korea, such as
the construction of new cement and fertilizer plants, that the USOM believed
conflicted with the ROK’s best interest. The United States even briefly
considered a diplomatic initiative to “forestall [the] development of U.S.-GOJ
[government of Japan] conflict over [the] direction of respective aid and
export assistance programs and over trends in ROK economic development.”88
108 : d i p l o m a t i c h i s t o r y
87. O, Han’guk hy ng ky ngje k ns l, 1:183–85. O does not give the last name of the Amer-
ican advisor who he refers to only as Hopewell.
88. “U.S.-GOJ Coordination on Projects in Korea,” 9 March 1966, NA/RG 59 General
Records of the Department of State, Central Foreign Policy File, 1964–1966, Box 567.
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Americans also feared that the Park government would use funds acquired from
Japan to pursue development projects that they deemed impractical. Concerned
about the attraction that the ROK government had exhibited for “showy” proj-
ects in the past, the State Department began seeking to coordinate aid efforts
with Japan in order “to minimize friction, to dissuade ROKG from expensive
show-case projects and to avoid loss to U.S. of opportunities in appropriate
sectors of ROKG economy.”89
South Korea’s participation in the Vietnam War—both military and
economic—further weakened the USOM’s capacity to influence Korean
policymakers. From the time American and South Korean officials began to
contemplate the use of ROK troops in Vietnam, both sides recognized that
doing so could shift the contours of the relationship. The Johnson administra-
tion sought support for the American war effort in Vietnam from several of the
United States’ treaty partners in Asia, but South Korea was the only one to vol-
unteer. The Park government dispatched an initial division of twenty thousand
troops to Vietnam in 1965; it added another a year later, and the number of
ROK troops in Vietnam increased to forty-six thousand. In all, three hundred
thousand ROK troops served in Vietnam between 1965 and 1972.90 The Park
government made it known, however, that the assistance furnished by the ROK
in Vietnam would come at a cost. Yi Tong-w n, the former ROK foreign
minister, recalls telling President Park that “Vietnam was a battlefield but it
was also a market. Because of that we should use this chance to get everything
we can from the United States.”91 South Korean officials were quite blunt in
demanding economic rewards for ROK participation in the conflict. In January
1965 the KCIA chief, Kim Hy ng-uk, wrote to Johnson’s special assistant for
East Asian affairs that the ROK was willing to do “almost anything that Presi-
dent Johnson requested,” but that in return he expected that the United States
would “arrange to have some of the materials needed in Vietnam purchased in
Korea.”92
The Vietnam War eventually became an economic bonanza for South Korea
that greatly accelerated the country’s economic development. In the first four
years of its involvement in Vietnam alone (1965–68), the Republic of Korea
earned $402 million through exports to Vietnam, sales to the U.S. military,
and other arrangements deriving from its decision to dispatch troops to the
country.93 Moreover, the ROK began exporting products such as steel, trans-
portation equipment, and nonelectric machinery to Vietnam. These were
products that South Korea had not yet begun to export to other countries;
by opening Vietnam as an export market for South Korean goods, the United
States ultimately gave many budding South Korean industries the chance to
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89. Ibid.
90. Kil J. Yi, “The U.S.-Korean Alliance in the Vietnam War,” in International Perspectives
on Vietnam, eds. Lloyd Gardner and Ted Gittinger (College Station, TX, 2000), 154, 159.
91. Yi, Taet’ongny ng l k rimy [Missing the President] (Seoul, 1992), 104–105, 109–110.
92. Yi, “The U.S.-Korean Alliance in the Vietnam War,” 159–160.
93. Ibid., 160–165.
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develop.94 Perhaps most significantly, however, participation in the Vietnam
War enabled South Korean officials to adopt a new posture in dealing with their
American counterparts. Just months after the first ROK troops arrived in
Vietnam, American officials were beginning to notice a shift in the dynamics of
their relationship with South Korea. When the USOM director, Joel Bernstein,
met with his supervisor in the USAID in October 1965, Bernstein explained
that he intended to continue using a “combination of ‘carrot and stick’
approach” and to tailor the United States aid program “to the evolving eco-
nomic situation as well as to political and psychological requirements.” But
Bernstein’s supervisor was worried; he wanted to know
what approach we could take in the event of poor Korean performance.
What bargaining power does A.I.D. have if the Koreans differ substantially
with our recommendations? If this happens are we stuck with the proposed
aid levels or with an even bigger bill? With Korean troops in Vietnam and
U.S. troops in Korea have we any bargaining power?95
As ROK officials gained greater leverage in their partnership with the United
States and became more confident in their own capacity to steer economic
development, America’s continuing efforts to control policy-making in the
ROK increasingly aroused their indignation. By 1965, such bitterness was
already evident to keen observers such as Robert Nathan. During his 1965 visit
to South Korea, Nathan observed the efforts of American economic advisors to
tutor their Korean counterparts on the planning commission. Presciently, he
recorded his fear that “some day there is going to be a terrible political or per-
sonal explosion because the Koreans resent this sort of partnership in which
they are in many ways the junior partner even though it is their own country.”
Nathan noted that, “Chang Key Young [Chang Ki-y ng] is rather resentful
about Joel Bernstein lecturing to him.”96
By 1966 Korean officials’ growing resistance toward American tutelage on
questions of economic planning was starkly apparent to American policy-
makers as well. South Korean officials had by this time become well acquainted
with the ideas of leading development experts, and they ingeniously turned their
knowledge of these experts against the demands of the USOM. When disputes
emerged between American and South Korean officials over the Second Five
Year Plan, South Korean officials pointed to Rostow himself as a validation
of their arguments. The director of the USOM wrote a letter to Rostow,
complaining:
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94. Woo, Race to the Swift, 94–97.
95. “Administrator’s Review of the A.I.D Program in Korea,” 14 October 1965, NA/RG
59, General Records of the Department of State, Bureau of Far Eastern Affairs, Office of the
Country Director for Korea, Box 2.
96. Robert Nathan, “Saipan and Korea, April-May 1965,” RNP.
You are being quoted as saying that conventional economists always under-
estimate demand for the products needed in a growing economy, that Korea
should not worry about overcapacity because demand is always underesti-
mated, that estimates of requirements should be made in the ordinary way
and then everything should be doubled, and that economic development is
too serious a matter to leave to economists who do not understand it
adequately.97
The Second Five Year Economic Plan was really the last plan over which
Americans would be able to exert much influence.
In drawing up the Third Five Year Plan, which covered the years between
1971 and 1976, the Park government made a very deliberate effort to limit the
influence of foreign specialists. Some Americans continued to serve in an advi-
sory capacity, but their role was limited to preparing specialized reports on
particular issues that the government could choose to disregard. Confident that
they were now capable of devising feasible plans by themselves, Park and his
close advisors played a preponderant role in drafting the third plan while limi-
ting the input of the EPB, which had been the primary conduit of American
influence in previous years. Much of the advice that Park did receive came from
the newly created Korean Development Institute (KDI), an institution whose
creation the USOM had proposed but the ROK government had decided to
fund and turn into an official government research institution. The relatively
autonomous way in which the Third Five Year Plan was created virtually assured
that it would include provisions that the USOM and other international finan-
cial institutions cautioned strongly against.98
A new tendency on the part of the Park government to ignore or circum-
vent American advice on more specific policy measures became apparent in
April 1966 when, after a lengthy struggle with USOM advisors, the Korean
Cable Company (Han’guk K’eib l) announced that it had successfully com-
pleted the construction of a new factory. In 1962 the Park government had
ordered the firm to acquire a loan contract to build such a factory, and it nego-
tiated a deal with a West German firm that offered a loan that could be used
to purchase the necessary equipment. The USOM opposed the agreement,
however, and ordered the Bank of Korea not to guarantee the loan. Publicly,
the USOM always contended that it opposed the agreement because South
Korea had already acquired one cable factory that was operating at far less than
full capacity and that building another would be a waste of resources. But South
Korean officials always suspected that the USOM was resistant because the
American company Phelps-Dodge hoped to sell equipment and technology to
the Korean firm, Taehan Cable, with assistance from the USOM. In Septem-
ber 1963, however, a Korean court nullified an earlier decision made by the
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97. Cited in Woo, Race to the Swift, 99.
98. Kim, Pisa ky ngje kih ekw n 33ny n: y ngyok i han’guk ky ngje, 208–210.
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Ministry of Finance not to guarantee the loan agreement negotiated by Korean
Cable, and in July 1964 Park decided to move forward with the construction of
the new factory. When the factory was finally completed in April 1966 Park
spoke at a special ceremony celebrating the achievement, in which he claimed
that criticisms of the factory from both the domestic media and the USOM
had been “irresponsible criticisms that hindered economic development.” O
W n-ch’ l thought that this was a significant turning point, because afterwards
the USOM’s “opposition to and interference in” Korean economic policy
“began to lose heart.” He also thought that it made “the independence of indus-
trial management” in South Korea possible.99 Certainly, Park’s triumph in the
face of USOM opposition gave him the confidence to adopt other policy meas-
ures that ran against the grain of American advice.
South Korea’s “Big Push” into heavy industries such as shipbuilding and
machine tools would not really get under way until the 1970s but by the end of
the Johnson administration the Park government was already beginning to lay
the basis of its subsequent industrial drive, often without American approval.
Park’s determination to proceed with the creation of an indigenous steel pro-
ducing facility was one of the most significant examples of this trend. Steel
production would eventually provide one of the key building blocks for
the development of other Korean industries, but during the sixties the ROK
government had tremendous difficulty in securing the capital that it needed
to produce the facility. In 1967 American representatives thwarted an effort by
the Korean government to acquire funding for the construction of a steel
complex from an international consortium in which the United States partici-
pated along with several European countries. The American position, that
South Korea still lacked the economic maturity for such a complex, had played
a pivotal role in the consortium’s ultimate decision not to fund the project. But
Park refused to give up on the idea of a steel complex and began seeking alter-
native sources of funding. Ultimately, South Korea turned to its new benefac-
tor, Japan, and during negotiations held in 1969 convinced the Japanese
government to fund an integrated steel mill in Pohang that was capable of pro-
ducing over one million tons of crude steel a year.100
By the late sixties, American influence over South Korean economic policy
was clearly on the wane, but Americans also started to become reconciled to
this fact. Although Korean officials had never internalized many of the ideas
about development that Americans attempted to foist upon them, by the late
sixties U.S. officials were increasingly pointing to South Koreans as successful
products of American tutelage. American officials were eager to hold out South
Korea and its government as an example of the kind of dynamic progress toward
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99. The entire episode is recounted in great detail in O W nch’ l, Han’guk hy ng ky ngje
k ns l, Volume I, 90–106.
100. Kim, Pisa ky ngje kih ekw n 33ny n: y ngyok i han’guk ky ngje, 167–172.
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modernization that could be achieved through determined leadership and
American guidance. South Korea, which experienced one of the fastest eco-
nomic growth rates of any developing country during the early sixties, was one
of the few places that American development experts could tout as a success.
Evaluations of ROK officials in American policy texts started to become more
positive; they talked about the need for further American guidance but also
credited the Park government for its perceived self-reform.
The same officials that Americans had characterized as immature or incom-
petent during the early sixties were, by the end of the decade, being put forth
as examples of the benefits of American guidance and modernization. Much as
Park Chung Hee himself had been the particular focus of American tutelary
efforts during the early sixties, the ROK president was now described as an
embodiment of the energy and discipline needed to foster the kind of trans-
formation in South Korea that they envisioned. The American ambassador in
Korea, Winthrop Brown, wrote in 1967 that Park was “the prototype of the
new political figure in Korea.” Brown praised Park’s cosmopolitanism, con-
tending that Park had been “heavily exposed to the ways and ideas of the outside
world” and that he had “seen and experienced the implications of modern
science and technology” and “recognized that these must be appropriately
introduced into Korean life if Korea is to survive.”101 By the late sixties
American officials were not only offering praise for Park but also for some of
his subordinates. While some American officials decried the EPB’s increasing
reluctance to accept American guidance on questions of economic planning,
others began to note improvements in Korean thinking. One USAID plan pre-
pared in 1966 reported that “the time horizon of official Korean thinking” had
been “extended significantly over the past year.”102
To be sure, American officials still sometimes emphasized the need for
continuing American guidance. But even when doing so, they still tended to
acknowledge the progress toward modernity being made by the Park govern-
ment. A letter from Joel Bernstein to Walt Rostow written in November 1966
supplied a typical expression of Americans’ changing attitude. Bernstein wrote
that
[t]here has been an encouraging growth of Korean understanding of their
economic problems and of the measures needed to deal with them most
effectively, and I’m sure there are responsible Koreans who understand much
more than we ever will about many aspects of their problems. There has also
been an encouraging growth of Korean willingness to accept disciplines
and difficulties involved in obtaining good solutions to the basic economic
From Pupil to Model : 113
101. Letter from the ambassador to Korea (Brown) to the assistant secretary of state for
East Asia and Pacific affairs (Bundy), 2 May 1967, FRUS, 1964–1968, Volume XXIX, 251.
102. Ibid.
problems of allocating their scarce resources among alternative needs.
(Where else has domestic revenue more than doubled in two years?) Yet,
these advances in understanding are still tentative and limited in scope. Their
further strengthening is essential to achieve U.S. purposes in Korea and will
need continuing U.S. reinforcement.103
Americans could tout the ROK as one of modernization’s success stories
because, by the late sixties, the South Korean government had certainly attained
the institutional capacity to create wealth, much as developmental experts had
argued that it needed to.
South Korea’s economic take-off had been so remarkable that the Com-
munist world, including South Korea’s northern rival, the DPRK, had taken
notice and begun to modify its approach to dealing with the ROK. During the
fifties, when North Korea’s economy had outperformed the South’s, the DPRK
leadership had hoped that their accomplishments would demonstrate the
superiority of the Communist system to South Koreans. By March 1968,
however, one Czech diplomat stationed in Pyongyang noted that “the Korean
Workers’ Party has given up on the possibility of making the DPRK into an
economic model for South Korea and has fully entered a path close to Chinese
ideas.”104 In subsequent months the DPRK would begin to invest an increasing
proportion of its resources into armaments and defense in an effort to outstrip
South Korea militarily, perhaps because it was losing hopes of competing
economically.
But if South Korea was pulling ahead of the North in the competition
for rapid economic development, its triumph was far from a validation of
American or “Free World” economic models. American capital had been vital
to the economic transformation of South Korea, and technical assistance pro-
grams had in some instances facilitated the South Korean government’s acqui-
sition of new forms of knowledge that helped it to manage the economy. But
the United States never dictated the direction of this transformation. Moving
South Korea toward self-sufficiency proved a complicated task, because the
more autonomous the ROK government became, the more capable it was of
rejecting American guidance and implementing its own visions of economic
development and modernization. During the seventies, as the Nixon adminis-
tration sought to make America’s allies in Asia fend for themselves through aid
reductions, the Park government shifted its developmental strategy. Despite
criticisms from both the United States and international development agencies,
the ROK government forged ahead and succeeded with a heavy and chemical
114 : d i p l o m a t i c h i s t o r y
103. “Joel Bernstein to Walt Rostow,” 8 November 1966, Confidential Files, Box 10, LBJ
Library.
104. “Some Aspects of the Political Line of the Korean Workers Party after the January
Events, Political Report No.12,” 15 February, 1968, Archives of the Ministry of Foreign
Affairs, Prague. Translated by Vojtech Mastny, Cold War International History Project Bulletin,
Issue XV.
industrialization plan that enabled South Korea to become one of the world’s
most dynamic economies during the late twentieth century. Ultimately, the
leadership in the Park government took charge of economic development in
South Korea; but the way that they did so was very different from the path that
the United States had envisioned.
From Pupil to Model : 115
12/18/2014 Ha-Joon Chang: Protectionism… the truth is on a $10 bill – Business Comment – Business – The Independent
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I have a six-year-old son. His name is Jin-Gyu. He lives off me,
yet he is quite capable of making a living. After all, millions of
children of his age already have jobs in poor countries.
Jin-Gyu needs to be exposed to competition if he is to become a
more productive person. Thinking about it, the more
competition he is exposed to and the sooner this is done, the
better it is for his future development. I should make him quit
school and get a job.
I can hear you say I must be mad. Myopic. Cruel. If I drive Jin-
Gyu into the labour market now, you point out, he may become a
savvy shoeshine boy or a prosperous street hawker, but he will
never become a brain surgeon or a nuclear physicist. You argue
that, even from a purely materialistic viewpoint, I would be wiser
to invest in his education and share the returns later than gloat
over the money I save by not sending him to school.
Yet this absurd line of argument is in essence how free-trade
economists justify rapid, large-scale trade liberalisation in
developing countries. They claim that developing country
producers need to be exposed to maximum competition, so that
they have maximum incentive to raise productivity. The earlier
the exposure, the argument goes, the better it is for economic
development.
However, just as children need to be nurtured before they can
compete in high-productivity jobs, industries in developing
countries should be sheltered from superior foreign producers
before they “grow up”. They need to be given protection,
subsidies, and other help while they master advanced
technologies and build effective organisations.
This argument is known as the infant industry argument. What
is little known is that it was first theorised by none other than the
first finance minister (treasury secretary) of the United States –
Alexander Hamilton, whose portrait adorns the $10 bill.
Ha-Joon Chang: Protectionism… the truth is on
a $10 bill
Monday 23 July 2007
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12/18/2014 Ha-Joon Chang: Protectionism… the truth is on a $10 bill – Business Comment – Business – The Independent
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Initially few Americans were convinced by Hamilton’s argument.
After all, Adam Smith, the father of economics, had already
advised Americans against artificially developing manufacturing
industries. However, over time people saw sense in Hamilton’s
argument, and the US shifted to protectionism after the Anglo-
American War of 1812. By the 1830s, its industrial tariff rate, at
40-50 per cent, was the highest in the world, and remained so
until the Second World War.
The US may have invented the theory of infant industry
protection, but the practice had existed long before. The first big
success story was, surprisingly, Britain – the supposed birthplace
of free trade. In fact, Hamilton’s programme was in many ways a
copy of Robert Walpole’s enormously successful 1721 industrial
development programme, based on high (among world’s highest)
tariffs and subsidies, which had propelled Britain into its
economic supremacy.
Britain and the US may have been the most ardent – and most
successful – users of tariffs, but most of today’s rich countries
deployed tariff protection for extended periods in order to
promote their infant industries. Many of them also actively used
government subsidies and public enterprises to promote new
industries. Japan and many European countries have given
numerous subsidies to strategic industries. The US has publicly
financed the highest share of research and development in the
world. Singapore, despite its free-market image, has one of the
largest public enterprise sectors in the world, producing around
30 per cent of the national income. Public enterprises were also
crucial in France, Finland, Austria, Norway, and Taiwan.
When they needed to protect their nascent producers, most of
today’s rich countries restricted foreign investment. In the 19th
century, the US strictly regulated foreign investment in banking,
shipping, mining, and logging. Japan and Korea severely
restricted foreign investment in manufacturing. Between the
1930s and the 1980s, Finland officially classified all firms with
more than 20 per cent foreign ownership as “dangerous
enterprises”.
While (exceptionally) practising free trade, the Netherlands and
Switzerland refused to protect patents until the early 20th
century. In the 19th century, most countries, including Britain,
France, and the US, explicitly allowed patenting of imported
inventions. The US refused to protect foreigners’ copyrights until
1891. Germany mass-produced counterfeit “made in England”
goods in the 19th century.
Despite this history, since the 1980s the “Bad Samaritan” rich
countries have imposed upon developing countries policies that
are almost the exact opposite of what they used in the past. But
these countries condemning tariffs, subsidies, public enterprises,
regulation of foreign investment, and permissive intellectual
property rights is like them “kicking away the ladder” with which
they climbed to the top – often against the advice of the then
richer countries.
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12/18/2014 Ha-Joon Chang: Protectionism… the truth is on a $10 bill – Business Comment – Business – The Independent
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But, the reader may wonder, didn’t the developing countries
already try protectionism and miserably fail? That is a common
myth, but the truth of the matter is that these countries have
grown significantly more slowly in the “brave new world” of neo-
liberal policies, compared with the “bad old days” of
protectionism and regulation in the 1960s and the 1970s (see
table). And that’s despite the dramatic growth acceleration in the
two giants, China and India, which have partially liberalised
their economies but refuse to fully embrace neo-liberalism.
Growth has failed particularly badly in Latin America and sub-
Saharan Africa, where neo-liberal reforms have been
implemented most thoroughly. In the “bad old days”, per capita
income in Latin America grew at an impressive 3.1 per cent per
year. In the “brave new world”, it has been growing at a paltry
0.5 per cent. In sub-Saharan Africa, per capita income grew at
1.6 per cent a year during 1960-80, but since then the region has
seen a fall in living standards (by 0.3 per cent a year).
Both the history of rich countries and the recent records of
developing countries point to the same conclusion. Economic
development requires tariffs, regulation of foreign investment,
permissive intellectual property laws, and other policies that
help their producers accumulate productive capabilities. Given
this, the international economic playing field should be tilted in
favour of the poorer countries by giving them greater freedom to
use these policies.
Tilting the playing field is not just a matter of fairness. It is about
helping the developing countries to grow faster. Because faster
growth in developing countries means more trade and
investment opportunities, it is also in the self-interest of the rich
countries.
The author teaches economics at the University of Cambridge.
The article is based on his book Bad Samaritans Rich Nations,
Poor Policies, and the Threat to the Developing World (Random
House).
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