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1IPE of Korea: Introduction

* Some parts of this note are summary of the references for teaching purpose only.1IPE of Korea 13.03.08 Semester: Spring 2013 Time: Friday 2-5 pm Classroom: 331 Professor: Yoo Soo Hong Office Room: By appointment) Mobile: 010-4001-8060 E-mail: yshong123@gmail.com Home P.: http://yoosoohong.weebly.com

2Study Method and Approach3Introduction Purpose of the Study To learn the implications and characteristics of the Korean development and its international relations in the context of international political economy. To learn the structural development of and the issues related to trade and foreign direct investment (FDI) of Korea in terms of economic and business activities and international relations. To learn theories of IPE and related economic schools, economic development and industrial strategies and policies, interactions between governments and private sectors in international context.

Approach to the Subject International political economyEvolutionary economics, etc.Theories, empirical studies, case analysis, etc.

4International Political Economy What Is International Political Economy (IPE)? International political economy is an analytical effort to break down the barriers that separate and isolate the disciplines of politics, economics, and sociology and their methods of analysis, seeking a comprehensive understanding of mainly international issues and events.

IPE employs elements of economics, politics, and sociology to describe and explain international and global problems and issues in a way that cannot adequately be addressed by each of those disciplines alone.5 The Essence of IPE IPE is international in scope, meaning that it deals with issues that cross national borders and with relations between and among nation-states. Increasingly today, people talk about a global political economy because more and more problems and issues affect the whole world, not just a few nations, and require a universal perspective and understanding.

IPE involves a political dimension in that it usually focuses on the use of state power to make decisions about who gets what, when, and how in a society.

Politics is a process of collective choice, drawing in competing and often conflicting interests and values of different actors, including individuals, nation-states on a bilateral and multilateral basis, conflicts between states and international organizations, regional alliances, nongovernmental organizations and transnational corporations.6IPE is about the economy or economics, which means that it deals with how scarce resources are allocated for different uses and distributed among individuals, groups, and nation-states through the market process, which is sometimes decentralized and other times quite centralized or controlled by state officials.

Economic analysis focuses less on issues of state power and national interests and more on issues of income, wealth, and individual interests.

IPE attempts to understand the complex interaction of real people in the real world, along with their attitudes, emotions, and beliefs.

The social forces associated with class, ethnic, religious, and other cultural groups, along with their different beliefs and values, must also be considered in the IPE analytical formula. Likewise, the state, economy, and society are also affected by the historical development of important events and issues.7 Why Study International Political Economy?

(Important) IPE is crucial in todays world, in which events and conditions in one part can strongly affect conditions in other parts, that we analyze these conditions so as to understand what caused them and how they might be managed.

(Useful) In a global political economy and society in which so many things influence and affect one another, employers and government officials seek out those who can understand the international and global context of human activity.

(Interesting) IPE is all about life and the many actions and interactions that connect human beings around the globe. 8Analytical Building Blocks: States, Markets, and SocietiesMuch of the study of IPE focuses on the interaction of three highly important institutions -states, markets, and societies- and how their relationship to one another affects the behavior of a variety of different actors.

The State The state is a legal entity, or a relatively coherent and autonomous system of institutions that governs for a specific geographic territory and population.

9 The Market A market can represent a geographic location where goods and services are exchanged. However, what defines a market is not the physical characteristic but its function as the institution for exchange of goods and services.

Under pure market conditions (the absence of state intervention or social influences), people are assumed to behave rationally. They will naturally seek to maximize their gains and limit losses by producing and exchanging things. This desire to exchange is a strong motive behind their behavior, along with pressure to generate wealth by competing with others for sales in local and international markets.

A value many people strongly hold that is reflected in market activity is economic efficiency, the ability to use and distribute resources effectively and with little waste.10Markets exist within some form of political arrangement or bargain whereby states or some other form of political unit helps maintain their existence and ultimately decides their primary function.

In mixed economies among others market forces influence a great many resource allocation and distribution decisions, but not all of them. In many nations, people prefer more state control or regulation over market activity in an effort to guide outcomes in directions that favor certain people or groups.

In many cases, such as with some of developing countries and also China, shifting to a market economy and to a democratic government that will supposedly limit the states role in the economy is not an easy process.

11Society adds another element of tension to the state, market, and society mix, because different societal groups usually want to preserve and promote the history, culture, and values of their social system.

In an age of increasingly growing globalization, market systems link people and their different values and interests with one another when they make products better, cheaper, or more attractive to people in other nations. Relatively unregulated markets can perform a social coordinating without a coordinator function, whereas, in more authoritarian systems, markets serve as a cruel and harsh coordinator.

The standards used to judge the effectiveness or efficiency of markets and market systems always reflect the dominant ideas about societys values and beliefs. Markets are a force but not one that is easily separated from social and political forces that give them purpose and provide them with different functions.

Society12We are interested in the patterns of interaction between the state, society, and markets that change over time and that shape local, national, and international institutions as well as individual behavior patterns in dynamic ways.

At times, the market may dominate more than the state or society, resulting in a shifting configuration of group and actor interests and values. This seems to have been the pattern of the 1990s when globalization became so prevalent.

13Because states, markets and society embrace different basic values and prefer to work in different ways to achieve different ends, sharp tensions and conflicts often result within and between different nation-states and their societies.

Most people live simultaneously in a state that exhibits certain types of political institutions, national market arrangements and a distinct social system that differs from other nation-states that have their own political, market and social arrangements and institutions.

How well the collective choices of the state reflect the general will and the public interest depends on a large number of factors, such as voting rights, rules about representation, and the nature of political institutions in a country.

Nature of Political Economy14 Four Global Structures The Security Structure: When one person, state, or international organization contributes to or provides security for states and other organizations, a security network is created. The nature of this security structure depends on the kind of bargain that is struck among its participants.

The Production and Trade Structure: Producing things is one element of generating value and wealth, and wealth is nearly always linked to power. The issue of who produces what for whom on what terms, therefore, lies at the heart of international political economy. Structural changes affect trade and the distribution of wealth and power in the world and the other IPE structures.

The Finance and Monetary Structure: One way to describe the finance and monetary structure is to say that it is the pattern of money flows among nations. This structure is, then, really a description of how certain resources are allocated and distributed between and among nations. Financial bargains create obligations, which join the interests of different nations.15The Knowledge and Technology Structure: Who has knowledge and how it is used is an important factor in IPE. Nations with poor access to knowledge in the form of industrial technology, scientific discoveries, medical procedures, or instant communications, for example, find themselves at a disadvantage relative to others. Increasingly, the bargains made in the security, production and trade, and finance and monetary structures depend on access to knowledge in its several forms.

Take together, these four IPE structures form the international system within the interdependent relations of individuals and states occur. The international systems therefore composed of a set of bargains and relationships that condition how states and individuals behave and determine in part the mix of values that result in IPE is that they are multi-dimension.Basic Feature of Korea1617

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Map of Altaic Language

21Korean History in BriefOld Choson (2333-108 BC)Three Kingdoms (57 BC-936 AD)Koryo (918-1392)Choson (1392-1910) - Colonialization (1910-1945)Modern Korea (1945-today)

Long history of Independence Noticeable Factors - Homogeneity (Nation, language) - Diplomatic survival - Cultural excellence

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Cultural Influence2323Refugees Fleeing from the Korean War

2425 Korea: From Ash to a G20 CountryGNP(1960): US $1.1 billionGNP per capita (1960): $82Exports(1960): $33 millionIndustry: Plywood and wigsDiplomacy: No member in major international organization25- Korea was one of the least developed countries in terms of industrial development in the early 1960s. It has been transformed into one of leading industrial countries in the world during the last 50 years.

Pop: 50 millionGDP (2010f): US$1,012.4 billion (14th)GDP per capita (2010f): $20,450Exports (2010f): $459,803 million (12th), (In 2012, 8th in world trade)Industry: Semi-conductor, Smart phone, TV, Auto, Shipbuilding, etc.Diplomacy: UN, OECD, G20, etc. Pop: 25 million GNP (1960): US $1.1 billion GNP per capita (1960): $82 Exports (1960): $33 million Industry: Plywood and wigs Diplomacy: No member in major internl organizations196020102525Growth in the Korean Economy$20,045 in 200713th largest economy in the world5-Year Economic Development PlanGNP Per Capita Growth Trend 6,742FinancialCrisisAround 8%Above 10%10,3072626Source: KDI2627Changes in Dominant Industries and Top Exports27FoodPlywoodWigTextileHome electronicsIron & SteelOverseas constructionHome ElectronicsSemi-conductorsIron & SteelAutomobileShipbuildingSemi-conductorsITAutomobileShipbuildingTextilePetro-chemicalsSemi-conductorsMobile communicationsDigital home electronicsE-commerceBio productsFine parts1960197019801990200028Development Stages in the Korean EconomyStages of Development28Aid,Laborintensiveproduction

1950s1970s1980s1990s2000s1960sImitationSimple tech.Import of oldplant/machinery

Heavy industryAssimilationMinorinnovations

R&DNew product development

R&D intensiveincrease in scienceNew productinnovationInnovationfrontier

Agricultural EconomyInvesment-driven EconomyExtensive GrowthInnovative Economy

Intensive GrowthTraditionalFactor-driven Economy

Extensive Growth

Outward-lookingInnovative Catch-upTransition to Innovation-driven Economy Outward-lookingImitative Catch-up282829Focus of Economic Development Strategy in Each AdministrationFound the Country(Lee Seung Mans Administration)Establish the CountryRapid Growth(Park Chung Hees Administration)Income Substitution IndustryExport-led EconomyDevelop Heavy-Chemical IndustryStable Growth(Chun Doo Hwans Administration)Economic StabilizationAdjust Heavy-Chemical IndustryMarket & Open Economy(Kim Dae Jungs Administration)Overcome Financial CrisisKnowledge-based EconomyInternationalization(Kim Young Sams Administration)OpeningCompetitionStep forward to InternationalizationDemocratization(Roh Tae Woos Administration)Private-Driven Economic OperationPromote Deregulation29Contribution to the Korean economy by share: GDP (14%) and Export (30%)

CP(28.8%) TFTLCD (41.3%)DTV(13%)MP3(20%)Memory(45.0%)(% in the world)Korean Electronics Leading the World Market

3030The Korean IT industry has been enjoying a high market share in memory chips, mobile communications and displays. But recently, Koreas digital TV and MP3 digital media players are increasingly taking up bigger share in global market. This contributing to the diversification of export items and markets. The IT industry, as you all know, has emerged as the driving engine of Korean economy, accounting for 13.5% of GDP and 30% of total exports last year.

21st century KoreaSeoul, a City of 12 Million

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3333Han River

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Villages3535

Source: KOREA TOURISM ORGANIZATIONLocation: Traditional Korean Houses, Seoul36

Source: KOREA TOURISM ORGANIZATIONLocation: Gyeonghwaeroo at Gyeongbokgung Palace, Seoul

Source: KOREA TOURISM ORGANIZATIONLocation: Haeinsa Temple, Hapcheon

Source: KOREA TOURISM ORGANIZATIONSeokguram, UNESCO World Heritage

Source: KOREA TOURISM ORGANIZATIONLocation: Gods Playground at Seorak Mountain

Source: KOREA TOURISM ORGANIZATIONLocation: Sol Island, Kangwon Province

Source: KOREA TOURISM ORGANIZATIONLocation: Jeju Island4243References Association of Korean History Teachers. 2010. Korean History for International Readers. Bahk, Byongwon and Gi-Wook Shin. (eds.) 2012. South Korea and the Global Economy in Transition. Walter H. Shorenstein Asia-Pacific Research Center.Balaam, David N.and Michael Veseth. 2008. Introduction to International Political Economy (4th Ed.). Pearson. Lee, Jong Won. 2004. The Korean Economy and Its Prospects. Seoul: Haenam.Ministry of Foreign Affairs, ROK. 2011. Foreign Diplomacy White Paper 2011. (In Korean) OECD. 2012. OECD Economic Surveys of Korea. (Google)

4344Sakong, Il. 1993. Korea in the World Economy. Institute for International Economics.Soh, Changrok. 1997. From Investment to Innovation?: The Korean Political Economy and Changes in Industrial Competitiveness. International Trade and Business Institute.Song, Byung Nak. 1990. The Rise of the Korean Economy. Oxford University Press.Mr. MonroeWorld History CPKorea: Dynamics of ChangeReference45Early Traditions

In ancient times, small bands of nomadic hunters migrated to Korea from Central Asia.100 A.D. 668 A.D.: Three separate kingdoms dominated Korea.Koguryo (north)Paekche (southwest)Silla (southeast)668 A.D.: Silla kingdom united all of Korea.Korea remained a single, unified state until 1945.

46Early TraditionsKorea absorbed many ideas and customs from China.Buddhism, Confucianism, Chinese writingChinese culture spread to Korea in several ways.China ruled parts of KoreaChinese refugees fled to KoreaBuddhist missionariesKoreans who went to China to study

47Invasions and Isolation

1592:A powerful Japanese ruler tried to attack China through Korea.Attacks lasted 6 yearsWith Chinese help, Koreans drove out the Japanese.War destroyed much of KoreaEarly 1600s: Manchus from the north invaded.

48Invasions and IsolationTo secure peace, Koreans paid tribute to the Manchu.In response to the invasion, Korea turned to isolationism.A policy of avoiding foreign involvements and contacts.Lasted almost 200 yearsAlso banned Christianity.

49Imperialism and Nationalism

Mid-1800s: Western powers wanted Korea to open its ports to foreign trade.With the Korean dynasty in decline, they couldnt resist.Imperialist powers forced Korea to sign unequal treaties.Gave trading rights and special privileges to foreign countries.5050Imperialism and NationalismJapan competed with Russia for power in Korea.1905: Japan won control of Korea.1910: Ousted the Choson dynasty, which was in power, and annexed Korea.Annex: to add territory to ones own country.Japanese imposed harsh rule on Korea.

51Imperialism and NationalismKoreans bitterly resented Japanese rule.Nationalists campaigned to win freedom.March 1, 1919: Korean nationalists held a huge, peaceful demonstration to demand independence.Japanese response: Killed 2,000 Koreas and jailed 19,000 others.

52Imperialism and Nationalism

During the years that followed, Japanese hunted down leaders of the March 1st Movement.Many fled to the U.S., China, and the Soviet Union.1930s-40s: Japan expanded its empire across much of Asia.WWII: Forced Koreas to fight and used their resourcesSuppress culture: Couldnt speak Korean and had to take on Japanese names.53A Divided Land

1945: Koreans celebrated Japanese defeat in WWII.Agreed to give Korea independenceSoviet Union and United Statses sent troops to Korea to accept the Japanese surrender.Soviets occupied the north and the U.S. occupied the south.38th Parallel: Geographical line that split north and south Korea.Occupation was to last only until elections could be held.54A Divided LandCold War rivalries led to a permanent division of Korea.Korean nationalists split into communist and non-communist factions.1945: Soviet Union helped Korean communists take power in the north.At the same time, U.S. backed non-communist Koreans in the south.1948: Korea officially split.Democratic Peoples Republic of Korea (North Korea)Republic of Korea (South Korea)

55War in Korea

1950: Beginning of Korean WarU.S. backed South Korea, fearing spread of communism.Soviets backed the north.The war ended in a stalemate in 1953.Both sides agreed to an armistice, or end to fighting.

56War in Korea

The truce agreement left Korea divided at the 38th parallel, with a demilitarized zone (DMZ) along both sides of the line.Costs of War:Almost 4 million people died during the Korean War.Many people became refugees.Fighting destroyed factories and farms.Many cities were left in ruins.57South Korea TodayMaintain a solid armyIt has also built a thriving economy.After the split, South Koreans accepted authoritarian rule of Rhee Sing Man, later Park Chung Hee. Today: After 60 years, South Korea is now an economic power with a strong defense capacityA fully democratized society

58South Korea Today

South Korea has a free market economy, but the government has kept a tight control over it.They stress manufacturing for export.Automobiles, textiles, and electronics.South Korea is closely tied with the global economy.59North Korea Today

North Korea is a closed society under a communist dictatorship.1948-1994: Kim Il Sung built a totalitarian state.Through propaganda, North Koreans were taught complete obedience to the man they called Great Leader.Preached self-reliance and developed a policy of isolationism.North Korea built heavy industry for their own use only. Plants and infrastructure are detieriorating.6060North Korea TodayToday, North Korea exports and imports very little.When Kim died, his son, Kim Jong Il, then Kim Jong Eun became ruler and continued similar policies.Quality of life lags far behind that in the south.1995: Progress was halted after floods and droughts.China has been assisting a half of rice and oil that North Korea to survive.61Outlook for the FutureMost Koreans hope to reunite someday.Since 1990s, both Koreas have held talks.They signed a nonaggression pact and set up meetings for some families separated during the Korean War.South Korea has also sent food aid to the north. Still, they face many obstacles.Each government thinks the other wants to overthrow them.North Korea has developed nuclear weapons and tested long-range missiles.North Korea has sold missiles and other weapons to international terrorist groups.U.S., South Korea, and other allies fear that North Korea will be tempted to use their weapons.

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