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Catch-up and Crisis in Korea

Wontack Hong

Whilst the process of catch-up in Korea – led by export-oriented growth – has been rapid and, in a sense, very successful, it has also been subject to turbulence, not least in a crisis of near bankruptcy that has dramatically revealed its Achilles heel. Informed by the 1997 crisis, Wontack Hong writes a new history of the Korean economy; one that seeks to understand export-oriented catch-up in newly industrialized countries (NICs) whilst offering a realistic appraisal and forewarning of the pitfalls which could signal self-destruction.
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Chapter 7: Experiences of East Asian NICs

Wontack Hong


A FEW AMONG MANY For more than three decades prior to the late 1990s, the export-oriented East Asian NICs, that is, Korea, Taiwan, Hong Kong and Singapore, grew by nearly 10 percent per annum on average. The East Asian NICs are often regarded unique because they could combine such rapid, sustained growth with relatively equal distribution of income. Japan also grew at a similar rate during the twenty-year period between the regaining of her independence in 1952 and the first oil shock of 1973, far exceeding the so-called post-Meiji long-run trend rate of 4 percent. By the 1980s Japan had become a fully-fledged advanced nation. The new or the second generation NICs, that is, Thailand, Malaysia, Indonesia and China, began to reveal similar high growth performances after the early 1970s. The sustained high growth of these East Asian NICs might have been, borrowing the expression of Krugman (1994), mostly the result of extraordinary resource mobilization rather than technological catch-up. That is, their growth could have been inputs-driven rather than efficiency-driven. According to Easterly and Levine (2001), however, something else besides factor accumulation plays a prominent role in explaining differences in economic performance across countries. In any case, out of more than 150 underdeveloped countries, the catch-up process had commenced only in these handful number of countries and the growth dynamism could have been maintained over such a long period of time only in these countries. Every nation consists of human minds that may be regarded as a...

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