IPE of Korea : Introduction

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

2. StudyMethod and Approach

3. Introduction • 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 economy • Evolutionary economics, etc. • Theories, empirical studies, case analysis, etc.

4. International 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.

6. IPE 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 today’s 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.

8. Analytical Building Blocks: States, Markets, and Societies • Much 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.

10. Markets 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 state’s role in the economy is not an easy process.

11. Society • Society 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 society’s 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.

12. We 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.

13. Nature of Political Economy • Because 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.

14. 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.

15. The 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.

16. Basic Feature of Korea

21. Map of Altaic Language

22. Korean History in Brief Old 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

23. Cultural Influence

24. Refugees Fleeing from the Korean War

25. Korea: From Ash to a G20 Country - 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. 1960 2010 • Pop: 50 million • GDP (2010f): US$1,012.4 billion (14th) • GDP per capita (2010f): $20,450 • Exports (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 intern’l organizations • GNP(1960): US $1.1 billion • GNP per capita (1960): $82 • Exports(1960): $33 million • Industry: Plywood and wigs • Diplomacy: No member in major international organization 25 25

26. Growth in the Korean Economy GNP Per Capita Growth Trend $20,045 in 2007 13th largest economy in the world Financial Crisis 10,307 Around 8% Above 10% 6,742 5-Year Economic Development Plan Source: KDI 26

27. Semi-conductors Mobile communications Digital home electronics E-commerce Bio products Fine parts Semi-conductors IT Automobile Shipbuilding Textile Petro-chemicals Home Electronics Semi-conductors Iron & Steel Automobile Shipbuilding Textile Home electronics Iron & Steel Overseas construction Food Plywood Wig 1960 1970 1980 1990 2000 Changes in Dominant Industries and Top Exports 27

28. Development Stages in the Korean Economy 1950s 1960s 1970s 1980s 1990s 2000s Aid,Labor intensiveproduction Imitation Simple tech. Import of oldplant/ machinery Heavy industry Assimilation Minorinnovations R&D New product development R&D intensiveincrease in scienceNew productinnovation Innovationfrontier Traditional Imitative Catch-up Innovative Catch-up Innovative Economy “Intensive Growth” Transition to Innovation-driven Economy Outward-looking Invesment-driven Economy“Extensive Growth” Agricultural Economy Factor-driven Economy “Extensive Growth” Outward-looking Stages of Development 28 28

29. Focus of Economic Development Strategy in Each Administration 29

30. Korean Electronics Leading the World Market (% in the world) Memory (45.0%) CP (28.8%) TFTLCD (41.3%) MP3 (20%) DTV (13%) Contribution to the Korean economy by share: GDP (14%) and Export (30%)

31. Seoul, a City of 12 Million 21st century Korea

34. Han River

35. Villages

36. Location: Traditional Korean Houses, Seoul Source: KOREA TOURISM ORGANIZATION

37. Location: Gyeonghwaeroo at Gyeongbokgung Palace, Seoul Source: KOREA TOURISM ORGANIZATION

38. Location: Haeinsa Temple, Hapcheon Source: KOREA TOURISM ORGANIZATION

39. Seokguram, UNESCO World Heritage Source: KOREA TOURISM ORGANIZATION

40. Location: God’s Playground at Seorak Mountain Source: KOREA TOURISM ORGANIZATION

41. Location: Sol Island, Kangwon Province Source: KOREA TOURISM ORGANIZATION

42. Location: Jeju Island Source: KOREA TOURISM ORGANIZATION

43. References • 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) 43

44. Sakong, 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, ByungNak. 1990. The Rise of the Korean Economy. Oxford • University Press.

45. Reference Korea: Dynamics of Change Mr. Monroe World History CP

46. Early 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.

47. Early Traditions • Korea absorbed many ideas and customs from China. • Buddhism, Confucianism, Chinese writing • Chinese culture spread to Korea in several ways. • China ruled parts of Korea • Chinese refugees fled to Korea • Buddhist missionaries • Koreans who went to China to study

48. Invasions and Isolation • 1592:A powerful Japanese ruler tried to attack China through Korea. • Attacks lasted 6 years • With Chinese help, Koreans drove out the Japanese. • War destroyed much of Korea • Early 1600s: Manchus from the north invaded.

49. Invasions and Isolation • To 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 years • Also banned Christianity.

50. Imperialism and Nationalism • Mid-1800s: Western powers wanted Korea to open its ports to foreign trade. • With the Korean dynasty in decline, they couldn’t resist. • Imperialist powers forced Korea to sign “unequal treaties.” • Gave trading rights and special privileges to foreign countries.