Japan and South Korea within several decades made their way from being damaged by the warfare and poverty-ridden to industrialized, highly developed and quite wealthy countries. Initially, it seems that testimonies of Japanese and Korean miraculous change are somewhat similar to one another. Both counties faced similar problems and issues in the beginning of their progress path. Furthermore, both Japan and South Korea received strong growth incentives from abroad. Thus, foundations of Japan's development were laid through the American Profession period, whereas South Korea following the Second World War was also occupied by the American pushes and received huge financial support from the United States. But were their ways of financial development actually as well and to what magnitude? So, why don't we look nearer and make an effort to answer this question.
Many scholars agree that Japan's and South Korea's spectacular financial performance was due to strong government regulations and productive reforms. The countries' approaches to economic development appear to be similar in a number of aspects. One of the most evident common features is interventionist policies. In Japan, the MITI shaped industrial insurance policies, while also seeing private stars and guiding those to the "right" way. South Korean federal government also applied direct intervention in monetary system by handling prices and taking part in decision-making procedure for private actors.
Government advice and supervision over economic operations significantly added to the Japan's and Korea's spectacular economic performance. Comparing the main administration economic development insurance policies, several parallels can be attracted here. In both cases, high and immediate economic growth was achieved through rigorous industrialization and export promotion. Japanese and Korean administration counted generally on development of heavy and chemical industry areas as the main driving power of development. The main element business were provided assistance and different benefits, including loans, subsidies, and tax privileges, etc. At the same time, investment was highly promoted. The success of industrialization and export-promotion policies owes to several specific policy instruments and approaches, which were effectively used both by Japanese and Korean governments. Among the most important are mobilization and allocation of capital, adoption of foreign technologies, assistance with business conglomerates, and restriction of imports.
The success of industrialization and export-promotion policies was closely linked to the effective mobilization and allocation of capital by handling savings and investment funds. The Japanese and South Korean government authorities were particularly effective to advertise domestic cutting down of financial institutions, enterprises, and households through monetary policy instruments. Likewise, they also been successful in channeling these money as capital assets to industrial production (and also services sector later). The factors of production were transferred from low-productivity areas to more fruitful ones (Pilat 1993).
While performing industrialization and promoting export, Japanese and Korean government authorities paid special attention to importing foreign solutions. Investments and lending options were provided 'selectively to people firms capable of adapting and enhancing imported technology' (Odagiri & Goto 1993). Successful adoption of overseas systems became a basis for modernization of Japanese and Korean industry and increased competitiveness of their goods on the international market.
Within the construction of industrialization and export encouragement insurance policies, Japanese and Korean government authorities maintained close relationships with big business. Similarly, scheduled to historical and cultural traditions, Japanese as well as Korean business is dominated by the top conglomerates. This trend has become clear in Japan since the 19th century. Although zaibatsu were dissolved by the Occupation authorities in the overdue 1940s, business conglomerates reemerged later as keiretsu. The Korean analogue known as chaebols made an appearance the second 50 percent of the 20th century. The go up of keiretsu and chaebols was both a consequence of state insurance policies of industrialization and export-promotion as well as its main power. Industry and big business benefited from this policy obtaining strong support from the federal government, which led to the growth of business conglomerates. Climb of conglomerates, in its switch, resulted into increase of commercial development and growing competitiveness of Japanese products on the international market. Thus, assistance between federal and big business conglomerates reinforced industrialization and stimulated exports, which, unquestionably, played a significant role in financial development in Japan and South Korea (Ohno 2006; Shin 2003).
Another common feature of Japanese and Korean government authorities' approaches to export campaign is trade procedures, which played a significant role in financial progress in both circumstances. At the original stage, governments were promoting protectionist plans. Various import constraints, such as tariffs, quotas, and other, were imposed in order to safeguard domestic producers from international competition. While import was restricted, export was intensively stimulated. The combination of these policies proved to be extremely effective in stimulating economical growth.
Foreign capital as a musical instrument of industrialization and of increasing exports was used both by Japan and Korea. However, the role assigned to foreign money and their contribution appeared to be significantly different in each case. Thus, in Japan foreign direct investment was constrained from considerations to be bad for Japanese current economic climate. Overseas borrowing was practiced by Japanese federal, but in average size. Japan typically relied on local capital for funding investment, while international loans constituted significantly less than 1% of the quantity.
Meanwhile, in Southern Korean case, home capital cannot cover the necessity for investment, so, to a greater degree, it was financed from foreign loans (which, interestingly, were borrowed generally from Japan). Foreign immediate investment was also firmly advertised by Korean federal and backed by special legislation. Moreover, in contrast to Japanese procedure, one of the primary sources of financing investment in Korea was immediate state investments and different talk about loan programs, which also constituted a considerable share in total investment (Shin 2003).
Thus, both Japanese and Korean government authorities centered on export-promotion as a primary driving drive of economic development. Evidently, in both circumstances this coverage was integrated in a quite similar way. However, there was one important difference. While promoting export, Japanese federal also taken notice of local market and stimulated domestic consumption. In that way, newly produced gadgets such as Television sets, refrigerators, washers, and cars visited domestic market in the first place, in support of then for export. Thus, local ingestion became one the primary drivers of expansion as well as export. Alternatively, Korean strategy was based on export-first principle. Matching to this insurance plan, 'Korean firms were marketing their products in abroad markets somewhat than in local markets', while many of consumer goods were inaccessible for Koreans or even prohibited to deal. For example, color Tv sets were accepted to home market only in 1980 (Harvie & Lee 2003).
The government financial development insurance policies in Japan and South Korea were framed into economical programs. Economic planning became an important device in supervising financial processes and applying insurance policies of industrialization and export-promotion. Being used reasonably, planning performed a significant role in attaining economic progress. The plans did not have a form of strict programs like in central planning economies, but served as indications for the further development and informed the public about the government expectations for future years.
Economic progress in Japan was combined with the several monetary plans. The plans usually included the medium-run scenario of development, stated the goals and priorities of the insurance plan, and, finally, mentioned the possible line of action for the private sector. The first one - the Economic Self-Reliance Five-Year Plan was adopted in 1955. It was accompanied by the Doubling National Income Plan in 1960, which became the most effective one. Aiming at doubling national income, the plan was put into practice even more efficiently than it was expected. The 1970s were also marked by several economical plans; each of them was designed appropriately to the situation to handle current problems. The Economic and Community Development Plan of 1967-1971 and the brand new Economic and Community Development Plan of 1970-1975 were focused on the issues that appeared as a effect of the immediate economic progress and emphasized balancing monetary development. Further, the Economic and Social Basic Plan, which was dealing with the development of Japan internationally and welfare of world, was in force between 1973 and 1977. The first engine oil crisis brought changes to the Japan's government economic policies, therefore the Economic Plan for the Second 50 % of the 1970's released for the period of 1976-1980 promoted initiatives for energy-saving (Otsubo 2007).
Likewise, in South Korea, economical planning was an essential element of authorities developmental policies. Economic plans were produced by the special agency, The Economic Planning Table, set up in 1961. Totally, seven five-year economic development plans were implemented during the economic miracle period of 1960s-1990s. Strategies were establishing targets of various macroeconomic signals, such as rate of progress, rates of investment and saving as a share of GNP, as well as exports and imports targets. The general path of development and goals to achieve were mentioned in the ideas. Strategies also included the development strategies. Generally, Korean economic development ideas paid special focus on industrialization and exports as the key factors of economical growth. At the original stage, emphasis was placed on advertising of light sectors development and import substitution, whereas later, concentration shifted to heavy and chemical sector, and also exports development. Within the last three programs the course was considered on continuous easing of authorities control and liberalization of trade (The Federation of Korean Sectors 1987).
Although the government policies and reforms evidently made the greatest contribution to the Japan's and South Korea's economic growth, it is worth to mention one more important factor, without which financial miracle wouldn't normally, probably, happen whatsoever. This identifies the ethnical peculiarities of the Japanese and Koreans. Japan and South Korea are both East Parts of asia with strong collectivist culture affected by Confucianism. Being both basic social features, Confucian custom and collectivism create a distinctive and favorable environment for monetary development. Confucianism as an official ideology was dominating in East Parts of asia from the finish of the 13th century. By the finish of the 19th century its effect became fragile and limited, now Confucianism does not exist in its original understanding as the communal and political system. Nevertheless, Confucian ethics and beliefs still stay relevant in the modern East Asian societies. The worthiness system along with the social composition in Japan and Korea are highly affected by the Confucian custom, which is quite apparent in everyday living. Principally, the Confucian teaching stressed the humaneness and the harmonious relationships between your people. Used, this process means the admiration to the regulators, to parents, to elder people, putting collective interests before the personal, and caring for other members of the group. The dominance of the Confucian system of worth contributed to the formation of the strong collectivist culture in East Asian countries, in contrast to the Western European individualism. The need for nation, population, community and family over the individual has become the key feature of East Asian ethnicities, Japanese and Korean particularly. Obviously, such attitude of Koreans and Japanese to the collective pursuits and their strong feeling of responsibility prior to the community are among the key factors that added to the success of these nations. Generally, owing to these national attributes, East Asia is among the most most dynamically producing region, growing more robust and attaining more impact on the international market over the last decades (Hang up 2011).
To conclude, Japan and Korea arrived to the financial miracle in a significant similar way. Despite the deep economical crises and cultural and political instability brought by the wars, Japan and South Korea efficiently transformed into economically advanced countries within several years, which are very rare circumstances in world record. Although sometimes different in details, Japanese and Korean techniques, generally, coincide in many aspects. Economic development in both situations was led by intense industrialization and export-promotion integrated through the machine of administrative assistance and economical planning. Consequently, it appears that this particular blend of devices against a qualifications of East Asian cultural tradition resulted in such outstanding results and created monetary miracle in Japan and South Korea.
In the second 50 % of 20th century, Japan and South Korea presented to the entire world two notable instances of remarkable economic transformation known as monetary magic. Many scholars concur that a lot of a credit for their success belongs to the government insurance policies. This thesis has been a research of the mechanism of Japanese and Korean economic miracles in the framework of government plans in historical point of view. The first goal of the research was to determine what were the essential policies that contributed to their monetary miracles. And second of all, it directed to determine if Japanese and Korean solutions were similar. It was supposed that monetary development strategies of Japanese and Korean government were partly similar, while based mostly primarily on guidelines of industrialization and export-promotion.
At the beginning of their route, Japan and South Korea were greatly affected by the conflict and, as a consequence, plunged into the deep sociable and financial crises. To recover their economies, countries' governments undertook quite similar approaches. Largely, their development habits were seen as a government intervention in to the market processes through administrative direction and by making use of economic plans. While not heading to extremes, Japanese and Korean strategy allowed preventing both deregulation of the free-market system and over-regulation of central planning. The policy of reasonable, healthy and appropriate involvement into economy became quite effective in Japanese and Korean cases (Liu 2012). Economic development insurance policies emphasized extensive industrialization and promotion of export as the basis of economic development. The industrialization and exports were activated by means of effective mobilization and allocation of home and foreign capital, transfer of foreign systems, maintaining strong relations with business conglomerates, and also restriction of imports. Noteworthy, the success of the particular development strategy in both Japan and South Korea was not unintentional, but owes to the East Asian ethnical background based on Confucian and collectivist tradition. Similarly to Japanese and Korean experience, other East Asian countries, including Singapore and Taiwan, also managed to achieve high economic growth within quite a short time frame through this system. The examples of Japan, South Korea, and other countries of East Asian region that come to high development allow let's assume that this approach forms the basis of so-called East Asian style of economic progress.
To conclude, during the last 25 years Japanese overall economy recorded average growth rate of around 1. 3% on a yearly basis. Certainly, this shape can not be weighed against the high development of the 1960s. However, against a background of the world craze towards economic decline, this rate will not look that bad which is in line with growth rates of other developed countries. In spite of slow expansion, Japan still remains one of the greatest economies on earth. Moreover, official figures showing economic drop do not indicate actual Japan's simple fact. Japan is an extremely developed and rich country with one of the best standard of living. Alternatively, South Korea is one of the most rapidly growing countries being the 15th most significant economy on earth. Korea is known as one of the Asian Tigers as well as Taiwan, Singapore, and Hong Kong. During the last several years, its overall economy has been growing at a well balanced rate of around 3% per annum. Korea and Japan jointly are among the world market leaders of know-how (Blaauw 2014; Dadush 2014). A lot of the present economic attainments of Japan and South Korea can be followed to their economic miracles of the next half of 20th century. Despite some recent and current challenges, Japan's and Korea's history demonstrates their great potential, so it is usually to be believed that better still accomplishments are yet to come.
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