worksheet 6

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

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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

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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

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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

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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-

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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:

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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

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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

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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.

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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

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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

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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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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

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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.

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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.

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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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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. ( o

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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

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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

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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

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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

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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. ( o

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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

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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

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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.

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