The Japanese, who dominated Korea from the late 1890s to 1945 and who governed Korea as a colony from 19l0 to 1945, were responsible for the initial economic modernization of Korea. Before 1900 Korea had a relatively backward agricultural economy. According to scholar Donald S. Macdonald, for centuries most Koreans lived as subsistence farmers of rice and other grains and satisfied most of their basic needs through their own labor or through barter. The manufactures of traditional Korea-- principally cloth, cooking and eating utensils, furniture, jewelry, and paper--were produced by artisans in a few population centers.
Following the annexation of Korea in 19l0, Japan thrust a modern blend of industrial capitalism onto a feudal agrarian society. By the end of the colonial period, Japan had built an extensive infrastructure of roads, railroads, ports, electrical power, and government buildings that facilitated both the modernization of Korea's economy and Japan's control over the modernization process. The Japanese located various heavy industries--steel, chemicals, and hydroelectric power--across Korea, but mainly in the north.
The Japanese government played an even more active role in developing Korea than it had played in developing the Japanese economy in the late nineteenth century. Many programs drafted in Korea in the 1920s and 1930s originated in policies drafted in Japan during the Meiji period (1868-1912). The Japanese government helped to mobilize resources for development and provided entrepreneurial leadership for these new enterprises. Colonial economic growth was initiated through powerful government efforts to expand the economic infrastructure, to increase investment in human capital through health and education, and to raise productivity.
In some respects, South Korean patterns of development after the early 1960s closely followed the methodology introduced by the Japanese fifty years earlier--industrialization from above using a strong bureaucracy that formulated and implemented economic policies. Many of the developments that took place in Chosen, the Japanese name for Korea during the period of colonization, had also occurred in pre-World War II Japan; they were implementation of a strong education system and the spread of literacy; the rise of a strong, authoritarian government that combined civilian and military administration to govern the state with strict discipline; the fostering and implementation of comprehensive economic programs by the state through its control of the huge national bureaucracy; the close collaboration between government and business leaders; and the development of industries by the major Japanese zaibatsu (commercial conglomerates).
Some political analysts, for example, Bruce Cumings and Gavan McCormick, have been impressed with the common elements in prewar and postwar economic growth in South Korea and especially with top-down government management of the economy. Economists, such as Paul W. Kuznets, however, also draw attention to the dysfunctional aspects of the colonial legacy and find some of the discontinuities important.
It is also important to note that between the end of World War II and Park Chung Hee's ascension to power in 1961, there was a major rupture, both politically and economically, from the Japanese colonial period. There was considerable disruption after 1945 because of plant exhaustion; the loss of linkages with Japanese capital and with upstream and downstream industrial facilities; the loss of technical expertise, distribution systems, and markets; and the subsequent obliteration of the industrial plant during the Korean War (1950-53).
Data as of June 1990