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01 capitalism

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  • 1. News topic• http://world.kbs.co.kr/english/news/news_ Ec_detail.htm?lang=e&id=Ec&No=91445& current_page=• http://world.kbs.co.kr/english/news/news_ Ec_detail.htm?lang=e&id=Ec&No=91416& current_page=2• http://world.kbs.co.kr/english/news/news_ Ec_detail.htm?lang=e&id=Ec&No=91474& current_page=
  • 2. Trade trend• http://stat.wto.org/CountryProfile/WSDBCo untryPFView.aspx?Country=KR&Languag e=F
  • 3. Richard Bronk• US model- The liberal market approach- Anglo-Saxon countries• German model- So-called “co-ordinated” market economies- Sweden, Japan.• Hybrid systems: France, Korea(After 1997)
  • 4. Michel Albert• Albert, Michel. (1991). Capitalisme contre capitalisme. Paris: Seuil- The Rhineland model (stakeholder economy)- American or Anglo-Saxon model (shareholder economy)• The Rhineland Model- A regulated market economy with a comprehensive system of social security.- Government, employers organisations and labour unions consult each other on economic goals and on the policy instruments to be used.- In the Rhineland, therefore, the welfare state is combined with a so-called "consultation economy".- Harmony of interests.- The primary goal is not the maximisation of short-term profits for the benefit of the shareholders.- The main concern is a sustainable, stable and continuous economic growth and a high level of employment.
  • 5. Michel Albert• American or Anglo-Saxon model• Shareholder economy.• Maximizing short-term profits for those who invest.• Less regulated than the Rhineland.• Its focus is said to be not on any harmony of interests, but on competition and if necessary confrontation.• Under the Anglo-Saxon type of capitalism individual responsibility plays a more important role than in the Rhineland, with its organized care and solidarity.
  • 6. Different Institutions• Relation between employees and employers- Trade-Unions- Employers’ Organizations• Labor laws
  • 7. Union Density
  • 8. Culture’s consequences
  • 9. Studies of Hofstede Hofstede, Geert (1982), Culture’s consequences, Sage Publications Countries Power Individualism Masculinity Uncertainty distance AvoidanceWest Africa 77 20 46 54 Germany 35 67 66 65 Denmark 18 74 16 23 USA 40 91 62 46 France 68 71 43 86Great Britain 35 89 66 35 Japan 54 46 95 92 Korea 60 18 39 85 The 38 80 14 53Netherlands Russia 95 47 40 75
  • 10. Divers styles of management Meier, Olivier (2006). Management interculturel, Paris:Dunod.• North American Model :- Important role of market competitiveness- Importance of individuals and contracts- Strong inequality- Low unemployment- Low union rate- Limited state intervention• Asian Model :- Different Cultures inside of Asian countries- Collective value- Solidarity- Consensus- Right and obligation between employees and employers
  • 11. Divers styles of management Meier, Olivier (2006). Management interculturel, Paris:Dunod.• European model- French model : Strong Intervention of State, Importance of Hierarchy, Importance of big business, Conflict between employees and employers Elite bureaucracy- German model : Importance of banks, Importance of small business, Strong vocational training, Strong labor-union, Co-management.• African model : Family conception, Importance of hierarchy, Paternalist leadership
  • 12. Selected Unemployment Rates January 2008 – January 2009
  • 13. Unemployment rate
  • 14. Labor Productivity Growth, Selected OECD Countries,1981–2006
  • 15. Namdaemoon area 1890, 1930
  • 16. Economic Growth PopulationEconomic Changein Colonial Period Industrial Modernization
  • 17. Wallerstein’s World system theory (1974)This division of labor refers to the forces and relations ofproduction of the world economy: one focusing on labor-intensive, and the other on capital-intensive production.
  • 18. Electricity cut off in May 14, 1948• Electricity Production 1,434,000kw• North Korea: 84%• South Korea: 16%• Almost of hydro electricity production equipments are located in North Korea• June 17, 1947: South and North Korea’s Electricity Agreement (4 million dollar value’s merchandise)• May 10, 1948: General Election in South Korea- Dang In Ri Thermal power station(1930): 22500kw• Floating Power Plant Ship – 20000kw (Incheon), 6500kw (Busan)• Lack of electricity: limited Electricity Distribution until 1963
  • 19. Soo Pung Dam (1930)
  • 20. Electricity Substation in Gaeseong Industrial Complex (June 21, 2007) Supply of South Korean in Gaeseong Industrial Complex (2005) 15000kw100,000~200,000 kw
  • 21. Destruction by Korean War South Korean Damage (86% of Korean GNP)
  • 22. Economic Dependence on International Aid• 70% of Korean Import from International Aid• From 1948 to 1960, 17% of Korean GNP depended on International Aid• US aid in Korea- Total US aid in Korea 5,434,000,000 US$ (1946-1962) – the largest recipient of US aid- Total US aid in the World 97,675,000,000 US$ (1946-1962)
  • 23. Import substitution industrialization• Source of capital: Korean Governmental sales of US aid goods – Source for 43.2% of Korean national budget• Korea-US Combined Economic Board: Decision of the orientation of capital use• “3 white industries”: Textile, Wheat and Sugar industries• Interest rate lower than inflation rate- Inflation rate: over than 20%- Private financial market’s interest rate (사채): 20~25%- Retail bank’s interest rate: 18.25%- Korea Development Bank’s interest rate: 3~12%• Consumer good industry• Limited impact for the economic development
  • 24. High inflation• Wholesale price index- 1955: 100- 1957: 170.3- 1959: 183.3• Low domestic savings rate• 1953-1962: 1.4%
  • 25. Economic difficulties before 1960’s• Since financial support from United States shrank, economic depression deepened.• Under the economic aid, Korea achieved yearly 3.8% economic growth.• However, a rate of economic growth decreased to 1.9% in 1960’s and GNP was $80
  • 26. Park, Chung-heehttp://www.youtube.com/watch?v=ZbmF4btDOz8
  • 27. PARK, CHUNG HEE SYNDROMLaunched five-year plans for economic developmentLaunched Saemaeul (New Community) MovementBuilt the Seoul-Busan expresswayBuilt an Integrated Steel Plant in Pohang 1962 1979 Average Economic 9.1% growth rate World Rank in GDP 101th 49th Export 5,480 million $ 15 billion $
  • 28. PARK, CHUNG HEE SYNDROM WHY? Result of ironic situation in Korea. "Whether democracy brings home the rice?" Korea has become democratized and the current administration is of a democratic political faction, but the lives of everyday people are getting harder.
  • 29. GDP (1960)• Philippines: $6,944,483,000.00• South Korea: $3,892,272,000.00
  • 30. South Korea (GPD per capita)1969 $239.261968 $194.801967 $157.311966 $130.281965 $105.781964 $120.651963 $142.381962 $103.881961 $91.63
  • 31. South Korea (GPD per capita)1979 $1,746.751978 $1,382.931977 $1,041.581976 $824.451975 $608.241974 $555.671973 $403.461972 $322.711971 $302.211970 $278.82
  • 32. South Korea (GPD per capita)1989 $5,438.241988 $4,465.671987 $3,367.531986 $2,702.641985 $2,367.771984 $2,306.851983 $2,117.531982 $1,938.131981 $1,845.661980 $1,674.38
  • 33. South Korea (GPD per capita)1999 $9,554.431998 $7,462.841997 $11,234.771996 $12,249.181995 $11,467.811994 $9,525.441993 $8,219.911992 $7,555.281991 $7,122.711990 $6,153.10
  • 34. South Korea (GPD per capita)2006 $18,340.762005 $16,387.642004 $14,152.692003 $12,709.672002 $11,486.552001 $10,176.552000 $10,884.45
  • 35. Jangchung Gymnastic Center (1963)
  • 36. Industrialization• The Economic Planning (established in 1961)• Program of rapid industrialization based on exports• First Five-Year Economic Development Plan (1962-66)• Second (1967-71), third (1972-76), and fourth five-year economic development plan(1977-81)• Exports also were encouraged by direct subsidies; all taxes and restrictions on the import of intermediate goods that were to be used to produce export products were removed.
  • 37. First Five-Year Economic Development Plan• Secured resources (Coal)• Development of light industry• Promotion of basic industries (electric product, textile)• Increase of agricultural productivity• Improvement of farm household income
  • 38. First Five-Year Economic Development Plan• Lack of Capital – Government also tried to develop the heavy industry. However, lack of capital is un obstacle.• Low saving rate• Government decreased the interest rate to stimulate investment. However, this policy caused the inflation.• Due to lack of domestic capital, the capital resource for the economic development had to depend on foreign capital.• In 1963, the government devaluated Korean currency and increased the interest rates.• Korea joined GATT (1967)
  • 39. Outcome of the first five-year economic development plan 1962~66 1962 1963 1964 1965 1966 (Average) GDP 239 247 271 280 307 A rate of Economic growth 4.1 9.3 8.9 8.1 11.9 8.52 A rate of National Saving 0.8 7.0 6.5 5.8 10.5 6.1 1st Industry 33.4 32.5 35.1 32.3 31.7 33.0 2nd industry 21.7 23.0 22.3 24.8 25.7 23.5 3rd industry 44.9 44.5 42.6 42.9 42.6 43.5 Current Account -292.0 -402.8 -221.0 -198.6 -250.6 Export 54.8 86.8 119.1 175.1 253.7 Import 421.8 560.3 405.0 450.0 673.0Source : The Economic Planning Board, <Economic Policy in Development Era>, 1982
  • 40. Second Five-Year Economic Development Plan• Modernization of Industry• Economic Independence• Self-sufficiency of food, Increase of export, modernization of chemical and steel industry• Expansion of Social overhead capital (SOC)- Transportation, Harbor, Highways
  • 41. President Park, Chung-hee’s visit in West Germany (1964)
  • 42. German Autobahn
  • 43. Construction of Highway• Seoul-Busan Highway• Commencement of construction: 1968• Completion of construction: 1970• Solution for transportation problems• Fast connection with producers and customers.
  • 44. Opposite political party’sdemonstration against Highway construction
  • 45. Highway• U.S. Route 40 an east–west United States highway (1926)• Germany: 7000km’s Highway construction (1930’s)• First French Highway (1941)• First French North-South Highway (1970)
  • 46. Outcome of the second five-yeareconomic development plan (1967-71) 1967 1968 1969 1970 1971 1967~ GDP 320 348 387 408 437 A rate of Economic Growth 6.6 11.3 13.8 7.6 9.4 9.7 Agriculture 37.5 34.2 33.2 30.4 28.8 Mining andmanufacturing industries 15.1 16.7 17.5 19.5 20.9 SCO 47.4 49.1 49.3 50.1 50.3 Current Account -191.9 -440.3 -548.6 -622.5 -847.5 Export 335 486 658 882 1132 Import 909 1322 1650 1804 2178Source : The Economic Planning Board, <Economic Policy in Development Era>, 1982
  • 47. Capital Resources• Normalization of Korea-Japan relations: $800 million loan from Japan• Severe trade deficit with Japan• Sending Korean troops to Vietnam: $200 million loan for dispatch of troops• Sending Korean miners (7936) and nurses (10723) to West Germany• The conflict in Indochina stimulated economic growth
  • 48. Problems• Foreign Loan – $200 million dollars during the second five-year economic development plan• Foreign investors enforced Park, Chung-hee administration to use their goods.• Under this condition, it was very hard for Korean industries to develop themselves.
  • 49. Problems• In order to develop economy, technology and capital were indispensable.• Foreign capital goods, raw materials, core components had to be bought.• Korean industry produce its products with imported raw materials and Korean cheap labors.• More export, More import!
  • 50. Outcome of the third five-yeareconomic development plan (1972-76)• Investing in steel, machinery, shipbuilding, electronics, chemicals• Automobiles began to be exported to a few markets.• The plan sought to better prepare South Korea for competition in the world market.
  • 51. Pohang Iron and Steel Corporation (POSCO) - 1973
  • 52. Production Global MaGlobal Rank Company in 2005 rket Country (million tons) Share % 1 Mittal (Baa3/BBB+) 63 5.56 Netherlands 2 Arcelor (Baa2/BBB) 47 4.15 Luxembourg 3 Nippon (A1/BBB) 32 2.82 Japan 4 Posco (A2/A-) 31 2.74 South Korea 5 JFE (Baa1/BBB) 30 2.65 Japan 6 Baosteel (BBB+) 24 2.12 China 7 US Steel (Baa1/BB) 20 1.77 United States 8 Corus (B1/B+) 18 1.59 United Kingdom 9 Riva 18 1.59 Italy 10 Nucor (A1/A+) 18 1.59 United States 11 ThyssenKrupp (Baa2/BBB) 17 1.50 Germany 12 Tangshan 16 1.41 China 13 Gerdau (Baa1/BB+) 15 1.32 Brazil 14 Severstal (B2/B+) 14 1.24 Russia 15 Evraz (B2/BB-) 14 1.24 Russia Others 756 66.73 Source: Iron and Steel Statistics Bureau
  • 53. First Lady, Yuk, Young-Soo’s (Inauguration of first ship ofHyundai Heavy Industry, 1974)
  • 54. HyundaiAutomobile’s first export (Pony model, Equator, 1976)
  • 55. Construction in Middle East
  • 56. Hyundai Construction (Jubayl , Saudi Arabia) Contract was signed in 1976930 million US$ - equivalent to ½ Korean Budget
  • 57. Side effects of growth-oriented economic strategy• The situation began to deteriorate in 1978.• The emphasis on exports had produced a shortage of domestic consumer goods• It was exacerbated by the increasing demands created by rising wages and the advance in living standards.• Price controls imposed on producers of consumer goods discouraged the manufacture of these goods.• Meanwhile, the inflow of dollars rapidly expanded the money supply and inflation became a serious problem.• According to a Bank of Korea report, consumer prices rose only 14.4 percent in 1978, but most observers agreed that the actual rate was near 30 percent.
  • 58. Chun Doo Hwan
  • 59. Chun Doo Hwan’spolicy of low-inflation
  • 60. American Deficit (Billion US$) 1981 82 83 84Budget Deficit 78.9 127.9 207.8 185.3Trade Deficit 28.0 36.4 67.1 112.5
  • 61. Plaza accord• An agreement between the governments of France, West Germany, Japan, the United States, and the United Kingdom• Depreciation of the U.S. dollar in relation to the Japanese yen and German Deutsche Mark by intervening in currency markets.• The five governments signed the accord on September 22, 1985 at the Plaza Hotel in New York City.• The value of Korean currency, KRW(Won) was linked to the US $.• Korean product’s price competitiveness
  • 62. Decrease of Oil price
  • 63. KOREA 86 87 88 89 TotalBalance of current account 47 101 145 53 346 Balance of Trade 43 75 113 43 274 Current Price GDP 111 140 188 231 670
  • 64. Seoul Olympic Games• South Korea hosted the Asian games in 1986 and the Olympic games in 1988• Seoul, South Korea hosted the 6th Asian Games in 1970.• Due to the economic and security difficulties, South Korea had to drop its bid.• The 6th Asian Games were held from December 9, 1970 to December 20, 1970 in Bangkok, Thailand.
  • 65. Bangkok Asian Games (1970)
  • 66. Seoul Asian Games (1986)
  • 67. Seoul Olympic Games (1988)
  • 68. Seoul Olympic Games (1988)
  • 69. http://www.youtube.com/watch?v=GwAqv9mzMbAhttp://www.youtube.com/watch?v=eBN1S_EnVaYhttp://tvpot.daum.net/clip/ClipView.do?cateid=16&clipid=9631393&q=&type=chal
  • 70. Labor productivity growth 85~89 89~97 98~01 1person~9persons 14.08 7.55 6.89 10~19 12.73 8.45 8.55 20~99 12.44 8.87 12.07 100~299 11.58 10.64 9.33More than 300 persons 8.92 11.25 12.74 From the end of 1980’s, Capital intensive industry leads the Korean Economy
  • 71. Asian Financial Crisis 1997• The crisis started in Thailand with the financial collapse of the Thai baht.• Facing to the attack on Thai Bath, Thai Government used almost of foreign reserve. It had to decide to abandon Peg System of Thai Bath to the USD.• As the crisis spread, the local currencies experienced sharp depreciation of currency.• Indonesia, South Korea and Thailand were the countries most affected by the crisis.
  • 72. IMF’s intervention• On 3 December 1997, the Korean government signed the papers with the IMF that prescribe these basic guidelines for the revitalization of the Korean economy.- Guidelines on macroeconomic policies including monetary and fiscal policies- 4 major sectors: financial sector, private sector, public sector and labor- Liberalization policies on capital market, investment and trade.
  • 73. Gold collection
  • 74. Change in GINI coefficient
  • 75. GDP (1960)• Philippines: $6,944,483,000.00• South Korea: $3,892,272,000.00
  • 76. South Korea (GPD per capita)2006 $18,340.762005 $16,387.642004 $14,152.692003 $12,709.672002 $11,486.552001 $10,176.552000 $10,884.45
  • 77. South Korea (GPD per capita)1999 $9,554.431998 $7,462.841997 $11,234.771996 $12,249.181995 $11,467.811994 $9,525.441993 $8,219.911992 $7,555.281991 $7,122.711990 $6,153.10
  • 78. South Korea (GPD per capita)1989 $5,438.241988 $4,465.671987 $3,367.531986 $2,702.641985 $2,367.771984 $2,306.851983 $2,117.531982 $1,938.131981 $1,845.661980 $1,674.38
  • 79. South Korea (GPD per capita)1979 $1,746.751978 $1,382.931977 $1,041.581976 $824.451975 $608.241974 $555.671973 $403.461972 $322.711971 $302.211970 $278.82
  • 80. South Korea (GPD per capita)1969 $239.261968 $194.801967 $157.311966 $130.281965 $105.781964 $120.651963 $142.381962 $103.881961 $91.63
  • 81. GDP per capita, 1990US$