The evolution of South Korea's rural institutions: the political economy of export promotion and market protection.
KEYWORDS: economic development, agriculture, livestock, institutions, protection, export promotion, National Livestock Cooperatives Federation (NLCF), National Agricultural Cooperatives Federation (NACF), Park Chung Hee
The Republic of Korea (hereafter South Korea or, for brevity, Korea) began an economic takeoff in the 1960s that later generated a debate over the causes and origins of the Korean "economic miracle." The debate surrounding South Korea's economic development focused on whether the Korean government adopted market-oriented or market-intervention measures to reinforce an economic development policy based on the export of manufactured goods. The neoclassical school argued that Korea sustained high economic growth rates because the government provided macroeconomic stability and adequate incentives for Koreans to save and invest. (1) In particular, advocates of the neoclassical view cite a Korean stabilization plan that included fiscal restraint, a devaluation of the won in 1964, and a sharp increase in interest rates in 1965 as having created an environment for South Korea's sustained economic growth based on a comparative advantage in labor-intensive manufactured goods. (2)
Most scholars espousing the neoclassical interpretation also acknowledge widespread market intervention in Korea, but they discount its effectiveness. Critics of market intervention also blame government policies for the distortions that accompanied the promotion of heavy and chemical industries in the 1970s, and for the financial crisis of 1997-1998. Some argue that Korea's economic growth could have equaled or surpassed the actual record if the Korean government had taken a more laissez-faire approach. (3)
In contrast to the neoclassical view, some scholars believe that government policies and extensive market intervention in East Asia accelerated economic growth. The statist school argues that information problems, risk, and late entry limit or restrict development, and that only by "getting the prices wrong" through government intervention will firms engage in the activities necessary to trigger sustained economic growth. (4) According to the statist view, South Korea in the 1960s represented a "strong state" insulated from particularistic societal demands that was able to accelerate growth through a coherent economic development strategy.
Both of these interpretations place strong emphasis on the industrial sector, whether through market means of resource allocation to export-oriented manufacturing or as a result of state direction. These approaches imply that Korea was able to bypass the traditional economic development path, which requires an increase in agricultural productivity to provide capital and labor for the industrial sector, because the Korean government established an institutional setting for industrialization and the subsequent allocation of scarce resources to industrial firms. (5)
This article argues that these views misrepresent the actual course of economic policy in South Korea during the transition to rapid growth and thus misunderstand the political economy of reform in the country as well. The Korean government under Park Chung Hee initially implemented a traditional economic development plan that targeted the agricultural and livestock sectors to accumulate foreign exchange and surplus capital and labor for the industrial sector. (6) The state implemented a set of policy incentives for export-led growth that applied to all sectors, including agriculture and livestock. Moreover, the Korean government initially targeted agricultural and livestock products for export promotion, in line with what a simple political economy analysis of policy in an overwhelmingly rural society would predict. The new military leadership was dedicated to export-led growth because of its nationalistic attitude, as well as the security externalities that economic growth would bring; but its conception of export-led growth did not neglect the importance of the rural sector. (7) In the 1960s the Korean government considered beef and livestock exports as a promising source of scarce foreign exchange and as mechanism for shoring up political support in the countryside.
South Korean agricultural and livestock products were targeted for export promotion in the early 1960s, but international trade quickly revealed a comparative disadvantage in these products. By this time, however, Korea had established institutions to promote agricultural and livestock exports. The political economy behind the creation of these institutions later had implications for the liberalization of these sectors. As the Korean economy began to industrialize, there were overwhelming economic reasons to liberalize agriculture and livestock, but political leaders took extraordinary measures to signal their commitments to the rural sector in return for political support, including the establishment of complex institutions to intervene in the market and protect rural interests. Some rural institutions existed before Park's government implemented its export promotion strategy, and some were established afterward. However, all were later transformed from export-promotion mechanisms into instruments of protection.
The political economy of this transformation will be examined, with a particular emphasis on livestock institutions; however, I also will show how these institutions operated in more economically significant sectors, such as rice.
The Beginning of Korea's Livestock Industry
During the Japanese colonial period (1910-1945), Tokyo viewed Korea as a source of agricultural and primary products for the industrializing home islands. In the 1920s the colonial government began to organize livestock cooperatives and promote livestock exports, but the economic hardships of the war caused many farmers to slaughter their cattle for food. And in the days following Korean liberation on August 15, 1945, Koreans looted Japanese property and slaughtered many cattle for "celebratory feasts." The looting destroyed many of the facilities for raising cattle and processing milk products, and furthermore, anti-Japanese sentiments caused Koreans to reject much of the livestock and dairy technology introduced by the Japanese. (8)
The outbreak of the Korean War in June 1950 was even more devastating to the livestock sector. Therefore, in 1951 the South Korean government unveiled a plan to replenish livestock and established cattle protection zones in the areas recaptured by UN forces, and in 1953 the government formulated a Five-Year Livestock Restoration Plan (1953-1957). The five-year plan had the following objectives: restrict the slaughter of cattle to increase the breeding stock, expand the production of high-quality livestock, utilize foreign aid to import livestock for breeding, improve sanitation and disease control to reduce losses, and increase feed production in unused land areas. (9)
The first two Five-Year Livestock Restoration Plans were successful in raising livestock production. However, the plans began with a very low base, and beef prices were subject to wide fluctuations because farmers used their cattle for plowing in the spring and then slaughtered many of them for meat throughout the rest of the year. The problem of cyclical price fluctuations led to the frequent replacement of livestock bureaucrats and incoherent policy in the waning days of the First Republic.
The Five-Year Livestock Promotion Plan languished as President Rhee Syngman was overthrown in April 1960 and the opposition Democratic Party established a parliamentary government led by Prime Minister Chang Myon in August 1960. The Chang government was overthrown in a coup d'etat on May 16, 1961. Four days later, the junta, led by Park Chung Hee, announced the establishment of the Supreme Council for National Reconstruction (SCNR) and appointed military officers to all cabinet positions. (10) The SCNR took over the legislative, executive, and judicial functions of government and was in power from May 19, 1961, to December 26, 1963. (11)
The coup leaders were relatively young, and the majority of them (72 percent) came from poor rural families. (12) As Korea was a poor agricultural country in the 1940s and 1950s, many of Korea's military officers came from small tenant farms. Park Chung Hee was no exception; he was the son of a poor tenant farmer in Gyeongsang province. The humble backgrounds of the junta leaders may have led them to implement populist policies, including policies that were beneficial to the rural sector. (13) But even if their rural backgrounds were not the reason for the policy changes, Korean demographics in 1961 and the need to build political support would have steered the SCNR in the same direction. In 1960 about 72 percent of South Koreans lived in rural areas, and many of them viewed urban industrialists as being tainted with the corrupt practices of the Rhee government. (14) One of the SCNR's first actions was to extend debt relief to farmers. (15) This policy was politically astute as the SCNR was looking for support and legitimacy in the aftermath of the coup. In June 1961 the SCNR issued a law for "handling usurious loans" that permitted farmers to report all debts incurred before May 25, 1961, with an annual interest rate of 20 percent or above. The National Agricultural Cooperatives Federation (NACF), established by the SCNR in 1961, assumed these debts, and farmers paid off the loans with a reduced interest rate of 12 percent. (16)
Export Promotion for Agricultural and Livestock Products
The SCNR also implemented policies to increase the exports of agricultural and livestock products in order to raise rural income and support industrialization. These policies were in stark contrast to those of the First Republic. President Rhee favored a small group of industrialists, many of them former Japanese collaborators. The economic policies of the First Republic can best be described as promoting import substitution and maximizing US aid. The Rhee government also pursued a policy of low food prices that depressed production incentives and income in the rural sector.
The SCNR and the subsequent Third Republic (1963-1972) implemented export-promotion policies that led to the rapid expansion of manufactured exports, which were a catalyst for South Korea's economic takeoff. However, the same export promotion policies were also applied to agriculture and livestock. Conventional economic development theories at the time suggested that the agricultural sector should provide surplus labor, capital, and foreign exchange (through exports), as well as a market for industrial products. Park Chung Hee was very cognizant of the linkages between agriculture and industry, and he targeted the rural sector for development as part of his industrialization strategy:
More than anything else, Korea's late development has been due to backwardness in agricultural production and insufficient food supplies. Agriculture has not been able to provide the essential raw materials for industrialization, and the paltry incomes of farm households are the cause of extremely depressed markets for industrial goods. Therefore, industrialization is impossible without agricultural development; it is a precondition for the normal development of an industrial base. (17)
The foreign exchange constraint facing the Korean government was severe, so Park was looking for any sector that could provide export earnings. But since there was little industry, agriculture and livestock appeared to be the most immediate possibilities. Foreign aid had financed most of the First Republic's imports, and the Rhee government had a strategy of maximizing US aid, but by the early 1960s the United States had become committed to reducing the burden of providing military and economic assistance. The US desire to cut aid caused aid negotiations between the United States and the Rhee government to become quite contentious. Bilateral relations became strained once again because the United States felt uncomfortable with the SCNR's overthrow of a democratically elected government. (18) Since the United States briefly suspended economic aid after the coup, the SCNR recognized that South Korea could no longer rely on US aid; therefore, the SCNR had a strong desire to end the dependent relationship. (19) US aid also provided President John F. Kennedy with considerable leverage in extracting a commitment from Park to hold elections in 1963 even though Park faced extreme pressure from the military to extend SCNR rule. (20)
The SCNR's broad economic objectives, including the desire to end aid dependence, were revealed when it approved the First Five-Year Economic Plan at the end of 1961. The policy goal for the agricultural sector was to increase output for domestic consumption and export. During the colonial period Korea had been a major rice supplier for the Japanese empire, but a great migration of Koreans from abroad following liberation, political turmoil, and the Korean War turned the country into a large importer of grains, supplied in large part by US aid. But as the so-called Nathan Plan first proposed in 1954, the SCNR's agricultural policy targeted an expansion of rice production to replace aid as a source of foreign exchange. (21)
To help meet agricultural production goals, the SCNR promulgated the Agricultural Product Price Support Law on June 27, 1961, to "maintain appropriate agricultural prices with the objective of raising production and providing economic stability for the agricultural sector"--in effect, an "industrial policy" for agriculture and livestock. (22) The law gave the government extensive powers to intervene in the market and reverse the low-price food policy of the First Republic. These powers included government authority to purchase rice, guarantee farm loans, provide subsidies, and generally use any means to promote exports. Although the law was designed to provide price supports to encourage production and transfer income to farmers, a poor harvest in the fall of 1962 caused rice prices to soar in 1963, and the government had to utilize the powers under this law to keep prices down for price stability. (23)
In a related move to promote exports, the SCNR on September 9, 1961, promulgated the Export Cooperatives Law (Law No. 711), which permitted cooperative efforts in international marketing and prohibited noncompetitive or exclusionary practices among South Korean producers in exporting. In the 1960s several export cooperatives were formed for agricultural, fisheries, and livestock products, including the Korea Livestock Products Export Cooperative (KLPEC). (24)
The First Five-Year Economic Plan (1962-1966) also included a section on livestock development and a Ten-Year Dairy Promotion Plan that used 1961 as its base year. (25) But livestock development was not just targeted for domestic consumption; it was also targeted as an export sector, and South Korean producers did have some success. (26) On March 4, 1965, Korean livestock producers were quite optimistic about expanding cattle exports when the NACF and the KLPEC signed a long-term agreement with the Japan Livestock Trade Cooperative to export cattle to Japan. The agreement called for South Korea to export at least 3,000 head of cattle in 1965, with an option to increase exports in subsequent years. When the agreement was signed, the South Korean government and the NACF had the intention of reorganizing the KLPEC in order to achieve an export goal of 10,000 head of cattle to Japan in both 1966 and 1967. At the time, the Cooperative News reported that Korean cattle stocks had risen from 1,252,000 head in 1962 to 1,363,000 in 1963 (a 9 percent increase), implying that Korea was expanding production to increase cattle exports and foreign exchange earnings. (27)
However, rice has always been Korea's largest and most important crop, and it received even more attention in the export drive. In particular, the Korean government adopted a seven-year plan in 1965 to increase food production by an average of 6.2 percent a year. The plan called for food self-sufficiency by 1968 and an exportable grain surplus by 1969. (28) On January 9, 1965, President Park discussed the seven-year plan during his New Year's press conference, and he emphasized that South Korea had to find overseas markets for its agricultural and fisheries products and that the government's traditional role was to increase subsidies to accomplish this objective. (29)
The government effort to export primary products was extensive and included programs to improve the quality of agricultural inputs. These programs targeted higher output by providing mechanization, land reclamation, expanded roads and irrigation facilities, greater supplies of fertilizer and pesticides, and research and development to improve crop strains. This not only increased farm output but also indicated the Park government's commitment to the rural sector and to increasing food production. (30)
President Park reiterated his desire for South Korea to be an agricultural exporter on the nation's second Export Day (November 30, 1965), when he encouraged Koreans to exert greater effort because "they must win in intense international competition." Park's admonition extended to both the rural sector and industry; in fact, it may have been directed more toward the rural sector because of its sluggish export performance. The government policy of expanding agricultural exports assumed it was possible because of "idle" (surplus) labor in the countryside. (31) Therefore, "the government was urgently asking farmers to recognize that they could expand their markets and increase exports." (32) All agricultural and livestock products were considered potential export items, and the government exhorted farmers "to be aware of supply prices and market conditions, and to be always concerned about increasing the exports of agricultural products." (33)
Only three weeks later, the Ministry of Agriculture and Forestry (MAF) submitted a plan that targeted twenty-two agricultural, livestock, and fisheries products for import substitution and export promotion. (34) The plan had two policy objectives: (1) reduce or eliminate the imports of food products that could be supplied through domestic production (and save foreign exchange), and thus diminish the political influence of foreign suppliers like the United States; and (2) earn foreign exchange with products that could compete in international markets.
When President Park addressed the National Assembly on January 18, 1966, he emphasized that South Korea "must become a food exporter by fulfilling the Seven-Year Plan to Increase Food Production." Park declared that Korea was "preparing to transform the rural sector so that it could export products and provide resources for industry." Park even pledged to provide funds from Japanese reparations so that the rural sector could be modernized to meet these goals. (35) The following month Pak Tong-myo, Park's newly appointed minister of agriculture and forestry, announced in his first press conference that the government would strongly promote the agricultural sector so that it could provide resources for industry and export. (36)
As in other sectors, institutional changes were also an integral part of the government effort to promote exports. For example, on April 18, 1966, the NACF was expanded and a livestock department was added for the first time. The Special Cooperatives Section was elevated to become the Special Farming Department, charged with overseeing the Special Cooperatives Section, the Livestock Section, the Horticulture Section, and the newly formed Livestock Artificial Insemination Center. (37) The Livestock Section and the Livestock Artificial Insemination Center were created to increase the production of meat and dairy products in order to meet rising domestic demand and to enter export markets.
Despite the institutional reforms and incentives to encourage exports, agricultural and livestock exports failed to take off in 1966. President Park was keenly aware of this but had not yet given up on transforming the agricultural and livestock sectors into exporters. That October, Park was pleased with announced recent increases in rice production, but he was still dissatisfied because Korea had yet to become a grain exporter. In the Cooperative News, he admonished farmers that domestic agricultural prices were much higher than world prices. He cited the example of barley, which at that time was "about $60 per ton on the world market, but about $90 per ton in Korea." Park realized it was impossible to immediately begin exporting agricultural products, but he continued to believe that the agricultural sector would have to make gradual progress toward that goal and that the government would adhere to the main agricultural policies of the Second Five-Year Economic Plan. (38) Those policies included extensive land reclamation and the promotion of cash crops and livestock production to increase farm income. Park also stated that the two greatest policy problems facing agriculture were government management of price controls or supports for grain, and the expansion of markets (for export). (39)
On October 17, 1966, President Park issued instructions regarding the agricultural policies of the upcoming Second Five-Year Economic Plan. Park was concerned about the slow growth of the livestock sector and was determined to implement policies to promote growth in livestock by the end of the year. However, he may have begun to realize that export promotion in the agricultural and livestock sectors could not provide the employment and income benefits he had envisioned. The instructions issued on October 17 from Cheongwadae (the presidential residence) strongly advised all provincial governors to promote the growth of small and medium industries in rural areas, instead of solely concentrating on the development of the agricultural sector. (40)
The government addressed the livestock issue before the end of 1967 as Park had promised in his address on October 17. MAF Minister Kim Yeong-jun attended the First Korean Livestock Producers Conference on December 8 and delivered a message from President Park to about 500 livestock producers. He quoted the president as saying, "The livestock industry can play an important role in the country's economic development," and added, "The industry could make a great contribution by earning foreign exchange through exports." The minister relayed that President Park felt that "regardless of government subsidies, expected results (in growth and exports) could not be achieved unless producers participated in voluntary efforts for cooperation and production." (41)
The producers submitted a list of eleven demands to the government, but the conference adopted only three resolutions. Though the government and livestock producers were unable to agree on all issues, they agreed that livestock was a viable export sector. The conference resolutions were (1) the government would concentrate its efforts to find bold solutions to all bottlenecks that were becoming obstacles to the promotion of the livestock sector; (2) the government would consider policies to improve the diet of Koreans and secure the expansion of farm income; and (3)producers would increase livestock production in order to contribute to the supreme national goal of export promotion. (42) Livestock producers were interested in more concrete means of support and subsidy than the government was willing to provide, but the government objective was to integrate these producers into the existing institutional setting that was designed to meet Park's export and development goals.
Legislative changes also occurred in December 1966 to support Park's rural objectives as the National Assembly revised the Basic Agricultural Law to increase government intervention in agricultural markets and to promote exports. The law created an Agricultural Policy Deliberative Council directly under the president and stipulated that the government was "obligated to provide price stability" and that "agricultural imports should be regulated and exports should be promoted." (43)
As 1966 drew to a close, so did the First Five-Year Economic Plan. Although investment, domestic savings, and foreign investment levels were lower than anticipated, the economic growth rate targets exceeded what had been stipulated for the five-year period and for all years except 1962. (44) After a slow start in 1962, exports took off rapidly and greatly exceeded expectations by 1966, which compensated for the lower-than-expected savings and investment rates, and thus became the "engine" of South Korea's economic takeoff. However, labor-intensive manufactured goods dominated exports, and the export performance of agricultural and livestock products had been disappointing. Since the presidential election in May 1967 would essentially be a referendum on Park's economic plans, the president addressed the shortcomings of the plan to shore up political support.
In Park's 1967 New Year's address to farmers he acknowledged there had been a lot of criticism regarding the government's failed agricultural policies and that farm income may not have risen at all. But Park disputed these claims, citing the slow growth in agricultural output during the First Republic and the relatively superior performance of the previous five years. Park also referenced the "government's tremendous expenditures on the rural sector in 1966" and stated that "the average increase in rural income was 6.6 percent compared to 3.9 percent in the urban sector." (45) Park then told the farmers that the only way to raise their incomes and to improve their livelihoods continuously was by becoming price competitive in international markets and exporting. Furthermore, Park said the government would provide support but the farmers would have to work hard and diversify their production from grains into cash crops and livestock in order to become more prosperous. (46)
As the presidential election approached, Park had to address the relatively slower growth in the agricultural and livestock sectors or face the threat of losing the rural vote. On February 27, the Cooperative News carried the full text of an address by President Park entitled "The Nation Cannot Modernize Without Rural Modernization." In this address issued the previous day, Park stated that "industrialization was the key for Korea to escape its backwardness, but that there were limits to industrial advancement without agricultural development." Park went on to say that "while promoting development of the industrial sector, we have no choice but to pursue vigorously our principle agricultural polices." Park stressed that the industrial and agricultural sectors had to develop in tandem and that "small and medium agri-business firms had to grow in order to provide raw materials to industry and increase farm income." More specifically, Park still linked rural growth and development to exports, telling farmers that leadership and cooperation at the local level were necessary for government programs to be successful. He also encouraged farmers to seek this cooperation through the NACF. (47)
As economic growth in the rural sector continued to lag, electoral incentives were forcing Park to seek political support in the countryside. Just two days before the 1967 presidential election, the press announced that the government had decided to submit legislation to cut taxes for farmers. The tax cuts were to eliminate inheritance taxes on land holdings up to three jeongbo (1 jeongbo = 1 hectare), and the farmland registration tax was to be reduced from 1.5 percent to 1.0 percent. The proposed tax cuts were adopted during a cabinet meeting under the instructions of President Park. The Cooperative News emphasized that the farmland registration tax cuts were for the "protection of farmers" and that 99 percent of farm households would benefit. (48)
On May 6, 1967, Park was announced as the winner of the election that concluded on May 5. In previous presidential elections, opposition candidates had drawn greater support from urban areas, and the 1967 election followed this trend in Seoul and surrounding Gyeonggi province, where New People's Party candidate Yun Bo-seon outpolled Park 51.3 percent to 45.2 percent and 52.6 percent to 41.0 percent, respectively. However, Park trounced Yun in Pusan (64.2 percent to 31.2 percent) and in Park's home region of North Gyeongsang province (64.0 percent to 26.4 percent) and South Gyeongsang province (68.6 percent to 23.0 percent). (49)
The Shift from Export Promotion to Protection
Korean government policies had been promoting food products as export items, but the failure of producers to obtain international competitiveness resulted in unfulfilled government targets. Not only were agricultural and livestock producers unable to become price competitive in international markets and produce an exportable surplus, but they also were having trouble supplying enough food to meet domestic demand. Therefore, the government had to choose one of two options: liberalize agriculture and livestock, which would require importing the shortfall in supply, or continue granting subsidies and protection. The first option was politically unfeasible because Park had been promoting agriculture and livestock as export sectors and had committed himself to the proposition that agricultural development is a necessary condition for industrialization and economic prosperity. Park would have had to pay a tremendous cost in credibility, and the short-term social costs from a sudden liberalization of agriculture would have been great; the concomitant structural adjustments would have meant political suicide. In 1967, agriculture, forestry, and fisheries accounted for 37.5 percent of South Korea's economic output, compared to mining and manufacturing's 15.1 percent (with services making up the remainder). (50) The industrial sector was still relatively small compared to the rural sector, and it could not have absorbed a massive labor migration from the countryside in the short run.
About six and a half weeks after the 1967 presidential election, Park chaired Korea's Sixth Export Promotion Meeting, where an annual export target of $1 billion was set for 1971. During the meeting Park unveiled a plan to expand markets and exports for processed foods and cash crops such as mushrooms, asparagus, and raw silk. Park declared that a "system of mass production facilities" would have to be established with both domestic and foreign capital to meet the goal. He stressed that policy incentives should be considered to ensure that domestic ingredients were used in processed foods for export. (51)
Park had built elaborate institutional arrangements to promote the development and export of agricultural and livestock products, and these institutions had deeply penetrated his rural base of political support. To abandon this arrangement would also have meant the erosion of his political constituency. Clearly, Park's suggestion at the export promotion meeting that Korea adopt import substitution for the inputs in food processing revealed that inefficient domestic producers would have to be protected from lower-cost foreign producers of those inputs.
The South Korean government demonstrated the will to protect its "infant" agricultural and livestock industries in June 1967 when the Ministry of Agriculture and Forestry announced that it would continue to prohibit powdered milk imports. The dairy industry had been targeted for development in 1962, and by 1966 Korea had a surplus of powdered milk. (52) However, Korea had received powdered milk as aid, which had a detrimental impact on policy goals for the dairy industry. The MAF estimated that powdered milk production for 1966 and 1967 would total 1,127 tons, but domestic demand would only be 600-800 tons. The ministry was particularly concerned about the effect on dairy cattle prices, which had dropped to 190,000 won per head when it cost 270,000 won per head to import them. (53)
The dairy sector problem was relatively minor because the demand for powdered milk and dairy products was not significant and Korean producers were able to meet domestic demand. The political solution was simply to restrict powdered milk imports and thus shield domestic producers from foreign competition. However, Korea's problem in grain production, particularly rice, was much more complex.
After Park's inauguration on July 1, 1967, he was still concerned about farm income, but he suddenly began to back away from advocating agricultural exports. In his first cabinet meeting following the inauguration, Park emphasized his domestic policies and the need to fulfill the Second Five-Year Economic Plan. (54) Food production and farm income were at the top of Park's agenda, but Park apparently shifted his emphasis from exporting to an expansion of food processing in the countryside and to diversification into products such as livestock that could generate greater farm income. Park also recommended the founding of the Agricultural and Fishery Development Corporation as soon as possible to facilitate rural development. (55)
The tone of Park's remarks suggests that he was looking to domestic demand instead of exports to increase farm income. Park told his cabinet and provincial governors that "greater efforts were needed to ensure that many factories" were established in rural areas to "modernize agriculture and increase rural income." (56) In fact, growth in the industrial sector did increase demand for food products, and this contributed to increased income in the countryside. However, food production failed to keep up with rising demand, leaving policymakers no alternative but to import the shortfall. This scenario is inconsistent with economic growth models proclaiming that agriculture is to supply inputs (capital and labor) and demand for industry. (57)
As soon as the South Korean government began moving toward a more realistic goal of food self-sufficiency (rather than export-promotion), the fall harvest of 1967 forced the government to adopt drastic measures in the pursuit of this goal. Grain production in 1967 declined by 10 percent compared to the previous year, extinguishing any remaining hopes that Korea would fulfill its Seven-Year Food Production Plan of 1965 and become a rice exporter by 1969. Instead, Korea implemented a dual price policy for rice in 1968 to encourage rice production just to make up the shortfall in domestic supplies. What began as a one-off measure to deal with an emergency harvest shortfall quickly became a longstanding feature of the South Korean political economy.
According to Kim Chung-yum, Park's former chief of staff, Park had wanted a "high rice price" policy every year after coming to power with the SCNR. Although the ruling party and the MAF supported Park on this issue, the Economic Planning Board (EPB) and Ministry of Finance were strongly opposed because of concerns over price stability and budgetary expenditures. (58) But price stability and budgetary concerns would become a secondary issue because the income disparity brought about by slow growth in the rural sector had the potential of becoming a political and social problem for the government. In 1968 the government's purchase-price and handling costs were equal to the selling price, but in 1969 handling costs pushed the price slightly above the selling price; the purchase price surpassed the selling price in 1970. (59)
High food prices create incentives for farmers to increase production, but higher food prices decrease consumer welfare. This was a political concern for Park because urban consumers could have retaliated in the 1971 presidential election. The adoption of the dual price policy for South Korea's main agricultural product signaled the final turn in the Park government's commitment to subsidizing the agricultural sector and raising farm income while trying to minimize the negative repercussions in the cities. It also indicates Park's increasing political commitment to the rural sector as the 1971 election approached.
Park's commitment to the rural sector during this period also included the targeting of livestock as a growth sector. The government had hoped that the expansion of grazing areas and the provision of cattle to farm households would create a beef surplus for export, which would deliver political benefits to Park. On May 10, 1968, Park delivered a speech commemorating "Farmers' Day," which marked the beginning of efforts to greatly expand the beef industry. (60) Both the Korea Rural Economics Institute and the National Livestock Cooperatives Federation call Park's address a turning point in policy toward the South Korean beef industry. The livestock promotion policy, as depicted in Park's speech, was part of a four-year MAF plan to increase farm income that was announced just three days before Park's address. (61) In conjunction with Park's speech, the MAF revealed its Four-Year Livestock Promotion Plan (1968-1971) to increase financial support for acquiring cattle, and the Pasture Law was enacted to support plans to increase grazing areas. (62)
On July 10, 1968, the Korean Federation of Industries announced that it would "actively participate" in the development of the livestock industry. On August 5, the government announced that it would "actively provide support to any individual or legally registered organization that was qualified and desired to become a livestock-producing enterprise." (63) The MAF then decided on August 20 to provide between 1.0 billion won and 1.2 billion won to livestock producers between October and the end of the year. On September 1, the MAF announced that it would increase the budget for the Four-Year Livestock Promotion Plan by 2.898 billion won. (64)
The MAF expected foreign exchange earnings for the livestock sector to reach $237.6 million in 1970, but to expand production, Korea would also have to expand production of feed grains and increase grazing areas in a land-scarce country. (65) Otherwise, an increase in feed grain imports would negate the foreign exchange earning objectives of the livestock industry. Therefore, on March 18, 1969, the MAF issued a directive to the provinces outlining its plan to establish "cooperative livestock production areas" and at the same time drafted a plan for Korea to become self-sufficient in corn production to meet the rapidly rising demand from beef producers. (66) Between 1969 and 1971, 196 "cooperative grazing areas" were established, but these projects failed because of the classic commons problem. (67)
Institutional changes for the livestock sector also occurred in the wake of Park's 1968 Farmers' Day speech. The MAF's Livestock Bureau was soon expanded to include a feed division, (68) and in February 1969 the Livestock Development Department was established in the NACF. (69) In May 1969 the MAF founded the Korean Animal Improvement Association (KAIA) to register the bloodlines of Korean cattle (hanu), other beef cattle, dairy cattle, and pigs. (70) And the first Korea Hanu Champion Competition was held the same year to promote the beef industry and improve the breeding stock. (71)
A change in government and a possible change in Park's agricultural and livestock policies were on the horizon because the South Korean constitution prevented Park from seeking a third term in 1971. However, the ruling party took care of that by ramming a constitutional amendment through the National Assembly in 1969. Park was then eligible to run but was vulnerable to the opposition exploiting the relatively slow growth in the rural sector and the undemocratic means Park was using to extend his rule. Park should have expected a strong challenge from the opposition in metropolitan areas regardless of his policy platform, so his political strategy was to ensure that he maximized votes in the countryside and his hometown region.
In previous elections Park was able to count on the support of rural voters, but by the late 1960s these voters had become sensitive to the increasing disparity between urban and rural incomes. The ruling Democratic Republican Party (DRP) sensed that it may have been losing support in rural areas, which meant Park was facing challenges in areas he felt were necessary for continuing his rule. The potential decline in political support and rising income disparity between urban and rural areas motivated Park to start the Saemaul Movement, another institution designed to raise rural income. (72)
Park won the presidential election on April 27, 1971, but there were widespread claims of fraud, and the election was much closer than had been expected. Furthermore, the DRP faired relatively poorly in the National Assembly elections the following month, winning only 113 of 204 seats (55.4 percent). The opposition New Democratic Party (NDP) of Kim Dae-jung did well in major cities, even in the southeastern cities of Pusan and Taegu, Park's regional turf. (73) Even more surprising, the NDP was able to capture seats in rural areas that had been considered secure for the ruling party.
After three close presidential elections Park decided electoral politics was an obstacle to his objectives and declared a state of emergency in December 1971. Park was motivated by several factors, including US president Richard Nixon's "Guam Doctrine" announced in 1969 and Nixon's decision to withdraw one combat division from South Korea in 1970. On October 17, 1971, Park declared martial law, disbanded the National Assembly, suspended the constitution, and restricted political activities and free speech. Using the changing international security environment and the promise of impending unification with the north, Park submitted a new constitution to a national referendum that was passed the following month. Park called the new political arrangement yusin, or "revitalizing" reforms, but the new constitution essentially made Park president for life with sweeping powers, giving him even greater authority to intervene in the economy. Nevertheless, authoritarian leaders still require a critical mass of support, and Park looked to the countryside and his hometown region of the southeast for that support. Greater integration of farmers into rural government institutions served Park's economic development goals as well as his political objective of maintaining his conservative rural base. Therefore, the South Korean government under Park had to shift its objective from agricultural and livestock exports to self-sufficiency and ultimately to the protection of farmers as the country had to import food to meet domestic demand.
The Third Five-Year Economic Plan (1972-1976) called for imports of $3.14 billion and a trade deficit of $472 million in 1974, but the terms of trade shock from the rapid increase in oil prices greatly expanded Korea's import bill. The actual figures were $6.45 billion and $2.02 billion, respectively. (74) The government's price stabilization policies included greater market intervention, such as releasing more food stocks onto the market through the NACF and "providing support for more food production." (75)
The government was now committed to increasing food production not only to raise farm income but also to help alleviate inflationary pressure and to improve the balance of payments so that food imports would not come at the expense of foreign exchange needed to finance Park's industrialization plans. Despite the 1973 oil shock, national income was still rising, which increased demand for high-quality protein foods. On March 2, 1974, the MAF released a plan to provide 1.3 billion won to expand livestock production following a report that the demand for meat products and milk would climb by 11.5 percent and 28.7 percent respectively in 1974 alone. (76) To meet this rising demand, the MAF announced a long-term plan to invest 557.1 billion won of both domestic and foreign capital in the livestock industry by 1981. (77) And on April 4, the MAF announced that it would attempt to provide one head of hanu to every farm household engaged in "special agricultural businesses" to increase hanu production. The announcement also included plans to import 7,000 dairy cattle in 1974 to meet the rising demand for milk. (78)
Even though the government was trying to increase food production to forestall inflation, the MAF had to announce price increases for beef, pork, and powdered and fresh milk on April 8, 1974. Exactly one month later, the MAF issued a directive to provincial leaders to take strong administrative actions against beef distributors and retailers who were hoarding beef in anticipation of price increases. (79) To achieve price stability, the government applied similar subsidies and supports it provided to industry with the hope that this support would increase efficiency in the rural sector. For example, to boost production and provide price stability, a "livestock development fund" was established in 1974 and subsequently expanded in the mid-1970s. The fund was established when the Horse Racing Association Law, which had a provision for the MAF minister to assess a tax on the earnings from horse racing, was passed in 1974. The following year the passage of the Feed Grain Management Law established a surcharge on imports of feed grains, and both funds were incorporated into the Livestock Development Fund with the revision of the Livestock Law in 1976. (80)
The Livestock Development Fund as amended under the Livestock Law also included government subsidies from the budget, the horse racing tax, the feed grain import surcharge, a wholesale tax on beef and pork collected at the time of slaughter, a tax on milk, and a surcharge on imported livestock products. The fund was operated by the NACF to promote the livestock and feed grain industries and provide price stability. (81)
As inflationary pressure mounted on beef prices, the government took further measures. On March 19, 1976, the MAF moved to ban exports of pork in the hope that consumers would substitute lower-priced pork for beef, with the effect of keeping beef prices down. (82) Then on April 27, "economics-related" cabinet ministers held a meeting and decided to import 1,000 tons of beef from New Zealand in the middle of May. (83) This marked the first time South Korea imported beef. On June 16, the EPB decided to import 1,000 more tons of beef (500 tons from New Zealand and 500 tons from Australia) in July and August in order to maintain price targets. (84)
The South Korean government also implemented institutional reforms to manage the rising demand for beef and the decision to import beef during this period. After a Korea-Japan conference on agricultural and fisheries technology in March 1977, the MAF minister commissioned Song Chan-won, director of the Livestock Division, to do a thorough study on the development of the Japanese livestock sector. Song concluded that since Korea's annual per capita consumption of meat doubled from 3.0 kg to 6.0 kg as annual per capita income increased from $100 to $500, consumption would probably again double, to 12 kg, when per capita income reached $1,000. (85)
Song surmised that Korea "would be in a difficult situation unless measures were taken to develop its weak livestock industry in the face of rapidly rising demand." Furthermore, Song's report stated that Korea "urgently needed an agency that was solely responsible for managing the Livestock Development Fund, controlling the supply and demand of livestock products and feed grains, and administering activities to improve the livestock industry." (86)
On May 13, MAF minister Choi Kak-kyu appointed a committee headed by Song to draft a proposal for a "Livestock Promotion Agency." This agency was to be responsible for the functions recommended in Song's report, as well as the distribution of meat. Economic cabinet ministers approved the committee's recommendations on July 15, and they were incorporated into a revised Livestock Law that passed the National Assembly on November 19, 1977. The law expanded the livestock promotion fund and increased the government's ability to intervene in the beef and feed markets to maintain price targets. After a preparatory committee headed by the new MAF minister Chang Duk-hee was formed, the directors of the Livestock Promotion Association (LPA) were appointed on March 16, 1978, and the association opened for business on April 1. (87) The LPA began with a staff of 237 and had expanded to 402 by the time it was absorbed by the National Livestock Cooperatives Federation on January 1, 1981. (88)
The creation of the Livestock Promotion Association was another indication of the South Korean government's commitment to promote and protect the livestock sector. The government had already been providing subsidies and other incentives to increase beef production, but the LPA was the first institution designed to "manage" beef imports if domestic producers were unable to meet domestic demand. (89) In May, the LPA took over the management of imported beef sales and the importing of feed from the NACF, as well as the importing of beef from the Supply Administration. (90)
The policy objectives of raising rural income, maintaining food prices within targeted price bands, and increasing beef production would require extensive market intervention as well as income transfers to livestock producers. These goals would also require further institutional development and greater authority to intervene in the market, and the Korean government was willing to take these steps. For example, following the EPB's announcement of its "Comprehensive Measures for Economic Stabilization" (91) on April 17, 1978, the MAF implemented a system of price bands to stabilize "supply and demand and prices" on June 15. (92) Accordingly, the MAF agents for price stability at the distribution and retail levels were the LPA and the NACF.
In 1979 economic and political shocks reverberated across South Korea. The second oil shock worsened Korea's terms of trade and caused inflationary pressure, while Park Chung Hee's assassination on October 26 threw the country into political turmoil. The political events of late 1979 and early 1980 are arguably more dramatic than the military coup of 1961 because of prolonged political uncertainty and the transition to a new military regime that took months to complete. The economic effects of the 1979-1980 oil shock and political uncertainty had a negative impact on beef consumption, while at the same time farmers slaughtered their cattle for cash during the economic downturn. The result was a dramatic decline in beef prices. The fluctuation in beef prices provided justification for protecting the livestock sector and deepening the institutions for beef market intervention. Though institutional changes were already planned before the new military regime came to power, the new junta could not oppose or abolish them because this would have alienated a large portion of the rural population when the new military regime was consolidating its political power.
There were already signs that rural support for the government was in decline before Park's assassination, so the Chun Doo-hwan junta had to reverse this decline in rural support if it wished to consolidate its power. In May 1978 the National Council for Unification (NCU) had reelected Park to another term as president (2,576 out of 2,578 votes). (93) But Park's DRP received fewer votes than the New Democratic Party (NDP) in the National Assembly election held in December (32.8 percent to 31.7 percent). The difference was even greater in Seoul (51.2 percent to 26.6 percent), but Park's control was assured under the Yusin constitution with the NCU's ability to appoint one-third of the National Assembly. (94)
Kim Jae-kyu, director of the Korean Central Intelligence Agency (KCIA), assassinated President Park while eating dinner at a KCIA safe house, and under the rules of the Yusin constitution, Prime Minister Choi Kyu-ha, a lifelong technocrat with no real base of political support, was sworn in as president and then elected president by the NCU on December 6, 1979. (95) As Choi held the official title of president, a power struggle was underway within the ranks of the military. As commander of the Defense Security Command, Major General Chun Doo-hwan was responsible for investigating Park's assassination. Using his broad investigative powers, Chun moved to take control of the military. On December 12, 1979, Chun arrested Army Chief of Staff Cheong Sung-hwa, ostensibly for his involvement with Park's assassination. At the same time, Chun's followers, including Major General Rob Taewoo, moved on the capital to oust Cheong's supporters.
By the spring of 1980, Chun Doo-hwan had gained control of the military, promoted himself to general, and taken over as director of the KCIA. (96) On August 16, Choi resigned from office; the NCU elected Chun as president eleven days later. (97) As the junta was rounding up "hooligans" and leftists who might lead street protests against Chun, it was also formulating policies to garner support from the conservative rural sector. At first, the Standing Committee for Emergency National Security Measures (SCENSM), which was established on May 31, 1980, in the wake of the Gwangju rebellion, considered confiscating "illicit wealth" and transferring it to a fund for rural villages, but its members decided to implement institutional changes instead. On September 11, the SCENSM announced that it would introduce "promotional measures to revise the livestock promotion system." Eleven days later the government announced the formation of a "Secretariat to Establish the National Livestock Cooperatives Federation (NLCF)." (98)
The SCENSM then announced on September 29, 1980, that a revised constitution would be submitted as a referendum to voters in October. (99) The Fifth Republic Constitution included a clause in the Economy Article "promising the nation would establish the necessary plans to develop rural villages so that farmers and fishermen would have a foundation of self-reliance and societal sectors would develop in balance." (100) This was designed to earn the support of conservative rural voters who had become disillusioned with the political excesses of the Yusin constitution and the economic side-effects of Park's program to promote heavy and chemical industries. But, more important, it signaled the new government's commitment to preventing rural income from falling too far behind that of the urban sector, and the will to use trade protection if necessary.
The new government under Chun Doo-hwan viewed the proposed institutional arrangement for livestock as a mechanism for increasing production, which was necessary to meet the rising demand for high-quality protein as well as an instrument to manipulate the supply of beef through the distribution system. (101) The Secretariat to Establish the NLCF, consisting of fifteen members from the Livestock Promotion Association and ten members from the NACF, considered it a "sense of duty to consider the protection of livestock producers" when it drafted the regulations and the law governing the NLCF. (102) This group was delegated the task of writing the NLCF Law and the NLCF Articles of Association, and deciding which livestock assets the NLCF would acquire from the NACF. (103) Since the LPA basically was assured the right to make the rules, the new institution was created to promote and protect the domestic livestock sector. And since the SCENSM had dismissed the National Assembly and replaced it with a legislative body appointed by Chun Doo-hwan, there was no question about the proposed NLCF law being rejected because livestock promotion was a part of Chun's plan to seek rural support.
The law establishing the NLCF was passed by Chun's National Security Legislative Council on December 15, 1980, establishing the NLCF with 100 cooperatives on January 1, 1981, (104) The original law established the NLCF as an agent of the government; the MAF minister had the authority to appoint the NLCF president, and the NLCF president had the authority to appoint local cooperative presidents. The NLCF and NACF were democratized in 1988 when the law was changed to effect the elections of the national cooperative federation presidents and local cooperative presidents. However, the electoral rules are biased toward protection because small producers are overrepresented.
Local cooperative members are granted one vote when electing their local president, regardless of the amount each member has invested in the cooperative. In the election of the NLCF president, each local cooperative president has one vote regardless of the cooperative size or the amount the local cooperative has invested in the NLCF. The NLCF president is assisted by a board of directors with fifteen members. The local cooperative presidents elect thirteen directors on the board, and these board members must have been local cooperative presidents. The NLCF president appoints the other two board members. (105)
In addition to the voting rules, entry and exit is biased toward protection. Small producers have a greater incentive to join a cooperative and gain access to cooperative assets, and there is no "free exit." Members cannot transfer their shares "without the approval of the cooperative," and "a member can only terminate his membership at the end of the fiscal year by giving a minimum of 60 days advance notice." However, members may be expelled from the cooperative for misbehavior, or face automatic dismissal for "membership disqualification, death, bankruptcy, or incompetence." (106) Furthermore, local cooperatives are granted exclusive rights to operate within their geographic jurisdiction, essentially restricting competition among cooperatives.
The Livestock Cooperative Law has several provisions that may be interpreted as instruments of protection, subsidy, or bias in favor of domestic producers. For example, Article 9 states that "the government and public organizations shall actively support the business of the cooperatives and the federation and shall provide preferentially their own facilities." This article was amended in December 1994 to include: "The government may support or grant financing the business expenses necessary for the operation of the cooperatives and the federation." (107)
The NLCF and local cooperatives have been granted the legal authority to engage in a wide range of business practices. These activities include transportation, storage, processing, inspection, warehousing, credit and finance, the operation and management of livestock markets, and trade activities. (108) The range of business operations gives the NLCF extensive control over the distribution system, which was used to discriminate against beef imports.
In the early 1960s the South Korean government established an institutional arrangement in support of an export-led economic development strategy. This strategy was targeted not only at industry but also at the rural sector. President Park Chung Hee initially believed farmers would provide the foreign exchange necessary to finance industrialization; institutions to support the expected expansion of agricultural exports were built accordingly.
However, agricultural and livestock products could never achieve price competitiveness in the international market. When the government realized the rural sector could not become a net foreign exchange earner, the strategy shifted to food self-sufficiency, and by the late 1960s South Korea had to import food to meet domestic demand. Neoclassical economic theory would recommend complete market liberalization on efficiency grounds, but political considerations were instrumental not only in providing protection for agriculture--which has been well-documented in the literature--but in maintaining rural institutions as well. These institutions were transformed from instruments of development and export promotion into protectionist mechanisms. In other words, successive military regimes targeted livestock for export promotion, subsidy, and eventually protection in exchange for political support in the countryside.
With the establishment of the National Livestock Cooperatives Federation in January 1981, an institutional arrangement biased toward protectionism was in place before South Korea would face bilateral and multilateral pressure to liberalize its beef market later in the decade. The government's commitment to the rural sector was not based on a factor endowment that bestowed Korea with a comparative advantage in agricultural and livestock products. Instead, the commitment was the result of political decisions as South Korea rapidly industrialized and became integrated with the world economy.
In summary, a dispersed cattle industry consisting mostly of small producers was integrated into government livestock promotion programs and institutions that included production and marketing cooperatives, export cooperatives, the Korean Animal Improvement Association, the Saemaul Movement, the Livestock Promotion Association, and eventually the National Livestock Cooperatives Federation. These institutions helped surmount transaction costs in the production and marketing of Korean beef, provided a mechanism for surmounting the collective action problems in lobbying for protection, and established a model for collusion in the distribution of imported beef.
When Chun came to power in 1980, his primary economic concerns were centered on industry, which then accounted for 35.7 percent of South Korea's economic output while agriculture, forestry, and fisheries accounted for only 15.9 percent. (109) The structural transformation of the economy had reversed the economic roles of agriculture and industry compared to the early years of Park Chung Hee's rule. But this did not mean Chun could neglect the rural sector; he faced considerable opposition from labor, urbanites, students, and intellectuals. While Chun focused on industrial policy, he sought political support from relatively conservative farmers by delegating most of the government's rural policy to the institutions that had evolved over the previous twenty years. These institutions had a natural bias toward preserving Korean agricultural and livestock production, and in conjunction with the government's political commitment to the rural sector they led many in the domestic beef industry to expect government intervention in the market on their behalf following market liberalization in the 1980s and 1990s.
I would like to thank Stephan Haggard and an anonymous reviewer for their helpful comments on an earlier draft. Of course, I am responsible for any and all errors in this article.
(1.) Edward K. Y. Chen, Hyper-growth in Asian Economies: A Comparative Study of Hong Kong, Japan, Korea, Singapore, and Taiwan (London: Macmillan, 1979).
(2.) Cho Soon, The Dynamics of Korean Economic Development (Washington, DC: Institute for International Economics, 1994), p. 30; Kwang Suk Kim, "Outward-Looking Industrialization Strategy: The Case of Korea," in Wontack Hong and Anne O. Krueger, eds., Trade and Development in Korea (Seoul: Korea Development Institute, 1975), p. 22; Larry E. Westphal and Kwang Suk Kim, "Korea," in Bela Balassa, Development Strategies in Semi-industrializing Economies (Baltimore: Johns Hopkins University Press, 1982).
(3.) Paul W. Kuznets, Korean Economic Development: An Interpretive Model (Westport, CT: Praeger, 1994).
(4.) For example, see Alice H. Amsden, Asia's Next Giant: South Korea and Late Industrialization (New York: Oxford University Press, 1989); Robert Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton, NJ: Princeton University Press, 1990).
(5.) Ibid.; Tun-jen Cheng, Stephan Haggard, and David Kang, "Institutions and Growth in Korea and Taiwan: The Bureaucracy," Journal of Development Studies 34, no. 6 (August 1998): 87-111; Stephan Haggard, Byung-kook Kim, and Chung-in Moon, "The Transition to Export-led Growth in South Korea: 1954-1966," Journal of Asian Studies 50, no. 4 (November 1991): 850-873; Eun Mee Kim, Big Business, Strong State: Collusion and Conflict in South Korean Development, 1960-1990 (Albany: State University of New York Press, 1997); Kwang Suk Kim and Sung Duk Hong, Accounting for Rapid Economic Growth in Korea, 1963-1995 (Seoul: KDI Press, 1997); Ezra F. Vogel, The Four Little Dragons: The Spread of Industrialization in East Asia (Cambridge, MA: Harvard University Press, 1991); Jon Woronoff, Asia's Miracle Economies (New York: M. E. Sharp, 1992).
(6.) Most analysts seem to have missed Anne Krueger's observation that in Korea "encouragement and incentives were extended to any and all who could export." Anne O. Krueger, "Contrasts in Transition to Market-Oriented Economies: India and Korea." In Yujiro Hayami and Masahiko Aoki, eds., The Institutional Foundations of East Asian Economic Development (New York: St. Martin's, 1998), p. 189.
(7.) The security threat of the Democratic People's Republic of Korea (DPRK, or North Korea) and the motivation it provided for development were tremendous in 1961. The DPRK had been recording greater economic growth rates after the Korean War and the coup leaders would have been responsible for repelling any DPRK provocation. In addition, the DPRK system provided an alternative to the dismal conditions in the ROK, and subsequently could have been a catalyst for social unrest, which had been increasing during the Second Republic (1960-1961). The first clause in the revolutionary declaration issued by the coup leaders stated that "anti-communism is the number one state policy and this policy would be strengthened." Nationalism encouraged the junta to promote exports and earn foreign exchange in order to end dependence on US aid. See An Hae-gyun, Han-gug haengjeongche-je-lon [Korean Administration Systems] (Seoul: Seoul University Press, 1988), pp. 140-142.
(8.) In 1936 the number of Korean cattle reached a peak of 1,703,000, but by 1944 the number had dropped to 887,000 head, and by 1945 it was 600,000 head. See NLCE Chug-hyeob 10nyeon-sa [A 10-Year History of the NLCF] (Seoul: National Livestock Cooperatives Federation, 1992), pp. 96, 150; Korea Rural Economics Institute (KREI), Han-gug-nongjeong 40nyeon-sa II [Korean Agricultural Policy: A 40-Year History, vol. II] (Seoul: KREI, 1989), pp. 865-866; Han-gug chug-san-yeon-gam 1993 [Korea Livestock Yearbook 1993] (Seoul: The Agriculture, Fisheries & Livestock News, 1993), pp.103-104.
(9.) KREI, Han-gug-nongjeong 40nyeon-sa II, pp. 870-871.
(10.) An Hae-gyun, Han-gug haengjeongche-je-lon, pp. 132-134.
(11.) Seo Won-woo, Han-gug beob-ui i-hae [Understanding Korean Law] (Seoul: Du-seongsa, 1996), pp. 26-27. For a review of the SCNR's legislative activities, see ROK National Assembly, ch. 6, "Gug-ga jae-geon choe-go-hoe-ui," in Dae-han-min-gug gug-hoe 50nyeon-sa [Republic of Korea National Assembly: A 50-Year History] (Seoul: National Assembly Secretariat, 1998), pp. 301-351.
(12.) See David C. Cole and Princeton N. Lyman, Korean Development: The Interplay of Politics and Economics (Cambridge, MA: Harvard University Press, 1971), p. 37; or Jon Huer, Marching Orders: The Role of the Military in South Korea's "Economic Miracle" 1961-1971 (New York: Greenwood, 1989), pp. 59-62. The coup marked a generational change in Korea's political leadership, as 55.2 percent of the junta's leaders were in their forties and 39.6 percent of them were in their thirties. See also Hahn Bae-ho and Kim Kyu-taik, "Korean Political Leaders: Their Social Origins and Skills," Asian Survey 3, no. 7 (July 1969): 305-323.
(13.) Arguably, the coup leaders had emotional ties to their "roots" and wished to help their families and friends in the countryside. Even today the National Agricultural Cooperatives Federation (NACF) appeals to urban consumer links to their rural hometowns in advertising domestic food products.
(14.) Urban areas defined as cities (si) with populations of at least 50,000 based on census reports.
(15. Many Korean farmers had to turn to the informal sector for credit with very high interest rates because of Korea's underdeveloped financial sector and the low capitalization of the Agricultural Bank.
(16.) For a detailed discussion of the liquidation of usurious loans see Ban Sung Hwan, Moon Pal Yong, and Dwight H. Perkins, Rural Development (Cambridge: Harvard University Press, 1980), pp. 214-216; or NACF, Nonghyeob 30nyeon-sa [NACF: A 30-Year History] (Seoul: National Agricultural Cooperative Federation, 1991), pp. 430-431.
(17.)"Bag-dae-tonglyeong yu-sin <ji-bangjanggwan-hoe>" [President Park's Instructions: A Meeting with Provincial Governors], Nonghyeob-sinmun [The Cooperative News], August 31, 1964.
(18.) See Donald S. MacDonald, U.S.-Korean Relations from Liberation to Self-Reliance: The Twenty-Year Period (Boulder: Westview, 1992), pp. 92-103, 280-281,285-292. The US suspended economic aid for a few months after the coup and then linked future economic aid to its efficient utilization.
(19.) Gyeongje-gi-hoeg-won (Economic Planning Board), Gae-bal yeon-dae-ui gyeongje-jeongchaeg: Gyeongde-gi-hoeg-won 30nyeon-sa [The Economic Policies of the Development Era: A 30-Year History of the Economic Planning Board] (Seoul: EPB, 1994), pp. 31-32.
(20.) In 1963, under pressure from the United States, the SCNR was dishanded and Park ran for president as the candidate of the newly established Democratic Republican Party (DRP). Park had significant advantages in the election held on October 15, 1963. The DRP was superior in organization and funding, the government had strong influence over or control of the media, many political rivals had been legally excluded from political activities, and the date of the election was announced only two months in advance. Park defeated Yun Bo-seon in a close direct election, capturing 4,702,640 votes to Yun's 4,546,614. Park won the election with about 47 percent of the popular vote. See Carter J. Eckert, Lee Ki-baik, Lew Young Ick, Michael Robinson, and Edward W. Wagner, Korea Old and New (Seoul: Ilchokak, 1990), pp. 361-363. For a discussion of Kennedy's relationship with Park and the return to civilian rule, see Kim Se-jin, The Politics of Military Revolution in Korea (Chapel Hill: University of North Carolina Press, 1971), pp. 125-137.
(21.) Robert Nathan and associates prepared an economic development plan for the United Nations Korean Reconstruction Agency in March 1954. The Nathan Plan assumed that Korea would be able to produce a rice surplus for export. See David C. Cole and Princeton N. Lyman, Korean Development: The Interplay of Politics and Economics, pp. 203-210.
(22.) KREI, Han-gug nongjeong 40nyeon-sa I, p. 30.
(24.) KREI, Han-gug nongjeong 40nyeon-sa II, pp. 121-122.
(25.) The dairy industry, which was ransacked in the aftermath of liberation from the Japanese, declined even further under the First Republic. Dairy cattle stocks had dropped to 860 head by 1960, and South Korea had become dependent on foreign aid for imported powdered milk. The Ten-Year Dairy Promotion Plan used aid and loans to import dairy cattle so that the nation could develop a dairy products industry. Other objectives of the plan were to expand idle land into pasture, increase employment in the countryside, increase the amount of manure for use as fertilizer, and increase the dietary protein intake for citizens. See KREI, Han-gug nongjeong 40nyeon-sa I, pp. 874-877.
(26.) After liberation, Korea exported its first livestock products in 1959 with the shipment of 2,030 hogs and 20 head of cattle to Hong Kong. See KREI, Han-gug nongjeong 40nyeon-sa I, p. 30, and II, p. 122; and NLCF, Chug-hyeob 10nyeon-sa, p. 882.
(27.) "So 3000du i-sang su-chul" [Exporting More Than 3,000 Head of Cattie], Nonghyeob-sin-mun, March 11, 1965.
(28.) KREI, Han-gug nongjeong 40nyeon-sa I, p. 30.
(29.) "Jeungsan su-chul geon-seol: sig-lyang dae-lyang hwag-bo dwisbadchimdo [Increasing Production-Exports-Construction: Countermeasures also Ensured Against Food Shortages-Financial Supports]," Nonghyeob-sin-mun, January 14, 1965.
(30.) For a discussion of agricultural inputs and growth, and government investment during this period see ch. 4, "The Sources of Agricultural Growth," and ch. 6, "Government Investment Policy and Plans," in Ban Sung Hwan et al., Rural Development.
(31.) Korea's surplus labor and land scarcity indicate a comparative disadvantage in agriculture and livestock, but this did not deter the government from targeting these sectors for exports in the 1960s.
(32.) "Su-chul jeungdae-e bun-bal" [Exerting Effort to Increase Exports], Nonghyeob-sin-mun, December 6, 1965.
(34.) NLCF, Chug-hyeob 10nyeon-sa, p. 884.
(35.) In 1965 the Korean government completed negotiations to normalize diplomatic relations with Japan. Opposition to the treaty was widespread, but Korean leaders insisted it was necessary for economic development. "Bag-dae-tonglyeong yeon-du-gyo-seo: jeungsan-su-chul geon-seol jeon-lyeog, 10nyeon-nae geun-dae-hwa-i-lug" [President Park's Annual Address: Complete Devotion to Increasing Production-Exporting-Construction; Achieving Modernization Within I0 Years], Nonghyeob-sin-mun, January 24, 1966.
(36.) "Nonglimjanggwan-ebag-tong-yeongssi: su-chul nong-eob-deung-ui ji-jeong [Minister of Agriculture to Mr. Pak Tong-myo: Emphasizing Agriculture as an Export Sector]," Nonghyeob-sin-mun, February 28, 1966.
(37.) Special cooperatives included things such as livestock, beekeeping, and silk. NACF, Nonghyeob 30nyeon-sa, p. 665.
(38.) The First Five-Year Economic Plan expired at the end of 1966, and the second plan began in January 1967.
(39.) "Bag-dae-tonglyeong ji-sa yo-ji: chug-nongjeongchaeg gye-sog gyeonji sae-nongmin-eun in-gan-gug-bo [A Summary of President Park's Commendation: Continual Adherence to Principle Agricultural Policies: New Farmers as a Human National Treasure]," Nonghyeob-sin-mun, October 3, 1966.
(40.) "Chug-san yug-seongchaeg-deung ganggu: bag-dae-tonglyeong ji-si pil-yo-su-geub-bun yeo-yu-issge [Livestock Promotion Policies Considered: President Park's Instructions; Marginal Adaptability in the Supply and Demand of Fertilizer]," Nonghyeob-sin-mun, October 24, 1966. Park's directives also included a plan for the supply and demand of fertilizer, a proposal to increase sweet potato consumption, and the establishment of special production zones in rural areas. Park had to be seriously concerned about economic performance and income in the rural sector, as the presidential election was approaching. And since economic growth in the countryside had been lagging in 1966, Park was in danger of losing the rural vote, which was crucial for his reelection in 1967.
(41.)"Chug-san jin-heung-ui sae-jeon-gi: chug-san-in-dae-hoe, geon-uimun-do chae-taeg [A New Turning Point in Livestock Promotion: Livestock Producers Conference, Proposal, and Adoption]," Nonghyeob-sin-mun, December 12, 1966.
(43.) ROK National Assembly, Dae-han-min-gug-gug-hoe 50nyeon-sa, p. 374. (Emphasis added.)
(44.) Gyeongje-gi-hoeg-won (Economic Planning Board), Gae-bal-yeondae-ui gyeongje-jeongchaeg: gyeongje-gi-hoeg-won 30nyeon-sa [The Economic Policies of the Development Era: A 30 Year History of the Economic Planning Board] (Seoul: EPB, 1994), pp. 358-359.
(45.) "Jeon-gug-nongmin-e-ge bo-nae-neun bag-dae-tonglyeong sin-nyeonme-se-ji [President Park's New Year's Message to All the Nation's Farmers], Nonghyeob-sin-mun, January 1, 1967.
(47.) "Bag-dae-tonglyeong chi-sa: nongchon geun-dae-hwa eobs-i jo-guggeun-dae-hwa eobsda [The Nation Cannot Modernize Without Rural Modernization]," Nonghyeob-sin-mun, February 27, 1967.
(48.) "Nongga 99%e myeon-se hye-taeg [Tax Exemption Benefits for 99 Percent of Farm Households]," Nonghyeob-sin-mun, May 1, 1967.
(49.) Chosun llbo, May 6, 1967, cited in C. I. Kim, "Patterns in 1967 Korean Elections," Pacific Affairs 41, no. 1 (Spring 1968): 62.
(50.) EPB, Gae-bal-yeon-dae-ui gyeongje-jeongchaeg, p. 360.
(51.) "Nongsusanmul kagongsuch'ul jungjeom [Exports of Processed Agricultural and Fishery Products Emphasized]," Nonghyeob-sin-mun, June 26, 1967.
(52.) There were 2,400 head of dairy cattle in 1962 when the dairy industry was targeted for development. In January 1962, the Ministry of Agriculture and Forestry decided to import 500 bulls for breeding dairy cattle; the imports were financed with loans from the German Development Bank, the World Bank, and Canada. The following month the first milk cooperative was formed in Seoul with 88 members and 448 dairy cows. NLCF, Chug-hyeob 10nyeon-sa, pp. 150, 156-157,883.
(53.) "Bun-yu-su-ib gye-sog gyu-je: nonglimbu, nag-nongjin-heung-wi-hae bangchim bal-hyo [The Prohibition of Powdered Milk Imports Will Continue: The MAF Reveals the Intention to Develop the Dairy Industry]," Nonghyeobsin-mun, June 26, 1967.
(54.) The meeting included cabinet ministers, provincial governors, and the chairmen of the NACF, the National Fisheries Cooperatives Federation, the Office of National Fisheries Administration, the Office of Rural Development, and the Office of Forestry. See "Nongmin-so-deug-jeungdae-e jeon-lyeog [All-Out Effort to Increase Farm and Fishery Income]," Nonghyeob-sin-mun, July 24, 1967; and "Bag-dae-tonglyeong yu-sin [President Park's Instructions]," Nonghyeob-sin-mun, July 24, 1967.
(55.) The Agricultural and Fishery Development Corporation was founded in December 1967. The public corporation at one time had twenty-three subsidiaries including Korea Cold Storage, which would later become a distributor of imported beef during liberalization in the 1990s. See KREI, Han-gugnongjeong 40nyeon-sa I, p. 36.
(57.) See Ban Sung Hwan, et al., Rural Development, pp. 24-31.
(58.) Kim Chung-yum served as vice minister of finance, vice minister of commerce and industry, minister of finance, and minister of commerce and industry between 1962 and 1969. He was President Park's chief of staff from 1969 to 1978. See Kim Chung-yum, Han-gug-gyeongje-jeongchaeg 30nyeonsa [Korean Economic Policy: A 30-Year History] (Seoul: JoongAng Daily, 1995), pp. 184-187.
(59.) See Ban Sung Hwan, et al., Rural Development, pp. 246-252. Also see KREI, Han-gug-nongieongjeongchaeg 40nyeon-sa I, p. 37.
(60.) KREI, Han-gug-nongieongjeongchaeg 40nyeon-sa II, pp. 877-878.
(61.) The plan budgeted 8.511 billion won for rural projects. KREI, Hangug-nongjeong-il-ji [Republic of Korea Agricultural Policy Diary] (Seoul: KREI, 1985), p. 295.
(62.) KREI, Han-gug-nongjeongjeongchaeg 40nyeon-sa II, p. 878.
(63.) KREI, Han-gug-nongjeong-il-ji, p. 298.
(64.) Ibid., p. 299.
(65.) Ibid., p. 317.
(66.) Ibid., p. 305.
(67.) NLCF, Chug-hyeob 10nyeon-sa, p. 169.
(68.) The Livestock Bureau then included four sections: feed, policy, production, and sanitation. See KREI, Han-gug-nongjeongjeongchaeg 40nyeonsa II, p. 878.
(69.) NACF, Nonghyeob 30nyeon-sa, p. 666.
(70.) KREI, Han-gug-nongjeongjeongchaeg 40nyeon-sa II, p. 880.
(71.) The registration of bloodlines and competition for hanu would later become part of industry efforts to differentiate hanu from imported beef. The name of the competition was changed to "National Livestock Competition [Jeon-gug-ga-chug-pumpyeonghoe]" the following year and was expanded to include dairy cattle and pigs in 1975. The name was changed again, to "National Livestock Promotion Competition [Jeon-gug-cbug-san-jin-heungdaehoe]." See ibid., p. 879; NCLF, Chug-hyeob 10nyeon-sa, p. 169.
(72.) Saemaul means "new village" in Korean.
(73.) In 1963 the DRP captured 110 of 175 seats (62.9 percent), and in 1967 the ruling party increased its share to 130 of 175 (74.3 percent). But in 1971 the DRP only won 113 of 204 seats (55.4 percent). See C. I. Eugene Kim, "The 1971 Elections and the Transformation of the DRP," ch. 3 in C. I. Eugene Kim and Kihl Young Whan, eds., Party Politics and Elections in Korea (Silver Spring, MD: Research Institute on Korean Affairs, 1976), pp. 35-45.
(74.) Ibid., pp. 362-363.
(75.) Ibid., pp. 299-304.
(76.) KREI, Han-gug-nongjeong-il-ji, pp. 368-369.
(77.) Ibid., pp. 369-370.
(78.) Ibid., p. 370.
(79.) Ibid., p. 372.
(80.) KREI, Han-gug-nongieong 40nyeon-sa, p. 881.
(81.) The new arrangement for the livestock promotion fund was effective from April 15, 1977. The tax on beef cattle was 7,000 won per head, and for pigs it was 1,000. The tax on milk was 2.0 percent, but this tax was shelved on April 1, 1982. See ibid., pp. 881-882.
(82.) KREI, Han-gug-nongjeong-il-ji, p. 391.
(83.) Ibid. p. 392.
(84.) Ibid. p. 393.
(85.) NLCF, Chug-hyeob 10nyeon-sa, p. 193.
(87.) Ibid., pp. 193-194.
(88.) Ibid., p. 197.
(89.) On March 9, 1978, the EPB selected thirty agricultural and livestock items that would be subject to price controls, and the MAF announced it would establish the LPA to "manage production, supply and demand, and price stability." See KREI, Han-gug-nongjeong-il-ji, p. 406.
(90.) NLCF, Chug-hyeob 10nyeon-sa, p. 195.
(91.) For a discussion of the politics behind the measures, see Stephan Haggard, "From the Heavy Industry Plan to Stabilization: Macroeconomic Policy 1976-1980," in Stephan Haggard, Richard N. Cooper, Susan Collins, Kim Choongsoo, and Ro Sung-tae, Macroeconomic Policy and Adjustment in Korea 1970-1990 (Cambridge, MA: Harvard University Press, 1994), pp. 59-64.
(92.) KREI, Han-gug-nongjeong-il-ji, p. 409.
(93.) The Korean term for the NCU is Tongiljuchegungminhoe.
(94.) Yun Hyung-sub, Han-gug jeongchi-lon [Korean Politics] (Seoul: Pagyongsa, 1988), pp. 292-293; An Hae-gyun, Han-gug haengjeongche-jelon, pp. 314-315.
(95.) Yun Hyung-sub, Han-gug jeongchi-lon, p. 278.
(96.) Chun became KCIA director on April 14, 1980. The agency's name was changed to the National Security Planning Agency in 1981. An Hae-gyun, Han-gug haengjeongche-je-lon, p. 349.
(97.) Ibid., pp. 318, 369-370.
(98.) NLCF, Chug-hyeob 10nyeon-sa, p. 202.
(99.) The referendum was held on October 22, 1980, and 95.5 percent of the voters turned out. The new constitution was approved by 91.6 percent of those who voted. See An Hae-gyun, Han-gug haengjeongche-je-lon, p. 372.
(100.) Fifth Republic Constitution, Article Nine, "The Economy," Clause
(101.) NLCF, Chug-hyeob 10nyeon-sa, p. 202.
(103.) Ibid. pp. 202-206.
(104.) NLCF, "The Livestock Cooperative Law" (Seoul: NLCF, 1996); and NLCF, Chug-hyeob 10nyeon-sa, pp. 208-210.
(105.) NLCF, "The Livestock Cooperative Law."
(109.) EPB, Gae-bal-yeon-dae-ui gyeongje-jeongchaeg, p. 365.
Daniel A: Pinkston is the director of the East Asia Nonproliferation Program and a Korea specialist at the Center for Nonproliferation Studies. He is also a professor at the Monterey Institute's Graduate School of International Policy Studies. He holds a doctorate in international affairs from the University of California, San Diego, and a master's degree in Korean studies from Yonsei University in Seoul. Pinkston also served as a Korean linguist in the US Air Force.
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|Title Annotation:||agricultural and livestock sectors|
|Author:||Pinkston, Daniel A.|
|Publication:||Journal of East Asian Studies|
|Date:||Jan 1, 2007|
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