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Moving out of Aid Dependency: Lessons from the South Korean experience

Moving out of Aid Dependency: Lessons from the South Korean experience. Irma Adelman University of California, Berkeley. Moving out of Aid Dependency: Lessons from the South Korean experience. Accelerated development is possible

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Moving out of Aid Dependency: Lessons from the South Korean experience

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  1. Moving out of Aid Dependency: Lessons from the South Korean experience Irma Adelman University of California, Berkeley

  2. Moving out of Aid Dependency: Lessons from the South Korean experience • Accelerated development is possible • The essence of development policy consists of the creation of dynamic comparative advantage. • Requires anticipatory and coordinated restructuring of : • -production and investment patterns • - technology • - social development • - economic, social and political institutions • - investment and trade policies

  3. The critical factors needed to generate economic development are both tangible and intangible • -leadership commitment to development • - social capital, including not only the level of human resources but also the degrees of social cohesion, social trust, cooperative norms and willingness to act in the social good • - institutional and social resilience and malleability • - appropriate policy design in investment, capital accumulation, technology and trade

  4. Government has a central role in the promotion of economic development. But its functions must adapt dynamically evolving from prime-mover and direction-setter into a quasi-Smithian State. A sound economy therefore requires a sound State • The economy, society, institutions and policies must be malleable and capable of even abrupt change • The prospects for economic development are intimately linked not only to the country’s own institutions and policies but also to existing global operational rules of global institutions

  5. KOREAN EXAMPLE • In the early 1960’s South Korea was thought to be “a bottomless sink” for foreign aid and “a hopeless case • In what was thought to be a miracle it became a fully developed and industrialized nation in a short period • South Korean development went through 4 phases: • Classical import substitution (1963-1966) • Labor-intensive export-led growth (1967-1972) • Heavy industry promotion (1973-1978) • Stabilization, liberalization and economic maturity( 1979-1996) • Financial crisis (1997–1999) • Reform, restoration of growth (1999-present

  6. WTO rules either prohibit or severely restrict most measures used by South Korea for its accelerated development Aid to South Korea was mostly untied; current flows are tied

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