Economic Crisis and the Stagnation of Agriculture

Abstract

Initially based on rapid economic growth fuelled by exports, the development strategy of South Korea eventually shifted more toward deepening of the industrial structure. The Third Five Year Economic Development Plan (1972–6) put more focus on strengthening the industrial production base, especially by promoting heavy and chemical industry. The heavy and chemical industrialisation development policies of the 1970s as well as the agricultural policy, emphasised national economic ‘self-reliance’. To some extent, these new nationalist and self-reliant policies undermined Korean competitiveness on the world market. Whereas the 1960s were characterised by strict adherence to the Ricardian laws of comparative advantage, and stressed Korea’s price competitiveness via low wages, the 1970s stressed investment in new industries in which South Korea did not necessarily possess comparative advantage, such as chemicals, heavy machinery, engineering, shipbuilding and construction.