The Han River has played a central role in Korean history from the earliest times. In the early days of its discovery, it was recognised for its fertile alluvial banks, which was a relative rarity on the mountainous peninsula.
Fast forward to modern times and The Miracle on the Han refers to the average annual GDP growth of 8% that was achieved between 1962 and 1989. During this period, the manufacturing sector expanded by close to two-fold.
And it all happened along the banks of the river.
South Korea had adopted an export-led growth model based on labour-intensive manufacturing; an area where it had a competitive advantage due to low wages. This outward-looking strategy allowed South Koreans to benefit from global growth and the liberalisation of trade.
Park Chung-hee, the former President of South Korea, continued the established practises of economic nationalism. He simultaneously supported protectionist measures to boost local firms. Once a domestic firm’s production increased, imports from overseas competitors were halted. Import substitution and infant industry protection went hand in hand in Park’s policy of economic nationalism.
In a nutshell, economic nationalism requires policymakers to establish a set of practices to create, bolster and protect national economies in the context of world markets.
The Miracle on the Han, however, would not have been possible if South Korea and Japan had not ‘normalised’ their relations. Seoul received $800 million in aid–by way of grants and soft loans–that served as compensation for Japanese colonisation of the Peninsula.
These funds were invested in infrastructure and industrialisation projects. This was the catalyst that ignited South Korea’s rapid growth. Given the difficult relationship between South Korea and Tokyo–Japan has never, and will probably never, get ‘credit’ for its aid package.
Giving Korean firms domestic monopolies while encouraging them to compete in international markets proved successful–forcing them to become more efficient and competitive while at the same time avoiding the hazards of over-protectionism which leads to stagnation.
Despite the economic miracle on the Han, South Korea is still not considered an environment conducive to entrepreneurship and startups face formidable challenges. The educational system does not permit, allow or encourage thinking outside the box.