[칼럼] Korea Story 18 - Economy and Finance 1 by Atty Jeong-kee Kim

(Newskorea=Seoul) Digital News Team = Korea Story 18 - <Economy and Finance 1  by Atty Jeong-kee Kim>



● The Evolution and Future Prospects of Korea's Industry

It is no exaggeration to say that Korea, a traditional agricultural country, had almost no ‘industry’ of this kind for a long time. Moreover, it was difficult for industries with industrial meaning to receive attention in the Joseon Dynasty’s strict social hierarchy of Sa-Nong-Gong-Sang(scholars, farmers, artisans, and merchant).

This social environment has not changed even in modern times. It's a shameful story, but during the Japanese colonial period, the Japanese built factories producing daily necessities, including munitions factories, and our workers worked there, gradually bringing industry closer to us.

After Korea was liberated in 1945 and the Japanese returned to their homeland, Koreans began to inherit the factories left behind by the Japanese or started their own manufacturing businesses based on the experience they had gained. It was through this process that Koreans began to become aware of the concept of industry. Meanwhile, Western countries had already gone through the First Industrial Revolution and were experiencing the significant advancements brought by the Second Industrial Revolution.

At this point, we should pay special attention to the year 1866. In the West, the Second Industrial Revolution was underway and gradually establishing itself. In the same period, in Joseon Dynasty, King Gojong ascended to the throne at the age of 12 in 1864, but because of his youth, the Daewon-gun, the king’s father acted as regent. In this year, the American merchant ship ‘General Sherman’ entered the Taedong River and its crew came to Pyongyang to demand opening and trade. Joseon defeated them by burning the Sherman and executing its crew.

In the same year, the Daewon-gun began a persecution campaign against Catholics, and  executed 9 out of 12 French priests who had entered Joseon to carry out missionary activities. In retaliation, France sent seven warships and 1,000 soldiers to attack the Ganghwa Island area, and demanded negotiations. Although Joseon eventually repelled the invaders after suffering significant losses, including the looting of cultural artifacts, this incident became known as the Byeonginyangyo, French Disturbance of 1866.

Following these events, the Daewon-gun strengthened his resolve to maintain a closed-door policy, and declared that “making peace with Western barbarians is tantamount to selling the country, and trading with them will lead to the nation's ruin.”

Then, in 1871, the United States used the General Sherman incident as a pretext to launch a military invasion of Ganghwa Island. They brought with them five warships, 65 cannons, and 1,230 troops led by the commander of the Asiatic Squadron and caused significant damage, but were eventually repelled in what became known as the Sinmiyangyo, U.S. Disturbance of 1871. This further solidified the Daewon-gun’s commitment to a policy of isolation and rejection of Western influence.

In 1873, the staunch isolationist Daewon-gun was ousted from power, and King Gojong took direct control of the government. Sensing an opportunity to impose its imperialist ambitions on Korea, Japan viewed this as an ideal time to push for a treaty with Korea. To demonstrate its military power, Japan sent warships to Busan, staged a show of force, and threatened Korea to open up for trade..

When Korea firmly rejected these demands, Japan escalated the situation by sending six warships, including the Unyoho and the Second Jeongmyoho, along with 800 troops, led by a special envoy, to Ganghwa Island. The Korean defense forces also did not stay still and fired cannons at their warships.

When Japan used this as a pretext to threaten the conclusion of treaty, Joseon could no longer hold out and signed the ‘Treaty for the Protection of the Sick’ with them in 1876. Also known as the Treaty of Ganghwa, this was the first modern international treaty Korea signed under international law, but it was an unequal treaty.

In the following years, Korea signed trade treaties with major powers like the United States, the United Kingdom, Germany, Italy, and Russia, and opened up the country. However, the Daewon-gun's isolationist policy had delayed this opening far too long, and especially due to his anti-Western stance, exchanges with Western countries were even more delayed.

Moreover, the opening and exchanges were passive and not voluntary, rather than active and proactive, so no significant opening effect was achieved, and ultimately suffered the tragedy of being reduced to a Japanese colony.

In contrast, Japan signed a trade treaty with the United States in 1854, followed by trade treaties with Britain, Russia, France, etc., and allowed port opening, free trade, and extraterritorial rights to Westerners. As a result, trade with the West became active, and imports and exports increased significantly.

However, this led to rising prices, and caused widespread unrest among the common people. And the once stable samurai class fell into poverty. This sparked anti-establishment movements against the Bakufu, the shogunate government, which had been the driving force behind the opening.

In the end, Japan found stability through the Meiji Restoration in 1868, which overthrew the Edo Bakufu during the reign of Emperor Meiji and established a unified, centralized state centered on the emperor. In addition, as the formation of Japanese capitalism began in earnest with the Meiji Restoration, trade and industry with foreign countries were greatly activated.

During this period (1861-1865), the United States was engaged in the Civil War, and after the Union forces led by Lincoln emerged victorious, the nation overcame its division and experienced a "second founding" in 1865. This enabled the U.S. to expand its exchanges with Canada, Germany, Italy, and other European countries, and participated in the Second Industrial Revolution.

The First Industrial Revolution, which originated in the United Kingdom, significantly increased production through innovative mechanization, but it was the Second Industrial Revolution that, with the participation of European countries, the United States, and Japan, brought about a global technological revolution in mass production. Today, the leading Western countries known as the 'G7'—the United States, the United Kingdom, France, Germany, Italy, Canada, and Japan—are all nations that participated in the Second Industrial Revolution.

But what about Korea? Due to the Daewon-gun's isolationist policies, Korea remained like a frog in a well, and were completely isolated in its foreign relations. Despite an attempt to build an ironclad ship modeled after the American merchant ship General Sherman that sank in the Taedong River, the ship failed to move. This was due to a lack of technology, the enormous financial burden of building the ship, and a shortage of iron and copper. Self-driven modernization was a distant dream.

Even the liberation in 1945, following the end of World War II, was not achieved by our own strength. The North aligned with the Soviet Union, while the South aligned with the United States, and after three years of U.S. military administration, the Republic of Korea was established in the South in 1948, and marked the beginning of the division between North and South Korea. The devastating Korean War that followed left the country in complete ruins.

At that time, President Syngman Rhee had to rely on foreign aid to barely manage the country, while the Second Industrial Revolution was entirely something that happened to other countries. Korea did not participate in the global currents at all, and as a result, our people suffered from extreme poverty.

In the 1960s, Korea entered the era of President Park Chung-hee. Today, evaluations of him are highly polarized, with his achievements and faults being heavily debated. While his faults cannot be denied, his "Five-Year Economic Development Plan" opened the era of industrialization, and through the "Miracle on the Han River," Korea achieved remarkable economic growth that astonished the world, and allowed the Korean people to escape poverty.

Particularly, by promoting exports across both heavy and light industries, Korea's industrial sector continued to grow at an astonishing pace. Technological advancements, especially in cutting-edge technologies, progressed rapidly, and Korea eventually took a leading position in the global market. Moreover, as the Third Industrial Revolution, characterized by the information and communication technology era, began in earnest, Korea's advanced technologies gained even more attention, and led exports.

The year 1991 is extremely significant. By the late 1980s, the Soviet economy was rapidly deteriorating. Consequently, East Germany, which heavily relied on the Soviet Union, experienced severe economic and social turmoil, and plunged into uncontrollable chaos. In 1989, the Berlin Wall, a symbol of the Cold War between East and West, fell, and finally, in October 1990, East and West Germany were unified through elections. 1991 marked the first year that a unified Germany stepped onto the international stage. Additionally, the Soviet Union collapsed, and brought an end to the Cold War between the United States and the Soviet Union. With the Soviet Union disappearing from history, the United States emerged as the sole superpower, and dominated international affairs. The U.S. also took the lead in global politics, military affairs, and culture. Moreover, the global economy was led by the United States. Particularly, the U.S. excelled in the fields of computers, IT, and other advanced technologies, based on a strong industrial foundation. They held 70% of the world's intellectual property rights. To use new advanced technologies in the information and communication technology era, one had to pay a high price to borrow American intellectual property rights.

In Korea, although the Chun Doo-hwan regime stepped down in 1987, the military regime continued under President Roh Tae-woo, which had its roots in the Park Chung-hee era. The surge in demands for democratization led to social chaos. In 1992, with the election of President Kim Young-sam and the establishment of a civilian government, democratization was finally achieved. Thus, Korea achieved both industrialization and democratization. Since 1992, Korea actively participated in the new world order, and rose to the position of the 10th largest trading nation globally. Korea's successful adaptation to the information and  communication technology era led by the U.S. brought about remarkable results. In conclusion, Korea's emergence as an IT powerhouse today is because it aligned itself well with the global order.

Although Korea failed to respond effectively to the Second Industrial Revolution in the 1870s and remained largely isolated, by 1991, it successfully adapted to the global landscape and experienced over 30 years of unprecedented prosperity. No other period in Korean history has matched this level of affluence, largely driven by Korea's active participation in the information and communication technology revolution. As a result, Korea emerged as one of the top 10 economies in the world.

Since 2011, the Fourth Industrial Revolution has been accelerating. Generally, it takes about 20 years for a new industrial era to fully settle in. In other words, by 2030, the Fourth Industrial Revolution will reach its peak. A new era is unfolding, dominated by the Internet of Things, artificial intelligence, robotics, and biotechnology. As mentioned earlier, advanced countries are preparing various strategies suited to their environments and are moving forward with vigor. The leading countries in this race include the United States, Germany, Japan, the United Kingdom, and China. However, considering our current situation, Korea desperately needs its own thorough strategies to continue the prosperity of the last 30 years. This is an extremely important practical task to secure our livelihoods for the next 20 years. Unfortunately, despite much talk, there is no clear vision yet. So, who will take the lead in solving this urgent national task?

According to the government's proposed measures, they plan to gather innovative capabilities led by the private sector to push forward the Fourth Industrial Revolution. So, who in the private sector will lead this task? In my opinion, the only concrete answer is our global companies. But which global companies are they? In fact, the number is quite small. For example, the most competitive global company is 'Samsung.' As a leader in advanced technology industries, Samsung holds a firm position in the global market. Its technology-intensive semiconductors and smartphones are ranked first in the world. Numerous electronic products integrated with artificial intelligence are making a strong presence worldwide.

Clinging too much to the past prevents progress and makes it difficult to expect a bright future. The Moon Jae-in administration spent its entire five-year term focusing on the past and failed to present specific strategies for the Fourth Industrial Revolution or any significant plans for our future. Even after the inauguration of the Yoon Suk-yeol administration, although the president's will is strong, the central ministries are not coordinating effectively. Korea must take a lesson from history, particularly from 1866, when Joseon failed to respond to the Second Industrial Revolution and became isolated, which  led to a hundred years of suffering.

Even now, we must move forward toward the future. Especially in the information and communication technology era, the cycle of industrial change is fast, with each cycle lasting only about three years at most. While Korea is stuck in the past, China, which once looked to Korea's technological development as a model, has now surpassed Korea and doesn't even look back. China have already caught up with or overtaken Korea in the main industries such as electronics, steel, petrochemicals, shipbuilding, and automobiles. Even in semiconductors, which are represented by 'Samsung,' it is expected that China could.

☆ Author:  Atty Jeong-kee Kim ☆

● Education
- Bachelor of Arts in Political Science, Summa Cum Laude, State University of New York at Stony Brook
-  Doctor of Jurisprudence, Marquette University Law School
- Senior Executive Program, John F. Kennedy School of Government, Harvard University
- Research Scholar in North Korean Studies, Peking University

● Experience
- Consul General of the Republic of Korea in Shanghai
- Commissioner General for the Korean Pavilion at the 2010 Shanghai Expo
- CEO, Asia-Pacific Local Government Network for Economic and Social Development (CityNet)
- Secretary General, World Smart Sustainable Cities Organization(WeGO)
- Law Clerk, Milwaukee Circuit Court, USA
- Senior Attorney-at-Law, Dr & Aju LLC
- Distinguished Visiting Professor, World Economy Research Institute, Nanjing University
- Research Professor, Institute of Oriental Studies, Peking University
- Distinguished Professor, Graduate School of Political Science, Kookmin University
- Chair Professor, Graduate School of Business, Dongguk University
- First President of Soongsil Cyber University

● Publications
- Georo English Studies Series for College Students [10 volumes] (Georo Publishing)
- I Challenge the Possibility of One Percent (Chosun Ilbo)
- The Art of Negotiation (Cheongnyonneongsin Publishing)
- Korea and the World (Chekmidum Publishing)