South Korea is known as a Late Developing County (LDC) or Late Industrializing Country. This is important to differentiate between these and the earlier industrialized countries because the method of development is very different. In earlier industrialized nations there was a reliance on a generation of innovation and invention, for later developing nations there is a focus on learning and adoption of skills/technologies. It should also be noted that the process of learning and development of a nation was not a new concept for the LDCs, as in various times of history one nation would play the innovator (i.e. England), and others would follow as learners (i.e., the United States and continental Europe). Learner nations do not necessarily innovate but manage to compete on the basis of low wages, state subsidies, and incremental quality improvements to developed products.
Within South Korea we see a variety of steps taken in order to spur it's economic development. The state intervened with subsidies in order to spur business, on the caveat of performance standards for these firms. Another major boon to development was the diversification of business groups, the creation of what we would know as conglomerates, known in Korea as chaebol, or zaibatsu in Japan. Put together, a large part of the initial development of the Korean economy was placed in government backed subsidies and legislative support for the chaebols. The support for these chaebols allowed these firms to diversify and mitigate risk from failure in certain industries with successes in others. Their deep economic penetration in a variety of areas also supplanted the need for multinationals to invest in target industries that the chaebols already covered. Korea is a notable case among other LDCs because their chaebols were considerably larger than similar conglomerates found in other nations. While Korea has taken foreign loans it does not see direct foreign investment outside of labor industries.
Another major boon to economic development was the heavy investment in education and the rise of the salaried engineer as a social class. The sheer quantity of engineers increased competition and productivity as a result. Korean firms showed a preference to hire additional engineers over administrators, exemplifying their importance in the Korean economic model. In developing a business culture Korean firms had a tendency to try and reduce administrative overhead and even appointed managers to production positions on the shop floor, alongside engineers. Worker productivity and culture tended to play a large role as well, as Koreans worked longer weeks, a holdover of the intensive factory system under Japanese colonialism. However, these long hours were met with higher wages, promoting additional productivity and the incentive for managers to gain additional education.
In short South Korea's economic boom can be attributed to three fundamental sources:
Bonus: Though the chaebol reliance led to issues during the Asian economic crash there are still several in the modern Korean economy that are doing well and account for an excessive amount of the countries economy. The biggest modern chaebols include Samsng, Hyundaie, and Daewoo. Samsung alone earns revenue equivalent to 17% of the South Korean GDP.
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