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Chapter Nine: The Korean Model of Development and its Environmental Implications

Jong-Il You

In March of 1991 eight officials of the Doosan Electro-Materials company, a member of the Doosan chaebol, were arrested for dumping some 300 tons of phenol - known to cause cancer and damage the nervous system -into the Nakdong river which supplies drinking water to around 10 million people. Seven government officials were also arrested for trying to cover up for the company. A month later, the environment minister was forced to resign. Not an unusual story in many countries but very much so in South Korea (hereafter simply Korea) where anything that was seen as a hindrance to growth maximization - be it political freedom, labour rights and social equity, or protection of the environment - used to be ruthlessly suppressed or wilfully neglected. What has changed is the political climate since democratization began in 1987. In an unprecedented reaction to industrial pollution the citizens of Taegu, where the plant was located, took to the streets and the environmental protest movement spread like wildfire, leading, for instance, to the closure of three factories in Taejon charged with polluting the Kuem river. And a successful boycott of the Doosan products, ranging from circuit boards to the most popular beer, Coca Cola and Kentucky Fried Chicken, forced its chairman to resign (Merson 1991).

Koreans are not prepared to tolerate the enormous environmental damage and the extreme levels of pollution any more. In this, they are challenging nothing less than the foundation on which the Korean economic miracle has been created even as it is being touted as the model to be emulated. Amazingly, I have not been able to find a single scholarly journal article on the economic analysis of the environmental issues in Korea. Both the left and the right seem to love the Korean model of development, albeit for different reasons, and not much attention has been paid to the social ills and the environmental degradation it has entailed. Are they a price well worth paying for the 'good life' in terms of material consumption the rapid growth has brought about? Is the Korean model the best way to development? How many Koreas can the fragile Earth afford?

This chapter investigates the environmental implications of the Korean model of development. First we look at the political economy of development in Korea and draw the connection between political freedom, social equity and the environment as victims of growth maximization. The next section documents the environmental consequences of development in Korea - population growth and urbanization, natural resources and environmental pollution. It will be seen that environmental pollution is a much more serious problem than resource depletion in Korea. Next the relationship between growth and environmental depletion in Korea is analysed. The final section attempts to make a judgement on the Korean model of growth in light of its environmental implications.

The central claim of this chapter is that the Korean model of development should not be regarded as 'the model' to be followed by the rest of the South once environmental considerations are brought into account. Korea pursued maximization of growth rather than maximization of welfare, one aspect of which is that the welfare cost of environmental degradation was virtually ignored. It does not seem to be prepared to commit itself to environment-friendly growth in the foreseeable future. After decades of economic growth at the expense of grave environmental degradation, the government and the people of Korea are addicted to growth that has an increasingly tenuous relationship with enhancing the quality of life. The world would be on a dangerous course if the entire South were to emulate Korea.

I wish to make it clear that, far from there being no lessons to be learned from the Korean model, on the contrary, there is a great deal to be learned from the Korean experience about what sort of policies and institutions work successfully in achieving rapid economic development. And I have nothing against rapid economic development in the poor South which is probably necessary for sustainability of the world economy for demographic reasons (see Baldwin 1993). What I am saying is that the proper model of development must be one of 'growth with environmental care' instead of 'growth at the expense of the environment' as in the case of the Korean model.

THE POLITICAL ECONOMY OF DEVELOPMENT AND ENVIRONMENT IN KOREA

The Political Economy of Growth Maximization

During the last three decades Korea has undergone a remarkable transformation from one of the poorest countries in the world to a 'new giant' of East Asia. Its GDP growth rate averaged 8.8 per cent during 1963-1990. GDP per capita reached $6250 in 1991 and is expected to exceed $10000 in 1996 according to the seventh 5-Year Economic Development Plan. Key statistics regarding the growth performance are presented in Table 9.1. Structural change has been equally rapid: the employment and the GDP shares of agriculture declined from 63 per cent and 43 per cent in 1963 to 16 per cent and 9 per cent in 1990, while those of the manufacturing sector rose from 8 per cent and 15 per cent in 1963 to 27 per cent and 29 per cent in 1990.

Table 9.1 Growth performance in Korea 1963-1990

Note: manufacturing wage
Sources: Bank of Korea and Economic Planning Board

While there are disputes about the secret of the fantastic growth performance of Korea, with the orthodoxy stressing the importance of the neutral trading regime and free-market competition and its opponents highlighting the role of import substitution and a heavy dose of government intervention, what is clearly beyond dispute is the ability of the Korean state to impose its policies with little resistance from either the capitalist or the working classes. Not only was it free to pursue relentless growth-maximization policies, but it was able to discipline errant capitalists or trouble-making workers who deviated from the course of action set out by the economic development plans. This rather unusual state of affairs is, more than anything else, the central ingredient of Korea's economic success, except perhaps for its special geo-political status as an anti-communist garrison state in the Cold War which earned Korea huge amounts of aid and access to the US markets.

Why was the Korean state so strong in terms of both its relative autonomy in defining goals (ie growth maximization) and its capacity to mobilize resources and implement policies? The autonomy of the state can be explained by the fact that the social classes were very weak and in no position to oppose the agenda of the developmental state organized by President Park who assumed power through a military coup in 1961. Capitalists were dependent on the state, with their meagre economic base having originated from the disposal of the industrial assets left by the Japanese and the US aid in the 1950s under the Rhee government (1948-1960). Landlords were stripped of their political might and economic base through the land reform in the early 1950s. Organized labour and other popular movements were ruthlessly destroyed by the US military government (1945-1948) which considered them obstacles to erecting an anti-communist regime in South Korea. The middle class was practically non-existent.

The extraordinary administrative and coercive capacity of the Korean state has such historical origins as the long tradition of centralized bureaucratic state, the inheritance from the colonial period of a strong military-administrative apparatus, and the massive build-up of the military and the national police following WWII and the Korean War (Choi 1983). On top of this, the military junta led by Park nationalized the commercial banking system and seized control over the entire financial system, gaining an extraordinary leverage over the private sector.

Not all strong states are developmentalist, although in the postwar era most of the states pursued economic development to a greater or lesser extent. The Korean state was highly committed to development for two reasons. First, the military leadership perceived that economic development was an imperative for national survival and dignity. For them, economic development was a national security issue as North Korea was ahead of the South in economic strength in the early 1960s. The military leadership also felt threatened by declining US aid and humiliated by their dependence on US support; thus the slogan 'ration-building through exportation'. Second, it attempted to erase the illegitimacy of the coup by fostering rapid economic development. In a country where the military class were subordinated to the literary class for centuries the military-dominated state led successively by Park (1961-79) and Chun (1980-87) never gained wholehearted acceptance by the populace. Rapid economic development was offered as a compensation for the loss of political rights (Bello and Rosenfeld 1990).

The military leadership did not need to look far to discover a secret formula for rapid economic development. Park, a former official in the Japanese army, knew only too well how the Japanese colonial government quickly built an impressive industrial base in Korea during the 1930s to prop up its war aims. This episode featured extensive state intervention in the economy, a peculiar developmental banking system, enlisting of zaibatsu groups for crash industrialization and their reward with heavy subsidies, and mobilization of the entire population to achieve the objectives of the state -all featured again in the 1960s and 1970s (Woo 1991). The model worked once again. State intervention, developmental banking, reliance on big business, these are all quite typical of late industrialization. What set Korea apart from the less successful countries was the immense effectiveness with which these instruments were used to carry out the development plans, owing to the strength of the Korean state. In particular, the state in Korea imposed performance standards on the businesses in return for subsidies more successfully than other states (Amsden 1989).

For all its economic successes the military-dominated regime could not hold on to power forever. In fact, in the long run, it was the very success of the regime in delivering rapid economic development that undermined the foundation of the regime. For the rapid economic development meant increasing power for social classes: the gigantic chaebols amassed enormous economic power, the newly prosperous middle class increasingly resented the arbitrary use of the state power, and the numerical and organizational strength of the working class was growing. The response of the state, especially in the early 1980s, was to accommodate the chaebols' needs - for example, by selling the commercial banks to the chaebols in the name of liberalization - in return for illicit political contributions on the one hand, and, on the other, to forcefully suppress the labour movement and political dissent. The growth coalition between the state and chaebol looked increasingly suspect and this undermined the implicit social compact in which the state would harness the social forces and mobilize the economic resources to the goals of economic development and the citizenry would tolerate authoritarian politics. In the minds of the younger generation of Koreans, with no living memory of wars and starvation, the military-dominated state had outlived its purpose. Such was the political reality which, along with the increased strength of the popular classes, led to the demise of authoritarian politics and the beginning of democratization in 1987.

Victims of Growth Maximization: Political Freedom, Equity, Environment

More or less absent in the large literature on Korean development is a sober assessment of what it meant for the well-being of the people. True, many noted the rise in the material standard of living, including health and education, that accompanied the rapid rise in income. Moreover, these benefits of growth have been widely, if not equally, shared by the majority of population as ample employment opportunities were created by the rapid growth of the economy. However impressive these achievements may seem in comparison to what has happened in many other parts of the developing world, they should not blind us to the deep social discontents that have persisted within Korea. The costs which the hyper-rapid growth has imposed on the population are as real as its benefits, and we need to ask if the benefits justify the costs and, more importantly, if some of the costs could have been avoided.

The first casualties of the Korean-style development were political freedom and human rights under the military-dominated authoritarian state. Any profound social change is bound to have traumatic aspects, especially when it occurs as fast as it did in Korea. The breakdown of traditional values and social ties and rapid structural changes inevitably bring about heightened social conflict. In Korea such changes were engineered by the powerful state machinery which, with its unusual capacity for repression, suppressed any dissent on the path of development, producing thousands of political prisoners and provoking self-immolation by many protesters. Striking workers, protesting farmers and communities seeking to protect themselves from destructive development projects were ruthlessly put down by the security-police apparatus.

The very fact of political repression suggests that not all was well in spite of rapid economic growth. In fact, in the name of growth maximization, distributional equity and social welfare were neglected and the environment was actively sacrificed. In the minds of the leaders of the state economic growth was a collective good serving the 'nation' and was not to be constrained by mere individual welfare considerations. In the 1970s the government officially proclaimed its policy priority to be 'growth first, distribution later'.

It has been widely publicized that the income distribution in Korea is one of the most equal among the developing countries and that it did not experience the typical worsening implied by Kuznets' U-shaped curve. For casual observers inside Korea, however, the inequality of income distribution was plainly excessive and worsening over time as even the government acknowledged in the 1980s. Why the difference in perceptions? Besides the obvious point that there is no reason why Koreans should be satisfied with the fact that their income distribution is better than the Brazilian one, it is important to note that the international economists' perception was shaped largely by what happened up to the early 1970s, when the rapid reduction in unemployment did improve income distribution. Few took in the subsequent deterioration. Moreover, the data from which earlier calculations were made are seriously flawed as they exclude a large segment of population including the very rich and the very poor, the 'imputed income' from housing and of course the unreported income (Yoo 1990). Corrections for the unrepresented households (Kim and Ahn 1987) reveal an unmistakable trend of rising inequality from the early 1970s, even though it still underestimates the degree of inequality due to the importance of the imputed income and unreported income in wealthy households.

A more visible and acutely felt inequality, which is not captured by the household income distribution data, is the enormous concentration of power and financial resources in the hands of chaebol whose explosive growth has been underwritten by the state. In a loan market characterized perennially by excess demand they had nearly monopolized access to preferential loans and low-interest rate bank financing, crowding out small and medium-sized businesses into the unorganized money markets. Regional inequalities created by concentration of industrial facilities in Seoul area and the South-east have also been an important source of conflict Not only was the growth maximization by the state engendering growing social disparities, but the state, in keeping with the 'growth first, distribution later' policy, did little to ameliorate them through social spending. The share of government spending on social welfare has been one of the lowest in the world (You, forthcoming).

Not surprisingly, the environment also fell victim to growth maximization policies. There have been positive developments such as the sharp decline in the population growth rate from above 3 per cent in the fifties to below 1 per cent in 1991 and the successful reforestation, but they pale in comparison to the massive environmental degradation brought about by the rapid industrialization and urbanization in a milieu where polluting smoke was hailed as a symbol of development. The state had no inclination to protect the environment lest it hurt business profits and growth. The victims of toxic pollution were viewed, if they protested, as antisocial enemies of the national drive toward economic growth. Faced with the government's unwavering pro-industry stance, the victims of pollution - usually the most powerless members of the society like farmers and fishermen - opted to bring their cases directly to the polluters and usually received only a small fraction of their original claims (suer 1991).

On paper, there was the Public Nuisance Prevention Law (PNPL) of 1963 which empowered the government to set emission and effluent standards and required pollution-abatement facilities in all new factories. But as the responsibilities for enforcement of PNPL were assigned to an understaffed Environmental Division under the Ministry of Health and Social Affairs, itself the ministry with the least clout in the government, there was no systematic monitoring and rarely have polluters faced any penalties (Cha 1976). As public concern with the environmental degradation grew, the PNPL was replaced by the Korean Environmental Preservation Act in 1977 and the Environmental Division was upgraded to the Environmental Administration in 1980. In the early 1980s the government, for the first time, began to take some actions to tackle the most politically sensitive pollution problems - the unbreathable air in Seoul and the filthy water in the Han river. But even after the Environment Administration was upgraded to the Ministry of Environment in 1990, in the wake of democratization, its regulation of pollution discharge remains mostly cosmetic as it lacks both the judicial power and the necessary enforcement personnel (Chung et al. 1990).

The next part of this chapter will document the details of the environmental degradation caused by decades of neglect. What I want to stress here is the connection between the political freedom, social equity and environmental protection as the victims of the growth maximizing Korean model of development. Already democratization has brought into question the obsession with growth-maximization as the national goal under the military-dominated regimes, although rapid growth remains the primary objective of the long-term economic policy. The government of Roh (1988-1993), which represented a halfway house to democracy, began to relax labour repression in the aftermath of the giant eruption of strike waves in 1987 and to pay attention to the long-neglected welfare needs by introducing the minimum wage law, national health insurance and the national pension system (You, forthcoming). Korea may never again enjoy the frantic economic growth rates of the late 1980s. The inevitable erosion of competitiveness due to rising labour costs has slowed down the growth machine in the 1990s. As Koreans wrestle to imagine a new political economy which balances growth and social needs, environmental issues have also come to the fore.

THE ENVIRONMENTAL CONSEQUENCES OF DEVELOPMENT

Population Growth and Urbanization

Korea is one of the most densely populated countries in the world, second only to Bangladesh if we exclude city states, with the population density of 438.4 persons per km2 in 1990. The total population increased from 25.0 million in 1960 to 43.5 million in 1990. But the population growth rate steadily decreased from 2.9 per cent per annum in 1960 to 0.98 per cent in 1990. The total fertility rate dropped from 6.0 to 1.6, considerably below the replacement rate, during the same period. The population projection based on the 1990 census estimates that the population will stabilize at around 50.6 million by the year 2021 (Ministry of Environment 1991). Due to the reduction in the fertility rate and increased life expectancy the population structure has changed from a pyramid shape to a bell shape, with the percentage population aged 14 or less decreasing from 42.3 per cent in 1960 to 25.8 per cent in 1990.

The rapid reduction in the population growth rate can be attributed to the rapid rise in income as well as to the vigorous promotion of the national family planning programme. Adopted in 1962 as a part of the economic development plans, it succeeded in raising the rate of contraceptive use from 9 per cent in 1964 to 77 per cent in 1988, the highest in the developing world (see Table 16.6 in WRI 1992). It is worth noting that the population policy was carried out by subtle advertising and free provision of family planning services rather than in a repressive way.

While Korea has done well in curbing population growth, it has been unable to solve excessive urbanization. The process of urbanization in Korea has been extremely rapid. The percentage of urban population (those living in the cities of at least 50,000 residents) increased from 28.3 per cent in 1960 to 71.6 per cent in 1990. The percentage of population living in cities of one million or more increased from 17.3 per cent in 1965 to 50 per cent in 1990. The growth of the Seoul metropolitan area has been especially explosive. The population of Seoul, the land size of which is only 0.6 per cent of Korea, reached 10.6 million or 24.4 per cent of the total population.

The population of the Seoul metropolitan area was 18.6 million or 42.7 per cent of the total population (Ministry of Environment 1991).

The chief cause of the heavy concentration of population is the concentration of the social infrastructure and industrial facilities in large metropolitan areas and industrial complexes, which was promoted on grounds of economies of scale and growth maximization. Seoul, in particular, is not only the political centre as the capital city of the country but the centre of industry, commerce, finance, education and culture. In the face of such overwhelming attractions, government policies to disperse population away from Seoul region have been ineffective.

The rapid urbanization has inevitably caused serious problems in the natural and living environment in urban areas. In addition to the pollution of ambient air and water near cities and the generation of solid wastes, which will be discussed below, there are incredible traffic congestion and housing problems.

Table 9.2 Number of motor vehicles (000s)

Note: Excludes 2-wheeled motor vehicles * projection Source: Ministry of Transportation

As can be seen in Table 9.2 the growth of the number of motor vehicles has been extremely rapid, roughly doubling every four years or so, and is expected to continue at a similar pace for the foreseeable future. In recent years, especially, the increase in the number of passenger cars has been explosive: it almost doubled in just two years between 1988 and 1990. Apart from rising incomes and falling automobile prices, government policy to promote the car industry by expanding the domestic market has been at work Compared to the increase in the number of cars, the expansion of the road system has been totally inadequate. For example, between 1970 and 1985, the length of city roads in Seoul increased only twofold whereas the vehicle fleet increased tenfold. To keep the expansion of the road system in line with the rise in the number of cars seems near impossible due to the skyrocketing cost of land. As a result traffic congestion in large cities is expected to get worse from an already intolerable situation. The average speed of motor vehicles during the peak hour was measured at about 15 km/hour in Seoul and 18 km/hour in Pusan in 1987, but is expected to fall to about 7-8 km/hour in both cities by 1996 (KTI 1989). In addition to the huge inconvenience, the traffic congestion causes enormous economic losses in terms of the additional fuel consumption, the loss of additional driving time, the environmental cost of additional automobile emissions, increased accidents, and so on. The cost of additional fuel consumption due to congestion in Seoul during 1987 was estimated to be over $500 million and is expected to increase up to $8 billion by the year 2001 (KTI 1987).

The housing problem in urban areas is one of the most serious social problems in Korea. The rapid growth in urban population, coupled with the trend towards nuclear families resulted in ever-growing demand for urban housing with which supply of housing has been unable to keep up. Thus, between 1960 and 1988, the ratio of the number of housing units to the total number of households declined from 82.5 per cent to 69.8 per cent nationally and from 64.8 per cent to 58.2 per cent in urban areas. Since some households own multiple housing units, the actual supply condition is even worse: for example, in Seoul only 28 per cent of the households own any land at all.

Energy and Other Natural Resources Energy

Industrialization and economic growth in Korea have been literally fuelled by increasing energy consumption. As shown in Table 9.3, the total consumption of primary energy in Korea increased more than tenfold and the per capita consumption more than sixfold during 1961-1991. The elasticity of energy consumption with respect to GDP was below unity in the 1960s, but exceeded unity in the 1970s despite the oil shocks, as Korea pushed its Heavy and Chemical Industrialization programme which changed the industrial structure toward energy-intensive industries such as steel and petrochemicals. Energy efficiency was taken more seriously in the 1980s and it improved substantially up to 1987. More recently, however, energy consumption increased much more rapidly than GDP as energy prices declined considerably. A sectoral analysis shows that this was mainly due to the deterioration of energy efficiency in the highly energy-intensive industries and the rapid increase in energy consumption in the transportation sector (Chu 1991).

The increase of energy consumption, well over 10 per cent per annum since 1988, is ringing alarm bells in Korea. In the absence of drastic measures, however, rapidly expanding energy consumption is expected to continue: the conservative estimate in the Sixth Five-Year Plan forecasts 7.1 per cent annual growth rate during 1992-1996. This is on top of already high energy-intensity of the economy. Even at the low point of 1987, the ratio of energy consumption to GDP in Korea was about 40 per cent above that of the OECD average and more than twice that of Japan (per capita energy consumption is roughly half of the OECD level, while per capita GDP is roughly a third). The main reason for this is the inefficient energy use in the industrial sector, whose share of the energy consumption rose from 38.5 per cent in 1975 to 46.3 per cent in 1988 which is considerably higher than that of the OECD countries.

Table 9.3 Energy consumption in Korea 1961-91

Source: Ministry of Energy and Resources

Due to insufficient domestic energy resources Korea has increasingly relied on imports from overseas to meet the growing energy demand. In the earlier stage of the development the bulk of the energy consumption derived from anthracite and firewood, which are the only indigenous energy resources in Korea besides hydropower. But firewood has been rapidly phased out as a source of energy (from 43 per cent in 1965 to 6 per cent in 1980) and the supply of anthracite could not keep up with the rapidly growing energy demand. Since the 1970s Korea has heavily depended on oil and, to a lesser extent, bituminous coal, both of which are imported. In the 1980s, nuclear energy and liquified natural gas, which are also imported were introduced and their relative importance is growing in recent years. As a result dependence on imported energy rose from 8.6 per cent in 1961 to 91.9 per cent in 1991. In 1991 imports of mineral fuels amounted to 12.8 billion dollars which was 15.6 per cent of total imports or 5.4 per cent of GNP.

The rapid increase of energy consumption has had its predictable consequences on the environment. On a favourable note, destruction of forest for firewood ceased to be a problem as the government prohibited the use of firewood in the early 1960s. However, air pollution from burning of fossil fuels has become serious and there are concerns about the safety of the nuclear power plants. Concerned with the dependence on imported oil, the government made a strategic decision to go nuclear in the 1970s. After the first reactor was built in 1978, Korea has continued to build new reactors and by 1999 will have 14. Nine reactors currently operating are already supplying half of electricity demand. The public is apprehensive after it was reported in 1989 that the wife of a worker in a nuclear plant had two miscarriages of brainless fetuses and that there were many deformed animals born in the area.

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