Jwa Sung-hee
The author is a distinguished member of the Korean Institutional Economics Association and former CEO of the President Park Chung Hee Memorial Foundation and the Korea Economic Research Institute.

The Nobel Prize winner in economics has twice denigrated Korea’s economic miracle on the Han River. The economic theories that won the Nobel Prize in Economics disappointed Korea again this year, after 2019. The experimental economic theory of RCT (Randomized Controlled Trials) by MIT professors Abhijit Banerjee and Esther Duflo — which won in 2019 — didn’t understand the Nobel Prize in economics. principles of success of the Saemaul Undong (New Village Movement) in the 1970s, the main economic development experiment that led to the economic miracle on the Han River. This theory has been imported and undermines Saemaul Undong’s miraculous achievements, thereby harming the Korean economy. Moreover, this year’s winning theory – the so-called inclusive growth theory of Professors Daron Acemoglue and Simon Johnson of MIT and Professor James Robinson of the University of Chicago – does not adequately explain the economic miracle over the Han. Yet they claim that their theory explains it well, thus completely misleading the Korean economic community.

The 2019 Experimental Economics RCT borrowed its idea from clinical trials in medicine and proved, by experimenting with small groups of people, that offering incentives changes economic behavior. However, the RCT is nothing compared to the policy of “economic differentiation based on performance”, which consists of “never failing to reward merit nor leaving a mistake unpunished” that the Saemaul Undong experimented with nationally for more than 50 years. years ago. Former President Park Chung Hee, who made the miracle possible, adopted a strict reward and punishment policy that only supported successful villages and excluded unsuccessful ones from the Saemaul Undong game, motivating all villages and villagers to work hard for better performance. This rivalry created a self-sustaining population and economic progress. This policy initiative generated miraculous economic results in less than 10 years by eradicating poverty and increasing incomes, leading rural incomes to surpass urban incomes.

Today, the RCT experiment, which became famous by winning the Nobel Prize, created the myth that punishable faultless government support can overcome poverty and has been imported, becoming a poison that undermines the spirit of self-reliance at barely revived by the Saemaul. Undong by guaranteeing a fault-free income under the name of basic income and security income.

Furthermore, the Saemaul Undong stands in stark contrast to North Korea’s Chollima (fast horse) movement, which failed without the incentive system of rewards and punishments while forcibly mobilizing the entire population. Park Chung Hee’s strategy of economic differentiation based on performance – which lifted up all citizens by telling them he would abandon them if they did not succeed – saved South Korea from 5,000 years of poverty and achieved a an economic powerhouse now recognized around the world, while North Korea – which prided itself on saving everyone equally – has become one of the poorest countries in the world.

This year’s Nobel Prize-winning theory claims to be based on such experiences from the Korean Peninsula. In short, he argues that if a country dictates politically and exploits its people like North Korea, it will fail. It seems obvious that if a country follows liberal democracy, guarantees the rule of law and property rights, and allows freedom like Western advanced countries, it will develop, but this seems like a repetition of demands that have proven ineffective . However, according to the winners, Park Chung Hee, who led the Miracle over the Han, was a dictator that should never have happened, and yet he made a miracle possible. Didn’t China, Taiwan and Singapore, which joined the economic miracle after Korea, also have dictatorships just as important as Park Chung Hee? Did a developing country achieve such an economic miracle thanks to Western-style democracy in the 20th century?

Moreover, did not the industrial revolutions of advanced countries, including Japan, succeed in incomplete democracies, under absolute monarchies, exploiting the colonies? So why do these so-called advanced economies – which are supposed to be models by their standards today – all suffer from low growth and polarization? History seems to imply that democracy may not be a sufficient, or even necessary, condition for economic development. Rather, it implies that we must ask ourselves what type of democracy would be most conducive to development.

Plus, this year’s winners seem far from outspoken. In interviews with Korean media, they acknowledge the remarkable export results of Park Chung Hee’s Miracle because they cannot deny a fact. Yet they make somewhat absurd and contradictory claims that the Miracle was possible due to political democratization after the Park Chung Hee era. When asked how China succeeded, they answer irrelevantly that it will fail if it does not democratize in the future. They do not seem to understand the basic principle of development that democracy and dictatorship can only succeed if the economically differentiated incentive system of reward and punishment, like that of Park Chung Hee, can create a spirit of self-reliance among the people, the necessary ingredient for development. Instead, they advocate for an inclusive and egalitarian Western democracy, leveling everyone down by demotivating with lax support without penalty for poor performance. This author has shown that the current economic stagnation and deterioration of income distribution in the world may come from an egalitarian (probably inclusive) democracy ignoring merit without acknowledgment of fault rather than from a market democracy with the strict principle of dispensing justice by helping only those who help themselves, contrary to popular arguments or this year’s Nobel Prize-winning theory.

Did a developing country achieve such an economic miracle thanks to Western-style democracy in the 20th century?