Past Forward — page 2

In 1945, the Soviets had accepted Japan's surrender north of the 38th parallel, an arbitrary division point, and the Americans had done the duty in the south. The Korean War transformed the 38th parallel into a de facto border--one of the most fiercely guarded in the world. The 1953 armistice also cemented forever a deep and emotional split in the Korean psyche, first found in the nationalist movement that had arisen under the abhorred Japanese: some saw the outside world as the eternal enemy, others saw it as Korea's path to learning and progress. Soviet-backed Kim Il Sung transformed North Korea into one of the most psychotically hermetic nations of the post-war world, building on political structures the Soviets installed immediately on their arrival in 1945. In the south, administered by unprepared and less astute Americans, the contrary mission was given to Rhee, a septuagenarian Christian who had lived in exile in Hawaii for more than 40 years: to create a liberal democratic Korea.

Thanks to the hated Japanese, both Kim and Rhee took control of populations united in nationalistic fervor and remarkably egalitarian. (The Japanese abolished Korea's traditional class system at the beginning of the century; war ultimately accomplished the rest of the social leveling.) Kim set about building his totalitarian "worker's paradise." Rhee, however, had less success living up to the democratic standards entrusted to him--which were also being ardently studied by his newly liberated people in American-supplied textbooks. In 1960, students poured into the streets of cities to denounce Rhee for corruption and political high-handedness. The army sided with the students, Rhee resigned and went home to trim his hedges while students cheered him. (Cheers reverted to jeers within weeks, and Rhee, 85, was forced into exile in Hawaii, where he died in 1965.)

Rhee was ultimately succeeded by the humorless and puritanical Park Chung Hee, a general who participated in a 1961 coup and later narrowly won two presidential elections. Park was hardly a democrat: he eventually set up a bureaucratic authoritarian regime. But in one of the strangest ironies of the period, the veteran military man turned South Korea away from war with the North and toward an economic miracle. Throughout his 18 years at the helm, Park kept tabs on the two countries' GDPs while presiding over monthly export award ceremonies. South Korea became twice as large as the North, then doubled again and again. The comparison seems meaningless today, with North Korea on the point of economic collapse, but in the early 1960s the South's triumph did not appear so likely.

Park, the son of peasants, didn't have Japan's luxury of rebuilding an industrial base. He had to create one. "We had never heard of long-term economic development," recalls O Wonchol, one of Park's main economic architects. "No one had any experience or enough knowledge." To formulate a five-year plan, Korea asked Japan for help. "They turned us down," O says, "saying that such thinking was for Communist countries." So Park's men came up with their own export-oriented model, starting with shipments of rice--Koreans switched to eating barley instead--and shaving brushes made from the bristles of local pigs. Park had to beg for funds to import materials and equipment. To get a $40 million loan from Germany, he bartered Korean nurses and miners. When he visited a group of his scruffy miners in Germany in 1964, the President was so overcome with emotion that he was unable to complete his speech. "The German President, who was standing next to Park, passed his handkerchief to him," recalls O.

Park relied on a handful of entrepreneurs with decidedly little experience, including Samsung's Lee Byung Chull, who began as a rice trader in the late 1930s; Hyundai's Chung Ju Yung, who ran an auto repair shop in 1940; Lucky-Goldstar's Koo In Hwoi, who was hawking a face cream called "Lucky" in 1947. After Richard Nixon in 1971 pulled 20,000 U.S. troops from South Korea in preparation for his rapproachment with China, Park decided that South Korea needed more than wig and shoe factories. He set his country on the path of producing its own armaments and all the industries needed to do so, including machinery, steel, electronics and chemicals. Labor exports to the Middle East helped pay the bills, along with ever-increasing foreign loans. And once again, Park parceled out the work to the growing chaebol, whether they liked it or not--and held them to strict export quotas in exchange for easy credit.

But learning how to make tanks was harder than putting together pig-bristle brushes. When the Lucky-Goldstar Group wanted to produce radios in the 1960s, it pulled apart Japanese models and relied heavily on a single expert shipped in from Germany. Japan was stingy with technology, so the chaebol hired engineers retired by Japan Inc. By the 1990s, South Korea was rich enough to buy companies in Silicon Valley for technology--even Russian expertise had become available--and Korea Inc. was fully formed and purring. But nearly all of Korea's business was done by a handful of giant firms. "The use of the chaebol as the engines of growth under Park," says Lee Doo Won, an economist at Yonsei University, "may have been the greatest single factor affecting the Korean economic landscape in the decades to follow."

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