------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (October 2006)
Young-Iob Chung, _Korea Under Siege, 1876-1945: Capital Formation and
Economic Transformation_. New York: Oxford University Press, 2006. xv
+ 390 pp. $74 (cloth), ISBN: 0-19-517830-0.
Reviewed for EH.NET by Myung Soo Cha, School of Economics and
Finance, Yeungnam University.
_Korea Under Siege, 1876-1945_ claims that Japanese imperialism
triggered an industrial revolution in Korea, highlighting capital
accumulation as a key force driving the transition. Following a brief
introduction, Young-Iob Chung, Professor Emeritus of Economics at
Eastern Michigan University, begins by describing poverty persisting
in traditional Korea (Chapter 2). Japan forced dynastic Korea to be
open to international trade in 1876, allowing modern technologies to
flow into the country, but living standards hardly improved before
the beginning of Japanese rule in 1905 (Chapter 3). Modern economic
growth in Korea required institutional reforms stimulating saving and
education, which included legalization of property rights and
modernization of pubic finance and the monetary system as implemented
during the first decade of the colonial rule (Chapter 4). The next
three chapters take a closer look at investment: Chapter 5 estimates
sectoral investment; Chapter 6 explains measures taken to encourage
investment and identifies sources of funds for different types of
financial institutions; and Chapter 7 calculates how much of the
investment was financed by domestic (or foreign) savings and by
private (or public) savings. The capital accumulation resulted in per
capita output rising 1.2% per year and primary sector output as a
share of GDP contracted from around 90% to less than 50% during the
colonial period (Chapter 8). Beneficiaries of the industrial
revolution included Japanese landlords, entrepreneurs and skilled
workers, while living standards enjoyed by Korean peasants and
unskilled workers hardly improved (Chapter 9). Chapter 10 concludes
by claiming that in terms of economic development the colonial rule
was a "blessings in disguise" bestowed on Koreans by Japanese
taxpayers.
The tale of Japanese colonialism rescuing Korea from a Malthusian
trap sounds not only plausible (if not politically correct in Korea),
but also familiar. What makes this volume unique is its focus on
capital accumulation. Unfortunately, the author does not make any
attempt to validate this important claim, confining himself to
presenting aggregate input and output growth estimates. Had he used
these numbers to do growth accounting, the outcome would have been
quite misleading, because they are at best ballpark figures.
First, Chung conjectures that the Korean aggregate output grew 3% per
year under Japanese rule, taking an average of two very different
estimates: the growth rate of output from primary and secondary
sectors as estimated by Suh (1978) and the aggregate output growth
rate taken from an obscure conference paper. Chung apparently is
unaware of Mizoguchi and Umemura (1988), the outcome of the first
serious effort to estimate the national accounts of colonial Korea,
which portrays the colony as growing considerably faster than Chung's
estimate - i.e., 4% per year. A more recent and refined calculation
by researchers at the Naksungdae Institute of Economic Research (full
details published in Korean as Kim (2006) and English summary
included in Cha and Kim (2006)) produced a somewhat slower growth
rate, 3.7% per year.
Second, Chung offers a population growth estimate - 1.8% from 1904-43
- calculated from the number of residents as published in the
Statistical Yearbook of the Colonial Government. This is an
overestimate, because the first census taken in 1925 revealed that
the pre-1925 enumeration left out a considerable number of Koreans.
Projecting backwards the downward trend in mortality found in census
results, Ishi (1972) argued that population expanded significantly
more slowly than Chung believes - 1.4% per year from 1906-44. This,
in combination with the recent output growth estimates, implies per
capita output growing twice as fast as Chung claims.
Finally, drawing on paid-in capital as published in firms' financial
statements and capital spending as recorded in public accounts, Chung
estimates that investment from 1905-38 amounted to 6.4 billion yen.
This figure is about twice as large as the sum of investment
(estimated as a spending item in the national accounts of colonial
Korea) from 1911-38. Young (1995: 651) observed similar inconsistency
between investment in the South Korean national accounts and capital
stock in the South Korean national wealth surveys, the latter being
the sum of the value of asset ownership as declared by individual
firms. Then he chose to use the investment figures in the national
expenditure accounts, the reason being that they are at least
constrained by the production accounts, while there is no way of
checking the reliability of numbers offered by firms.
Chung's assessment of the trends in colonial living standards sounds
unduly pessimistic as a result of not paying enough attention to the
mortality decline occurring under Japanese rule. Incomes earned by
unskilled workers and tenant farmers did fail to rise as a matter of
trend, which together with rising life expectancy implies improving
living standards. The mortality decline also should have been
highlighted in Chapter 4 as an important aspect of human capital
accumulation, in addition to the spread of modern education. Chung
presents falling per capita food availability as another piece of
evidence proving that the benefits of economic growth failed to
trickle down to a large majority of Koreans. The downward trend may
well be a figment of the overestimated population growth, however. A
recent estimate of pre-1925 population (based on demographic
information from genealogies) suggests a growth rate even slower than
Ishi (1972) - 1.3% per year - removing the negative time trend in per
capita food availability (Cha (2006)).
Justly portraying the colonial government as bringing about modern
economic growth in Korea through institutional modernization, Chung
at the same time launches unjustified critiques of some of its policy
measures. Most primary prices fell in the late 1920s and early 1930s
all over the world, which makes it implausible to attribute falling
rice prices in Korea to policy interventions to stimulate rice
production. The external shock (known as the interwar agricultural
depression) appeared to cause a number of irrigation associations to
go bankrupt. While Chung explains the debacle in terms of the
colonial government enforcing wasteful investment in irrigation,
investigations using financial records of individual irrigation
associations found no evidence to support the assertion (Chang, et al
(1992)).
References:
Cha, Myung Soo. 2006. "Kyo�ngje so�ngjang, kujopyo�nhwa, sodu�k
punbae," in Nak Nyeon Kim. ed. _Han'guk u�i kyo�ngje so�ngjang
1910-1945_. Seoul: Seoul National University Press.
Cha, Myung Soo and Nak Nyeon Kim. 2006. "Korea's First Industrial
Revolution," Naksungdae Institute of Economic Research Working Paper
no. 2006-3.
Chang, S. Matsumoto, T. Miyajima, H. and Rhee, Y. eds. 1992. _Ku�ndae
choso�n suri chohap yo�n'gu_ Seoul: Ilchogak.
Ishi,Yoshikuni. 1972. _Kankoku no jink� no bunseki_. Tokyo: Keis� shob�.
Kim, Nak Nyeon. ed. 2006. _Han'guk u�i kyo�ngje so�ngjang 1910-1945_.
Seoul: Seoul National University Press.
Mizoguchi, Toshiyuki and Mataji Umemura. eds. 1988. _Ky� nihon
shokuminchi keizai t�kei_. Tokyo: Toyo keizai shuppansha.
Suh, Sang-Chul. 1978. _Growth and Structural Changes in the Korean
Economy, 1910-1940_. Cambridge: Harvard University Press.
Young, Alwyn. 1995. "The Tyranny of Numbers: Confronting the
Statistical Realities of the East Asian Growth Experience."
_Quarterly Journal of Economics_ 110 (3): 641-80.
Myung Soo Cha is Professor at School of Economics and Finance,
Yeungnam University. He is currently working on the pre-colonial
demographic history of Korea and the spread of modern education in
colonial Korea.
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