Toward a New Era in Korea - U.S. Relations


Paper for the Korea-U.S. Friendship Association, Seoul, Korea, January 21, 1981


               Throughout this past year, I have been keenly aware of the friendly concern of the American leaders over the shape and direction of our society. As allies, ideological compatibility between the two countries is as important as toleration and understanding. It renders the alliance more effective and lasting. If the past gave cause to that friendly concern, I can assure you today that the future will be different. We too aspire to the same ideal that consent of the people freely expressed provides the sole basis of political legitimacy, that rule of law-rule over individual will, rule as accepted norms of conduct, and equality before law-governs the exercise of popular mandate, and that certain rights of man are inalienable and governments are therefore of a limited nature. We have a long way to reach that goal, but we certainly have not reached the end of the road toward that goal. Lack of external security guarantees and fear of internal disorder, which are characteristically indistinguishable in this country, often prevented us from moving rapidly toward that goal in the past. Furthermore, the deteriorating world economy unsettled us, heightening the sense of insecurity.

That was the story of the past. We have now reached a point where we must ask ourselves a different set of questions: Can economic development go on without corresponding political development? Will our security needs be met with people enjoying only limited political participation? And, above all, will political stability be maintained with only promises of democracy? The answer is obvious. A dynamic and sophisticated people require a balanced society to be happy and productive, a society where a pluralistic economic system underpins the pluralistic political system. Just as an orderly market competition is the fuel for economic growth, an orderly political competition is the prerequisite for a viable political system.

The parallel between economic and political development, however, should not stop here. A primary-based economy cannot leapfrog into a post-industrial society. It must move in stages: Skills must be learned, capital has to be accumulated, and a rational way of problem creating and problem solving has to be nurtured, invariably through experiences, some of which are painful. Likewise, societies must develop interest articulation and aggregation skills, indigenous democratic institutions must be developed through trial and error-some of which is even more painful-and, above all, people must acknowledge by tradition the virtue in compromise rather than reject it as incomplete answers. The indispensable task of government in promoting democracy, therefore, is first to convince the people that it does not consider itself indispensable.

Since the death of our late president, North Korea has stepped up its campaign against the South. A massive propaganda scheme has been carried out abroad depicting this nation as something of an aberration. All along the DMZ, provocations and denunciations are hurled at the people living in the South. And, heaven only knows how many agents and provocateurs are sent and how much money is spent to undermine our society. The South-North dialogue on Prime Ministerial Talk was unilaterally suspended by the North last September, and the hotline, the only line of direct communication, was cut long ago. Lately, the regime has dusted off an old unification package calling for a federal state with two governments, a setup certain to perpetuate the hostility.

We will not let down our guard. But neither will we play the tit-for-tat game. We believe that restoration of mutual trust is the precondition for improved relations and that the functionalist approach to the problem is most workable. We must begin with what is feasible now, such as mutual refraining from verbal hostilities and exchanges of private communications. The test of their sincerity will be their response to President Chun's unconditional invitation to visit each other's capital. From there we can expand the scope of cooperation, given the will to reduce tension. We want to live in peace with our brothers and sisters in the North, and we are willing to take initiatives, even give them the benefit of the doubt. But we will not be misunderstood about our love of our way of life, and we will defend it with force if that becomes necessary.

The international political scene in Northeast Asia holds powerful elements of uncertainty. The Soviet Union is fortifying its air and naval cordon around the Pacific coast of the Asian continent, the People's Republic of China is still in the process of redefining its ideology, the Japanese government is still unable to disengage itself from the incredible policy of noncommitment to regional security, and in the midst of all these is the gigantic military machine-North Korea-which is now run by a hereditary duo of unprincipled communists. Considering the fact that the nerves and muscles of the four largest world powers are directly interwound at the Korean peninsula, a slight miscalculation of each other's intention can easily catapult the region into a classic textbook version of an accidental or catalytic war, if not anymore a war by proxy.

Under these circumstances, I believe the minimum condition for peace is that a credible alliance for deterrence be maintained, not in words and agreements alone, but in daily practice. Such an alliance does not have to be based on the massive retaliation doctrine. Instead, an effective defensive capacity that can survive a first strike would be more preferable, considering the requirements for the stability of deterrence. To increase the credibility, however, portions of our defensive capacity must clearly be committed in advance to the area in question and be a part of the trip-wire strategy. It is this logic of the situation that compels our two countries to work together, for no one else in this part of the world will do it with us.

I am often referred to as the "economic prime minister." But the truth of the matter is that I do not have snake oil to dispense! I am only one of the economic team. I too agonized, argued, and cajoled to turn the troubled economy around. Now I am more confident than ever that the Korean economy has bottomed out of the downward trend. The index of industrial activities is picking up, investments are appearing, and exports lately outperform our expectations. We have overcome the initial thrust of the triple shock-sky-high oil prices, soaring interest rates, and dwindling export demands. Internally, the improved social stability and timely adjustment policies have given the business leaders something to ponder over, and they are moving ahead.

The basic objectives of the government's economic policies remain unchanged:

  • We will proceed with our outward-looking strategy. Not only on the export side, but also on the import side, we will lower step-by-step barriers that make the flow of goods and ideas expensive. New direct investment opportunities including one in the banking industry will be given. We are not considering import restrictions in spite of the deficit in the current account, for we are confident that a payments adjustment can be made in time sufficient to preserve our financial integrity.
  • We will strengthen the market function of the economy and dismantle one-by-one government regulations that stifle business initiatives. As a precondition for this, we have adopted lately a new Fair Trade Act and asked our firms to desist from excessive horizontal integration.
  • Some ask back, "What about the industrial restructuring?" Well, the government did intervene rather forcibly here. But without it, the firms could not have survived the severe financial crunch. Besides, we are talking here about some dozen or so firms with overinvestments and extensive duplications made possible by financial resources that the government provided them out of public savings. In any case, let me announce here today that we do not see the need for any more industrial restructuring.
  • We will not reflate the economy. Our balance of payments constraints need to be removed first. Public investments in projects that do not generate import demands will be made in advance within fiscal balance. Inflationary pressures must be overruled if this economy is to develop further with income equity and international competitiveness.
  • The lion's share of our resources will be committed to the refinement of the existing production potential, in technology development, managerial know-how, manpower training, and marketing and engineering. We are now reviewing the basic investment allocation procedure for this purpose.

Even though I am in the economics profession, or because of it, I will not cite a target figure or date of full recovery. A large part of the Korean economic variables originates from abroad, and the important ones are not even economic in the traditional sense. Rather, I want to base my optimistic expectations on the practitioner's educated hunch. I will mention just a few things that will put this economy back to its normal pattern:

  • There is the heavy and chemical industrial capacity. It was let down by a global cyclical downturn just as it was being set up. We should not forget that the so-called overcapacity has meaning only in relation to demand. After carefully managed refinement, that sector will tap the unconventional export markets in the Middle East, Africa, Asia, and the Eastern bloc.
  • We have the human resources. In the past, they were made of people who were just hardy, disciplined, and accustomed to work. They have lost none of these characteristics, but they are now a bit more sophisticated, experienced, and tempered by misfortune.