Food aid and industrialisation : an examination of the role and contribution of the United States surplus agricultural commodities to the economic development of the South Korean economy 1945-1975
The South Korean economy has been among a few select developing countries which have experienced sustained, high and rapid economic growth through the export of manufactured goods in the world market. This remarkable economic growth performance was accompanied by an equally remarkable and sustained inflow of economic aid from the United States of America since the Korean war. As much as 40% of this economic aid was in the form of commodities (foodstuffs and industrial raw materials) donated under the United States PL 480 programme. The purpose of this work is to assess the contribution made by commodity and food aid to the industrialisation and economic growth of the Korean economy. At least two distinctive sets of theories - laissez-faire and the theory of the state - have been proposed to explain the Korean development success. The laissez-faire view considers that the economic growth success has been predicated upon the adoption of liberal trading policies in pursuit of their comparative advantage. This school of thought argues that economic aid, including food aid, has not contributed directly to economic growth and industrialisation, but has provided a breathing space until such time as liberal policies were adopted which, in turn, underpinned the exemplary growth performance. One variant of this interpretation of the role of food aid considers it to have contributed only as a consumption good and, as such, was damaging to the prospects of the indigenous agricultural sector. An alternative interpretation of Korean economic development argues that the State, through a form of planning, has played a major role in the formulation of industrialisation and growth policies. The theory of the state view argues that foreign aid has made a positive contribution to Korean economic progress and, without this contribution, progress would have been retarded. The theory of the state view on the role of foreign aid in Korean development however, is not explained in terms of the nature of the aid, and the mechanisms for the contribution are unspecified. The central concern of this work is to examine, as comprehensively as possible, the role and contribution of food aid to South Korean industrialisation. South Korea has received a constant 1.9% of GNP from the PL 480 programme since the Korean war. The role of food aid can be explained within the theory of the state view of Korean economic development. The classical concept of the central importance of food and raw materials (as the basis of growth and industrialisation) is adopted and an empirical assessment is made which indicates that food aid has not been neutral to Korean economic growth. It is argued that food aid has made a unique and positive contribution to Korean industrialisation in so far as commodity aid has provided foodstuffs for the wage good and raw materials for industry, both having contributed directly to the industrialisation of the Korean Economy. In addition food aid has provided additional benefits by preventing bottlenecks in food supply, which may have resulted in the slowing down of the rate of economic progress through inflation. It is assessed that the overall impact of food aid on the Korean agricultural sector has not been adverse. Finally it is concluded that food aid has made a unique contribution to economic development and, particularly, industrialisation, in a society which by its culture regards the real wage (wage good) as a central concern of the State.