The Government of Republic of Korea was established in August 1948. When the government took over the property which Japanese had possesed, it disposed of it in a very unfair and irregular manner to a few favored people. As a result, the growth of sma...
The Government of Republic of Korea was established in August 1948. When the government took over the property which Japanese had possesed, it disposed of it in a very unfair and irregular manner to a few favored people. As a result, the growth of small and medium industries was checked and heavy industry stagnated.
Prices rose, while the fall in the real price of rice threatened farmers livelihoods. A small rise in the price of rice meant little when the price of fertilizer rose by 600 percent between 1953 and 1959.
Since 1961 Korea has proceeded with extraordinary speed to equip itself with the productive techniques of the western style. Vast foreign loans were required to import foreign capital goods to be used in the modernization of industry. Meanwhile, under state tutelage and the stimulus given by high rate of investment, the extensive consolidation of industries was carried out. This industry-oriented policy, achieving almost 10 percent annual average growth rate of GNP during the 1961-71 period, contributed to modernizing the Korean economy. As there has been such a strong tendency among Korean policy-makers to identify economic growth with industrialization, the agricultural sector has received rather insufficient resources. In spite of increasing pressure upon the balance of payments resulting from a growing food deficit and widening income disparity between urban and rural households, the price policy in Korea have neglected to raise the farm income. In point of fact, the government has not had an essential policy to make a balance between income level of the agricultural sector and that of others in the long-run. The government purchase prices have always been below market prices. Because of the leading role of rice in the Korean economy a low rice price was regarded as one of the most effective tools to achieve general price stability. In addition, Korean farmers must purchase producer's goods (fertilizer) at the high price under the monopolistic structure. So, farm income has rather had a pressure by such two price factors. The price mechanism of rural products is the most important factor to upgrading farm income as well as to increased production in the future.
If the government attempts to achieve self-sufficiency in staple food, gvernment price support programs must be strengthened with a view to stimulating food grain production. Increased supply of agricultural inputs is another essential factor for increased food grain production.
In a few words, all those efforts require increased investment in the agricultural sector and provision of incentive prices for farm producers to achieve the development of economy as a whole.