South Korea and Argentina: The Perfect Match

Development is every nations’ goal; it is something that every nation strives for.
Development encompasses more than the material and financial side of people’s lives; it is not
just purely an economic phenomenon. it is more of expanding human freedom in the sense that
the constituents of a nation have a choice and alternatives at their disposal. Development should
therefore be perceived as a multidimensional process involving the reorganization and
reorientation of entire economic and social systems. Development is not just about the addition
to improvements in incomes and output but it typically involves radical changes in institutional,
social, and administrative structures as well as in popular attitudes and even customs and beliefs
like the reduction of inequality where the rich are far more favored than the poor even though
they’re the one who needs most help. Finally, although development is usually defined in a
national context, its more widespread realization may necessitate modification of the international
economic and social system as well. It is through the first four broad approaches to development
— growth, structural patterns of development, dependence and neoclassical — that we
understand about development process and policy.
South Korea and Argentina are two countries that are reasonably well matched for
comparison. Even though South Korea is in Asia and Argentina is in Latin America or South
America, they are both midsize in population and are classified as middle-income countries by
the World Bank — the international financial institution, the one that gives fund assistance to
countries for development. Being a middle-income country means having a GNI per capita with
adjustments of PPP between $1, 025 and $12, 475 in 2011. In 2011, Argentina has a population
of 41 million while South Korea has 5o million. However, the World Bank designated South
Korea to be a high-income country in 2008 with about $31,000 PPP (Purchasing Power Parity)
and Argentina has half almost half of this with $17, 000 in 2011. Surprisingly, 30 years ago, the
reverse was true; Argentina is above South Korea. This reversal can be answered through the
four classic approaches to development.
For South Korea’s stage of growth, it has confirmed some linear stage views, albeit in a
limited way. South Korea has the highest share of investment in national income and it is
believed that this is the crucial part of how to explain how they have developed so well, how their
nation has rapidly ascended. We say that this is a rapid ascent because the country did not even
rate a mention in Stages of Economic Growth by Rostow in 1960. When the book was published,
few of the “preconditions for takeoff” were in place. Accordingly, investment has been very high
since then however, as a share of GNI, the investment ratio is just at 15% and that percentage is
below takeoff levels in 1965. Yet it rose dramatically to 37% of GNI by 1990, an increase of 23%.
And it remained close to 40% in the years 2000 to 2007 but the ratio has fallen in the last few
years. But still, this ascent of South Korea seemed to be the epitome of Rostow’s notion where
the economy in the midst of a “drive to maturity”, is on its way toward mastering the range of
currently available technologies; that means they are leading the modern era where gadgets will
soon conquer our medium of communication. And we appear to be entering an “age of high
mass consumption” where everyone would have it, the demand for it would a high.
Rostow actually claimed that maturity is attained after 60 years from when the takeoff
begins but he never denied that there may be unique experiences for each country, which is for
example, South Korea, which he said ‘that’ unique experience may well be that gap between
traditional and advanced technology can actually be crossed more quickly at later stages of
development but South Korea, did it earlier than later. The larger the productivity, which is
influenced by the country’s human capital — productive investments in people like skills, values,
and health etc. — gap, the quicker income can grow once takeoff has been achieved. This
because productivity equals income and if gaps are larger, it would mean more income that
would further separate that country from the countries behind it. South Korea, without a doubt,
meets the “maturity” criterion of becoming integrated in the world economy through its new types
of exports and imports, South Korea offers some confirmation of their value even though it was
not chosen by Rostow but India for takeoff shows the limits of predictive powers of stages theory.
In the stage of Structural Patterns, South Korea confirms some of patterns-of-
development structural-change models — shows certain patterns, like for example, a shift away
from agriculture to industrial production, the steady accumulation of physical and human capital,
the change in consumer demands from emphasis on food and basic necessities to manufactured
goods and services. Accordingly, South Korea’s rise over the past generation has been because
of its rapid increase in agricultural productivity — measured as the ratio of agricultural outputs
to agricultural inputs, shift of labor from agriculture to industry, the steady growth of capital stock
and of education and skills, and the demographic transition from high to low fertility. Per capita
income of South Korea has grown by more than 7% annually from year 1965 to year 1990 as
these changes have occurred. In the year 1990 to 2002, in the face of the Asian financial crisis of
1997 to 1998, the mature economy of South Korea grew at a 5.8% rate. Even though it grew less
than 4% in average in 2002 t0 2011, it is still substantially higher than most other high-income
countries. South Korea carried out a thorough- going land reform in the late 1940s and 1950s,
and so agriculture was not neglected and its growth with its rapid expansion of the percentage of
labor force in the industry satisfy the Lewis model of development. Rapid increase of productivity
growth in agriculture has been observed in after about 1970 owing in part to a successful
integrated rural development program.
 For South Korea’s Dependence, it is strongly dependent in international relations. South
Korea actually received U.S aid in the 1950s that formed large part of its national budget and
both exported and imported great from developed countries. Especially the U.S and Japan. The
shape of South Korea’s development was thus “conditioned” or conditional in large part by export
opportunities to developed countries. The nation was highly interventionist at home and in
international trade that poses a strong challenge to the aspect of neoclassical counterrevolution
aspect. They are into policies that address real technology and skill-raising market failure
problems of development, and at least prior to the 1997 Asian currency crisis, from which Korea
quickly recovered, very few cases of glaring government failure can be pointed to in this
experience. Of course, it does confirm that firms respond to economic incentives. But it may also
be claimed with at least equal force that South Korea provides a compelling example of
government’s role in overcoming coordination failures.
Argentina, on the other hand, It remains unclear whether Argentina has now relaunched
onto a new growth episode following its 2002 default, as growth has been erratic, foreign
exchange reserves falling, and political uncertainty returning. Argentina’s history is actually a
concern or poses a strong challenge to what Rostow claimed as “takeoff”, a linear-stage
approach and is defined to be “the interval when the old blocks and resistances to steady growth
are finally overcome…Growth becomes its normal condition”. Argentina ranked 11 th in world in
per capita income in 1870, just one rank ahead of Germany today. Rostow claims that the fact
that preconditions were there for a time before takeoff to excessive import of foreign capital over
too long a period without increasing domestic savings and therefore, Argentina, without a doubt,
meets the Rostow’s criterion of developing manufacturing sectors at a rapid rate. World Bank
data states that Argentina has a negative growth rate through 1965 to 1990 period. Argentina’s
share of investment in GDP (Gross Domestic Product) from 2000 to 2007 was 17%, under half
that of South Korea. Argentina demonstrated that development progress is not irreversible and
that sustained growth can come to an end.
For Argentina’s Structural Patterns, they have exhibited many of the usual structural
patterns of development like agricultural productivity rising, increase in industrial employment,
urbanization, fertility and so on. Unlike South Korea, Argentina offers some vindication for
dependence theories as they relied to large extend on exporting primary goods and its real prices
fell if you compare it to the imports. With the presence of multinational corporations, Argentina
was unable to create its own viable manufacturing export industries that led them to having to
submit to stringent structural-adjustment programs, to sell state industries to foreign companies
and etc. For neoclassical counterrevolution, Argentina offers some vindication as well for that
faulty interventionist restrictions, insufficient state enterprises, bias against export production and
the unnecessary red tape that ends up hurting the industry and entrepreneurship. It may seem
that the government policy consistently to favor privileged interests rather than broad goals of
development. A large-scale liberalization and privatization program seemed to be beginning to
reinvigorate Argentina’s growth in mid-1990s. However, four years of recession culminated in the
economic implosion as the enemy collapsed under the weight of the rising internal fiscal and
external trade deficits by 2002 that is caused by the linking of the peso to a strong U.S dollar.
The recovery and comparative rapid growth since 2004 and despite the 2002 debt fault, we are
showed that single explanation for development success and failure are rarely adequate. Yet,
Argentina’s economy remains vulnerable like in the events where growth dropped from about 9%
in 2010 and 2011 to under 2% in 2012 and this led to political institutions to remain somewhat
unsettled.
Argentina and South Korea are really a match for comparison because South Korea
provides a challenge to both dependence and neoclassical theory, the starkest opposites in
many ways. And Argentina can be viewed more as a vindication for these two theories. South
Korea serves more to confirm linear stages of growth and structural patterns of development
conclusions and Argentina poses a challenge to their universal importance. Lastly, South Korea
illustrates the role of the government in overcoming coordination failures and Argentina illustrates
how the government can form part as a factor in a bad equilibrium. These two countries illustrate
to us how the four broad approaches to development somehow contradict each other depending
on the countries’ effort to achieve development. How a factor like the government, is the answer
to a problem for South Korea and the cause or part of the cause for Argentina. Also, the reversal
of South Korea and Argentina after 30 years can be explained by the focus on growth and
structural patterns by South Korea that led it to be have readily available advanced technologies.
Development is the end, and these four approaches are the means and just like any other path to
success, consistency is the key. We have to continue improving and innovating to progress and
to eventually achieve development just like how South Korea did it.