Essay Example on Korea: Successfully Reducing Poverty and Inequalities

Introduction

Korea represents one of the countries in the world that have successfully managed to reduce poverty and inequalities to manageable levels. The success was evident by the end of the 1980s and after 1997-98. The process of poverty reduction was not as easy as only less than 25% of the country can be used for agriculture, and the country had very few natural resources that would be used for commercial purposes. Destruction of infrastructure during the civil war was also a significant challenge in the attempts of poverty reduction. Coped by these challenges, the Korean government opted to adopt excellent economic policies, teaching, and encouraging disciplined work efforts and taking advantage of the opportunities when they arose (The World Bank 2).

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Between 1975 and 2001, Korea experienced a decline in the poverty levels. High levels of poverty in Korea are seen in families that are headed by a person with low educational levels or a person who is underemployed or unemployed. Families that are headed by older people also have a higher probability of experiencing absolute poverty. Households led by single mothers who have dependent children also have a higher likelihood of being poor. Majority of the poor people in Korea are in the cities (The World Bank 5).

In the reduction of poverty and inequality within its economy, South Korea made its planning and policies based on what had happened or what was speculated would happen. The planning process concentrated on both poverty reduction and reducing inequality. After the economic crisis of 1997/8, many people were rendered jobless, and household income shrank, while most people in the middle class pushed below the poverty level. The crisis also led to an increase in the gap between the poor and the poor. This economic crisis was an indication that the South Korea economy was not strong enough to deal with external economic shocks. However, the Korean government adopted new models to restore its economy and reduce poverty levels.

Measures that were Taken by the Korean Government to Reduce Poverty Levels

Commitment and Credibility of the Government

The success in reducing poverty can be attributed to the in-charge authorities' determination and dedication to implementing the set economic policies to achieve development. Since 1948 Korea had established the office of planning, which had developed a five-year plan under president Syngman Rhee, but the project was never implemented. In 1960, a three-year program was established, but its implementation delayed with a year. It was then applied shortly before the regime of President Rhee came to an end. After the coup that occurred in 1961, the president Park Chung government prioritized economic development. President Park believed that in human life, economic development preceded politics and culture. He also thought that the beneficial outcomes of policies determined by its implementation. In his regime, President Park strengthened the process of planning and implementation of strategies. The method of policy implementation was accompanied by rewards when well performed and sanctions when the person in charge failed to implement it. Implementation of policies increased the trust of the people in the government that it would do what it promised. Citizen's perception made it easier for the government to implement its policies without applying extreme measures. This report presents findings from a joint project of the Levy Economics Institute and the Korea Employment Information Service, with the central objective of developing a measure of time and income poverty for Korea that takes into account household production (unpaid work) requirements. Standard measurements of poverty assume that all households have enough time to adequately attend to the needs of household members—including, for example, caring for children. But this assumption is false. For numerous reasons, some households may not have sufficient time, and they thus experience “time deficits.” If a household officially classified as nonpoor has such a time deficit and cannot afford to cover it by buying market substitutes (e.g., hiring a care provider), that household will encounter hardships not reflected in the official poverty measure. To get a more accurate calculus of poverty, we developed the Levy Institute Measure of Time and Income Poverty (LIMTIP), a two-dimensional measure that takes into account both the necessary income and the household production time needed to achieve a minimum living standard. In the case of Korea, our estimates for 2008 (the last year for which data are available) show that the LIMTIP poverty rate of employed households was almost three times higher than the official poverty rate (7.5 percent versus 2.6 percent). The gap between the official and LIMTIP poverty rates was notably higher for “nonemployed male head with employed spouse,” “single female-headed” and “dual-earner” households. Our estimates of the size of the hidden poor—roughly two million individuals—suggest that ignoring time deficits in household production resulted in a serious undercount of the working poor, which has profound consequences for the formulation of policy. In addition, the stark gender disparity in the incidence of time poverty among the employed, even after controlling for hours of employment, suggests that the source of the gender difference in time poverty lies in the greater share of the household production activities that women undertake. Overall, current policies to promote gender equality and economic well-being in Korea need to be reconsidered, based on a deeper understanding of the linkages between the functioning of labor markets, unpaid household production activities, and existing arrangements of social provisioning—including social care provisioning (Zacharias et al.7).

High Growth Development Strategies

Rapid poverty reduction was achieved through accelerated GDP growth. Korea adopted a high growth strategy that required massive investments. However, Korea did not have these resources, and they would have to borrow from abroad. The acquired loan had to be repaired using foreign exchange. For Korea to obtain foreign exchange was through export. President Park's government shifted the economy from an import substitution industry to an export-led economy. The government, therefore, focused on expanding the export sector. The country had to compete in the international markets, and consequently, it was concentrated to adopt measures that ensured that resources were used efficiently, and their productivity was increased. Korea focused on value-added products, and in 1980 90% of the exports were composed of manufactured goods. The economy changes from that that was dominated by agriculture that was dominated by the manufacturing industry (Henderson et al.11).

Land Reforms

Land reforms have been a subject of discussion, with some arguing that it is a requirement for economic development to occur. In contrast, others think that reforms can bring political unrest, which harms development. However, land reforms in Korea in the 1940s were directly related to its economic growth and poverty reduction. Some rules were formed and governed land ownership based on three principles that encouraged equality in land ownership. The first principle was that farmland would only be owned by those who farmed the land. Secondly, land ownership was limited to three hectares, and lastly, farmers would not lease their property to other farmers. Implementation of these principles, the government bought land that owned land beyond the set limits and from those who did not cultivate their owned land. The land was then sold to those who farmed the land. Land reforms in Korea reduced inequalities in land ownership while it created self-owning farmers. Land productivity also increased with land reforms. Farmers in the rural areas who owned land started sending their children to school. The effect of land reforms on education was astonishing. Literacy levels in Korea had risen to 90%.