The phrase “Miracle on the Han River” refers to the explosive growth in the South Korean economy during the 1960s and beyond. South Korea had been physically and psychologically devastated during the 1950-1953 Korean War following North Korea’s invasion and the protracted, bloody effort at liberating it. Photographs of the capital, Seoul, taken during the war are indistinguishable from photographs taken of Hiroshima and Nagasaki following the atomic bombings of those Japanese cities in August 1945. Such was the devastation that, by war’s end, the south barely existed as a functioning political entity. Financial assistance from the United States helped South Korea to begin to rebuild, but progress was slow through the 1950s. In 1961, however, a South Korean army general, Park Chung-hee, came to power. Park not only imposed a rigid, autocratic structure on South Korea, he also instituted a government-driven economic policy that resulted in a massive rebuilding of the economy. Implementing what he referred to as “the First Five Year Plan,” the period from 1962 to 1966 witnessed the beginning of one of the most dramatic periods of economic growth in modern history. Borrowing a phrase previously applied to West Germany’s economic growth following its destruction during World War II – the “miracle on the Rhine” – South Koreans and its admirers began to refer to the “miracle on the Han River,” for the river that runs through Seoul. During the following decades, South Korea’s Gross Domestic Product rose from the level associated with the world’s poorest countries to that associated with the largest economies. Today, South Korea boasts the 13th largest economy in the world. [See U.S. Central Intelligence Agency, World Factbook, Korea, South]
South Korea’s economic growth since the early 1960s was driven in no small part by the establishment of “chaebols,” or family-owned conglomerates the presidents of which exercised enormous power over expansive corporations. Such companies as Hyundai and Samsung have emerged as world leaders in their respective fields on the strength of the government-sponsored policies that enabled them to monopolize the South Korean market for many years, following which they spread out to encompass the world.
The term “Miracle on the Han River” refers to the rapid expansion of the South Korean economy and the miraculous growth rates that it generated in the 1960s. Despite having been devastated during the Korean War due to widespread bombing and fighting, South Korea was able to transform itself from a poor, impoverished nation to a major East Asian economy in the span of less than two decades. The government played a major role in such developments by adopting and implementing a state-guided, export-oriented strategy of industrialisation. To regenerate the economy, the South Korean authorities actively protected and assisted the large family-controlled corporate groups, known as chaebols, which were prominent in Korea, through the provision of bank loans and subsidies.They also instituted tight controls over the influx of foreign direct investment (FDI). While multinational corporations (MNCs) were banned from selling electronic products locally, transfers of technology between foreign and local firms, on the other hand, were encouraged. Such actions gave domestic firms the space and time they needed to grow before entering the global market, whereby they could compete with international brands on a more equal footing. The strong leadership provided by General Park Chung Hee also saw the emergence of a climate of stability and political order, that was not only seen as necessary, but desirable for economic growth, allowing South Korea to achieve prosperity in the long term.