SRC Winter Symposium Socio-Cultural Dimensions of the Changes in the Slavic-Eurasian World ( English / Japanese )

The Lessons of the Chinese and South-Korean Reforms for Russia

Nodari Simonia
(Institute of World Economy and International Relations,RAS)

Copyright (c) 1996 by the Slavic Research Center( English / Japanese ) All rights reserved.

From the Experience of the Chinese Reforms

Reforms in China have always attracted close attention in Russia. During the past five years, heated debates have flared up from time to time over the applicability of the Chinese experience to Russia. As usual, the parties to the discussion broke up into two opposite camps: the enthusiastic partisans of this experience (Ryzhkov, Volsky and Shatalin among others) and its vehement opponents (Gaidar and his supporters).

It is obvious for any unbiased person that countries differ from one another in a number of specific features, in terms of their demographic situation, territory, natural conditions, traditions, culture and socio-historical experience, and that it is virtually impossible to copy the experience of any single country without modifications. At best, we can only speak about typological similarities in the general trend of reforms at the macroeconomic level and ultimate goals, such as the transition from a command and administrative system to a market economy and democracy. In this instance, comparative analysis seems to be an exceptionally useful tool for scientific and practical purposes.

True, in terms of its population, China is the world's biggest country and Russia falls far behind it but, in its turn, Russia's territory is much larger than that of China. It is logical therefore to compare Russia with China rather than Hungary or Czechoslovakia. But most important is that Russia is a Euroasian country, not only geographically, but also in the broader sociological sense meant by the historian Vasili Klyuchevski, which Georgi Plekhanov and Vladimir Lenin termed the "Asiatic mode of production," "barbarianism," etc. The presence of a number of Asiatic features in Russia's social development makes it comparable with China within strictly defined limits.

The Chinese reforms have been going on for 18 years now. This period is long enough to be able not only to appraise their results, but also to reveal their specific features and universal significance. In his interview given to the Segodnya newspaper at the end of November 1995 the Extraordinary and Plenipotentiary Ambassador of the CPR to Russia, Mr. Li Fenglin, explained China's success as follows: "It is said that what matters for China is the correct combination of six hieroglyphs denoting three concepts: social stability, development and reform."*1 The important aspect of this formula is not only the combination of the three factors of success mentioned above, but also the order of priorities: first, stability as the most important requisite, second, development as a basis and, third, reform, success of which is predetermined by the preceding two factors. It seems that the correct combination of these three factors conveys the universal significance of China's experience and the guarantee of successful reforms in the period of transition in the development of any country. Russia has proved the truth of this approach the other way around, by its negative experience: first, sociopolitical stability was upset, then development stopped and decline followed. Hence, the opposition to reforms and their failure.

As in Russia, reforms in China were started "from above" but the country's leaders, above all Deng Xiaoping, succeeded in maintaining relative social and political stability. I say "relative," because reforms as such, imply the violation of stability. When a structural crisis developed at a certain stage leading to destabilization of the political situation (events in Tiananmen Square, 1989) Deng Xiaoping, who had initiated the reforms, swiftly quelled this outbreak of discontent by decisive action and ensured political conditions for the continuation and progress of economic reforms. This accounts for the fact that, in spite of the great hullabaloo raised in the Western mass media about these events, all developed countries continued trading with China and investing in its economy. Although he formally renounced all his highest official posts Deng, as the "patriarch" (Confucian tradition) continued to keep watch on the proper balance between reformers and their opponents in the upper echelons of the country and did not stop short of removing those reformist leaders who might threaten the equilibrium and, hence, political stability (Hu Yaoban, Zhao Ziyang).

Does this mean that nothing has changed in the political structure of the CPR during the years of economic reform? At first glance it may look this way, but in fact, major changes have taken place in the life of society and in the political suprastructure concerned with managing the national economy. Large areas of the economy were freed from the hitherto rigid control of the state and party nomenclatura (bureaucracy). Changes affected even those structures which were still in the framework of the state sector. The economic, government and party bodies divided their functions amongest themselves, and the enterprises decided for themselves what, how much, and how to produce. True, there are certain limits within which this formula of liberalization works and is self-sufficient. As the reforms grow in depth and the scope of market relations expands, the general discordance between the political superstructure and its rapidly changing socioeconomic basis will increase.

The Chinese leaders have succeeded in maintaining relative stability for 18 years, due primarily to continuing development and steep economic growth. This was made possible by a strategy of gradual and phased social change. In this context, the Chinese experience gives belies the widespread contention of the advocates of "shock therapy," that reforms should be launched simultaneously in all spheres of the economy, and that "one cannot skip over an abyss in two or three jumps." China has proved that economic reforms, especially in big countries, have nothing to do with "skipping over an abyss." It has also refuted the postulate current in Russia in the beginning of the 1990s, that first the old economic system should be razed to the ground and then the market would all but automatically build a new economy. In their economic strategy the Chinese leaders were guided by the principle that no decline in the existing level of production should be allowed in the course of reforms and that the reforms should be identified in mass consciousness with growing standards of living to ensure social support.

The reforms began in agriculture. This was logical for China, a developing country, where 80 per cent of the population lived in the countryside. In this respect China differs radically from Russia (but not from most developing countries). In Russia, 14-15 per cent of the population live in the countryside. But the important thing is that the peasants were wiped out as a class in the course of total collectivization under Stalin's rule. Those who are left represent a different social type, strongly resisting any change, which explains why efforts to turn them into farmers have, for all intents and purposes, failed. In China Mao Zedong, in spite of his repeated attempts (mass collectivization in 1956, "people's communes," 1958, "great proletarian cultural revolution," 1966) did not live long enough to complete his campaign, and the peasantry survived. Under these conditions, all the Chinese leaders had to do was to give the peasants the freedom of economic enterprise to achieve striking results. At the first stage of reforms between 1978 and 1985, agricultural production rose by 67 per cent on the basis of the family contract system. Land was not yet privately owned, but was turned over to the peasants on a long-term lease basis. However, the fact that the peasants could dispose of the portion of their product above the fixed quota to be turned in to the state, was a great incentive which raised the productivity of labor by 50 per cent.*2 As a result, China achieved almost full self-sufficiency in grain. In 1995 it produced 455 m tons, i.e. 10 m more than in the preceding year, and it is planning to produce 500 m tons of grain in the year 2000. These successes are very impressive, considering that the country has only 7 per cent of the world's arable land while its population is 1.2 bn people (21 per cent of the world's population).*3

At the second stage of reform (1985-91) emphasis was shifted from countryside to town. But the principle was maintained that instead of destroying the old infrastructure, a new one should be built alongside the old. One important side effect of the growth of productivity of labor in the countryside was the release of the work force and the mass growth of village and township enterprises. Small-scale industrialization began, providing the urban and rural population with all kinds of every-day necessities and even agricultural machinery, such as mini-tractors and motor vehicles. At this stage, emphasis was laid not on the privatization of state enterprises, as is the case in Russia, but on creating new industrial structures of private capital, both national and foreign. The growth of production was so intensive that at the end of the 1980s the economy was so "overheated" that measures had to be taken to roll it back and "regulate it" by limiting investments and credits and stemming inflation.

At the third stage, beginning in 1992 after the much-publicized trip by Deng Xiaoping to South China, the government took measures to further the reforms and tried to reform the state sector which was getting increasingly unwieldy and ineffective against the background of rapidly developing private enterprises. Between 30 and 40 per cent of all industrial enterprises of the state sector incurred debts and the subsidies granted to them were a heavy burden on the country's economy. It should be noted that by its earlier policy, the government decreased the share of the state sector in the national economy from 70 to 40 per cent. However, the government proceeded very cautiously in this sphere, fearing mass unemployment and workers' disturbances. Radical reform of the state sector was announced and postponed many times. Until 1995, measures were confined to the partial liberalization of management, the mass replacement of directors (up to 90 per cent) and the introduction of a dual price system: part of the products were delivered to the state at fixed prices and the "surplaces" were sold at free market prices. Already in the mid-1990s, many consumer goods were sold exclusively at market prices. At present, the state regulates only 10 per cent of prices. A considerable part of 14,000 state enterprises achieved not only a substantial growth in production (up to 7%) but also profits (on average up to 4% a year). At long last, in 1995, bankruptcy laws were enacted in 18 big cities as an experiment. Since 1996, the reform of state enterprises has been extended to cover 52 cities. It is planned to affect 1,000 key enterprises in 1996. The commercialization of state enterprises in the form of joint-stock companies, etc. is gaining in strength.*4 It is typical of reforms in China for any new reform to be first tested at a small "proving ground" and then extended to cover the whole industry if the results are good.

In parallel with the reform of industry in the state sector, commercialized banking is planned. At the end of 1995, the first commercial bank came into existence in China. It will engage in crediting and servicing industrial and commercial enterprises. Completion of the commercialization of the bank system and introduction of world standards is planned by the year 2000.*5 Once again, I would like to draw your attention to the sequence of Chinese reforms: they began with agriculture, the basic sector, and followed with small-scale industrialization, development of small and medium-size private enterprises, reform of industry in the state sector and financial system. In other words, the "house" for the new economy was built up from the foundation to the roof. It is in sharp contrast to what happened in Russia in the first half of the 1990s. We began with the "roof," that is to say the financial sphere, liberalization of prices and the creation of thousands of commercial banks which immediately started "making money out of thin air." We have gone through a short but eventful period (like that ushered in in Germany in 1850-70) which was characterized by a broad emission of securities, stock-exchange speculations and the creation of false enterprises.

Social differentiation in China took a more coherent form in its 18-year history. The regulation of inflationary processes was not fetishized and was not so one-sided. China proved once again that moderate inflation in economies in transition is not only permissible but also conducive to economic growth. Characteristically, unlike the Russian government, the Chinese government has been holding back excessive economic growth in recent years. During the first half of the 1990s it constantly planned to bring down China's 12-14 per cent economic growth to at least 10 per cent but succeeded in doing so only in 1995. Moreover, owing to continuous economic growth, inflation did not grow to disastrous proportions. Only in 1994 did it reach its peak of 21.7 per cent, but the following year it was reduced to 15 per cent a year, and the government is planning to bring it down to 5 per cent during the five-year period 1996-2000. This is not wishful thinking against the background of preceding economic achievements. Vice-premier Zhu Rongji, the chief reformer, has said that the Chinese national currency may become fully convertible in the near future (possibly in 1996), even though earlier expectations held that this goal would be achieved by the year 2000.*6

Foreign investment and foreign trade played an important role in the success of the Chinese reforms. In these spheres, too, the Chinese economy is in sharp contrast with the Russian one. The Chinese leaders match their words with deeds. Since they recognized that foreign investment is objectively necessary and useful for mastering new technologies, they provided the relevant legal infrastructure and other conditions for the normal operation of foreign capital in those spheres, sectors and regions, where development is in the national interests of the country. The results were felt in no time. According to Chinese statistics, the total sum of investment obligatoions in China amounted to $220 bn in 1979-93. True, the implementation of these obligations is a different matter. And yet, at the end of 1995, the aggregate sum of accumulated foreign investments amounted to $110 bn.*7 It is an impressive sum. It will be recalled that by that time Russia had received merely $6 bn in direct foreign investments. This is not surprising because the only thing the Russian government did was to try to persuade Russians and foreign investors that foreign investments are desirable, but the relevant legislation (not of the best variety) was adopted only at the end of 1995. This applies above all to the law on production sharing. This progressive form of foreign investment, the product of the 35-year struggle of developing countries against Western transnationals, which had brought many benefits to the respective countries, was debated in our legislative bodies for many years. It was the subject of pseudo-patriotic manipulations by self-seeking groups (metropolitan and regional). As a result, time and multi-billion dollar incomes so necessary for the Russian economy were lost.

China is one of a few countries of the world where the concept of "free economic zones" was put into effect consistently and successfully. Inaugurating the first of the five "special cities" or "special economic zones," Deng Xiaoping counted on Huaqiao (overseas Chinese) capital. And the results matched his expectations. From 75 to 80 per cent of all investments in China were made by Chinese living in Hongkong, Macao, Taiwan, Singapore and other countries of South-Eastern Asia and other parts of the world.*8 Incidentally, this fact resulted in somewhat uneven and one-sided industrial development in China. The overseas Chinese preferred to make investments in their "home-town" provinces and for this reason the South-Eastern coastal provinces of China are far ahead of the vast hinterland in their level and rate of development. Nevertheless, big foreign investments are being made today in Shenzhen ("second Hongkong") in Guandong Province and Pudong in the suburbs of Shanghai. Of special interest is the experience of creating a free economic zone in the city of Yangji situated in the Korean autonomous district in Jilin Province. The investments of South Koreans play a leading role here. True, we do not have such a powerful Russian diaspora as China, but there are many Korean and German Russians who could draw sizeable investments from South Korea and Germany to free economic zones, provided they are created. The weakness of the central government, the arbitrariness and self-seeking interests of the federal and regional bureaucracy lead to situations where even the existing free economic zones (Nakhodka, Kaliningrad) face insurmountable barriers to their development. The multilateral development project of the Tungmenjian Basin, with the participation of five countries--Russia, China, North and South Korea and Mongolia-- is a graphic example of the differences between China and Russia in their approaches to the problem of free economic zones. The project submitted by the Commission of the United Nations Development Program many years ago was stopped in its tracks at the initial stage primarily because of the waverings of Russia and its undefined position. And this in spite of the fact that its implementation would have revived economic activities in the Russian Far East and speeded up the integration of Russia into the Asian and Pacific Region. Meanwhile, long before the signing of the relevant agreements on the project at the United Nations Headquarters in December 1995, China and even North Korea made considerable efforts to build infrastructure on their territories covered by the project.*9

As for foreign trade, China found its niche in international trade (textiles and other consumer goods) and did all it could to develop exports and strictly regulate imports. As in South Korea, export-oriented trade was conducted in parallel with import substitution, whereas Russian foreign trade developed, within four years, the clearly visible traits of a colonial division of labor: the export of raw materials in exchange for the importation of second-rate consumer goods and luxury goods for the Russian nouveaux riches. By the mid-1990s China had accumulated $72 bn in hard currency reserves. It is planning to boost its foreign trade to $400 bn by the year 2000. The Chinese leaders took a very circumspect approach to the problem of opening the Chinese market and integrating into the world economy. It was not before it had scored considerable successes in its economic development that China began to re-open its markets gradually. From January 1, 1996 the government lowered its import tariffs on 4963 items of goods to 23 per cent (from the 36 per cent rate that existed hitherto). In two years it is planning to make the next step by cutting the main import tariffs down to 15 per cent, thereby creating the conditions for the admission of China to the World Trade Organization.*10

We have touched upon some of the main features of the Chinese reforms but it seems they are sufficient to evaluate the importance of the Chinese experience for Russia. After all, China followed in the wake of the USSR by taking the path of socialist development. Like the USSR, it went through a short period of new economic policy which was halted by its leaders. Like the USSR (and even earlier), it launched market reforms.

True, an objection may be raised at this point to the effect that, unlike Russia, China has remained "a developing socialist country" (as it calls itself) and is continuing to build "socialism with specific Chinese features" while Russia has chosen a different alternative of social development. Well, make a comparison then with a country which has never taken a fancy to the socialist idea and has never tried to put it into practice but which, during the past 35 years, has covered a great distance from backwardness to a very high level of socioeconomic development. The country I mean is South Korea. Let us see what the Russian reforms look like in the context of South Korean economic and political transformations.

The South-Korean Model

Much has been written and spoken about the "Korean miracle" in recent years. According to handbooks and scholarly publications, in the beginning of the 1960s South Korea was listed among poor developing countries. Twenty years later the whole world talked about the impressive economic successes of this country. In another ten years South Korea knocked at the door of the club of developed countries and was struck out of the list of developing countries entitled to Official Development Assistance. The most striking aggregate indicator of these successes of South Korea is the per capita GNP, which at the start, in 1961, was merely $74 and 30 years later, in 1991, rose to $6,790.*11 But in spite of the great popularity of the South Korean experience, superficial judgements (with few exceptions) prevail both in Russia and in the West. Far-fetched myths are spread and it is a common practice to take some aspects or elements of this experience out of the context to adduce proof and substantiate one's subjective views. The experience of the post-war socioeconomic and political development of South Korea is not examined in its integral whole or dynamic and there is no answer to important questions, such as: What is the essence of the South Korean model? When and how did it take shape? How did it change? What basic factors ensured its success? I shall try to answer these questions in broad outline.

First of all, it should be emphasized that there is no fixed South Korean model. It was born in the beginning of the 1960s and since then has been constantly developed and modified. Its main and fundamental difference from the classical Western pattern of social development lies in the fact that it did not evolve naturally in the course of history, as in the primary model countries, such as the Netherlands, Great Britain, Belgium and France, but was shaped by the will of the ruling circles of the state. This was logical because South Korea and all other developing countries for that matter had to choose between two alternatives: to continue its natural historical evolution and join the neo-colonial system of division of labor or take the path of "catch-up" development. In the latter case, the government had to work out the appropriate strategy and implement it. At first, during the rule of Syngman Rhee, the first alternative was tested. The dictator rejected the idea of industrialization, referring to the need to unite the country. Moreover, professing chauvinistic anti-Japanese ideology he refused to restore diplomatic relations with Japan and thereby cut off an important source of financing for the economic development of his country. Ideological considerations prevailed over the actual needs of the country and Syngman Rhee's rule led to the unrestrained development of speculative trade capital and complete military, political and economic dependence of South Korea on the United States and on foreign assistance. Although Syngman Rhee had to carry out an agrarian reform, South Korea remained a backward agrarian country.

The situation began to change radically when the new military dictator Park Chung Hee came to power. First of all, General Park brought about a psychological change in the minds of the ruling circles of his country. He renounced the extremes of the chauvinistic anti-Japanese stance, restored diplomatic relations with Japan and established economic cooperation with it. Having received a military education in Japan, General Park was in close touch with the influential circles of that country and was well aware of the situation in Japan. He furthered the development in his country of "two-layer," or dualistic consciousness, which, according to the Japanese scholar Toyama Shigeki who coined this concept, emerged in Japan itself after the revolution in the Meiji Period. It meant that the "consciousness of resistance" to great foreign powers combined with the "consciousness of being subject to them." *12 Beginning in the 1960s the negative attitude to the colonial dominance by Japan in Korea was combined in South Korea with the awareness of the need for economic cooperation with Japan and even for drawing on its historical model of "catch-up" development. Similar attitudes were in evidence in the USSR under Khrushchev when Soviet leaders regarded the United States as their main imperialist enemy but at the same time recognized American economic achievements and were aware of the need to draw on this experience. It is a point of interest that this dualistic attitude led to the formulation of almost identical slogans: "Catch up with and outdistance America" in the USSR and "Catch up with and outdistance Japan" in South Korea.

It is generally accepted that one of the most characteristic features of the South Korean model borrowed from Japan is the renunciation of the strategy of import substitution and the transition to export-oriented industrialization. Professor Wookhee Shin of South Korea goes so far as to say that unlike other developing countries, including those in Latin America, import substitution in South Korea was "just a transitional period" because it did not rely on a broad "nationalist and populist coalition." *13 Generally speaking, most Western scholars regard import substitution and export orientation as two alternative strategies. But some Japanese scientists justly point out that the concept based on contrasting import substitution to export orientation is untenable because it does not account for the economic successes of South Korea. In fact, one concept was not simply substituted for the other but the two strategies were intertwined. On this basis, the Japanese scholars Imaoka Hideki and Yanagihara Tooru of the Institute of the Developing Economics (Tokyo) came up with the concept of the "model of double growth" which was supported and developed by other scientists, such as Prof. Sibageki Kazuo and Koichi Ohno.*14 These scholars arrived at the conclusion that export orientation began in the labor-intensive industries of South Korea with the support of the government but that their development increased the demand for semi-finished products put out by capital-intensive industries, leading to a boom in those sectors which relied on the protectionist policy of the state. This produced the effect of "double-industrial growth" raising the national industry to a higher level.

Then the following picture comes into view. First import substitution laid the ground in South Korea for export-oriented industrialization in labor-intensive industries*15 and then, increasing export orientation sparked a new wave of import substitution in capital-intensive sectors. Subsequently some capital-intensive industries were drawn into export-oriented production. All this accelerated the process of development of the national economy. This scheme suggests that not only import substitution but also export orientation were the stages in transition to the fully-fledged modern economy and that in the South Korean model at any rate these two strategies closely cooperated rather than excluded each other.*16

The most important aspect of the South-Korean model, which the proponents of Western liberalism pass over in silence, is the truly gigantic role of the state in the economic development of the country. The fundamental difference of this model from others lies in the fact that it does not confine itself merely to regulating the economic processes. In its efforts to catch up with the developed countries the state finds itself in the situation where it has to tackle the tasks of several stages of capitalist development (from the primary accumulation of capital to the transition to the post-industrial era) at the same time. The state must not only initiate but also solve a wide range of purely economic problems. In fact, it takes over many of the functions, which in the primary model countries, were performed by the respective strata of the bourgeois class, including the new function of "breeding" the capitalists. Here are the major functions in broad outline which the state performed in South Korea in the 1960s-70s:

1. Central economic planning. Planning was centralized. The Economic Planning Board headed by a vice-premier was set up for this purpose. It had broad powers, which were exercised directly, unlike those of the State Planning Commission of the USSR. The Board was responsible for drafting and supervising the fulfilment of the five-year plans.

2. Credit and finance monopoly. Commercial banks were nationalized. The staff members of the Central Bank and other banks for that matter were appointed by the government. The government controlled the granting of credits, interest rates, investments in industry and thereby formed the structure of social reproduction in accordance with its strategy. Price control was applied selectively. In its campaign against dollarization and yenization the government decreed that foreign currency should be kept in special accounts in the Central Bank.

3. Control of foreign trade. The state subsidized exports for the express purpose of expanding trade rapidly. At the same time the government strictly controlled imports by introducing prohibitive tariffs on luxury goods and "excessive" consumption. But it facilitated the imports of equipment for the new industries and promoted thereby the diversification of exports. The president held conferences on exports every month.

4. Development of private business. Emphasis was placed on the development of Korean monopolies, "Chaebols," including the world famous Samsung, Daewoo, Hyundai and Lucky Goldstar. The government provided them with credits on favorable terms, subsidies and cheap infrastructure, lowered taxes and wrote off their debts in certain cases, but demanded in its turn that they strictly abide by its instructions concerning specialization, the range of goods, price policy, etc. Some companies were forcibly merged, others were driven out from the given sector. The companies which ignored the "advice" of the government were severely punished by withdrawal of credits or even by the arrest of their leaders.*17 Concerned with the expansion of its social basis, the government began to give assistance to small and medium-size businesses (credits, the reservation of certain sectors of social production, etc.).

5. A few words should be said about the attitude of the state to the role of the external factor and external financing of the economic development of South Korea. The government exercised rigid control over the in-flow of foreign financial resources. It strove to attract not just any foreign resources, but only those which were consistent with its general development strategy. The main sources of external financing until the beginning of the 1980s were loans. Since 1962 when South Korea received $52.5 m in state and $1.8 m in private loans, these sums grew steadily and in 1975 amounted to about $728 m and $423.5 m respectively. In 1983 South Korea received $2,467 m, including $1,493 m in state and $974 m in private loans. The volume of Official Development Assistance continued to decline. While in 1957-65 South Korea received $1,400 m, in 1966-70 it was $497 m and in 1971-75, $60.6 m. In March 1995, South Korea received its last loan from the EBRD and was transferred to the category of donors. At first, direct investments did not play a notable role. Since the times of Syngman Rhee the leaders of the country were apprehensive about the dominance of foreign capital and virtually refused to allow it into the country. Under Park Chung Hee, the situation began to change slowly. The volume of direct annual investment rose from $0.6 m in 1962 to $22.3 m in 1965 and $179.5 m in 1975. But even in 1983, it amounted to a mere $101 m, or 3.9 per cent of all inflows from external sources.*18

The government saw to it that foreign investments were made either in joint ventures or took the form of portfolio investments. This is not meant to say that foreign investments were not an essential component of the internal economic development of South Korea. In the period 1965-74 up to 30 per cent of investments were made at the expense of foreign financial sources as distinct from Japan where investments were made at the expense of domestic accumulation.*19 The role of domestic accumulation in South Korea began to increase only in later years. But the role of the external factor, particularly the use of foreign technologies, continued to be important. The extension of export orientation and the rising wave of import substitution would hardly be possible without it.

Even this brief analysis of the South-Korean model would be incomplete if we did not take into account the factor of culture. Here we will touch only on three of its aspects: the role of Confucian ethics, the importance of education and the qualitative standards of the bureaucracy.

1. For decades, at least since Max Weber, the Confucian tradition was regarded as an impediment to economic development. But beginning with the end of the 1970s, publications appeared which attributed the successes of the newly industrialized countries (NIC) in the Far East almost exclusively to the influence of Confucianism, especially to particular aspects, such as hierarchy and obedience, respect for education and the family, thriftiness, flexibility and ability to adapt.*20 But it does not serve any useful purpose to go to an extreme. Old Confucianism, like Christianity (Catholicism) of the period of feudalism, was an obstacle to modernization. As it evolved, however, under the influence of socioeconomic and political changes, Confucianism and Protestantism for that matter became one of the vehicles for economic progress. It will be recalled that having survived the period of feudalism, Roman law became a motive force of the consolidation and development of bourgeois society.

2. The success of the South-Korean model would have been unthinkable without serious progress in education. In the beginning of the 1960s the government introduced obligatory primary education and began to set up a network of vocational and technical schools which trained a skilled work force. Between 1945 and 1985 the number of universities in the country increased from 19 to 100 and the number of students from 7,819 to 932,000. In 1982, 82 per cent of the adult female population and 96 per cent of the males could read and write. In 1984, 99 per cent of children of school age, 91 per cent of young people in the age category of secondary school, and 26 per cent of young men and women in the age category of university education were covered by the system of education. The second and third sets of figures showed that South Korea surpassed Singapore, Taiwan and Great Britain and was second only to Japan and the United States. In the 1980s the expenditures on education made up 20 per cent of the state budget.*21

3. Considering the role the state has played and continues to play in the economic development of the country it is hard to overestimate the decisive importance of the quality of the South-Korean bureaucracy. Most experts point out the following major aspects of the bureaucracy in South Korea: first, professionalism and acumen in economic matters. Second, it has no ideological biases in the narrow sense of party affiliations but is oriented and even faithful to the national cause and economic reforms ("socially-oriented bureaucracy," to quote one Singapore scholar).*22 Third, it is independent materially, for the most part, of business. The relations between the bureaucracy and business are those of leader and subordinate. Some believe that until recently the positions of the bureaucracy vis-a-vis businessmen have been even stronger in South Korea than in Japan because the former relied on the support of the army while political parties in Japan depended on donations from business.*23 One can say that until the end of the 1980s the "spear" dominated the bourgeoisie in South Korea (Karl Marx's expression he used to describe the Bonapartist regime in France). There were no close personal contacts between the bureaucrats and business. After their resignation, only a few members of the high bureaucracy were appointed honorary (not active) presidents or vice-presidents of corporations. Fourth, business did not take part in politics or serve as a springboard for promotion to government posts. The Korean scholar Jae Jean Suh cites interesting data on the composition of the government and parliament in 1980-86. Of the 290 persons who held the posts of ministers and deputy ministers in the period mentioned above, 60 and 21 per cent were members of the civilian and military bureaucracy respectively. They also included professors and journalists but not a single businessman. The Parliament was composed of officials (21%), the military (12%), politicians (25%), journalists (11%), professors (9%), and only one representative of big business and 13 per cent of small businessmen (mostly from opposition parties).*24 Finally, it should be said that there is corruption in South Korea, as in any other state, but compared with most other developing countries the level of corruption of the state bureaucracy in this country is relatively low. The exposure of corruption leads not only to a country-wide scandal but also to judicial proceedings with very serious consequences. Chun Doo Hwon and Roh Dae Woo, two former presidents of the country, are no exception.