Essay Instructions: PLEASE NOTE THAT I NEED A REFUND ON A PAYPAL ORDER I PLACED TODAY (THE 21ST) THAT WON'T CLEAR UNTIL MAY 27TH. I DO NOT WANT THAT ORDER PLACED AND PROCESSED, JUST THIS ORDER HERE.
Below are the initial four pages I've written for this essay. Please work with this material to bring the page total to 7. Rework, correct, or add to material already present. Also, please rework the provided sources into proper MLA format and provide the additionally requested sources.
________________________
Without doubt, the 1960s represent the main time frame in which South Korea and Israel laid the framework for future economic prosperity. Not only that, the most torrid economic development occurred at this time. The most critical propellant of this prosperity, of which will be the primary topic of this paper, was the state-led policy linkages shared between South Korea and Israel. Discussion will be limited to the 1960s because this decade predated nearly twenty years of economic decline for both nations, and also because of the above-mentioned reasons. Further exploration of this intervention will focus on government financing, investment, and the use of economic nationalism.
In light of the economic development that both nations experienced in the 1960s, the hardships that both South Korea and Israel endured during this time must be mentioned if only to highlight the true wonder of their expansion. The 1960s saw Israel affected by the most constrictive period of the Arab Boycott, which prevented Arab states from importing goods and services originating from Israel. This had deprived Israel of many possible local trading partners. During the 1960s, Israel spent 9% of its GDP on defense initiatives aimed at keeping its regional enemies at bay, far more military spending than most other developing nations. Finally, Israel had to cope with the massive influx of immigrants who doubled Israel’s population within the decade. Considering the greater emphasis Israel placed on welfare when compared to South Korea, expenditures on housing, food, and education for these immigrants placed a huge strain on the Israeli economy. As for South Korea, its people lived under the repressive military dictatorship of General Park Chung-hee while also reeling from the destruction of the Korean War. In addition, a scarcity of natural resources contributed to a national per capita income in 1960 of $80 (1). To counter these deficiencies, both nations exploited a reality that was unique to themselves among other developing nations, in that each state was able to form a cohesive national identity. Each population has a longstanding history with their own singular historical narrative. With this unity at their disposal, each respective government was capable of pursuing a nationalist economic agenda.
Burdened with the responsibility of sustaining Israel’s newly acquired existence, the government sought to oversee the fruition of industrializing their economy away from the stagnant and once dominant dependency upon agriculture. Even though they were put in power through democratic elections, Israeli officials consolidated their power away from non-government actors, such as interest groups and business firms. This gave them the ability to control the direction of the Israeli economy. Officials in the newly formed Ministry of Finance drew from a talented pool of economists from the Hebrew University in Jerusalem. Privileged positions were filled from within the bureaucracy and were obtained through exceptional performance instead of cronyism or nepotism. Of great importance to their autonomy, officials were able to disconnect themselves from total reliance on local funding thanks to financial assistance from the international community and reparations from Germany. Two figureheads within the government guaranteed a decisive and coherent economic policy: Levi Eshkol of the Ministry of Finance, and Pinhas Sapir of the Ministry of Commerce and Industry. They worked hand-in-hand to formulate a unifying agenda that bureaucrats from both departments could pursue towards a single common goal.
As for South Korea,
The end-product of this labor in both nations was a financial structure in which banks, and by extension the government at large, controlled the flow of capital. On one hand, banks in Israel were autonomous only to the extent that the central bank’s severe regulations and restrictions allowed. The government used the banking system as a means of regulating its own financial initiatives. Private domestic capital, of which includes bonds and savings accounts, had restrictions enforced by the MOF so that the government could quickly utilize these funds should the state’s budget deficit spiral out of control. The Bank of Israel, Israel’s central bank, also set high liquidity ratios to limit the amount of credit banks could extend to keep monetary expansion at a safe pace. Banks were also the major beneficiaries in the Israeli stock boom of 1962-1964, due to their ownership of 22 of the 34 companies listed on the exchange. This success was due to the fact that the central bank cherry picked which bank-funded projects best coalesced with the government’s most valued sectors of development. This subject will be expanded upon further two paragraphs down.
On the other hand, the banking system in South Korea was owned and controlled by the government with an iron grip. Even after centralizing the five major banks in 1961, South Korea failed to utilize private domestic capital in the way that Israel had.
Instead of allowing the market to determine what sectors investment monies were to be spent in, South Korea and Israel dictated investment policies through plan-based initiatives. One instance where the state formulated and guided a successful investment endeavor was in the case of textiles. Israeli officials, in particular MOCI chief Pinhas Sapir, envisioned in the Textile Industry Development Plan that by 1966, twelve major textile manufacturing plants would be operational and ultimately produce 26% of Israel’s total economic output. The government indulged the project with total financial backing, and by 1968, textile income grew sixfold (3). Unfortunately, total textile production was more than double of what Israelis were consuming. To shed the extra product, Israel began an export regimen guided by large government subsidies. By 1971, textiles became Israel’s most lucrative export.
Textiles also played an enormous role in jumpstarting the South Korean economy.
As for what psychological imperatives drove these events, economic nationalism was active in both South Korea and Israel. South Koreans realized as early as the end of the Korean War that their nation needed to engage free-market nations as trading partners if they were to ever achieve heavy industrialization. Although this might seem to be a minor shift towards liberalization compared to their past economic behavior, xenophobic fears and an ideological commitment to industrial norms and values drove South Koreans to block any vestige of foreign investment within their country. Where did this “ideological commitment” come from? Confucian values deeply imbedded in Korean culture emphasize “diligence, loyalty, and education as well as the respect for authority”. (4) The other “Asian Tigers” held similar beliefs during their economic ascension in the 20th century. Where individualism fueled capitalist growth in Western nations, a loyalty to one’s community permeated South Korean culture and thus was used by the government as a rallying point to industrialization.
While still following the mindset of economic collectivism, Israelis believed that a free market economy would have to coexist with nationalist sentiment should Jewish colonization of Palestine succeed. Once the Jews achieved political sovereignty, this event solidified the consensus towards collectivism. Also contributing to the movement towards nationalism was the fact that the local bourgeoisie had no intension of overseeing and controlling national economic development, and instead left that task in the hands of the Labor Party. The state built its initial monetary foundation on the notion that the Jewish character of Israel would elicit donations from world Jewry.
1.
2.
3.
4. http://www.questia.com/ by Andrew Eungi Kim , Gil-sung Park Nationalism, Confucianism, Work Ethic and Industrialization in South Korea.
5. http://www.geocities.com/michaelshalev/Papers/IsrAff.htm Michael Shalev, The Hebrew University of Jerusalem, December 1997
There are faxes for this order.