How was social policy integrated in development strategy in South Korea

Seoul Policy Dialogue 1 - 2 November 2012

UNDP Seoul Policy Centre and KDI

www.unrisd.org

ILCHEONG YI

Research CoordinatorSocial Policy and Development Programme

UNRISDGeneva, Switzerland

Definition of Social Policy

“Social policy is the collective interventions to directly affect social welfare, social institutions and social relations. It is concerned with the redistributive effects of economic policy, protection of people from the vagaries of the market and the changing circumstances of age, the enhancement of the productive potential of members of society, and the reconciliation of the burden of reproduction with that of other social tasks.” (Mkandawire, 2004)

Multiplicity of Objectives• Social policy in developing countries is not only

about poverty eradication. • Historically, social policy has had other objectives

such as national or social cohesion and equity• Indeed, in a number of countries that have

successfully dealt with poverty within a relatively short period of time, the relief of poverty was not even the most explicit motive for the introduction of social policies. In the Nordic or East Asian countries, for example, “poverty reduction” per se was not one of the main pillars of their social policies.

• Social policy must deal with distribution, protection, production and reproduction

• Different welfare regimes have placed different weights on each of these. Thus, while one may speak of “distributionist” or “productivist” welfare states, one has to recognize that such descriptions are merely positions on a continuum.

• False dichotomy : laissez-faire vs. planning. In fact, “Planned Economy” or “Economic Planning” is a

tautology since “economy” itself by definition implies the purposive activities which dispose available resources for a specific goal or end. A key issue in the policy towards economy is, therefore, that to what extent we do or should control economic activities rather than whether we should or should not control economic activities (Myrdal, 1960; Lewis, 1966).

• How was social policy incorporated in development strategy in South Korea?

• Planning understood in a broad term such as “conscious attempts by the government of a country to coordinate public policies more rationally in order to reach more fully and rapidly the desired ends for future development which are determined by the political process as it evolves” (Myrdal, 1960). It refers to a variety

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• Misperceptions about South Korean Development– Social policy free zone– Marginal role of social protection

• Land Reform in the 1940s and 1950s – Severe inequality in landholdings, with more than 80

per cent of farmer as tenants paying usurious rent in 1945

– Two land reforms, entailing redistribution of previously Japanese-owned lands and the lands of large Korean landowners, were implemented by the US Military Government in Korea (USAMGIK, 1945-1948) and the Rhee government (1948-1960).

• Land Reform in the 1940s and 1950s – Under the Rhee government, 74 per cent of land

subjected to reform was redistributed. The government acquired the land, compensating landowners with government bonds whose value was below the market value of the land. The reform thus had a strong wealth redistribution effect. This was compounded by increasing fiscal instability and rising inflation, which further reduced the value of the bonds.

– The proportion of families owning all or part of the land they farmed rose dramatically, from 48.4 per cent in 1945 to above 90 per cent after land reform in the 1950s.

• Land Reform in the 1940s and 1950s – Under the Rhee government, 74 per cent of land

subjected to reform was redistributed. The government acquired the land, compensating landowners with government bonds whose value was below the market value of the land. The reform thus had a strong wealth redistribution effect. This was compounded by increasing fiscal instability and rising inflation, which further reduced the value of the bonds.

– The proportion of families owning all or part of the land they farmed rose dramatically, from 48.4 per cent in 1945 to above 90 per cent after land reform in the 1950s.

• Economic Development Plans : 1. Inter-ministerial dialogue (pooled resources): The

Economic Planning Board asked all the ministries to submit the proposals in line with the economic development plan for economic growth. All the ministries participated extensively in the plan deliberation, and they at least could be well aware of the overall resource constraints. Therefore economic development plans became a meaningful guide for the government’s capital budget and decisions on approval of foreign investment within South Korea (Cole and Nam, 1969).

• Economic Development Plans : 2. Think tanks : ex. the Korea Research Institute for

Health and Development (established in 1975), the Korea Education Development Institute (established in 1972), the Korea Development Institute (established in 1971)

3. The social policy, in particular the investment in social overheads such as schools and hospitals was planned based on the projection of industrial demands which were in most cases unrealistically ambitious but consequently surpassed by the reality. The ministries related to the human resource and infrastructure such as the Ministry of Educaiton and the Ministry of Labour had to make its solid plans to secure the budget to meet the demands for education and training, and facilities during the period of the Economic Planning.

• Education and Health Apart from fees for university education, there is no

significant difference in terms of service quality and costs borne by users between public and private provision of education and health services.

Primary and lower secondary education are predominantly public, and upper secondary and higher education are predominantly private. Since 1945, public schools have provided education to more than 98 per cent of primary school students. The proportion of students in public lower secondary schools increased from 55 per cent in 1965 to 81 per cent in 2005. In contrast, about a half of students in upper secondary education and more than 80 per cent of students in higher education are in private institutions.

• Education and Health With regard to the provision of curative health services,

the expansion of for-profit sector, however, is one of the key features of the Korean health service system. In 2010, 88.2 per cent of the total beds were in for-profit establishments, compared with 41.8 per cent in 1962.

• Urban and Rural Development

Contrary to the conventional view that agricultural development is a precondition or precursor to industrial development, rural development in the Republic of Korea followed the take-off of labour-intensive export-oriented manufacturing industries. Rural development in terms of income per household and improvement of basic infrastructure were mainly due to the resource transfer from urban to rural areas through various policy mechanisms.

• Informal and Formal Social Protection

Two factors were argued to contribute to reducing absolute poverty and inequality between households in terms of income distribution at least until the Asian financial crisis. Firstly, increased labour market participation and low unemployment rate were the key factors behind the reduction of poverty and inequality at least until the 1980s. The increasing wage share against the total national income could contribute to reducing poverty and income inequality since there was a relatively less inequality in terms of wealth, in particular the land.

• Informal and Formal Social Protection

Secondly, the customs of elderly people living with their children, young people living with their parents until marriage and the relatively low rates of divorce were pointed out as the main factors fostering the potential for income redistribution with thin family cell. Under the circumstance where the distribution of work between households is equal, i.e. there are fewer households without any working members, and also relatively few households with two “core workers”, these factors certainly contributed to reducing poverty and inequality.

• Social insurance schemes have developed in the way to maximize the benefits of these two factors.

• These two factors and social insurance schemes reinforced each other until the introduction of flexible labour market.

• Since the Asian Financial Crisis and the introduction of flexible labour market, the synergistic linkages between these broke down, or became weakened.

Concluding Remarks

• Social policy have not tackled “poverty” per se, but the consequence of the synergies of all the policies was the reduction of poverty and inequality. Development in All Policies were pro-poor.

• Policy sequence: Different sequences in different policy areas. Lessons should be about how policies are interrelated (synergies of policies) rather than which one comes first (a sequence of policies).

• Financial sustainability of social protection : Jobs, in particular decent formal jobs are the basis of the financially sustainable social protection schemes (tax and contributions, etc).

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