Different Political Regimes Affect Business Development History Essay

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In the 1970's two dictators in the Asian region, Ferdinand Marcos of the Philippines and Park Chung Hee of South Korea both established Martial Law in their countries barely 4 weeks apart.

They each justified its implementation under the guise that it was necessary in order to defend their respective countries against numerous challenges and to promote democratic foundations appropriate to the national circumstances at hand. Both men enjoyed a strong power base backed up by military and political means and also feared popular electoral rivals and both made changes to their countries constitutions to ensure their continuance in office. . The authoritarian regimes that came about were based on a high concentration of personal authority and power, and a relatively weak role for the ruling political party. Despite both situations being very similar the resulting outcome for both situations was truly different. With the Philippines plunging into economic stagnation from its previous position as one of the most powerful economies in Asia at the time and with South Korea emerging as a global economic powerhouse. This paper seeks examine how the different political regimes affected business development in both countries and why even though both regimes started out similarly did they diverge into completely different outcomes?


Two dictatorial regimes emerged in Asia in the 1970's the Marcos regime of the Philippines and the Park Regime of South Korea each had their own distinct characteristics that set them apart. The Marcos regime will always be remembered as the reason why the Philippines fell from economic grace, towards the end of the regime the Philippines went from being one of the strongest economies in South East Asia to becoming one of its weakest. Since the end of World War II, the Philippine economy has been on an unfortunate trajectory, going from one of the richest countries in Asia (following Japan) to one of the poorest. Growth immediately after the war was rapid, but slowed over time. Years of economic mismanagement and political volatility during the Marcos regime contributed to economic stagnation and resulted in macroeconomic instability. A severe recession from 1984 through 1985 saw the economy shrink by more than 10%, and perceptions of political instability during the Aquino administration further dampened economic activity( TDS 2009). This would be due to the fact that at during the time of Marcos the economy experienced economic stagnation, rampant corruption in the government (Marcos and his cronies had illegally extracted billions from the Philippine economy. The exact fortune Marcos amassed is unknown. Estimates suggest it lies between US$3 billion and US$35 billion. Also, 24.6 kg of gold was found in one of the numerous Marcos' Swiss bank accounts. Marcos arrived in Hawaii with suitcases full of jewels, 24 gold bricks and paperwork relating to large amounts of money in various Swiss bank accounts), crony capitalism wherein Marcos seized private businesses under the pretext of some form of violation of the law and afterward gave that said business to one of his cronies, not to mention the fact that he was interested in only promoting the interests of his family and close associates ( Philippine Archipelago 2009)

It has only been recently that the Philippine economy has started to show great progress under their current President Gloria Macapagal Arroyo however there are still systems existing in the Philippines today such as members of the old cronies that used to be with Marcos as well as multiple laws that are still in effect that were created by him. While it may be true that under the Marcos regime he did create more schools, hospitals and infrastructure than all of his predecessors combined the resulting graft and corruption left an indelible mark on the political system whose effects are still present in today..

Park Chung Hee's dictatorship on the other hand was built upon a far more institutionalized civilian and military bureaucracy. His economic achievements, patriotism, frugal lifestyle and strength of character are widely recognized in South Korea as the reason it is able to enjoy its economic success today. Park was obsessed with national goals of economic development and displayed a concern for strengthening the national economy and even early in his presidency was obsessed with promoting heavy industry in Korea. Korean political economy scholars very rarely say that Park used his position to create a substantial personal fortune, while others in the regime wee certainly rewarded with substantial economic opportunities in order to cement their loyalties, the president himself seemed to have been concerned far less with ensuring his own enrichment than with enhancing his own power and promoting national development. (Hutch croft 2002: 16). South Korea is full of monuments to Park Chung Hee, from the giant steel mills, shipyards and factories he built, to the superhighway system he launched. All are reminders of the man who, more than any other, made South Korea what it is today in economic terms (Donalds 1999).

The legacy of Park Chung Hee is obvious in the economy of South Korea today. Cited as one of the strongest economies in the world South Korea possesses massive enterprises in shipbuilding, steel production as well as IT products. Early investments during the time of Park paid off and resulted in the prosperity that South Korea currently enjoys.

Upon examining the two individuals one would notice a marked difference in their attitudes. While both had goals of attaining power Park focused on attaining power for the sake of improving the state while Marcos gained power for the sake of lining his own pockets and that of his cronies. Maybe that in itself is the reason why South Korea came out of the 1990's having a robust economy while the Philippines continued to stagnate under the effects of the Marcos regime.

Theoretical framework

The theoretical framework I believe is best suited for this particular topic is the theory of liberalism wherein individuals are the primary actors in international relations. In the case of Marcos and Park with the consolidation of the power of the state on them they themselves make are their own decisions and not the result of collaboration of departments. Consolidation of the decision making powers into one individual as is the case for both Marcos and Park yielded different results. With the case of Marcos the power was not well invested, Marcos chose to focus more on improving the wealth of his friends than that of the country itself while Park used his powers to create radical reforms which enabled the South Korean economy to start anew.

Reformation of institutional and political structures

Park unlike in the Philippines worked in a thoroughly bureaucratic environment: he knew where power lay and acted accordingly showering Korea's bureaucratic elite with privileges. Park benefitted from the earlier centralization of the political system and immediately after his coup of 1961 moved to establish two powerful agencies with a clear division of responsibility that would play pivotal roles in achieving his key goals. The Korean central intelligence agency was given the broad control of guarding power and managing elections and the economic planning board was in charge of overseeing rapid industrialization. Within a system he dubbed "administrative democracy," Park worked carefully and steadily to create a more meritocratic bureaucracy. despite his own background in the military Park actually forced military officers to disengage themselves from the most important agencies of civilian bureaucracy. (Hutch croft 2002: 17)


He nurtured the growth of strong and clearly delineated bureaucratic institutions, he simultaneously ensured a strong degree of control over them, this was done by centralizing authority in the Blue House(the equivalent of the White House in the U.S.), under Blue House supervision the EPB and the ministry of finance played strong coordinating roles over the economic policy implementation. At the same time other agencies were used as spoils for more powerful members of his political coalition including military officers. Finally Park favored strong bureaucratic institutions but discouraged the institutionalization of the ruling political party. When Kim Jong Pill, the first director of the KCIA, sought to strengthen and centralize the ruling democratic party after 1963, Park stopped the effort and consolidated his personal leadership and turned the political system in a one man band in the late 1960. During his predecessors years businesses were required to contribute large sums of money to the regime party in exchange for cheap loans and government contracts. In order to promote "the goal of economic efficiency" Park protected the economic bureaucracy from pressure by DRP politicians.(Hutchcroft 2002: 17)

This was actually a good idea since it eliminated the prospect of special interest groups who focused more on making money than actually creating an effective system. With business' focusing more on the process of making money and receiving support from the government businesses in South Korea had the opportunity to thrive, especially with the government guiding them the way it did by giving more funds towards projects that it wanted to push through.

Marcos also displayed a strong inclination toward centralizing personal control over the political system in the 1960's, but used very different means to achieve his ends. He put far less effort into strengthening institutions than in reorienting institutions toward regime goals.

There was no major new initiative of bureaucratic reform under his constitutional presidency, if anything, he further undermined the minimal institutional integrity of bureaucracy long manipulated for particularistic purposes by politicians and oligarchic families, In addition to "harnessing" of the military to patronage projects beneficial to the regime he very blatantly used the regulatory authority of the Central Bank to bail out his friends and punish his enemies. In other words while Park was building up the Korean bureaucracy in order to promote his own personal goals Marco was undermining the Philippines bureaucracy to bolster a far more self serving regime. (Hutch croft 2002: 17).

As you can see by reading the text the difference between Park and Marcos, while Park was willing to create a bureaucratic system wherein South Korea would be able to thrive and at the same time would enable him to keep his power and position Marcos focused more on self serving interests which didn't help the country at all and in fact may have been one of the contributing factors behind why the economy found itself in a state of sustained stagnation.

The creation of new agencies of government was a good idea by Park it would help the country focus the industries that it should focus on instead of being diversified it brought about specific growth in the appropriate sectors which would help the South Korean Economy to grow.

Government business relations

Park nationalized all commercial banks thus putting the entire financial sector under the firm control of the ministry of finance, State and business thoroughly intertwined in a system that came to be knows as Korea Inc. the state controlled access to funds and thereby encouraged the dependent business calls to move into increasingly sophisticated industrial production organized around huge diversified family conglomerates for many years they followed the orders of the economic policymaking agents.

While in the Philippines the haphazard allocation of import and exchange licenses provided a new source of riches to the major families without any systematic promotion of national developmental goals. In the early 1960's nearly all major families expanded their interests into financial ventures and the growing number of private banks created new possibilities for private plunder of public cash. Nationalization of the private banks would be unthinkable in the Philippine context, as powerful families would never give up the opportunity to milk their banks for the benefit of related family enterprise (Hutch croft 2002: 18).



As shown by the various examples I've given a regime that pursues a path that encourages the growth of industry by providing the necessary funds and support needed as well as a creating a stable political environment will create a suitable environment for business development. The South Korean government under the leadership of Park sought not to line its pockets with tax wealth rather focused on improving and creating the necessary bureaucracy needed to maintain and create a stable financial environment. Park Chun Hee unlike Marcos did not focus on crony capitalism nor did he try to create a political dynasty what he did was focus his energy towards the goal of an industrialized South Korea that would be able to rival the North. What Marcos did was to merely squander the money of the country since he did not create the necessary bureaucratic infrastructure that would be needed to guide the country through a period of industrialization. Yes he did focus several infrastructure projects at the time however they did not make up for the problems he caused by taking over privates businesses and giving them to his cronies which created uncertainty in the business environment at the time which was not conducive in encouraging the growth of business. History shows that Park's legacy, even though he abused his power by staying in position too long, will always be that of one of South Korea's greatest presidents who helped the country rise out of poverty and become the industrial powerhouse it is right now. As for Marcos he will always be remembered as the man who destroyed our economy through his negligence and ineptitude. It would have been a different picture should he have imitated the measures that Park had tried. For me Park was the iron hand that South Korea needed at the time in order to become what is today while Marcos was the iron hand that missed its mark completely and wound up hurting more than helping.