U.S. Aid to South Korea, 1945-1968

Abstract

This study examines the role of foreign aid in building South Korea’s (hereinafter referred to as “Korea”) governance between 1945 and 1968. In this study, governance is defined as “the state capacity of the institutional environment to establish and implement policies and manage public resources,” focusing on an institutional capacity aspect (Ahrens 1999: 45; Kjaer 1996: 6). In line with this definition of governance, I refer to good governance as a state’s capabilities in carrying out sovereign functions (Goldsmith 2001: 124). This study attempts to ask the following questions: (1) what was the role of U.S. aid, which was a major source of Korea’s national income and expenditure, in developing institutions and a well-trained bureaucracy, thus building Korea’s governance?; (2) if there was a positive correlation between U.S. aid and Korea’s governance, what was the conducive conditions?; and (3) although U.S. aid to Korea was intended to spread democracy in Korea in the Cold War era, why did Korea’s governance have little democratic content? Since the 1990s, governance has become the major trend in theoretical and policy discourse of foreign aid. While aid literature highlights the significance of governance in the perspective of aid effectiveness, donors have a limited range of instruments mostly through aid conditionality and selectivity to promote governance of recipient nations. However, many scholars point out that institutional change and governance-building have been historically endogenous and slow, and therefore these tools do not facilitate institutional change and improve the quality of governance in developing countries (Booth 2011; Bräutigam and Knack 2004; Grindle 2004; Kanbur 2000; Moss et al. 2008; Morrissey 2004; Robinson et al. 2006; van de Walle 2001). Therefore, aid literature has introduced alternative aid approaches to support country ownership of recipient countries. However, questions still remain about what aid attempts to do; how aid can contribute to improving governance of recipient nations; and why the impact of aid on governance varies across countries. The theoretical significance of this study is the incorporation of institutional isomorphism literature, which discusses how powerful institutions affect the less powerful institutions so that the latter mimic the organizational structure of the former. This theory will help explain the process in which foreign aid can affect the governance of the recipient nation (Beckert 2010; DiMaggio and Powell 1983; Djelic 1998). Led by DiMaggio and Powell (1983), institutional isomorphism argues that when other influential organizations exert formal and informal pressure on dependent organizations, institutional homogenization occurs (DiMaggio and Powell 1983: 150). More recently, Beckert points out that convergence in institutional change emerges when existing institutions have been morally or functionally discredited, in addition to the presence of an external actor powerful enough to enforce institutional change (Beckert 2010: 153). The U.S. government and its aid were the most influential external factors throughout the 1950s and 1960s which were broadly involved in Korea’s institution-building (Ahn 1992; Krueger 1982; K. Lee 2004; Lee 2009; Kim et al. 2013). Therefore, this study examines how the U.S. aid enforced institutional reform in Korea’s government through various aid management institutions, which were established in the 1950s when the Korean government was seen as corrupt and functionally ineffective. Also, this study integrates studies on good enough governance and the developmental state to provide a more comprehensive view on governance-building in recipient countries. Good enough governance emphasizes the role of state in producing core public goods and services including state intervention (Grindle 2004). The study points out that a developing country needs to improve the institutional environment required for growth at the initial stage of development rather than tackle all governance challenges (Fritz and Menocal 2006; Grindle 2004; Rodrik 2004). The empirical significance of this study is that while many studies on foreign aid suggest a negative relationship between aid and governance (Bräutigam and Knack 2004; Moss et al. 2008; Rakner et al. 1999), the Korean case is empirically interesting and significant as there is evidence of a relatively positive impact of aid on governance-building (Ahn 1992; Kim 2013; Kim et al. 2013). Previous studies on the relationship between aid and governance focus on the problems caused by the aid system including aid management and the relationship between donors and recipients as well as aid conditionalities. Korea also had a specific aid management system and an unequal relationship with the U.S., in addition to aid conditionalities imposed on aid agreements. Therefore, a careful examination of Korea will enhance our understanding to help maximize the impact of aid on governance. This study utilizes an archival research method. It explains how Korea became capable and supportive of development within a decade and more specifically, this study focuses on the role of U.S. aid in building governance in Korea. My analysis focuses on three ways in which U.S. aid influenced Korea’s governance. First, I investigate objectives of U.S. foreign policy toward Korea to examine U.S. interests and its approach to development and democracy in Korea. Second, I analyze the dynamic interplay between Korea and the U.S. through aid management institutions, jointly administrated by key officials from the U.S. and Korea, and focus on their role in shaping Korea’s institutional capabilities. Lastly, I will explore how aid programs, particularly technical assistance, influenced development of bureaucrats and technocrats in Korea. ;한국은 오랜 식민통치와 한국전쟁으로 정치·경제·사회적으로 매우 취약한 가운데도 불구하고 빠른 속도로 국가건설과 개발을 이룩하여 전세계적 이목을 집중시킨 바 있다. 한국의 개발 경험은 세계에서 유래가 드문 사례인 만큼 그 동력을 찾기 위한 다양한 선행연구가 진행되어왔다. 본 연구는 한국의 원조수원의 역사에 주목하며 해외원조 특히 미국 원조가 한국에 미친 영향을 거버넌스 측면에서 살펴보고자 한다. 특히, 원조가 집중되었던 1945년부터 1968년을 중심으로 한국의 국가건설과 국가 역량 개발 과정에서 원조 정책, 원조 관리 및 운영체계, 원조 프로그램의 역할 및 기능을 다각도로 살펴보고자 한다. 한국의 국가건설과 역량 개발 경험 그리고 이에 대한 원조의 역할에 대한 분석은 거버넌스가 강조되고 있는 국제개발협력학에서 원조와 거버넌스의 상관관계에 대한 논의를 확대하고 실증적 자료를 제공하는데 기여할 수 있다. 특히, 대부분의 원조와 거버넌스 관련 연구는 외부요인인 원조가 어떻게 수원국의 국가건설 및 거버넌스 개선에 영향을 미칠 수 있는지에 대한 논의 없이 그 관계를 규명하고자 하였으며 대부분 부정적 결론에 도달하였다. 이러한 이론적 한계를 극복하고자, 본 연구는 기존의 원조연구에 Institutional Isomorphism theory를 도입하여 어떻게 외부요인인 원조가 거버넌스에 영향을 미치는지, 제도적 동질화 과정을 살펴보고 이를 바탕으로 한국의 경험 및 원조의 역할을 재조명하고자 한다.