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Nigel Harris

The Far East and Neo-Colonialism

(Autumn 1968)

From The Notebook, International Socialism (1st series), No.34, Autumn 1968, pp.7-8.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Nigel Harris writes: South Korea and Taiwan (Formosa) are currently being offered by Washington as vivid examples of the possibility of ‘free enterprise’ development. The growth rates of both are high, but it is very unclear how far that growth is due partly or wholly to the Vietnam war. Nor is it clear whether the growth is much more than an increase in exchanges between the same American companies operating in the US, Korea, Taiwan, Thailand and Vietnam.

From 1965, South Korea (and Taiwan) has achieved an annual growth rate of 8.4 per cent. At the same time, South Korea has vastly expanded the flow of capital it receives from the US either as direct aid or credit, civil or military, private US investment in Korea, payments for local supplies to US troops in Korea, and so on. In 1966, for example, Korea earned 73 million dollars from Special US procurements. By the end of 1967, South Korea’s foreign currency reserves had reached 350 million dollars (Taiwan 430m; Philippines 180m; Thailand 1,000m).

Two separate economic networks have begun to transform the Far Eastern trading pattern. The first, and oldest, involves a three-way flow – US capital to south Australia to finance ore exports to Japan, which then exports manufactured goods to the US. But the Vietnam war has imposed a different pattern, ousting the former imperial powers (Britain and France) and replacing them by the US with a cluster of very much smaller satellites or allies – Japan in particular, followed by Thailand, the Philippines, Taiwan and South Korea. This network has its centre in Vietnam. All of the subsidiary powers are more or less deeply involved in supplying materials and men for Vietnam, the costs being met by Washington. One recent estimate suggests that 25 per cent of recent annual exports from Japan are based upon the Vietnam war, and another argues that South Korea’s earnings on the export of men, materials and services to south Vietnam in 1967 reached 100m dollars. However, these figures often mis-estimate different national shares in the loot of war, for under each individual countries’ figures are concealed the operations of companies of different nationality. South Korea’s exports notoriously conceal a large volume of Japanese exports, diverted via South Korea (either by the Japanese, to evade US quota restrictions, or by the Koreans, to make something on buying cheaper in Japan than they sell in Vietnam). Of their nature, US companies are likely everywhere to get the lion’s share, since the US administration naturally favours ‘reliable’ sources (even when disguised with foreign names), and US companies have experience of the quality required and the best contacts or colleagues in the US-directed or influenced purchasing agencies.

There has still been a capital inflow into South Korea. Yet the investment of this capital by the South Korean government is still powerfully influenced by the US Government and companies. Take for example, the case of the proposed petro-chemical complex, one of the four pillars of the second five-year plan (1967-72). This began as an attempt to replace imports of refined oil; South Korea has no indigenous crude oil, and this was to be imported and refined in Korea by the US importing companies. The major part of the refined oil was needed for the armed forces – South Korea has the fourth largest army in the world, thanks to US foreign policy.

What South Korea does have is extensive coal deposits, low-paid miners and substantial unemployment. Yet once begun, the Government’s dependence on imported oil from the US has gone on growing, culminating in the decision to permit nine major US companies to put up 250 million dollars to create a whole petro-chemical complex. The new Plan, moreover, lays it down that henceforth oil will be the principal energy source for the future economy. Meanwhile, coal stocks accumulate, miners are being laid off, and there are relatively few jobs available in the highly automated refineries. The oil imports will take an increasingly large bite out of the foreign exchange earnings, which will increase Korea’s dependence on the US purse. Nor is this all. The Korean government is now borrowing money abroad to set up 11 thermal power stations, all to burn oil, and has received an AID loan to buy 62 US diesel locomotives.

The same goes for the proposed Korean steel project. South Korea has no indigenous ore, and the US Kopper’s Corporation (part of Gulf Oil), the major initiating company in the Korean project, will no doubt be buying its ore from itself in the US – at the highest going ore prices possible. Of course, the plan might come unstuck if the US continues to ban steel supplies from Korea to Vietnam (to eliminate Japanese steel flowing via South Korea) – or if the Vietnam war ends.

Thus, much of the so-called growth of the South Korean economy is no more than elaborate shadow-boxing between different segments of US capital, its profits and capital guaranteed by the US State in order to encourage ‘investment in backward countries.’ US capital, bribed by the US Government, goes to a backward country where it distorts that economy in its own favour for years to come (and squanders scarce capital supplies), purchases its own high-priced products from the US to supply, in Korea, the US army or the massive US-financed Korean army, or itself or the US Government in Vietnam. The unemployed Korean miners look on.

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