Abstract
Much scholarship on East Asian development has sidelined the crucial role of geopolitics by insisting that wars such as the Vietnam War had limited effects on industrial development and economic growth patterns. We find such arguments unpersuasive, and also unduly reductionist. The Vietnam War, in particular, had unambiguously powerful effects on industrial development in South Korea; but even in cases where the direct effects of war were somewhat less spectacular, such as Taiwan, the reasons for the differences were themselves deeply geopolitical and expressive of decision-making processes centered on the Vietnam War. In this paper, we explore the differential effects of such geopolitical decision-making by contrasting the development trajectories of the Ulsan and Kaohsiung industrial zones during the war period. We show, in addition, that the subsequent development of industrial projects in South Korea and Taiwan has continued to bear some of the marks of Vietnam War-era geopolitical economy.
Introduction
War wreaks havoc not only in the lives of the people who suffer from it but in the theoretical interpretations of social processes affected by war. To put it perhaps a bit too simply, the multiple forms of chaos fomented by war seem to impair not only the lives of the victims but the ability of analysts to provide a sense of structured coherence to events of which war forms a part. One unfortunate analytical response to this threat of intellectual chaos is to relegate war to the background while giving explanatory priority to more tractable and “rational” social processes such as industrial policy.
Perhaps nowhere has this relegation of war to the deep background been more conspicuous than in studies of East Asian development. As Jung-en Woo long ago noted, for example, studies of South Korean development have too often assiduously avoided discussion of the effects of the Vietnam War on Korean industrialization (Woo, 1991: 85), thus implicitly denying that these effects were of significance, and two decades later much the same can still be said of scholarship on Korean development, with only a few exceptions (e.g., Armstrong, 2001; Glassman and Choi, 2014; Glassman, forthcoming; Kwon, 2006; Lie, 1998). In cases like those of Taiwan and the newly industrializing countries (NICs) of Southeast Asia, scholars such as Robert Wade and Robert J McMahon have openly argued that war and the economic assistance programs connected to it cannot account in any substantial way for processes and trajectories of development (McMahon, 2000; Wade, 1990: 82–84). Wade, for example, suggests that if aid programs could account for very much of East Asian industrial development then the kinds of assistance that countries such as Japan, South Korea, and Taiwan received should be expected to produce similar industrial development dynamics in other countries that received such assistance, yet this is not the case; therefore, economic aid—whether war-related or otherwise—cannot be the key to East Asian growth.
Wade’s argument is somewhat strained, for a variety of reasons, not least because the amounts and forms of aid received by recipient countries vary dramatically, and we would expect that countries receiving less—and/or less preferable forms of—assistance would not benefit to the same extent as those receiving more. As Jim Glassman and Young-Jin Choi have noted, elaborating on the earlier work of Woo, South Korea—like Japan before it—received a unique opportunity to build industries connected to US military offshore procurement (OSP), contributing substantively to its development of a heavy industry-oriented “construction state” (Glassman and Choi, 2014; see also Park, 2011). We would thus expect, and we in fact see, that South Korea’s industrial development dynamic during the Vietnam War era was different and much more powerful than that of a country like the Philippines, which received far less in the way of general aid or OSP opportunities than South Korea.
But Wade’s argument is strained for another reason that is more germane to our purposes in this paper. The issue of whether war, war spending, or general assistance contributes to industrial development dynamics is only a sub-set of a broader question—the question of what roles geopolitical decisions play in these dynamics. Geopolitics can be construed either quite broadly, in the fashion of much of the critical geopolitics literature, or more narrowly; but under any construal it includes an array of negotiations and decisions pertaining to issues ranging from the deployment of troops and expenditure on military commodities to treaty processes and trade agreements. In this paper, we use geopolitics to refer to processes in which state policymakers’ decisions regarding different forms of development and security are center stage. Moreover, we argue from a geopolitical economic perspective in which this array of geopolitical decisions is seen as crucial to outcomes such as industrialization—however unruly the foregrounding of geopolitics may seem to make the industrialization process.
More specifically, in this piece we use archival sources on Vietnam War policy decisions of the US government and its allies to interrogate the thick nexus connecting geopolitics and political economy. In doing so, we are not interested—after the fashion of Wade’s analysis—in weighting the determinants of industrial growth so that some can be deemed more important than others or more proper objects of analysis. Given what we show in the paper—namely, that in Cold War East Asia there have been not only very different quantitative amounts of geopolitically motivated investment in differing industrial projects but very different qualitative forms of geopolitical economic support—we think that trying to assess the relative importance of geopolitics vs. other factors (e.g., developmental state industrial policies), in the differing cases, would be like comparing apples and oranges. The evidence regarding the qualitative and quantitative contributions of war spending to South Korea’s growth by itself merits taking geopolitics seriously as a cause of industrial transformation, but here we are more interested in showing that the very same geopolitical negotiations and decision-making processes that can lead in one context to an outcome such as the development of a construction state might lead in another context to a very different kind of project.
To illustrate our point, and to show the broad significance of the geopolitical decision-making within which the Vietnam War was embedded, we look here at some of the crucial differences in industrial development trajectories between South Korea and Taiwan, during and after the Vietnam War. We focus, in particular, on the simultaneous but differential development of two different industrial zones, the industrial complex at Ulsan, South Korea, and the complex at Kaohsiung, Taiwan. The former of these constitutes an exemplary heavy industry complex and an emblem of the kinds of industry that Korean developmental state leaders wished to foment, an aspiration that was abetted in direct fashion by war-related spending and OSP. The latter of these exemplifies a different kind of complex, centered more on the light industries favored by the less dirigiste Taiwanese developmental state, and seemingly less connected to war or war spending. Nonetheless, as we show, both complexes took on some of their specific character and their particular forms of dynamism as a result of a series of geopolitical decisions connected to the US war effort in Vietnam. As such, we believe, geopolitics is equally, qualitatively significant for these two different processes of industrial transformation that have their origins in the Vietnam War era. Moreover, although it is not our primary concern here, we think this evidence suggests that Vietnam War-era geopolitics has had path-dependent effects on the two industrial zones up to the present.
Our argument proceeds as follows. In the next section, we briefly outline some theoretical considerations regarding East Asian developmental states that we will use to frame our analysis. After this, we will provide some broad geopolitical economic background on the interconnected but differential ways that war-related industrialization developed in South Korea and Taiwan. After this, we examine, in succession, specific features of the Ulsan and Kaohsiung industrial zones that highlight the geopolitical economic processes of industrialization in these two locales, as well as in the broader South Korean and Taiwanese economies. In the conclusion, we draw together some of our arguments.
Developmental states—Bureaucratic and networked
Developmental states are not merely those states that foreground development projects or practice industrial policy (this characterizes virtually all states) but those that discipline capital—and especially financial capital—in order to generate investment of surplus in targeted industries that can help spur broader economic growth (Amsden, 1989; Chibber, 1999, 2003; Wade 1990). Both South Korea and Taiwan—rightly, in our view—have been characterized as having featured developmental states during the period of their emergence as NICs (roughly the 1960s–80s). The question of the extent to which each of these states has remained developmental in an era when neoliberalization has become a powerful force is not one we address here (see Yeung, 2016), but we find it useful to note that even in the period when both states were more unambiguously developmental there were significant differences between them. Some of these certainly extend back at least to non-isomorphic experiences under Japanese colonialism (Cumings, 1984), but, as we will show, the Cold War put a further stamp of difference on the two states.
An analytical terminology developed in recent years within the broader neo-Weberian developmental state literature, designed to identify different kinds of developmental states, is worth introducing in order to help explain this. Developmental state theorists have argued for a distinction between developmental bureaucratic states (DBS) and developmental network states (DNS). The former have been characterized as more dirigiste and organized around promoting crucial national (heavy) industries, while the latter have been characterized as organized around “attempts to nurture localized post-Fordist networks of production and innovation within global investment flows by shaping the character of the various local connections to global technology and business networks” (Ó Riain, 2004: 4–5), and as helping “firms develop product and process innovations that do not yet exist, such as new software applications, new biotech medications, or new medical instruments” (Block, 2008: 172). Japan and South Korea during the Cold War are often taken as exemplars of the DBS, while the United States and Taiwan (especially during the post-Cold War period) have often been taken as exemplars of the DNS (see Block, 2008; Ó Riain, 2004).
We neither endorse nor reject all of the conceptual scaffolding connected to the DBS/DNS distinction, which has problems that include an overly loose characterization of developmental states—one, for example, that does not insist on the necessity of one of the features highlighted in the original developmental state literature, disciplining of financial capital. But we find it useful to follow and employ certain aspects of the typology in thinking about differences between South Korean and Taiwanese state practices. South Korea has certainly been, since the 1960s, the more dirigiste of the two developmental states, and it has focused from the 1960s through the 1980s—and even beyond—on fomenting a nationally grounded heavy industry complex that underpins what has come to be called the Korean construction state (Glassman and Choi, 2014; Park, 2011). Taiwan, by contrast, was less dirigiste in its industrial policies even during the Cold War, focusing more on building transnationally networked production processes with light industries at the core (see Fields, 1995; Glassman, forthcoming). Although we would be cautious in deploying these terms, we find it useful to think of South Korea during the Cold War as a DBS and Taiwan during the Cold War as a DNS.
The authors who put forward this distinction between the South Korean and Taiwanese developmental states, such as Seán Ó Riain (2004), frequently highlight the different kinds of industrial structures that are connected to these kinds of states. Ó Riain does this in ways that are useful, but that can also imply a degree of voluntarism by state planners that we think sits uneasily with the strategic-relational approach to states that we find persuasive, with its emphasis on the specific constraints and enabling conditions within which state projects are positioned (Sum and Jessop, 2013). As such, though we do not reject Ó Riain’s terminology, we want to show that an array of forces impinging on state policy-making helped foment the different kinds of industrial structures and state policies that came to be associated with the South Korean and Taiwanese developmental states. The one on which we focus here, which largely escapes Ó Riain’s analysis, is the differential impact of Vietnam War-era geopolitics on the shapes taken by the South Korean and Taiwanese industrialization campaigns.
The South Korean DBS, the Taiwanese DNS, and the Vietnam War
To highlight the roles of geopolitics in fomenting South Korean/Taiwanese differences, we start with some broad observations about the different ways in which US, Korean, and Taiwanese policy-makers interacted around the Vietnam War. In the next section, we show how these differences came to ground in the development of the industrial complexes at Ulsan and Kaohsiung. The Cold War South Korean DBS and the Cold War Taiwanese DNS, along with their specific industrial policies, were overdetermined phenomena, and we in no way present a reductionist account of their differences. Nonetheless, we make the case that crucial geopolitical decisions put a distinctive stamp on the industrialization processes that began to unfold in the two different locations during the 1960s–70s.
In the case of South Korea, one of the crucial factors indirectly underpinning the South Korean DBS’s industrialization campaign was the animated desire of US leaders to get Korean military support in Vietnam. Starting in 1964, as part of what came to be called the “More Flags” program, US political and military leaders began to encourage South Korean troop commitments to the expanding US war effort. Protracted negotiations with Park Chung Hee and other Korean leaders were undertaken from this period into mid-1966, ultimately resulting in the deployment of some 300,000 Korean troops to Vietnam, along with large numbers of contract workers (Glassman and Choi, 2014; Glassman, forthcoming). The Park regime negotiated very ably in this process, ultimately gaining not only pay for troops that was more than 20 times the regular rate of pay—thus generating an enormous amount of remittance income—but a special and secretive arrangement allowing Korean firms to bid on US military contracts without competition from Japanese suppliers. This secret arrangement, summarized in the “Brown memorandum” of March 1966 (authored by US Ambassador Winthrop Brown), opened the door for an enormous influx of OSP dollars to Korean construction firms (e.g., Hyundai, Daelim) and transportation firms (e.g., Hanjin), helping spur the growth of Korean heavy industry and the Korean construction state (Glassman, forthcoming).
The geopolitics of this negotiated arrangement were simple and fairly obvious, though their details and implications have often been suppressed or neglected by leaders on both sides, since they imply not only preferential treatment for certain military contractors but an exchange of troop commitments for this treatment, thus making the entire venture seem mercenary—a characterization that is accurate enough but that was (and is) disliked by elites on both sides of the alliance. Be that as it may, there is little doubt that the flow of OSP generated by war contracts and exchanged for troop commitments contributed substantively to South Korea’s industrialization, as well as to the heavy industry-centered form that it began to take by the 1960s–70s (Cumings, 2005; Glassman and Choi, 2014; Glassman, forthcoming; Woo, 1991).
The Taiwanese DNS’s experience during the Vietnam War was fundamentally different in this respect, though the difference stemmed from precisely the same geopolitical decision-making process that generated transnational support for South Korean heavy industry growth. US leaders strongly wished to portray their war effort in Vietnam as a regional campaign, supported as aggressively by their Asian allies as by the US leaders themselves (Gardner, 1995: 182). Provided that one means by this primarily that certain elite leaders from selected Asian countries strongly supported the US war effort in Vietnam, it is clear that there was indeed Asian support for the US campaign (though there was also considerable popular opposition in countries like South Korea, even where there was some popular support). It was in no small measure because of this elite support that US negotiators were able to secure the Korean troop commitments, though they also had to ante up considerably—in the form of OSP concessions—in order to push through the final arrangements (Glassman, forthcoming).
Somewhat paradoxically, Taiwanese leaders such as Jiang Jieshi and his strongest Guomindang (GMD) allies were likely even more enthusiastic about sending troops to Vietnam than South Korean leaders, yet were largely denied the opportunity to do so. US foreign policy decisions, in this respect, had a unifying logic that nonetheless led to differential considerations for different allies. US leaders wanted the image of broad, regional Asian support for the war in Vietnam, fearing that it would otherwise be perceived as a unilateral US, imperial venture. In this sense, the support and encouragement of both South Korean and Taiwanese leaders was welcomed. But South Korea was in a unique position to provide troops to the Vietnam War effort without untoward consequences. By the early 1960s, most US leaders no longer felt that there was a serious threat of war breaking out between North and South Korea, which in turn justified more commitment of US—and potentially South Korean—troops, to conflicts elsewhere (Glassman and Choi, 2014; Glassman, forthcoming). Moreover, US leaders were not deeply disturbed by prospects of North Korean military support for the Vietnamese Communist Party and so did not worry that commitment of South Korean troops to Vietnam on the US side would bring North Korean forces into the war in retaliation.
In the case of Taiwan, the Chinese revolution led US alliance members to a very different calculus. Jiang and other GMD leaders had lobbied since 1949 for increased US military support, hoping to be able to retake the mainland by force. While US leaders had positioned the 7th Fleet in the Taiwan Straits to ensure the survival of the GMD regime on Taiwan, they had not encouraged Jiang’s most aggressive plans for reconquering the mainland, considering them unlikely to succeed, and by the 1960s most US—and even some Taiwanese—leaders no longer considered GMD plans for reuniting the mainland under its rule a viable, going concern. Jiang, nonetheless, continued to push for US support toward this end, and with US involvement in Vietnam increasing he saw a new opportunity to encourage US backing for a GMD military venture (Glassman, forthcoming).
Jiang used the Vietnam conflict in an attempt to sell US leaders on the notion that they were essentially fighting the Chinese Communists in Vietnam and that they should therefore carry the war directly to the People’s Republic of China (PRC). US leaders, in contrast, agreed that they were making a show of force against the PRC and the spread of communism in Vietnam, but they did not see evidence that Chinese Communist military forces were doing any significant fighting there. 1 As a consequence, they strongly and consistently resisted efforts by Jiang and his cronies to sell plans for either a US-backed GMD invasion of the mainland or a substantial, visible GMD troop presence in Vietnam. 2 US Secretary of State Dean Rusk—among many others—routinely and forcefully stated the US position on Jiang’s proposals: as he put it in an early 1964 telegram to US Embassy staff in Taipei, an overt alliance involving Republic of China (ROC) forces in Vietnam would have the effect of “exporting Chinese civil war to Korea and Saigon.” 3 US leaders wanted no such exports, and thus consistently opposed any overt ROC troop presence in Vietnam. 4
This policy in turn conditioned the ways US financial and military assistance flowed
into Taiwan during the Vietnam War era. While South Korean leaders had successfully
bargained to gain OSP opportunities in Vietnam that fueled the growth of the Korean
construction state, the ROC was denied similar kinds of OSP opportunities, receiving
no special arrangements to increase its firms’ OSP opportunities and ultimately
garnering only about one-third the total amount of OSP received by South Korean
firms. Moreover, the kinds of OSP received by Taiwanese contractors went mainly to
different kinds of industries than the construction and engineering industries that
featured so heavily among South Korean OSP recipients, and far more Taiwanese OSP
went to non-national firms operating within Taiwan, rather than to the kinds of
“national” firms receiving most of South Korea’s OSP contracts. Figures 1 and 2, constructed from US National Archives and
Records Administration (NARA) data on prime US military contracts, illustrate the
resulting differences in the form and volume of OSP. As these figures show, between
1965 and 1975 some 40 percent of South Korea’s US$1 billion plus in OSP contracts
(US$434 million) were reaped by construction and engineering firms (a wide array of
other kinds of firms reaping the remaining 60 percent), while on Taiwan about 78
percent of its US$356 million in OSP contracts (US$278 million) were reaped by
organizations involved in aircraft maintenance, repair, and production, electronics,
fuels, and medical supplies. By the 1980s, while virtually all of South Korea’s much
larger OSP revenue was accounted for by construction and engineering contracts,
Taiwan’s smaller amount of OSP revenue was accounted for entirely by aircraft,
electronics, fuels, and medical supplies. South Korean OSP, by
Industry (millions of current USD). Source: calculated from NARA
Database. Taiwanese OSP, by Industry (millions of current
USD). Source: calculated from NARA Database.
Top construction firm comparisons and cumulative offshore procurement contracts, 1965–1991 (constant 1966 USD).
Source: calculated from NARA Database.
The net influence of these differences in the volume and forms of Vietnam War-era OSP on Taiwan thus included the fomenting of a different pattern of industrial growth than what was witnessed in South Korea. Whereas the latter was already beginning the process of capital accumulation that would quickly result in a DBS and a nationally anchored, heavy industry-oriented construction state, Taiwan was developing in the direction of an industrial structure based to a greater extent on light industries, including electronics and information and communications technologies (ICT), with more transnational corporate investment and joint venture tie-ups, and a state oriented toward facilitating such tie-ups—all of this coming quickly to resemble what would later be called a DNS.
Ulsan, Kaohsiung, and the differences that geopolitical economy makes
The differences between the development of Ulsan and Kaohsiung during the 1960s–70s illustrate the crucial differences Cold War geopolitical economy has made in the industrial orientations of South Korea and Taiwan. We survey some of those differences here, noting outcomes not only in the Ulsan and Kaohsiung industrial complexes but within the broader national and regional economies they have helped transform.
Islands of development and heavy industry in South Korea
In Ulsan, from the mid-1960s the Park Chung Hee regime implemented the kind of heavy industry-centered industrialization campaign that Park saw as crucial to national economic power and defense capacity. Ulsan was targeted because of its coastal location, its distance from the border with North Korea, and Park’s network of cronies in the southeast region (Sonn, 2007). Park had especially wanted to develop an integrated steel mill in Ulsan as an anchor for this project (Woo, 1991: 134, 225 n). This particular effort failed—though the mill was eventually developed at Pohang—but a large fertilizer and petrochemical complex did develop, and ultimately Hyundai expanded its operations in Ulsan as well, making the city a key node in South Korea’s heavy industry campaign (Glassman and Choi, 2014; Glassman, forthcoming; Woo, 1991: 138).
The geopolitics of the Park regime’s relations with the Kennedy and Johnson administrations were of great significance to this outcome. Former commander of US military forces during the Korean War, General James Alward Van Fleet, led an industrial mission to Ulsan in 1962, at Park’s invitation, bringing along representatives of major US firms interested in steel, airlines, petrochemical, and many other ventures. 5 Ultimately, Van Fleet’s friends at Gulf Oil made major investments in large-scale petrochemical production, and his friends at Fluor built Gulf’s first major facility at Ulsan, ultimately run as the Korea Oil Corporation, a joint-venture between Gulf and the Korean government (Chesnais and Kim, 1999: 172). Hyundai’s expansion in Ulsan and elsewhere in South Korea—as well as around the world—was also fueled by US military connections, particularly by large OSP contracts, and in the 1970s it became not only a major heavy industry producer in Ulsan but a major employer, giving birth to the large industrial labor force that would transform South Korea in the 1980s (Doucette, 2013; Glassman and Choi, 2014; Glassman, forthcoming; Hart-Landsberg, 1993; Koo, 2001; Ogle, 1990).
The Vietnam War has thus had not only short-term effects but lasting socio-spatial legacies for the South Korean economy. One major legacy worth emphasizing here is the emergence of industrial complexes as a spatial form representing uneven investment and development of social overhead capital (SOC). Between 1966 and 1972 there was a surge in the number of loans to South Korea, both public and commercial (see Ministry of Finance and Korea Development Bank, 1993: 110). Most of the loan monies were invested in the expansion of SOC and basic industrial facilities. During this period, a total of US$3.5 billion in foreign capital flowed into Korea, of which 45.6 percent was in the form of commercial loans, while 26.4 percent comprised public loans. Of the commercial loans, US$240 million came from the United States and were related to the Vietnam War. Some US$180 million, or 75 percent of the commercial loans, were invested in the construction of the Korea National Oil Corporation’s Ulsan naphtha-cracking facility and other factories and power plants in the southeast coastal industrial zone (Ministry of Finance and Korea Development Bank, 1993: 119). The remaining US$60 million was invested in power and refinery facilities near Seoul.
In spatial terms, all commercial loans from the United States between 1966 and 1972 were used to construct “islands of developments” in the Seoul area and in the southeast coastal industrial zone (Gimm, 2013). Such geographically uneven development began with the development of the Seoul–Busan transportation axis during the Japanese colonial period, and was reinforced further during the 1970s (including via Hyundai’s construction of the Seoul–Busan highway), thereby becoming a defining spatial characteristic of Korea’s economic geography. Ulsan’s development as a major industrial city, linked to Seoul (via nearby Busan) by a highway and the nation’s major high-speed rail link, is one outcome of such policies.
More generally, islands of development—composed of infrastructure and basic industrial facilities with a concentrated industrial labor force—became South Korea’s standard spatial form for industrial planning. The industrial complexes of the 1960–70s can be categorized into either light industry complexes—clusters of small and medium-sized companies—or heavy chemical industry complexes, requiring large capital investments and a cluster of companies integrated vertically (Yoo, 1998). These heavy chemical industries, fostered by public policies, were especially strongly influenced by US foreign policy strategies, particularly because during the Vietnam War era the required technologies and resources for development of heavy chemical industries in Korea were procured almost exclusively from the United States (Gimm, 2013).
The spatial legacies of this developmental era are, of course, inextricably linked to the emergence of Korea’s giant integrated firms, the chaebols. The chaebols needed the industrial complexes, and the vitality of the complexes was sustained by the chaebols. In this context, the legacies of the Vietnam War include the emergence of chaebols with strong footholds in the petrochemical industry as well as the chaebols that achieved growth by expanding their businesses in the Vietnam War—the so-called “Vietnam chaebols” (see Choi, 2001: 229; Korean Central Intelligence Agency (KCIA), 1970: 72). These Vietnam chaebols include, especially, the construction firms Hyundai, Daelim, Gong Yong, Samwhan, Hanyang, and Daewoo (originally a textile firm), along with the eventual transportation giant Hanjin.
Korea’s petrochemical industry owes much of its success to the refinery plants built with technology and investment from Gulf and Caltex during the Vietnam War era. In particular, Sunkyung and Hyosung, which became members of the top 10 chaebols during the mid-1970s, along with Ssangyong, Hyosung and LG Oil (renamed GS Oil in 2006), which boosted their chaebol rankings by producing steady income streams from refinery and chemical businesses, all have key operations in the petrochemical complexes of the southeast coastal industrial zone, including Ulsan and Yeosu. A common, shared characteristic of these petrochemical companies—with the exception of Sunkyung (renamed SK in the 2000s)—is that they all began with strong foundations in other industries, and their expansion into petrochemical production during and after the Vietnam War allowed them to substantially increase their asset bases.
In contrast to the petrochemical firms, the Vietnam chaebols–especially later household names such as Hyundai, Hanjin, and Daewoo–seemed to emerge “out of nowhere.” Most Vietnam chaebols were originally small and medium-sized enterprises (SMEs) in construction, transport, and textiles, but through their domination of OSP opportunities during the war they expanded to become chaebols by the mid-1970s. In particular, Hyundai was a medium-sized construction company that repaired bridges or built military barracks, small dams, or reservoirs, even as late as the mid-1960s (Choi, 2001: 228). Hyundai achieved phenomenal growth from that time forward by dominating construction OSP during the Vietnam War. In 1969, for example, Hyundai accounted for more than half of the total repatriated dollars of Korean construction companies in Vietnam. This kind of Vietnam success story also characterized the development of Daewoo and Hanjin. Daewoo, which was a small textile company, began its construction business—and expanded it tremendously—during the Vietnam War. Hanjin, which led all Korean firms in earnings performance during the war, went on to acquire Korean Airlines Co., thus becoming a transport chaebol encompassing air, sea, and land transport (Cumings, 2005: 308).
Most of the top Korean companies winning construction contracts overseas during the 1960s–80s were companies originally involved in war production during the Vietnam War (see Table 1). Hyundai was a pace-setter in this respect, and based on its success overseas the firm built its production base for automobile and shipbuilding industries in Ulsan (Glassman, forthcoming). Even today, among the four industries that dominate Ulsan—automobile, refinery, petrochemical, and shipbuilding—“Ulsan’s” automobile and shipbuilding industries refer fundamentally to the main automobile factory and the shipyard built there by Hyundai during the Vietnam War era (Chang, 2007: 12).
The geopolitical economic events of the 1960–70s have thus had lasting effects on the Korean political economy and its specific socio-spatial structure, generating a process of path dependent industrial growth. Vietnam War era development reinforced the geography of uneven development in Seoul and southeast coastal areas, and strengthened the positions of construction chaebols. At the national scale, it enabled a very efficient “Big Push,” which also had a social learning effect throughout Korea. Even in the 2000s, the Korean government would compare wartime opportunities in the Middle East to the past periods of construction boom during the Vietnam War or the 1970s Middle East campaigns. Often the Middle East has been described as the land where Korean firms can find their fortunes, thus legitimizing the sending of South Korean troops and technical support workers to the region. Even in contexts of global recession, South Korean Presidents have openly argued that the “second Middle East Boom” is here. 6 In ways such as these, selective memories of Korea’s gold rush in Vietnam and the Middle East have been edited and recycled, indicating a deep and lasting impact of Vietnam War era geopolitical economy not only within the Korean political economy but within Korean political culture and ideology. The Korean DBS, in other words, has deep roots in the transnational collaboration of the Vietnam War era.
Kaohsiung and the transnational networking of Taiwanese capital
In Kaohsiung, by contrast to Ulsan, the kinds of geopolitical connections the Taiwanese state cultivated with US leaders limited the possibilities for projects like those of Hyundai (construction, shipbuilding, heavy industries, automotive production), but they did enable a somewhat different kind of industrial campaign, one that was in its own way dependent upon geopolitical arrangements. As early as 1964, Taiwanese state planners such as Vice President Chen Cheng, Prime Minister CK Yen, the Ministers of Finance and Economic Affairs, the Governor of the Central Bank, and a large number of ROC officials and businessmen, had concluded that restoring GMD rule on the mainland—even if it remained Jiang’s obsession—was not as crucial as focusing on prospects for developing the economy on Taiwan itself. 7 In this context, planners like Yen and KT Li had focused even more than had the Korean leadership on seeking out private sector loans and foreign investment to make up for dwindling US assistance and limited OSP opportunities (Gold, 1986: 63, 78). The Kaohsiung Export Processing Zone (KEPZ) was developed in 1965–66 in response to this strategy, with electronics assembly—one of the industries that had been favored by US OSP, including indirectly via US spending in Taiwan on aircraft repair—playing an especially central role (Gold, 1986: 79–80; Wade, 1990: 94–95). Investment by both Japanese and US firms was crucial here, and this investment led to a massive increase in FDI as Kaohsiung ramped up operations: foreign investment approvals by the Investment Commission of the Ministry of Economic Affairs jumped from 36 in 1962 to 103 in 1966 (24 of these for the KEPZ), 212 in 1967, and 325 in 1968 (Gold, 1986: 80). Taiwan was heading quickly toward becoming a major location for light industry assembly operations that involved joint ventures between foreign and Taiwanese capital. Indeed, over the entire period 1952–1985, the value of foreign and Chinese overseas investment in the signature light industrial sector, the electronics and electric equipment sector, would be higher than for any other, US$1.5 billion, far outstripping sectors such as chemical products (US$922 million) and construction (US$503 million) (Taiwan Provincial Government, 1986). The effect of Vietnam War spending was apparent, moreover, in the tremendous growth of fabricated metal, machinery, electronic, and transport equipment, which in 1959–1961 accounted for only 1.8 percent of GDP but by 1967–1969 had grown to 5.9 percent of GDP, the highest share for any industrial activities recorded by the Taiwanese government (Directorate General Budget, Accounting, and Statistics (Taiwan), 1959–1969).
The impetus given to these outcomes by the relationship between US and GMD aspirations, and the limits and opportunities placed on OSP by this relationship, are clear from the comparison and contrast between Taiwan and South Korea highlighted in the figures above. In addition, it is worth noting that whatever limits US geopolitical calculation may have placed on the kinds and amounts of OSP received by Taiwanese bidders, the US military’s commitment to encourage and shelter the kinds of production that did take hold at Kaohsiung was also important to the kind of industrialization that began to occur in the 1960s–1970s. The presence of the 7th Fleet in the Straits was undoubtedly crucial to the confidence that foreign investors had in their prospects on the island—indeed one executive of a TNC that invested there is cited as saying “We wanted a site where we could have the US Navy between us and mainland China” (Reynolds Wolfe, 2013).
Taiwan’s turn toward export-oriented industrial (EOI) policies, in this context, is worth examining in somewhat more detail, since it has been praised as central to the “economic miracle” in Taiwan and has had significant socio-spatial legacies (Gold, 1986; Wade, 1990; World Bank, 1993). Two factors were especially important in helping shape the development of the Original Equipment Manufacturing (OEM) model which has been presented as the key pillar of this Taiwanese miracle (Gereffi, 1996; Shieh, 1992) One is the rise of the New International Division of Labor (NIDL, see Frobel et al., 1981), in which some NICs such as Taiwan and South Korea became industrial processing platforms, rather than material and input sourcing countries. The KEPZ benefited from and participated in the configuration of the OEM model within the NIDL.
The other factor in Taiwan’s EOI turn was the force of the Cold War—including the hot war in Vietnam—with Taiwan being involved through both direct OSP and more indirect resource mobilization for economic development. But, as we noted above, US leaders were reluctant to get the GMD regime of Taiwan involved overtly and massively in the war and, instead, subcontracted some of the military preparation and maintenance jobs to Taiwanese firms, in addition to the training of political warfare officers for the South Vietnamese military. In this sense, Vietnam War era OSP contributed to the growth of Taiwan’s economy, but not as significantly as it did for South Korea, working somewhat more indirectly and in dollar values that diminished much more rapidly after 1973 than was the case for South Korean firms, which began collecting large Middle East OSP contracts by the late 1970s. In contrast to the Korean case, in which the chaebols in the construction and logistics sectors were the key beneficiaries, it was Taiwanese SMEs in the electronics sector that derived more benefit from participation in the war than most other kinds of firms. The KEPZ, in this sense, represented both of these two factors—the NIDL and the Cold War—in its history of development.
The GMD government in 1965 issued the “Statute for the Establishment and Administration of an Export Processing Zone,” which was targeted at attracting investment and expanding international trade in the export processing zones by providing preferential treatment and tax exemptions for exporting enterprises. Accordingly, the first KEPZ was established on coastal reclaimed land in Kaohsiung, in the southern part of Taiwan. The setup of the KEPZ was closely related to the winding down of the US aid program which had originally been implemented after the GMD regime retreated to Taiwan. Because the financial strains of postwar reconstruction and the maintenance of a large military establishment had become unbearable for the defeated GMD regime, a massive injection of US aid came to Taiwan's rescue in 1951. From that time until 1965, US aid programs provided more than US$1.4 billion in economic assistance (Jacoby, 1966). According to Jacoby, this US aid offset heavy government deficits, balanced international payments, provided the capital for investment in infrastructure, and supplied scarce capital for investment in both the public and private sectors. The winding down of US aid to the GMD regime in the mid-1960s thus became a crucial issue, particularly given the challenge of attracting foreign capital to fill the gap created by this termination of financial support. EOI policy was framed and implemented to counter the challenge, and the KEPZ was one of the key moments in this process. It is revealing that the Preparatory Office of KEPZ Administration began to accept applications for investments in the zone on 20 July 1965, just 20 days after the official termination of US aid on 1 July 1965 (Wang, 1981).
The performance of the KEPZ was quite impressive. Among all industries in operation in the KEPZ at the end of 1972, electronic products dominated with 56 percent of all sale value, 47 percent of all investment, and 40 percent of all employment. The other major industries were metal, plastics, handicrafts, knitted and woven goods, and garments. In terms of the source of inward investment, about 56.2 percent of the US$50 million in approved investments were from foreigners (mainly US and Japanese investors), 12.5 percent from overseas Chinese, 17.6 percent from joint ventures, and only 13.7 percent from domestic investment. In brief, multinationals from the US and Japan, especially in the electronics industry, constituted the central investors in the KEPZ (Mathews, 1997). Among others, the US electronics giants, General Electric (GE) Company, and Texas Instrument (TI) were the landmark firms at the KEPZ.
The main motivations for Taiwanese planners adopting EPZs as a developmental strategy included the opening of the international market and the opportunity to increase exports, the increased employment opportunities that went along with this, and—most importantly—the possibilities for technology transfer (Amirahmadi and Wu, 1995). In particular, technology transfer through skilled labor mobility rendered local spin-offs easy and effective in the KEPZ case (Chang, 2011). Most of the local new firm formation belonged to the category of SMEs, whose owners learned skills and knowledge from the foreign factories in the KEPZ. One of the well-noted cases was the Advanced Semiconductor Engineering (ASE) group, now the number one semiconductor package firm in the world, originally a spinoff from the GE Company at the KEPZ, where the founders worked as engineers long before starting up the small electronics firm. In spite of the government’s establishment in the early 1980s of the Hsinchu Science-based Industrial Park (in Hsinchu, Northern Taiwan) to host semiconductor-manufacturing firms, the KEPZ and its neighboring spinoff, the Nanzi EPZ, still form the core area for electronics assembly in Taiwan.
Indeed, US OSP benefitted the development of the SMEs all around the KEPZ area. For example, to serve aircraft repair contracts, SMEs making steel fasteners and screws proliferated and constituted an industrial cluster in the Gangshan Township, the largest base of the air force and a neighboring town of the KEPZ (Xie, 2001). OSP contracts also benefitted the growth of electronics assembly in the Kaohsiung area where most of the local electronics firms, such as the ASE Group, Unitron Electronics, Orient Electronics and Integrated Electronics, were located (Zhang, 2006). Cross-fertilization between local spinoffs of the KEPZ multinationals and OSP contracts strengthened the industrial subcontracting system in Taiwan. Nevertheless, as the industrial structure that developed from this illustrates, the ways US OSP worked in Taiwan and South Korea were notably different and signify the importance of geopolitical calculation in influencing the geoeconomic development of each country. The Taiwanese developmental state, like the Korean developmental state, has origins in Vietnam War era transnational projects—but in the Taiwanese case the geopolitical context contributed to the forms of transnational networking associated with a DNS, rather than a Korean-style DBS.
Conclusion
Geopolitics has had a highly substantive influence not only on rates of economic growth in South Korea and Taiwan, but on the differential socio-spatial forms of industrial transformation evident both during and after the Vietnam War era, including in crucial local sites of capital accumulation and industrial transformation such as Ulsan and Kaohsiung. Moreover, the somewhat different forms of industrial policy, thematized by later authors as those characterizing a DBS and a DNS, were visibly taking hold in the Vietnam War era, with the Park regime focusing on building a heavy industry complex that could sustain high levels of industrial and military autonomy, while Taiwanese state planners moved away from Jiang’s quixotic quest for militarily conquering the mainland and focused on building transnational production networks for industries such as ICT, based on tie-ups between foreign and Taiwanese capital.
The Vietnam War thus helped set in motion dynamic but varied forms of industrial transformation in South Korea and Taiwan, and specifically in Ulsan and Kaohsiung. This did not, of course, predetermine all that followed in the postwar period. But as we have argued, certain aspects of industrial development in Ulsan and Kaohsiung continue to bear the marks of their Cold War geopolitical origins. In this sense, Ulsan and Kaohsiung, like South Korea and Taiwan more generally, are even today products not just of political economy but of geopolitical economy.
In making this argument and championing a geopolitical economic approach, we are not suggesting the need for an omnibus alternative to one-size-fits-all explanations of East Asian industrial dynamism that highlight either global markets or national planning agencies; rather we are suggesting that industrial development dynamics in the region have been complex and have had unruly and irrational moments like war as integral features. A geopolitical economy approach that foregrounds the integration of decisions about military campaigns within the geographical political economy of the region helps us bring out this crucial aspect of industrial transformation.
Footnotes
Declaration of conflicting interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This work was supported by the National Research Foundation of Korea Grant funded by the Korean Government (NRF-2014S1A3A2044551). The authors also acknowledge the receipt of funding from the Peter Wall Institute for Advanced Studies (PWIAS) at the University of British Columbia (Grant #F14-02074), and from the Social Sciences and Humanities Research Council of Canada (SSHRC Connection Grant #F14-03197), for the “Geopolitical Economies of Development and Democratization in East Asia” PWIAS International Research Roundtable during which some of this material was presented in May 2015.