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A Solution To The Problem Of Food Shortages In Korea

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A Solution To The Problem Of Food Shortages In Korea

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Content This dissertation has been
microfilmed exactly as received 66-5485
KIM, Sun K ee, 1933-
A SOLUTION TO THE PROBLEM OF FOOD
SHORTAGES IN KOREA.
U n iversity of Southern C alifornia, P h.D ., 1966
E co n o m ics, agricultural
University Microfilms, Inc., Ann Arbor, Michigan
A SOLUTION TO THE PROBLEM OF FOOD SHORTAGES
IN KOREA
by
Sun Kee Kim
A Dissertation Presented to the
FACULTY OF THE GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(Economics)
January 1966
UNIVERSITY O F SO U T H E R N CALIFORNIA
TH E GRADUATE SCHOOL
U NIVERSITY PARK
LO S ANGELES, CA LIFO RN IA 9 0 0 0 7
This dissertation, written by
Sun Kee Kim
under the direction of h i , S . . . .Dissertation Com
mittee, and approved by all its members, has
been presented' to and accepted by the Graduate
School, in partial fulfillment of requirements
for the degree of
D O C T O R OF P H IL O S O P H Y
Dean
Date Januar.y...-19.66
SSERTATIQN COMMITTEE
..
TABLE OF CONTENTS
Chapter Page
I. INTRODUCTION 1
The Problem
The Objectives of the Dissertation
The Hypothesis of the Dissertation
The Significance of This Study
~ The Scope of the Dissertation
Methodology and the Major Sources of
Statistical Data
The Organization of the Dissertation
II. THE EXTENT OF FOOD SHORTAGES................ 11
Population and Arable Land
Grain Production
Other Food Products
Minimum Food Requirements
Food Imports
Per Capita Daily Food Supply and the
III. POSSIBILITIES OF INCREASING THE SUPPLY OF FOOD 45
Increase in Domestic Agricultural
Production
Comparison of Productivity
Physical and Monetary Value
Increase in Food Supply and the Growth of
Population
Deficiency
Chapter Page
IV. THE COST OF INCREASING THE SUPPLY OF FOOD . . 71
The Technology of Increasing Production
per Hectare of Land
Comparison of the Inputs
Costs of Increasing Production
V. THE COST OF INCREASING THE SUPPLY OF FOOD,
CONTINUED................................. 109
The Value of Target Output
Cost of Increasing the Supply of Food
Cost Reduction Possibilities
The Problem of Financing Capital Expendi
tures
VI. OUTPUT, INCOME, EXPENDITURE, AND THE PRICE
L E V E L.................... 145
Level of Input and Output
Income
Expenditure on Gross National Product
Price Level
l '
I
i
VII. FINANCING CAPITAL EXPENDITURE.............. 180
The Demand for Food
Increase in Real Income
The Process of Financing Capital
Expenditures
The Economic Burden of the Increase in the
Supply of Food
i
VIII. INCREASE IN THE FOOD SUPPLY AND ECONOMIC
DEVELOPMENT............................. . 196
Increase in Food Supply and Industrial- |
ization
Increase in the Food Supply and Its Impact
upon the Agricultural Sector j
The Role of the State
iii
Chapter Page
IX. SUMMARY AND CONCLUSIONS.................... 232
Summary
Conclusions
BIBLIOGRAPHY........................................ 243
i
LIST OF TABLES
1 Table
I
Page
1. Grain Products and the Productivity of Land,
1953-1963 . . ............................... 13
2. Per Capita Grain Production . . .............. 15
3. Composition of Total Grain Products ..........
18
4. Fruit Production......................... 20
5. Vegetable Production ......................... 21
6. Number of Livestock Slaughtered .............. 23
7.
■
Fish Production ............................... 24
8. Average per Capita Domestic Food Supply per Day 26
9. Estimates of the Minimum Daily Calorie
Requirements for the Different Age Groups . . 28
10. Average per Capita Domestic Food Supply
Expressed in Terms of Calories ............ 31
11.
Grain Imports ................................. 35
12. Composition of Total Grain Imports, 1953-1963 . 37
13. Composition of per Capita Grain Import .... 38
14. Other Food Imports........................... 39
15. Per Capita per Year Value of Other Food Imports 41
I
Table Page
! 16.
Weather and Climate in Japan and Korea, 1963 49
I 17.
i
A Comparison of Productivity per Hectare of
L a n d ....................................... 52
18. Average Annual Physical Output, 1960-1963 . . . 60
19. Projected Increase in Production ............ 61
20. International Market Prices ................... 62
21. Monetary Value of the Gains in Output ........ 64
22. Projected Total Food Supply ................... 66
23.
/
Projected Population Increases .............. 67
24. The Percentage of Land Used for the Production
of Grains ................................... 79
25. The Percentage of Land Distribution ........ . 80
26. Comparison of Fertilizers Used, 1960-1961 . . . 86
27. Comparison of Pesticides Used, 1960-1963 .... 90
28. The Stock of Farm Machinery, 1963 ............ 97
29. Monetary Value of the Average Annual Domestic
Crop Production, 1960-1963 113
30. Monetary Value of the Domestic Food Supply . . 119
31. Monetary Value of Grain Imports, 1953-1963 . . 127
32. Monetary Value of Total Food Supply .......... 132
33. Distribution of the Labor Force, 1963 ........ 147
34. Capital-Output Ratio of Major Industries, 1963 149
35. Industrial Origin of Gross National Product . .
vi
151
Table Page
36. Expenditure on Gross National Product, 1953-
1963 157
37. Composition of Private Consumption Expendi
ture, 1954-1963 ............................. 160
38. Volume of Exports and Imports................. 165
39. Changes in the Terms of Trade.............. . 168
40. Imports Indices................................ 169
41i Relative Composition of Exports-Imports by
Commodity Groups . ....................... 173
42. Money Supply, Velocity, Output, and the Price
Level............................... 175
43. Total Money Supply, 1953-1963 ................. 177
44. Distribution of Cultivated Land, 1963 ......... 213
vn
CHAPTER I
INTRODUCTION
Perhaps no economic problem is more urgent than
providing an adequate amount of food for the members of a
society, as man's life on earth hinges upon an adequate
intake of food. Yet, the problem of hunger resulting from
inadequate supply and/or maldistribution of food persists
among almost all the nations in the world, rich and poor
lands alike.
In the rich lands, although on a small scale, the
problem of hunger persists largely because of the inability
to devise a system whereby a relatively abundant supply of
food can be distributed among the members of the society
according to one1s food requirements.
In the poor lands, the problem of large scale
hunger persists largely because of the inability to devise
a system whereby the supply of food can be increased suffi
ciently to meet the food requirements of the population.
1 .
«
. . 2
Thus, in the rich lands, the solution to the prob
lem of hunger hinges upon the improvement in the system of
food distribution, while the solution in the poor lands
hinges upon an increase in the supply of food as well as
improving the scheme of food distribution.
Consequently, it is far more difficult for the poor
countries to solve the problem of hunger than the rich.
This is especially true in view of the higher population
1 2
growth, lower rate of capital formation, and more unequal
3
distribution of income in the poor countries than the rich
countries.
The Problem
Korea is a poor country and one of the most
unfortunate countries in the contemporary world.
During her known history of over 2,000 years, she
was invaded by foreign forces fourteen times. The most
recent invasion was that by the Japanese in 1910. The
^Gerald M. Meier and Robert E. Baldwin, Economic
Development. Theory. History. Policy (New York: John
Wiley & Sons, Inc., 1957), p. 280.
2Ibid.. p . 281.
3
Gunnar Myrdal, Rich Lands and Poor (New York:
Harper 6c Brothers, 1957), p. 39.
----------------------------- ■ ■ T
subsequent annexation of the nation lasted for thirty-six
years, until Imperial Japan lost her colonies at the end
of World War II.
No sooner had the Korean people gained their
political independence than the nation was divided into
two, South and North, by the two most powerful nations in
the world making the fateful 38th parallel the national
boundary. And this division of the nation paved the way
for the tragic international event called the Korean War,
the war between the Koreans aided and involved by over
thirty nations in the world, in 1950.
Severe devastation and national catastrophe were
the only gifts of the war that lasted for three years.
The process of national reconstruction started immediately
after the armistice agreement in 1953 with massive economic
aid from the United States as well as various agencies of
the United Nations.
It has been more than a decade since the armi
stice. The war wounds are almost completely healed, yet
the rate of economic growth is slow--just about the same
as the rate of population growth. Growth had been hampered
by the burden of maintaining over half a million soldiers,
runaway currency inflation, political corruption, and
. _ _ _ _ _ 4
occasional political upheavals.
The one factor outstanding among all the disturb
ances which occurred during the decade is persistent and
large scale hunger, spreading among a large proportion of
the population.
As will be shown, hunger comes mainly from absolute
shortages in the supply of food in relation to the food
requirements of the population.
There are many reasons for absolute shortages in
the supply of food in Korea, but the major reason is that
the government of Korea, the owner and operator of most
of the major industries of the nation, has persistently
neglected to formulate a consistent economic plan whereby
an adequate supply of food can be attained.
This negligence stems primarily from the belief
on the part of the government that the capital expenditure
made for an increase in the supply of food means a loss of
capital for the industrialization of the nation, as the
main road to economic development.
The Objective of the Dissertation
The principal objective of this dissertation is
simply to find a way to solve the problem of, shortages in
_
the supply of food in Korea within the constraint of the
Korean economy.
A subsidiary objective is to analyze the economic
effect of the increase in the supply of food upon the
process of industrialization; that is to say, to find out
whether the increase in the supply of food can be attained
only at the expense of industrial growth or whether it
would in any way promote industrialization itself. As
will be shown, this subsidiary objective is important for
the long-run solution to the problem of food shortages as
well as industrialization in Korea.
The Hypothesis of the Dissertation
The hypothesis of the dissertation is that the
problem of shortages in the supply of food in Korea can
be solved within the constraint of the Korean economy
without deteriorating the welfare of any person or hinder
ing the long-run growth of urban industries.
The above hypothesis will be tested by an economic
analysis based upon statistical data. The essence of the
economic analysis is as follows: an increase in the supply
of food would lead to a decrease in the price of food; a
decrease in the price of food would lead to an increase in
6
the real income, given the level of money income; this
increase in the real income would be sufficient to finance
the cost of increasing the supply of food.
The Significance of this Study
The significance of this study is that, with the
appropriate government economic policy, the Korean economy
within the economic means available can solve the problem
of persistent large-scale hunger without deteriorating the
welfare of any person or the growth of the industrial
sector of the Korean economy.
The Scope of the Dissertation
The scope of this dissertation is confined only
to economic analysis, based upon the statistical data,
pertaining to the objective and hypothesis of this disser
tation given above.
Thus, the historical, sociological, cultural,
political, institutional, demographic, and other noneco
nomic facts or analyses that may be related to the problem
and objective set forth in this dissertation are beyond
the scope of this dissertation and they are assumed to be
given.
Specifically, the economic analysis is confined
7
mainly to the calculation of gains and the cost of
increasing the supply of food just enough to meet the
minimum food requirements of the Korean population, and
the source and scheme of financing the cost of increasing
the supply of food by that much without deteriorating the
welfare of any individual or the growth of the industrial
sector of the economy.
The economic analysis of the effect of the increase
in the supply of food upon the process of industrialization
is confined largely to the effect on capital formation,
income, employment, and economic stability.
Methodology and the Major Sources
of Statistical Data
As was noted above, the analysis of this disserta
tion is based heavily upon statistical data, most of which
has been obtained from Korea Statistical Yearbook, pub
lished by the Economic Planning Board of Korea; Production
Yearbook, published by the Food and Agriculture Organiza
tion of the United Nations; and Japan Statistical Yearbook,
published by the Bureau of Statistics, Office of the Prime
Minister of Japan.
The time period used in this dissertation is
confined mostly to the period 1953-1963. This period was
chosen largely due to the fact that 1953 was the year the
Korean armistice was signed and 1963 was the most recent
statistically compiled year on which data could be obtained
at the time of writing this dissertation.
Throughout the following analysis the statistical
|
data quoted will be accepted as the true data. However,
it will be assumed, of course, that any numerical value
derived from the statistical data by way of statistical
analysis is an approximate value to the true value. For
that matter, the entire economic analysis given in this
dissertation belongs to the realm of rule of approximation.
Insofar as the analysis is based upon statistical
data, the direct quotation of sentences from books or other
sources is kept at a minimum. Finally, it may be men
tioned that the author of this dissertation may be regarded
as an authority on facts about poverty in Korea because he
lived there for a quarter of a century.
The Organization of the Dissertation
The contents of this dissertation consist of nine
chapters, including the first introductory chapter.
Since the primary objective of this dissertation
is to find a way to increase the food supply sufficiently
; — _ r
to meet the minimum food requirements of the Korean popula
tion, the first task is to find the extent of food short
ages. Thus, the analysis leading to finding the extent
of shortages in the supply of food in Korea is given in
Chapter II.
Once the extent of the shortages in the supply of
food is found, then the next task is to find the possible
ways of increasing the supply of food. The analysis
pertaining to this question is given in Chapter III.
Economic decision-making requires the calculation
of gains and costs. Thus, the calculation of the cost of
increasing the supply of food equal to the deficiency in
the food supply is given in Chapter IV and V.
Once the cost of increasing the supply of food is
known, the remaining task of increasing the supply of food
is to find the source for financing the cost.
However, the objective of finding the source for
financing the cost of increasing the supply of food cannot
be attained without knowing the magnitudes as well as
general trends of some of the most important variables of
the Korean economy that may be directly affected by the
increase in the supply of food. Thus, the analysis of such
, effects on the level of output, income, expenditure, and
10
the prices in Korea is given in Chapter VI and the analysis
on the financing of the cost of increasing the supply of
food is given in Chapter VII.
The major arguments on the primary objective of
this dissertation will be completed at the end of Chapter i
t
VII. The remaining arguments are concerned with the j
subsidiary objective, the economic effect of increasing
the supply of food upon the process of industrialization.
This is given in Chapter VIII. Included in Chapter VIII
is the role of the state, an indispensable institution in
the process associated with the increase in the supply of
food as well as industrialization.
The usual summary and concluding notes are given
in Chapter IX.
CHAPTER II
t
I
! THE EXTENT OF FOOD SHORTAGES
The extent of shortages in the supply of food in
Korea can be estimated by finding the difference between
the total supply of food and required quantities of food
I
I consumption by the population.
s
I Population and Arable Land
i As of the end of 1963, the total population of
|South Korea was estimated at 27,225,000 and the numbers
Iwere increasing at approximately 2.8 per cent per annum
|
during the period 1953-1963.^
They live within 98,431 square kilometres, about
23,277,764 acres, of land in a climate similar to the mid-
2
Iwestem states of the United States.
■^Economic Planning Board of Korea, Korea Statisti
cal Yearbook. 1964 (Seoul, Korea: The Government Printing
Office, 1964), p. 16. (Additional references to public
documents previously cited hereinafter will be designated
|by the title of the document only.)
i
2
Ibid., p. 1.
- 1T
Their lives depend upon the power of the soil
since agricultural crops are the major, if not exclusive,
components of the daily food consumption. Yet, the area
of arable land in comparison with the numbers of the popu
lation is small.
The total area of arable land is only 5,096,995
o
acres of land as of 1963. Thus, the per capita arable
land in Korea is just about .2 acre of land, which is
equal to that of Japan, about one-sixth of the per capita
arable land of the world as a whole, and only ohe-four-
A
teenth of that of the United States.
There is very little possibility of increasing the
amount of arable land inasmuch as the rest of the land is
comprised mostly of mountains, forests, and built-on
areas.3
Grain Production
The total physical output of all the grain products
produced by the Korean agricultural sector during the
period 1953-1963 is shown in Table 1.
3Ibid.. p. 62.
^Benjamin H. Higgins, Economic Development (New
York: W. W. Norton & Co., 1959), p. 342.
5
Food and Agriculture Organization of the United
13
TABLE 1
GRAIN PRODUCTS AND THE PRODUCTIVITY OF LAND
1953-1963
Total Land Useda Total Products Productivity
(Acre) (Metric Ton) (Metric Ton)
1953 6,184,579 3,770,057 .609589
1954 6,297,286 3,923,869 .623104
1955 6,472,186 3,990,857 .616616
1956 6,587,085 3,502,811 .531769
1957 7,035,185 3,906,026 .555212
1958 6,604,254 4,223,912 .639576
1959 6,627,504 4,288,265 .647050
1960 6,684,118 4,248,322 .637784
1961 6,773,190 4,924,929 .727120
1962 6,931,600 4,523,814 .652636
1963 7,146,376 4,439,851 .621273
Source: Economic Planning Board of Korea, Korea
Statistical Yearbook 1963 (Seous, Korea: The Government
Printing Office), pp. 62, 66. (The computation of the
fourth column was by the writer.)
aThe total area of land used for the various grain
production is obviously greater than the total area of
arable land of the nation due to the fact that a unit of
land can be used twice in a year for the production of
certain agricultural products. The land used for the
production of barley, for instance, can again be used for
the production of certain vegetables in a year.
________ 14
The table shows that total grain products in the
last quarter of the period are about 15 per cent greater
than that of the first quarter and the total area of land
used for the grain production in the last quarter is about
10 per cent greater than that of the first quarter, indi
cating some increase in the productivity of land over the
period. The exact value of the productivity is shown in
column 4 of the table.
Per capita grain output
Since the population during the period increased
by approximately 30 per cent, the per capita grain output
during the period actually decreased. The exact values of
and the changes in the magnitudes of the per capita grain
output during the period are shown in Table 2.
The table shows that per capita grain output in
the last quarter of the period is about 5 per cent smaller
than that of the first quarter, while the arithmetic
average of per capita grain output during the entire period
is .1757064 metric ton per year. In other words, an aver
age Korean was provided with 387.3644 pounds of grain
Nations, Production Yearbook. Vol. 17 (Rome, Italy, 1963),
p. 5.
15
TABLE 2
PER CAPITA GRAIN PRODUCTION
Year
Total
Production
(Metric Ton)
Total
Populationa
Per Capita
Product
(Metric Ton)
1953 3,770,057 20,840,000 .18090484
1954 3,923,869 21,178,000 .18528043
1955 3,990,857 21,526,000 .18539705
1956 3,502,811 21,870,000 .16016511
1957 3,906,026 22,949,000 .17020462
1958 4,223,912 23,611,000 .17889593
1959 5,288,265 24,291,000 .17653719
1960 4,248,322 24,989,000 .17000768
1961 4,924,929 25,731,000 .19140060
1962 4,523,814 26,470,000 .17090343
1963 4,439,851 27,226,000 .16307393
Arithmetic Average = .17570645
aSource: Economic Planning Board of Korea, Korea
Statistical Yearbook, 1964 (Seoul, Korea: The Government
Printing Office, 1964), p. 16.
.
16
product per annum by the Korean agricultural sector during
the period 1953-1963, giving per capita daily grain produc
tion of 1.0612 pounds.
It is assumed here that the present level of per
capita grain production in Korea is 1.0612 pounds per
day.
The composition of the per
capita grain product
The daily per capita grain product in the amount
of 1.0612 pounds is composed of the following five groups
of grain products: rice, barley, pulses, potatoes, and
miscellaneous grains.
Rice is composed of paddy as well as ordinary
field rice. The grains grouped into barley are naked
barley, rye, oats, and wheat. Pulses, besides soybean,
include red and green beans, pearse, peanuts, and other
miscellaneous beans. All kinds of millets, sorghum, corn,
and buckwheat are grouped into miscellaneous grains.
White as well as sweet potatoes are grouped into potatoes.^
The percentage distribution of these five groups
of grain products to total grain production given in
^Korea Statistical Yearbook. 1964. pp. 64-71.
------------------------ -JJ-
Table 2 is shown in Table 3.
The table shows that, on the average, rice produc
tion comprises about 55 per cent of the total grain prod
uct, barley 21 per cent, pulses 4 per cent, miscellaneous
grains 2 per cent, and potatoes 18 per cent.
Then, the average composition of 1.0612 pounds of
grains per capita per day would be as follows:
Rice .5836 pound (55%)
Barley .2228 pound (21%)
Pulses . .0424 pound ( 4%)
Miscellaneous grains .0212 pound ( 27«)
Potatoes .1910 pound (18%)
Total 1.0612 pounds
Other Food Products
Grains are the major food products in Korea.
However, besides grains, there are a few other food items
that are produced in Korea even though the total quantity
is almost negligible. The most important ones are fruits,
green vegetables, meats, and fish.
Per capita fruit production
The major fruits produced in Korea are apples,
COMPOSITION
TABLE
OF TOTAL
3
GRAIN PRODUCTS
......18
Year
Rice/
TGP
Barley/
TGP
Pulses/
TGP
Miscellaneous/
TGP
Potatoes/
TGP
1953 .522 .182 .042 .022 .211
1954 .539 .221 .045 .021 .160
1955 .550 .181 .042 .022 .193
1956 .525 .220 .049 .023 .181
1957 .580 .175 .044 .020 .179
1958 .656 .198 .041 .025 .169
1959 .557 .224 .036 .020 .160
1960 .540 .226 .035 .019 .178
1961 .552 .211 .038 .019 .177
1962 .507 .219 .040 .021 .210
1963 .622 .068 .040 .024 .243
Arithmetic Average
.551 .215 .041 .022 .187
TGP = rotal grain products
Source: The percentages are derived from the
original grain product data in the Korea Statistical Year
book, 1964, dp . 66-67.
rg
pears, persimmons, grapes, peaches, and oranges.^
The total, as well as per capita, fruit production
of all kinds during the period 1953-1963 expressed in
terms of metric tons is shown in Table 4. As is indicated
in the table, the average per capita fruit production per
annum is a meager .0060431 metric ton, or 13.3227 pounds,
giving .0365 pound per person per day.
Per capita vegetable production
The major food item next to grains in Korea is
vegetables such as radishes, Chinese cabbages, melons,
cucumbers, egg-apples, pumpkins, tomatoes, red peppers,
garlic, spinach, onions, and others. However, about 80
per cent of all the vegetables produced are radishes and
Chinese cabbages and these are the main dishes next to
grains in Korea.®
Total and per capita vegetable production during
the period 1958-1963 is shown in Table 5. This table
shows that the average per capita vegetable production per
annum is .0452372 metric ton, or 99.7310 pounds, giving
^Korea Statistical Yearbook. 1964. pp. 70-71.
8lbid.. pp. 72-73.
20
TABLE 4
FRUIT PRODUCTION
Year
Total
Production3
(Metric Ton)
Population
(Thousand)
Per Caput
(Metric ton)
1953 108,447 20,840 .0052037
1954 109,939 21,178 .0051911
1955 116,852 21,526 .0054284
1956 117,014 21,870 .0053504
1957 127,255 22,949 .0054512
1958 151,323 23,611 .0064090
1959 166,818 24,291 .0068674
1960 166,371 24,989 .0066577
1961 150,698 25,731 .0058566
1962 198,913 26,470 .0075146
1963 178,151 27,226 .0065434
Arithmetic Average .0060430
.0060430 metric ton = 13.3227 pounds per capita
fruit production per day: 13.3227/365 = .0365
pound.
aSource: Korea Statistical Yearbook. 1964, p. 70.
TABLE 5
VEGETABLE PRODUCTION
2T
Year
Total -
Production
(Metric Ton)
Population
(Thousand)
Per Caput
(Metric Ton)
1958 1,111,896 23,611,000 0.0470923
1959 1,010,149 24,291,000 0.0415853
1960 1,088,073 24,989,000 0.0435421
1961 1,191,021 25,731,000 0.0462874
1962 1,304,846 26,470,000 0.0492952
1963 1,187,629 27,226,000 0.0436211
Arithmetic Average 0.0452372
aSource: Korea Statistical Yearbook, 1964. d . 72.
22
.2732 pounds of vegetables per person per day.
Per capita meat production
Meats are an extremely scarce food product in
Korea. They are usually reserved for the wealthy class.
Cows, bulls, pigs, and horses comprise most of the meat
production in Korea.
Table 6 shows the number of livestock slaughtered
for human consumption during the period 1962-1963. As is
shown in the table, average per capita meat production per
annum is only 1.6618 kilograms, or 3.6637 pounds, giving
approximately .0100 pound per person per day.
Per capita fish production
Fishing is one of the major industries in the
nation. The major fish products are squid, anchovy, pol-
o
lack, shellfish, shrimps, and flat fish.
Table 7 shows the annual fish production during
the period 1958-1963. The table also shows that the
average per capita fish production per annum during the
period is .0160692 metric ton, or 35.4264 pounds, giving
the per capita fish production per day of .0970 pound.
9Ibid., pp. 116-117.
TABLE 6
NUMBER OF LIVESTOCK SLAUGHTERED
(In Kilograms)
Year Cows Bulls Pigs Horses
1962 18,927,909 9,220,066 17,680,325 1,957
1963 18,038,457 11,084,186 14,229,360 264
(In Heads)
1962 116,361 42,898 231,887 9
1963 139,216 77,816 264,986 3
1962 Per caput = 1.7314 kg
1963 Per caput = 1.5923 kg
Arithmetic Average = 1.6618 kg
Source: Korea Statistical Yearbooks 1964. p. 78.
24
TABLE 7
FISH PRODUCTION
Year
Total
Product
(Metric Tons)
Total
Population
Per Caput
(Metric Tons)
1958 395,192 23,611,000 .0167376
1959 382,125 24,291,000 .0157311
1960 342,471 24,989,000 .0169277
1961 435,567 25,731,000 .0169277
1962 450,384 26,470,000 .0170148
1963 443,757 27,226,000 .0162990
Arithmetic Average - .0160692
Source: Korea Statistical Yearbook. 1964. p. 116.
23~ ~
By way of summarizing the average per capita domes
tic food supply per day in Korea, the items are set forth
in Table 8.
Minimum Food Requirements
The preceding analysis showed the per capita domes
tic food production per day in Korea during the period
1953-1963. The crucial question is, then, whether or not
the aforementioned quantity of per capita food supply is
sufficient for the maintenance of the vigor as well as the
health of the Korean people.
The per capita minimum calorie
requirements
Man consumes food as it furnishes the essential
nutrients. Nutrients are required for the maintenance and
growth of the vigor of life.
The nutritive requirements of man are deter
mined and expressed in terms of essential compo
nents of food stuffs such as carbohydrates, fats,
proteins, minerals, and water, or the energy
derived from some of these components.10
Energy is measured in terms of calories. Thus,
"^United States, Department of Agriculture, Food
and Life. Yearbook of Agriculture, 1939 (Washington:
Government Printing Office, 1939), p. 15.
26
TABLE 8
AVERAGE PER CAPITA DOMESTIC FOOD SUPPLY PER DAY
Food Items Quantity in Pounds3
Rice .5836
Barley .2228
Pulses .0424
Miscellaneous grains .0212
Potatoes . 1910
Fruits .0365
Vegetables .2732
Me&ts .0100
Fish .0970
aIt should be mentioned that the value of the
average per capita domestic food supply shown in this table
is an approximate value not only because of the possible
error in the original statistical data but also because of
the omission of certain food products such as eggs, chick
ens, and other minor food products that must be included
in the calculation of the per capita value no matter how
small the value may be. The food products, other than
those listed in Table 8, are treated in the latter part
of this chapter. In any event, the approximate value
would meet the purpose of this chapter.
L
-------- 27
the nutritive requirements can be commonly expressed and
measured in terms of numbers of calories. The necessary
quantities of calories that should be taken every day
"vary with the size, age, and activity of the individual
and with the external conditions to which he is sub
jected."^
It can, then, be stated that the required quantity
of caloric intake per unit of time is essentially a func
tion of age, given the size and the activity of the
individual in a particular external condition of a society.
Table 9 shows the estimate of the absolute minimum
caloric requirement for the different age groups "living
an ordinary everyday life in a temperate climate"--like
Korea.
According to the latest complete census (taken in
1960), the percentage age distribution of the above age
groups in Korea was 18.9 per cent for the age group 1-4
years old, 13.7 per cent for 5-9 years old, and 67.4 per
13
cent for 10 or older.
11Ibid.. p. 15 12Ibid.. p. 16.
13
Korea Statistical Yearbook. 1964. p. 20.
28
TABLE 9
ESTIMATES OF THE MINIMUM DAILY CALORIE
REQUIREMENTS FOR THE DIFFERENT
AGE GROUPS
Age Group Calories Per Day
1 - 4 1,300
5 - 9 1,900
10 or more 2,500
Source: United States, Department of Agriculture,
Food and Life. Yearbook of Agriculture. 1959 (Washington:
Government Printing Office, 1959), p. 103.
— 2 9
By multiplying the calorie requirements for the
various age groups listed in Table 9 by the respective
percentage age distribution, and summing up the respective
values, we would find the weighted average per capita
minimum calorie requirements in Korea to be 2,191 calo-
Thus,1 a Korean must be provided daily with the
quantity of food capable of yielding at least 2,191 cal
ories in order to meet his daily minimum food requirements.
Shortages in the domestic
food supply
The extent of the shortage in the domestic food
supply can be found easily by transforming the average per
14
The above figure of the per capita daily minimum
calorie requirements is about 100 calories smaller than
the short-run calorie target set by the Food and Agricul
ture Organization of the United Nations for the Far East
as a whole. The short-run calorie target set by the Organ
ization for the Far East is 2,300 calories per person per
day (see Food and Agriculture Organization of the United
Nations, Third World Food Survey [Rome, Italy: 1963], p.
57).
The difference comes mainly from and can be justi
fied by the facts that the Food and Agriculture Organiza
tion gave the necessary allowance for the income inequality
(see ibid., p. 53) prevailing in the Far East as a whole,
which requires the higher per capita calorie target in
meeting a given level of food requirements for the popula
tion as a whole than in the case of ineome equality, and
30-
capita daily food production shown in terms of pounds of
various foods in Table 8 into numbers of calories and
comparing the number with the average minimum daily calorie
requirements.
The number of calories contained in the respective
quantities of the various food items listed in Table 8 is
given in Table 10.
This table shows that the total number of calories
contained in the average per capita domestic food produc
tion is approximately 1,546 calories. In other words, the
domestic food production in Korea is capable of providing
only 1,546 calories per day per person, whereas the
minimum calorie requirements are 2,191, giving a deficit
of 645 calories per person per day. This means that the
Korean agricultural sector had been able to produce
approximately 70 per cent of the minimum food requirements
of the Korean population during the period 1953-1963.
Starvation would be an inevitable consequence
regardless of the scheme of food distribution if the
deficit is not made up by the importation of food.
the short-run calorie target set by the Food and Agricul
ture Organization is for the Far East as a whole whereas
the above figure applies to Korea only.
31
TABLE 10
AVERAGE PER CAPITA DOMESTIC FOOD SUPPLY
EXPRESSED IN TERMS OF CALORIES
Per Capita Calories
Food Item Food Supply Calories per
(Pound) Pound
Rice .5836 955 (l,637)a
Barley .2228 351 (l,579)b
Pulses .0424 77 (l,828)c
Miscellaneous
grains .0212 33
. d
(l,579)d
Potatoes .1910 53 ( 279)e
Meats .0100 17 (l,675)f
Fish .0970 38 ( 396)s
Total calories 1,546
g
Agricultural Research Service, United States
Department of Agriculture, Composition of Foods. Agricul
tural Handbook, No. 8 (Washington: Government Printing
Office, 1963), p. 108. The calorie numbers are those of
unenriched raw rice.
^Ibid., p. 71. The calorie numbers are those of
pearled barley. Even though the per capita barley supply
includes wheat, the calorie number of pearled barley is
uniformly used not only because the proportion of wheat
production to barley production is very small but also the
calorie per pound of wheat is close to that of barley,
p. 120. (1,520 calories in a pound of wheat.)
_ 32
cIbid., p. 113. The calorie numbers are those of
soybeans, which comprise most of the pulse products in
Korea.
^Ibid.. p. 71. The calorie numbers are those of
pearled barley. The calorie number of barley is used
because the numbers of calories per pound of most of the
miscellaneous grains are more or less equal to that of
barley and the per capita miscellaneous grains are too
small in physical quantity to cause any significant varia
tion to the total calorie number.
eIbid.. p. 106. The calorie numbers are those of
fresh potatoes.
^Ibid., p. 68. The calorie numbers are those of
apples.. The calories per pound of apples is a figure
uniformly used not only because applies comprise the major
fruit product in Korea, but also because the calories per
pound of applies is more or less representative of most
of the fruits.
^Ibid.. p. 79. The calorie numbers are those of
fresh Chinese cabbages in fair quality. It is the major
vegetable product in Korea.
*VLbid.. p. 72. The calorie numbers are those of
beef, carcass total edible, prime grade. Even though
pork occupies a significant portion of the total supply of
meat, the calories per pound of beef are uniformly used
because of the insignificant quantity of the per capita
meat supply and of the small difference in the calorie
numbers per pound between beef and pork. (There are
1,637 calories for a pound of pork [ibid., p. 106J.)
•^Ibid.. pp. 68, 88, 99, 103, 112, and 114. There
are many different fish products in Korea. However,
squid, anchovy, Alaska pollock, shellfish, flat fish,
and shrimp comprise more than 50 per cent of the marine
products in Korea in terms of weight. Thus, the calorie
numbers shown in Table 10 are the weighted average of the
calorie numbers of those products. The weight is given
according to the metric tons of production of the above
products. The computation is as follows:
331
Products Weight
Calories
per Pound
Weighted
Calories
Squid .55 381^ 209.55
Anchovy .15 798 119.70
Alaska pollock .11 194 21.34
Shellfish .07 299 20.93
Shrimp .06 285 17.10
Flat fish .06 118 7.08
Weighted calories per pound of fish 395.70
Ibid., p p . 114, 68, 103, 99, 112, and 88 respec-
tively.
Thus, the calories per pound of marine products
in Korea is estimated at 396.
L
-------- — 34
Food Imports
The foregoing figures indicate the compelling
necessity of importing food lest the nation face mass
starvation.
Korea, in fact, had continuously imported food
products during the period under analysis. The kinds of
food products imported were grains, fruits, vegetables,
milk, animal and vegetable oils, fats, dairy products, and
eggs. However, grain imports constituted approximately 85
15
per cent of the total monetary value of the food import.
Per capita grain imports
The extent of the grain imports during the period
1953-1963 is shown in Table 11. Even though the table
reveals a great deal of variation in the amount of grain
imports during the period, the variation is nothing but a
simple fluctuation around the per capita arithmetic aver
age grain import of .0259897 metric ton, or approximately
57.2974 pounds, per year. Hence, the per capita grain
import per day is .1569 pound of grains.
15
The Bank of Korea, Economic Statistics Yearbook.
1963 (Seoul, Korea: The Bank of Korea, 1963), p. 226.
TABLE 11
35
GRAIN IMPORTS
Year
Total Importsa
(Metric Toils)
Per Capita Import
(Metric Tons)
1953 956,341 .0458896
1954 202,403 .0095571
1955 84,598 .0039718
1956 502,214 .0229636
1957 965,834 .0420861
1958 968,382 .0410140
1959 266,664 , .0109778
1960 467,688 .0187157
1961 603,123 .0234395
1962 499,207 .0188593
1963 1,318,095 .0484130
Arithmetic average of the per capita
grain imports .0259897
aKorea Statistical Yearbook, 1964, p. 79.
. 36
Composition of grain imports
The imported grains are composed of rice, barley
including wheat and flour, pulses, and miscellaneous
grains. The proportion of the various grains imported to
the total grain import during the period 1953-1963 is
shown in Table 12.
The total grain import during the entire period is
6,834,548 metric tons, of which 9.3 per cent is for rice,
79.8 per cent for barley, 7.3 per cent for pulses, and
3.4 per cent for the miscellaneous grains.
On the basis of these proportions, it is possible
to estimate the numerical value of the components of the
per capita grain import per day of .1569 pound. This is
shown in column 2 of Table 13. From these numerical
values, the per capita grain import per day of .1569 pound
can easily be expressed in terms of numbers of calories.
This is shown in column 3 of the table. It shows that the
per capita grain import of .1569 pound per day yields
approximately 249 calories.
Other food imports
The extent of the food import other than grains,
i.e., fruits, milk, sugar, fats, etc., is shown in Table 14
37]
TABLE 12
COMPOSITION OF TOTAL GRAIN IMPORTS
1953-1963
Kind
Importa
(Metric Ton)
Percentage
Rice 638,072 9.4
Barley 5,457,591b 79.8
Pulses 503,692 7.4
Miscellaneous
grains 235,191 3.4
Total grain imported 6,834,548
aKorea Statistical Yearbook, 1964, p. 79.
Composition
Pearled
Wheat
Flour
Source: Ibid., p. 79.
of the barley import is
1,863,056
3,181,438
413,097
as follows:
38
TABLE 13
COMPOSITION OF PER CAPITA GRAIN IMPORT
Grain Per Cent Pound
Calories
per
pounda
Calories
Rice 9.4 .0147 (1,637) 24
Barley 79.8 .01251 (1,579) 197
Pulses 7.4 .0116 (1,828) 20
Miscellaneous
grains 3.4 .0055 (1,579) 8
Total per capita
grain import .1569 249
aValues taken from Table 10 •
TABLE 14
OTHER FOOD IMPORTS
(In Thousands U.S. Dollars)
Year Fruits
Vege
tables
Dairy
and
Eggs
Milk
Oils
and
Fatsa
Sugar
1958 209 335 2,067 1,710 2,682 --
1959 277 296 1,109 1,095 2,493
- -
1960 154 180 1,325 1,313 2,528
1961 142 150 1,142 1,140 3,949 8,254
1962 22 261 2,492 2,453 3,856 4,503
aKorea Statistical Yearbook. 1964. p. 287.
Source: The Bank of Korea, Economic Statistics
Yearbook. 1963 (Seoul, Korea: The Bank of Korea, 1963),
p. 226.
expressed in terms of monetary value. In fact, the -supply
of those food products other than fruits, and vegetables,
has been almost exclusively relied upon importation.
However, the monetary value of the import of those
food products runs just a little over $10 million per year
as is shown in the table, indicating that the per capita
per year value of those important food products is just
about half a dollar; about .8 cent of fruits, .5 cent of
vegetables, 6.4 cents of dairy products and eggs, 6.1
cents of milk, 12.8 cents of oils and fats, and 23.9 cents
of sugar per year, shown in Table 15. Thus, the value of
per capita food imports other than grains is just about
.14 cent per day in spite of the fact that the nation
relies upon the supply of those products almost exclusively
from importation.
The per capita daily calorie contribution of .14
cent of those products would certainly be negligible and
the computation of .14 cent of those food products into
the number of calories is not even necessary because
Korea had exported food, mostly rice and marine products,
during the period 1958-1962 in the amount of about $10
3T
TABLE 15
PER CAPITA PER YEAR VALUE
OF OTHER FOOD IMPORTS
Fruits Vegetables
Dairy
and
Eggs
Milk
Oils
and
Fats
Sugar
.80$ .50C 6.44c 6.10C 12.83C 23.85C
Source: The data are computed on the basis of
statistical information in Tables 2 and 14.
!
42
per annum.^ Thus, it can be properly assumed that the
gain of calories from those imported food products is
offset by the loss of calories resulting from the export of
the food products.
Per Capita Daily Food Supply
and the Deficiency
Total food supply is equal to domestic food supply
plus net food imports.
The per capita domestic food supply per day in
Korea is, on the average, equal to 1,546 in terms of
calories and the per capita net food import per day is, on
the average, equal to 249 in terms of calories. Therefore,
the per capita daily food supply in Korea is, on the aver
age, equal to 1,795 in terms of calories.^**
^ Korea Statistical Yearbook. 1964. p. 286.
15
As of 1963, Korea has some 1,400,000 cattle,
27,000 horses, 1,000,000 dogs, 1,500,000 pigs, 12,000,000
chickens, and other domestic animals in smaller numbers
(see Korea Statistical Yearbook. 1964. pp. 80-81).
Some of the nation's grain products would be con
sumed by those domestic animals. That part of the grain
products which is consumed by the animals is not available
for human consumption. Therefore, that quantity of grain
products must be subtracted from the total agricultural
product prior to the determination of the value of per
capita food supply.
There is no statistical information available for
43
Thus, it is estimated that the per capita daily
food supply in Korea is 1,795 in terms of calories.
Since the minimum daily per capita calorie require
ments for a Korean are 2,191, it follows that the per
capita calorie deficit per day is 396. In other words,
the per capita food supply in Korea is just about 80 per
cent of the minimum food requirements of the Korean
the computation of the quantity of grains consumed by the
domestic animals.
However, the actual subtraction of the ’amount of
grains consumed by the domestic animals from the per
capita grain production may not be necessary in order to
estimate the calorie value of per capita food supply be
cause there are certain food products, such as chickens,
eggs, etc., that are not included in the computation of
the per capita domestic food supply in Table 10.
The value of calories gained from these unlisted
food items may be sufficient to compensate for the loss
of per capita calories resulting from the consumption of
grains by the domestic animals.
Even if there is a difference in numbers of cal
ories gained and lost, that difference would not make any
appreciable difference in the per capit total calorie
supply because the total quantity of calories to be gained
as a result of the inclusion of the unlisted food items,
and the total quantity of calories to be lost as a result
of the exclusion of the quantity of the grains consumed
by the domestic animals, is very small in relation to that
of the total food supply. Chickens, eggs, and the like are
extremely scarce and the domestic animals consume mostly
food waste and the grasses. Thus, it can safely be approx
imated that the per capita daily food supply in Korea is
1,795 in terms of calories.
44
population. This would indicate that at least 20 per cent
of the Korean population, over five millions, would be
starved to death if the rest of the population had eaten
enough food to meet minimum food requirements.
Thus, the supply of food must be increased by
approximately 22 per cent of the present level in order to
meet the minimum food requirements of the population as of
1963.
>
CHAPTER III
POSSIBILITIES OF INCREASING
THE SUPPLY OF FOOD
The extent of shortages in the supply of food in
Korea was found in the previous chapter. The question is,
then, how the supply of food can be increased to meet the
minimum food requirements of the population.
The supply of food can be increased either by
increasing domestic agricultural production or by increas
ing the importation of food by an amount equal to the
deficiency in the food supply.
Increase in Domestic Agricultural
Production
Domestic agricultural production can be increased
either by increasing the area of land cultivation and/or
by increasing the production per unit of land.
It was stated in the previous chapter that there
is very little possibility for the Korean agricultural
_______ ________ 46
sector to increase the agricultural production by increas
ing the area of agricultural land. Thus, the physical
impossibility of increasing the agricultural land automat
ically eliminates any economic consideration as to choosing
such an alternative as a means of solving food shortages.
Since one alternative is eliminated, the only
economically meaningful alternative is to increase agri
cultural production by increasing the production per unit
of land.
Before making any consideration as to choosing such
an alternative, the question that must be asked and
answered first is whether or not there is a technological
possibility of increasing the production per unit of agri
cultural land in Korea beyond the present level and, if it
can be increased, by how much.
The estimation by comparison
It is extremely difficult to find out precise
answers to the question of estimating the possibility and
the extent of increasing the production per unit of land in
Korea. However, one easy way of finding an approximate
answer to the question is to compare the production per
unit of land in Korea for the various agricultural
WT
productions with that of another country whose overall
production per unit of land is one of the highest in the
world, subject to the following requirements: the weather
and climatic influences upon the agricultural production
are more or less the same as in Korea.
These requirements are essential because, if the
weather and climatic influences were different, the dif
ference in the production per unit of land between the
nations could be due solely to differences in these natural
variables over which present human technology has very
little control and, consequently, no rational agricultural
economic policy can be formulated.
The nation that fits these qualifications is Japan.
The production per unit of land in Japan for the various
agricultural products is one of the highest in the world
and the highest among all the Middle-, South Eastern, and
Far Eastern countries in most grain and vegetable produc
tion.
Japan is not only a neighbor, situated in the same
geographical parallel as Korea, but is also surrounded by
the sea, like Korea. The horizontal length of the two
countries from coast to coast is also almost identical.
The vertical length of Japan is about three times longer
than that of Korea, but it is concave to Korea in such a
way that more than two-thirds of the total land in Japan
is situated within the parallels of Korea (between 34° and
38°).
The similarity in geography between the nations
is also shown by the fact that more than three-fourths of
the nation's territory is covered with mountains in both
countries.
The above geographical data would assure that the
weather and climatic influences upon the agriculture in
both countries would be similar, if not identical, in all
practical senses. The similarity is shown in Table 16.
For these two reasons, i.e., the high productivity
of agricultural land in Japan and the similarity in the
weather and climatic influences between Japan and Korea,
and many other reasons to be listed later, the comparison
of production per unit of land between Japan and Korea
would be an ideal way of finding the possibility and the
extent of increasing the agricultural production per unit
of land in Korea, given the state of world technology of
increasing the production per unit of land.
WEATHER AND
TABLE 16
CLIMATE IN JAPAN AND
1963
KOREA
49“
Fukushima, Seoul, Tokyo, Taegu,
Weather Japan Korea Japan Korea
37° 37° 35° 35°
Normal temperature 12.1 11.8 14.7 13.5
(C)
May 17.0 11.1 18.4 16.9
June 19.8 16.7 21.8 19.5
July 23.5 20.9 25.7 25.6
August 24.7 24.3 26.6 25.6
September 19.2 25.4 21.4 20.3
October 13.6 20.2 26.3 13.7
Normal precipitation 1,156.2 1,235.4 1,563.4 1,178.3
(mm)
May 44.5 186.7 135.6 110.4
June 175.7 383.7 248.2 373.1
July 186.2 276.0 65.9 248.9
Augus t 140.9 126.5 382.2 • 135.3
September 32.4 50.1 144.2 6.9
October 209.0 32.1 294.7 23.9
Total 788.7 1,055.1 1,207.8 898.5
Average relative
humidity (per cent) 72 71 66 67
May 69 72 74 71
June 77 77 78 81
July 81 85 76 80
August 80 78 77 79
September 73 66 73 70
October 78 67 74 69
Weather days
Clear 34 94 68 95
Cloudy 190 122 187 124
Rainy 95 114 97 100
Stormy 38 4 23 6
Normal sunshine
hrs. 1,954 2,070 2,018 2,151
TABLE 16--Continued
Sources: Bureau of Statistics, Office of the Prime
Minister, Japan Statistical Yearbook. 1965 (Tokyo, Japan:
The Government Printing Office, 1965), pp. 6-8; and
Economic Planning Board of Korea, Korea Statistical Year
book. 1964 (Seoul, Korea: The Government Printing Office,
1964), pp. 6-14.
Note: Even though the samples are confined to two
pairs of cities located at identical parallels, the table
indicates clearly the similarity in the weather and the
climatic conditions in terms of temperature, precipitation,
and average relative humidity. However, Korea has better
weather than Japan in terms of weather days because she
has significantly more "clear" days and significantly
fewer "stormy" days.
L
5T
Comparison of Productivity
|
|
A comparison of the productivity of agricultural
land between Japan and Korea in producing various agricul
tural products is shown in Table 17. The values of the
average physical productivity of Asia and of the world are
shown also in order to broaden the scope of comparison.
Rice production per hectare
Rice production per hectare of land in Korea during
the period 1960-1963 was fifth out of thirty nations in
Asia'*' and the value of physical productivity was about 70
per cent higher than the average physical productivity in
Asia, as shown in Table 17.
However, rice productivity in Japan during the same
period was about 140 per cent higher than the average
productivity in Asia. Thus, rice production per unit of
land in Japan is approximately 70 per cent higher than
that of the per unit measure of land in Korea.
The table reveals also that the producitivity
difference between the two countries has widened in recent
Food and Agriculture Organization of the United
Nations, Production Yearbook. Vol. 17 (Rome, Italy: 1963),
pp. 52-53.
521
TABLE 17
!
A COMPARISON OF PRODUCTIVITY PER HECTARE OF LAND
(100 kg/hectare)
Food
Item
Area
1948/
1953
1960/
1961
1961/
1962
1962/
1963
1960-1963
Average
Ricea Korea 27.5 27.9 32.9 27.4 29.4
Japan 40.0 48.6 50.4 52.6 50.5
Asia 14.1 17.4 17.6 16.9
World 16.1 20.1 20.3 19.9
Barley^ Korea 9.5 10.4 11.1 10.2 10.6
Japan 20.6 27.5 28.6 28.2 28.1
Asia 10.2 10.5 10.4 11.2
World 11.4 14.8 13.7 15.4
Pulses0 Korea 5.7 4.8 5.7 5.4 5.2
(Soybean) Japan 10.8 13.6 13.6 12.6 13.3
Asia 7.4 7.6 7.6 7.4
World 10.0 10.8 11.6 11.3
Miscella Korea 8.9 12.7 13.8 12.3 12.9
neous Japan 18.5 25.4 27.4 25.4 26.1
grains
(Wheat) Asia 10.2 10.5 10.4 11.2
World 11.4 14.8 13.7 15.4
Potatoese Korea 54 67 73 62 67
Japan 117 176 177 170 . 174
Asia 81 97 97 99
World 107 113 113 107
TABLE 17— Continued
53
Food . 1960-1963
Item Area Average
Fruitsf
Apples Korea 9,620
Japan 15,603
Peaches Korea 5,550
Japan 9,436
Vegetables®
Chinese
cabbage Korea 1,123
Japan 2,615
Radishes Korea 1,197
Japan 2,849
aFood and Agricultural Organization of the United
Nations. Production Yearbook. Vol. 17 (RomeT Italy: 1963)T
pp. 52-53.
bIbid., pp. 41-42.
cIbid., p. 118
dIbid., pp. 37-38
eIbid., p. 77
■^Korea Statistical Yearbook. 1964. no. 70-71; and
Japan Statistical Yearbook. 1965. p p . 102-103
®Korea Statistical Yearbook. 1964. pp. 72-73; and
Japan Statistical Yearbook, 1965. pp. 100-101.
_
years as the difference in the productivity during the
period 1948-1953 was less than 50 per cent.
Bariev production per hectare
Barley production per hectare of land in Korea
during the period 1960-1963 was 4th out of seventeen Asian
countries surveyed.^
However, as shown in Table 17, the value of physi
cal productivity was slightly below the average of the
Asian countries as a whole, due primarily to the incredibly
high productivity in Japan, the highest in Asia. In fact,
the barley production per unit of land in Japan was, on
the average, about 165 per cent higher than Korea during
the period.
As was true in the case of rice productivity, the
productivity difference between the two countries in barley
production has widened in recent years, for the differ
ence in productivity during the period 1948-1953 was 117
per cent, as is shown in the table.
Pulse production per hectare
In the production of pulses, the production per
Production Yearbook, pp. 41-42.
55
hectare of land in Korea during the period 1960-1963 was
q
the lowest among all Asian countries. Meanwhile, the
productivity in Japan during the period was the highest in
Asia and about 155 per cent higher than in Korea, as is
shown in Table 17.
The table also shows that the productivity differ
ence was widened significantly in recent years as the
difference in the productivity during the period 1960-1963
was less than 100 per cent.
Miscellaneous grain production
per hectare
The production per hectare of land growing the
miscellaneous grains in Korea during the period 1960-1963
was fourth out of eighteen nations surveyed in Asia.^-
However, the productivity value in Japan during the same
period was about 100 per cent higher than that of Korea,
as is shown in Table 17.
Potato production per hectare
The potato production per hectare in Korea during
the period 1960-1963 ranked ninth out of seventeen nations
3Ibid., p. 118 ^Ibid.. pp. 37-38.
. - 56
surveyed."* However, it was only 70 per cent of the produc
tivity average of the Asian countries and 40 per cent of
that of Japan, the highest among the seventeen nations.
Thus, the potato production per hectare of land in Japan
during the period was, on the average, about 160 per cent
higher than Korea, as shown in Table 17.
The productivity difference was widened in recent
years compared with that of the period .1948-1953 when the
difference was about 120 per cent.
Fruit production per hectare
Apple and peach production occupies more than two-
thirds of the entire fruit production in Korea in terms
of weight.^
The apple and peach production per hectare in
Japan during the period 1960-1963 was higher than Korea by
about 62 per cent and 70 per cent respectively, as is
shown in Table 17.
It is conservatively estimated here that the fruit
5Ibid.. p. 77.
z :
Economic Planning Board of Korea, Korea Statis
tical Yearbook. 1964 (Seoul, Korea: The Government Printing
Office, 1964), pp. 70-71.
57
production per hectare in Japan is at least 50 per cent
greater than Korea.
Green vegetable production per
hectare
Chinese cabbage and radish production occupies more
than two-thirds of the entire vegetable production in
7
Korea in terms of weight.
The Chinese cabbage and radish production per hec
tare of land in Japan during the period 1960-1963 was
higher than Korea by about 133 per cent and 140 per cent
respectively, as is shown in Table 17.
It is conservatively estimated here that the
vegetable production per hectare of land in Japan as a
whole is at least 100 per cent greater than Korea.
Summary of the comparison
A comparison of the productivity per unit of
agricultural land between Japan and Korea in the production
of major crops listed in Table 8 leads us to the following
conclusions:
The productivity average of agricultural land in
7Ibid.. pp. 72-73.
. 5 8
Korea for the production of major crops is above the
productivity average of the Asian countries as a whole.
However, there is a great potentiality and possibility of
increasing domestic agricultural production by increasing
the production per hectare of land.
It is possible for the Korean agriculture
to increase the production of:
Rice by at least 70 per cent
Barley by at least 165 per cent
\
Pulses by at least 155 per cent
Miscellaneous
grains by at least 100 per cent
Potatoes by at least 160 per cent
Fruits by at least 50 per cent
Vegetables by at least 100 per cent
of the 1960-1963 level of agricultural production without
increasing the quantity of agricultural land in Korea.
Physical and Monetary Value
On the basis of the projected percentage increase
in the production of the various grains shown above, it is
possible to estimate the physical as well as the monetary
value of the increase in the production of the various
_ . 59
agricultural productions.
Physical value
Table 18 shows the average annual physical output
of the various agricultural products during the period
1960-1963.
When the physical quantities of the various agri
cultural crops listed in Table 18 are multiplied by the
respective percentage increases shown previously, the
absolute quantity of the increase in agricultural produc
tion which would result from an increase in the production
per hectare of land in Korea comparable to present agri
cultural productivity in Japan, is shown in Table 19.
Monetary value
The lowest international market prices of those
products listed in Table 19 are given in Table 20.
The monetary value of the increase in agricultural
production can then be found by multiplying the prices by
the respective quantities of agricultural products listed
in Table 19. This is shown in Table 21.
The table shows that the monetary value of the
increase in agricultural production is $460,528,141. It
is, therefore, estimated that potential gains in
60
TABLE 18
AVERAGE ANNUAL PHYSICAL OUTPUT
1960-1963
Kinds of Products
Physical Products
(In Metric Tons)
Rice 2,519,929.5
Barley 826,079.8
Pulses 175,972.0
Miscellaneous grains 95,970.9
Potatoes 916,276.7
Fruits 172,305.0
Vegetables 1,192,892.0
Source: Economic Planning Board of Korea, Korea
Statistical Yearbook. 1964 (Seoul, Korea: The Government
Printing Office, 1964), pp. 66-73.
51
TABLE 19
PROJECTED INCREASE IN PRODUCTION
(In Metric Tons)
Kind of Product
Percentage
Increase
Physical Quantity
Increase
Rice 70 1,763,950.7
Barley 165 1,363,303.2
Pulses 155 272,756.6
Miscellaneous grains 100 95,970.9
Potatoes 160 1,466,042.7
Fruits 50 86,152.5
Vegetables 100 1,192,892.0
Source: The physical quantity is computed on the
basis of the statistical data shown on page 58 and Table
18.
Table 20
INTERNATIONAL MARKET PRICES
(In United States Cents)
62
Kind of Product Price/kg Supply Country
Rice 15.3 Thailand
Barley 4.2 U. S. A.
Pulses 15.2 U. S. A.
Miscellaneous grains 4.0 U. S. A.
Potatoes 3.6 The Netherlands
Fruits (apples) 3.6 Italy
Vegetables (tomatoes) 2.7 Italy
Source: Food and Agriculture Organization of the
United Nations. Production Yearbook. Vol. 17 (Rome, Italy:
1963), pp. 297-313.
Note: Prices listed above are those of average
wholesale prices which prevailed in the respective coun
tries in 1962.
All the prices quoted above are those of the low
est prices except that of rice. The wholesale prices of
rice in such countries as the United Arab Republic and the
Philippines are actually lower than that of Thailand.
However, the Thailand price is quoted here as the lowest
price at which Korea can import rice because the United
Arab Republic and the Philippines can not export rice at
their respective domestic wholesale prices. The rice
prices of the United Arab Republic and the Philippines are
low primarily because of government subsidies.
The prices of fruits and vegetables quoted here
are those of apples and tomatoes respectively due to the
I .
TABLE 20— Continued
lack of data. However, the prices quoted above may be
regarded as the reasonable average prices of those prod
ucts .
Finally, it should be mentioned that prices listed
are the lowest among about twenty major nations surveyed
by the Food and Agriculture Organization of the United
Nations.
64
TABLE 21
MONETARY VALUE OF THE GAINS IN OUTPUT
Product
Increase in
Metric Tons
Price/
kg
Monetary
Value of
the Increase
Rice 1,763,950.7 15.3C $269,884,457
Barley 1,363,303.2 4.2C 57,258,734
Miscellaneous
grains 95,970.9 4.0C
3,838,836
Pulses 272,756.6
15.2C
41,459,003
Potatoes 1,466,042.7 3.6C
52,777,537
Fruits 86,152.5 3.6C
3,101,490
Vegetables 1,192,892.0
2.7C
32,208,084
Total Monetary Value of the gains in products $460,528,141
Source: The above monetary values are computed on
the basis of the statistical data shown in Tables 19 and
20.
65
agricultural output resulting from an increase in the
production per hectare of Korean land comparable to Japan
ese land are $460,528,141.
Increase in Food Supply and
the Growth of Population
The increase in agricultural production resulting
from an increase in the production per hectare of land
would make it possible for the Korean economy to meet the
minimum food requirements of the population for a number
of years.
As a matter of fact, when the projected increase
in the agricultural production shown in Table 19 is added
to the 1960-1963 level of agricultural production shown in
Table 18, the Korean agricultural sector would be supplying
food capable of yielding approximately 76,620 millions of
calories per day, as is shown in Table 22.
Assuming that the per capita daily calorie require
ments are 2,191 and the food distributed according to one's
calorie requirements,,the increase in the total supply of
food resulting from an increase in the production per
hectare of land in Korea comparable to that of Japan would
meet the minimum food requirements of about 35 million
people without incurring grain imports.
66
TABLE 22
PROJECTED TOTAL FOOD SUPPLY
Food Items
Quantity in
Metric Tons
Quantity in
Million
Calories
Calories per
Metric Tona
Rice 4,283,880.2 15,460,388 (3,608,966)
Barley 2,189,383.0 7,621,457 (3,481,098)
Pulses 448,728.6 1,808,399 (4,030,050)
Miscellaneous
grains 191,941.8 668,168 (3,481,098)
Potatoes 2,382,319.4 1,462,956 ( 614,089)
Fruits 258,457.5 123,075 ( 476,189)
Vegetables 2,385,784.0 294,546 ( 123,459)
Meats 44,591.3 164,649 (3,692,442)
Fish 415,545.0 362,782 ( 873,027)
Total calories : 27,966,420
Total calorie supply per cay 76,620
Figures are derived from the calories per pound
data given in Table 10.
67
TABLE 23
PROJECTED POPULATION INCREASES
Total Population Projected
Year --------------- -------------------------------
Present Increase Rate Government Plan
1964 27,988,000 27,988,000
1965 28,772,000 28,771,000
1966 29,577,000 29,574,000
1967 30,407,000 30,397,000
1968 31,261,000 31,240,000
1969 32,140,000 32,103,000
1970 33,045,000 32,984,000
1971 33,977,000 33,884,000
1972 34,937,000 34,802,000
1973 35,925,000 35,739,000
1974 36,941,000 36,794,000
1975 37,991,000 37,768,000
1976 39,071,000 38,761,000
1977 40,183,000 39,775,000
1978 41,326,000 40,809,000
Source: The above values are computed on the basis
of the statistical data shown in Table 2 and the informa
tion given by Korea Information Office, Korean Report. Vol.
V, No. 2 (Washington, D. C.: 1965), p. 12.
5 8 -
Given a population increase of 2.8 per cent per
annum and the present population of 27,226,000, it would
take a decade for Korea to reach a population of 35 mil
lion, as shown in column 2 of Table 23.
Therefore, the Korean agricultural sector through
the in crease in the production per hectare of land can
solve the problem of shortages in the supply of food for
about ten years.
Population check
Needless to say, a decrease in the rate of popula
tion increase would contribute to a solution of the prob
lems of food shortages by decreasing the required rate of
increase in the supply of food to meet the future food
requirements of the population.
Even though the present rate of population increase
of 2.8 per cent per annum is certainly not an unusually
high rate in comparison with other underdeveloped econo
mies, it is nevertheless high in comparison with the value
of per capita arable land of the nation.
Being aware of this,
. . . the government of Korea, through its Ministry
of Health and Social Affairs, with the technical
assistance of the Planned Parenthood Federation of
Korea and many other voluntary groups, has under-
69 '
taken a heroic program to reduce the natural
increase rate of population . . . to 2 per cent
by the end of 1971.
If the Government of Korea were successful in
decreasing the rate of increase in population as planned,
it would contribute greatly to the long-run solution to the
present problem of food shortages, because the Korean
economy needs to increase the supply of food only by 2 per
cent instead of 2.8 per cent per annum to meet the food
requirements of the population.
Even though such a plan is vitally needed for the
long-run solution to the problem of; food shortages, it
would contribute little to the short-run solution because
the Korean economy already has large scale hunger. A
program of controlling the rate of increase in population
would not in any way decrease the degree of starvation,
although it would help prevent it from worsening.
The effectiveness of the program of controlling
the rate of increase in population for a short-run solu
tion is also hampered by the elements of lengthy time
needed to reduce the rate of increase in population.
^Korean Information Office, Korean Report. Vol. V,
No. 2 (Washington, D. C.: 1965), p. 12.
— 70
Column 3 of Table 23 shows the projected increase
in population based upon the assumption that the Govern
ment of Korea initiated the plan of decreasing the rate of
increase in population in 1964 and would be successful in
gradually decreasing the rate of population increase from
2.8 per cent £o 2 per cent by 1971.
It shows that the projected total population of
35,739,000 in 1973, a decade after the initiation of the
program, is only about 186,000 smaller than the total
population projected on the basis of the present rate of
population increase of 2.8 per cent per annum given in
column 2 of the table.
Either an addition of 186,000 people or a subtrac
tion of 186,000 people from the list of 5 million starving
people would not make any appreciable difference in the
state of starvation.
At any rate, Table 23 shows that the population of
Korea will reach a 35 million level, which was estimated
as the maximum level that the Korean agricultural sector
can support by increasing the production per hectare of
land comparable to that of Japan, in 1973, whether or not
the government program of decreasing the rate of increase
in population is successful.
CHAPTER IV
THE COST OF INCREASING
THE SUPPLY OF FOOD
In the preceding chapter it was found that Korea
has a great technological possibility for increasing the
production of major agricultural products through the
technique of increasing the production per hectare of land.
It was also found that the monetary value of the
increase in the production which would result from the
increase in the production per hectare of land comparable
to that of land in Japan was over $460 million, and that
Korea could solve the problem of food shortages for at
least a decade without incurring net food imports.
The next step then is to find out how the produc
tion per hectare of land in Korea can be increased to the
level of Japan and, subsequently, to determine the monetary
cost of increasing the production per unit of land in
Korea.
71
72
The Technology of Increasing Production
per Hectare of Land
The agricultural product is an output like any
other product. Output is a function of input. As the
quantity of the input used per unit of time increases, it
is normally expected that the output per unit of time
would also be increased. Strictly speaking, the output
can be increased only if the input used is increased.
Given the technical knowledge and the quantity of
those inputs which are controlled essentially by the
natural forces, such as wind, rain, and sunshine, the
agricultural inputs are land, labor, and capital. The
quantity of these inputs used per unit of time determines
the level of agricultural output per unit of time.
Thus, an increase in the use of land, labor, and
capital can not help but increase the total quantity of
agricultural products. Likewise, an increase in the use
of labor and capital in a given unit of land can not help
but increase the total quantity of agricultural output if
the relevant range of production function is positively
sloped. This increase in total output comes about by
increasing the production per unit of land through inten
sive application of labor and capital to a given unit of
73
land.
Therefore, with any attempt to increase the produc
tion per hectare of land, there must be an increase in the
labor and/or capital inputs used in a unit of land.
It was shown above by way of a comparative analysis
of the production per hectare of land between Japan and
Korea that the relevant range of the production function
of the Korean agricultural industry is indeed positively
sloped. Therefore, an increase in the production per unit
of land in Korea would come about by increasing the quan
tity of labor and/or capital inputs used in a unit of land,
assuming again that the weather and climatic influences
are favorable for agricultural production and that farmers
know the techniques on the application of the production
increasing inputs into the agricultural production.
It was shown above that the weather and climatic
influences upon the agricultural production in Korea are
as good as, if not better than, in Japan.
The Korean farmer is as informed as the Japanese
farmer in the ways to increase the production per hectare
of land. When Korea was a Japanese colony for forty
years,
Ir 7 4
. . . the Japanese did all they could to increase
rice production as a source of supply for Japan
itself. Korea obtained the benefits of Japanese
methods, including cultivation practices, use of
improved varieties, and especially the intensive
utilization of organic and inorganic fertilizers.
It can be concluded, therefore, that production
per hectare of land in Korea could and indeed would be
increased if labor and/or capital inputs were increased.
Then, the question is what kind of labor and
capital must be increased to increase the level of produc
tion per hectare of land.
In the case of labor, the quantity of labor that
must be increased is, of course, the farm labor power per
unit of time applied to a unit of land. In agriculture,
this is usually accomplished by increasing the number of
farmers because the farmer in most of the Asian countries,
including Japan, could hardly work longer and/or harder
during the agricultural season.
In the case of capital inputs, the kinds of capi
tal inputs that must be increased are those capital inputs
that would contribute to an increase in production per
unit of land.
^Food and Agriculture Organization of the United
Nations, Possibilities of Increasing World Food Production
(Rome, Italy: 1963), p. 132.
75
The capital goods used in the process of agricul
tural production are simply the means of production other
than land and labor. The means of production other than
land and labor used in the process of agricultural produc
tion are seeds, fertilizers, pesticides, tools, machinery,
and irrigation systems. Thus, it is assumed here that
these are the capital inputs that must be increased to
increase the level of production per unit of land.
Having identified the kinds of labor and capital
inputs that must be increased to raise output per unit of
land, the next question in calculating the cost of produc
tion is the crucial one of margin: by how much must those
labor and capital inputs be increased in order to increase
agricultural production per unit of land in Korea to a
level comparable to that of land in Japan.
A rough but practical answer is simple: increase
the use of labor and those capital inputs to the same
quantities as the Japanese farmer uses to a unit of land.
Thus, the answer to the question of how much labor and
capital inputs must be increased requires a comparison of
^Food and Agriculture Organization of the United
Nations, Forward Appraisal of FAQ Programs. 1959-1964
(Rome, Italy: 1959), p. 18.
76
the quantity of labor and those capital inputs used by the
two countries per unit of land.
When this is done, exactly how much labor and
capital inputs have to be increased by the Korean agricul
tural sector to reach the level of Japan can be determined
and the cost of increasing production per unit of land in
Korea comparable to that of land in Japan can easily be
found by converting the physical volume of labor and the
various capital inputs to be increased into the numbers of
monetary value.
However, it must be noted in advance that the
total cost of production so derived cannot be used as the
cost of production to be compared with the monetary value
of gains, $460 million.
The reason is that the monetary value of gains in
the amount of $460 million is the monetary value of the
increase in the annual flow of agricultural products
resulting from the increase in the production per unit of
land, whereas the total cost of production in this case is
the total initial cost of increasing the flow of agricul
tural production in the form of capital stock.
Thus, the total cost of production must be con
verted into the annual cost of production in order to be
the basis for the comparison with the monetary value of
gains. This conversion can be done properly by spreading
the value of each capital input over its lifetime.
Comparison of the Inputs
Total area of agricultural land
Japan has 6,072,000 hectares of agricultural land
as of 1960 and, in that same year, Korea had 2,063,000
hectares of agricultural land. Therefore, the amount of
the agricultural land in Korea is about 33.98 per cent of
that of Japan.
Land used for grain production.--The agricultural
land used for the production of crops of rice, barley,
pulses, miscellaneous grains, and potatoes was about 94 per
cent of the entire agricultural land in Japan.^ In the
same year, Korea used about 91 per cent of her agricul
tural land for the production of the above-mentioned
^Food and Agricultural Organization of the United
Nations, Production Yearbook. Vol. 17 (Rome, Italy: 1963),
p. 20.
^Bureau of Statistics, Office of the Prime Minis
ter, Japan Statistical Yearbook. 1965 (Tokyo, Japan: The
Government Printing Office, 1965), p. 86.
— 7 8-
crops . ^
Therefore, it may be assumed correctly that the
percentage of agricultural land used for the grain produc
tion between the two countries is the same. There is also
a close similarity in the percentages of agricultural land
used for the production of specific crops, as is shown in
Table 24.
State of land distribution.--The state of land
distribution between the two countries is also very similar
as is shown in Table 25.
The percentage of farm households cultivating the
area of land less than a meagre .3 hectare is 20 per cent
in both countries and the percentage of farm households
cultivating the area of land between .3 to .5 hectare in
Japan is slightly less than Korea and this difference is
compensated by the slightly higher percentage of farm
households cultivating .5 to 1 hectare in Japan than in
Korea. Thus, the total^percentage of farm households
cultivating less than 1 hectare of land between the two
5
Economic Planning Board of Korea, Korea Statis
tical Yearbook. 1964 (Seoul, Korea: The Government Printing
Office, 1964), p. 64.
791
TABLE 24
THE PERCENTAGE OF LAND USED FOR
THE PRODUCTION OF GRAINS
(I960)
Grains Japan3 Korea* 3
Rice 48.6 40.0
Barley 18.4 36.7
Pulses 9.0 11.6
Miscellaneous grains 16.5 7.0
Potatoes 7.5 4.7
aSource: Bureau of Statistics, Office of the Prime
Minister of Japan, Japan Statistical Yearbook. 1965
(Tokyo, Japan: The Government Printing Office, 1965), pp.
92-93.
^Source: Economic Planning Board of Korea, Korea
Statistical Yearbook. 1964 (Seoul, Korea: The Government
Printing Office, 1964), p. 66.
80
TABLE 25
THE PERCENTAGE OF LAND DISTRIBUTION
(1963)
Area of Land
under Cultivation
(in Hectares)
Percentage of Farm Households
Cultivating the Area
Japana Korea^
Under .3 20 20
.3 to .5 18 21
.5 to 1 34 31
1 to 2 26 20
2 or more 2 8
aSource: Japan Statistical Yearbook. 1965. p. 82.
^Source: Korea Statistical Yearbook. 1964. p. 64.
ST
countries is identical with a value of 72. The remaining
28 per cent of the farm households in both countries is,
of course, cultivating the area of land greater than 1
hectare of land.
It is quite surprising to find that the percentage
of farm households cultivating greater than 2 hectares
of land in Korea is about 4 times greater than Japan. At
any rate, it is quite safe to assume that the state of
land distribution between the two countries is identical.
Total farm labor
It is extremely difficult to estimate the numbers
of farmers because of the primitive nature of agricultural
occupation. It is especially true when an attempt is made
to estimate the numbers of farmers in two different coun
tries due mainly to the absence of the common criteria
upon which the numbers can be computed.
According to the report by the Food and Agricul
ture Organization of the United Nations, the numbers of
the population engaged in agricultural occupations in
Japan and Korea during the period 1945-1962 were 18,200,000
. _ _ _ _ _ 82
and 6,436,000 respectively.^
Therefore, the number of farmers in Korea is
approximately 35 per cent of that of farmers in Japan, even
though the farm population of 15,266,325 in Korea in 1963^
was about 48 per cent of the farm population of 31,890,221
Q
in Japan in the same year.
Since the area of agricultural land in Korea is
33.98 per cent of that of Japan and the percentages of
farmers and farm population are 35 per cent and 48 per
cent respectively, it is accurate to assume that Korea has
as many farmers per unit of land as, if it is not more
than, Japan.
The above comparisons lead us to conclude that the
difference in the production per hectare of land between
Japan and Korea is due mainly to the difference in the
quantity of capital inputs applied per hectare of land.
The use of capital inputs
It was stated above that the capital inputs used
Production Yearbook, p. 20.
^Korea Statistical Yearbook. 1964, p. 62.
^Japan Statistical Yearbook. 1965, p. 83.
— gj
in the process of agricultural production are seeds,
fertilizers, pesticides, tools, machinery, and irrigation
systems.
The level of seeding.--Seeds are an important input
for the obvious reason that without seeds, agricultural
production is impossible. An optimum amount of seeds for
a unit of land would maximize the output and better seeds
would increase the optimum level of output per unit of
land.
There is no comprehensive statistical information
covering the difference in the amount as well as the
quality of various seeds used in agricultural production
between the two countries.
However, it is highly doubtful that there is a
significant difference of sufficient importance to be a
factor in the productivity difference between Japan and
Korea. The seeding rate of rice in Korea, for example,
is about 52.5 kilograms per hectare, whereas the rate in
9
Japan is 53 kilograms.
Q
Food and Agriculture Organization of the United
Nations, Technical Conversion Factors for Agricultural
Commodities (Rome, Italy: 1960), pp. 168, 178-179.
84
Even if it is assumed that Korea uses less seed
and inferior seeds than Japan, the cost of increasing the
quantity as well as improving the quality of seeds would
be negligible in comparison with the costs of other inputs.
The level of fertilizers used.— Fertilizer is,
perhaps, the most important factor which contributes to the
increase in the production per unit of land, through its
ability to improve the natural quality of land. It can
increase the original power of the soil to produce.
The following statement by the Food and Agriculture
Organization of the United Nations reveals the significant
role that fertilizers play in increasing world agricultural
production.
It would . . . require an enormous amount of
detailed work, even if sufficient experimental
results were available, to estimate with any
degree of accuracy the potential contribution
which better soil fertility practices would make
to agricultural production.
It would, however, be a conservative estimate
that with the exception of very few countries,
such as Japan and the Netherlands, production
would be increased by at least 50 per cent . . .
simply through the better and more intensive use
of fertilizers, manures, and legumes. ®
tion, p. 109.
^ Possibilities of Increasing World Food Produc-
85
The average annual quantity of fertilizers used by
the two countries during the period 1961-1962 is shown in
Table 26. This table shows that Japan used $210,897,742
worth of chemical fertilizers and Korea, with an area of
agricultural land about 33.98 per cent of that of Japan,
used about $49,039,499 worth of chemical fertilizers, or
about 23 per cent of that used by Japan.
Korea, therefore, needs some $22,623,554 worth of
additional fertilizers to increase the level of use of
fertilizers to be equal to that used in agricultural pro
duction in Japan.
The level of pesticides used.— Pesticides are used
in agriculture to kill and control pests and diseases. The
system of controlling pests and diseases contributes to
the increase in the production per hectare of land by
minimizing the loss incurred on account of the consumption
of crops by pests and of waste of crops by diseases.
It is estimated that,
. . . in the United States losses on crops
due to diseases cost 4,800 million dollars per
year, and that throughout the world 10 per cent
of the total food grain production is lost
annually. In terms of human consumption gone to
waste, 10 per cent of the total production grain
(excluding rice) is something of the order of 50
TABLE 26
COMPARISON OF FERTILIZERS USED, 1960-1961
(Quantities in Metric Tons)
Japan Korea1
Kind Price/tona
Quantity Value Quantity Value
Nitrogenous fertilizers
Ammonium sulphate
(A-N 21%) ($ 47.50) 826,000 = $39,235,000 509,100 = $24,182,250
Urea
(T-N 46%)
( 95.00) 240,977 - 22,892,815 169,563 - 16,108,485
Ammonium Nitrate
(A-N 17%) ( 80.00) 21,125 = 1,690,000 18,850 = 1,508,000
Calcium cyanancide
(T-N 21%) ( 100.00) 233,616 = 23,361,600 850 * 85,000
Ammonium chloride
(A-N 25%) ( 100.00) 156,640 = 15,664,000
--- ---
Phosphatic fertilizers
Super phosphate
(S-P20s 17%) ( 37.00) 783,359 - 28,984,283 154,781 - 5,726,807
Fused phosphate
(C-P205 19%) ( 37.00) 265,802 - 9,834,674 10,601 = 392,237
00
O'
TABLE 26--Continued
Kind Price/ton
Japan Korea
Quantity Value Quantity Value
Potasic fertilizers
Potassic salt
(Converted at K„0
50%) 1
Quick and Slaked
Lime
($ 35.00)
( 20.00)
517,806 = $18,123,210
420.758 = 8.415.160
29,618 = $ 1,036,630
Subtotal
Import
168,200,742.
42.697.000
Total
$210,897,742 $49,039,499
Source: Bandini Fertilizer Company, Downey, California. Note: Prices quoted
are approximate prices.
^Source: Japan Statistical Yearbook. 1965, p. 90. Note: The quantity shown in
the table is the annual quantity of fertilizers shipped to the Japanese farmers by the
Japanese fertilizer manufacturing companies. Thus, the value of annual fertilizer
import by Japan is added in order to find the total value of fertilizers used per annum
by the Japanese farmers during the period 1960-1961.
i
cKorea Statistical Yearbook. 1964. Note: The quantity shown in the table is the
oc
TABLE 26--Continued
annual quantity of fertilizers used by the Korean farmers during the period. The active
ingredients of those fertilizers used by the Korean farmers are not known. However, it
is certain that the ingredients would be more or less in accordance with those of the
fertilizers used by the Japanese farmers because more than 50 per cent of the fertilizers
used by the Korean farmers are imported from Japan.
^Japan Statistical Yearbook. 1965.. p. 272.
00
00
_ 89
million tons, which would be enough to supply 250
million people for one year.
Table 27 shows the average annual quantity of
various pesticides used by Japan and Korea during the per
iod 1960-1963. It shows that Japan used some $158,484,703
worth of pesticides and Korea, meanwhile, used only about
$2,743,062 worth of pesticides, less than 2 per cent of
the value of pesticides used by Japan.
Therefore, Korea needs some $51,110,040 worth of
additional pesticides to increase the use of pesticides to
be equal to that of agricultural land in Japan.
The use of tools and machinery.— The primary func
tion of agricultural tools as opposed to the function of
machinery is to aid labor in the technical processes of
agricultural production. Without tools, it is technically
impossible to carry out most of the processes of agricul
tural production.
The principal function of agricultural machinery,
on the other hand, is to increase the productivity of
labor rather than land as it makes "possible for each man
^ Forward Appraisal of FAQ Programs« 1959-1964?
p. 39.
TABLE 27
COMPARISON OF PESTICIDES USED, 1960-1963
(Quantities in Metric Tons)
Kind and Prices in
Japan^ Korea^
Description Dollars3
Quantity Value Quantity Value
DDT
5 Dust
50 W
Emulsions, 20-30%
$8.00/cwt.
.29/lb.
4.00/gal.
3,014.6 = $
848.3 =
766.0 =
531,684
542,352
675,496
13.0 = $ 2,293
Benzene Hexachloride
1 |Dust
12 Wettable powder
Enkilsions, 10-20%
Granulus, 6%
8.75/cwt.
.45/lb.
6.10/gal.
6.50/gal.
52,423.6 =
763.6 -
1,238.6 =
481.6 =
9,654,033
791,920
1,665,693
690,134
1,968.3 = 379,694
Aldrin
Dusts, 2-4%
Emulsions, 24%
8.00/cwt.
7.20/gal.
3,948.3 =
166.0 =
696,361
263,496
.3 = 53
Dieldrin
Dusts, 4%
Emulsions, 18%
12.50/cwt.
7.25/gal.
158.5 =
390.0 -
43,679
623,357
V C
o
TABLE 27— Continued
Kind and Prices in
Japan Korea
Description Dollars
Quantity Value Quantity Value
Parathion
Dusts, 1.5% $9.00/cwt. 17,693.3 = $ 3,510,633
Emulsions, 4% 13.70/gal. 12,682.7 « 38,305,966 36.3 = $ 109,638
Malathion
Dusts, 1.5-3% 15,45/cwt. 11,069.3 = 3,770,359 45.3 = 1,543
EmuIsions, 50% 11.30/gal. 3,042.0 = 7,578,299
EPN dusts, 1.5% 15.00/cwt.c 8,970.3 = 2,966,418 120.0 = 39,683
Arsenicals
Lead, 98%; AS205-32% .50/lb.c 2,902.6 - 3,199,568 24.5 = 27,007
Calcium, 98%; AS20g-40% .40/lb. 263.7 = 232,543
* ■ “ «■ “
Rotenone
Emulsions, 2% 8.25/gal. 28.0 = 50,926 20.0 - 36,276
Derris powder, 2-6% .55/lb. 69.5 = 84,271 1.0 = 1,212
Pyrethrum
Dusts, 0.8% 23.00/cwt. 30.0 = 15,212 13.5 = 6,845
Emulsions, 1.5-3% 11.50/gal. 61.3 = 155,414
VO
TABLE 27--Continued
Kind and Prices in
Japan Korea
Description Dollars
Quantity Value Quantity Value
Nicotine
Nicotine sulphate, 40% $ .50/lb.c 2,786.6 - $ 3,091,699 4.0 = $ 4,409
Sulphur (soil)
Wettable powders,
50-95%
Lime sulphur
57.00/ton
.22/gal.
1,288.0 = 73,416
16,014.0 - 93,072
(hectoliters)
1,639.6 = 93,457
Mercury
Dressing and coating
dust 0.4-0.25% ,50/cwt.c 52,469.3 - 57,837,486 1,761.0 - 1,941,170
Dithiocarbamates
Wettable powders,
65-80%
Dusts, 2.4-3.9%
.78/lb.
14.35/cwt.
1.050.7 = 1,806,789
6.418.7 - 2,030,641
27.0 = 46,430
Others
2-4D
Endrin emulsions
3.65/gal.
11.00/gal.
17,186.0 = 13,829,351
5,286.3 = 1,536,172
(hectoliters)
10.0 =
12.0 «
24,251
29,101
_ ... s
TABLE 27— Continued
Kind and Prices in
Description Dollars
Japan
Quantity Value
Korea
Quantity Value
Heptachlor dust, 25% $30.00/cwt. 3,233.0 = $ 2,138,263
—
Total Monetary Values $158,484,703 $2,743,062
aSource: Stauffer Chemical Company, Agricultural Chemicals Division, Los Angeles,
California. Note: The prices listed above are the retail prices of the similar products
produced by the above chemical company. Thus, the true prices may be slightly different
from the prices listed above.
^Food and Agriculture Organization of the United Nations, Production Yearbook.
1963. Vol. 17 (Rome, Italy: 1964), pp. 277-292.
cDenotes the maximum market* prices estimated by the chemical marketing expert at
Stauffer Chemical Company of Los Angeles.
94
to do more work, not to make each hectare grow more
food.
Nevertheless, agricultural machinery can make
a very appreciable contribution to raising crop
yields per hectare, firstly, by enabling various
operations to be performed better, and secondly,
by making possible more timely operations . . .
The element of timeliness is a most important
factor so far as crop yields are concerned. Sow
ing at the right time and harvesting at the right
time would make differences in yields a great
deal and machinery makes it possible to take the
harvest off more quickly . . . [so as to] avoid
losses. . . . Thus, every mechanical improvement
which makes it possible for a farmer to do his
plowing, harvesting, etc., more quickly, gives him
greater control over the elements. 1
"The mechanization of farming has become so familiar
in Western countries that we have forgotten the many
changes it has brought about:
It has released for human food a great deal
of land formerly devoted to growing feed for draft
animals. Feeding fuel to a machine is cheaper
than feeding a horse, and the machine not only
plows and cultivates but also digs ditches and
postholes, loads and handles heavy materials,
harvests, threshes, chops, forages, cleans vege
tables, and does many other things the intelli
gent horse could never do. It does all these
things swiftly and virtually at a moment's notice,
so that the farmer no longer has to worry about
^ Possibilities of Increasing World Food Produc
tion, p. 115.
13Ibid.. p. 115.
95
whether or not he can get a job done before
threatening weather ruins his planting or his
harvest.
However, it must be stated that tools and labor
can be substituted effectively for machinery in the process
of agricultural production. Thus, where tools and labor
are plentiful, the necessity of mechanization tends to
decrease insofar as the attainment of the maximum produc
tion is concerned.
In fact,
, . . the Japanese have utilized a great propor
tion of the means which modem technology provides
to increase their physical productivity, while
continuing to use hand labor. Their use of organ
ic fertilizers and their methods of seed and plant
selection, cultivation, and harvesting bring their
productivity per acre up to that in the United
States. . . . It is possible, at least in rice
farming, to secure as much total energy, or feed
as many people, from an acre with hand labor as
is secured in the United States from an acre
tilled with machines.
However, it is needless to say that Korea needs
o have agricultural machinery in an amount as much as 33.98
14
Nevin S. Scrimshaw, Technology and Economic
Development (New York: Alfred A. Knopf, Inc., 1963), p.
41.
15
Fred Cottrell, Energy and Society (New York:
McGraw-Hill Book Co., 1955), p. 140.
96
per cent of the agricultural machinery possessed by Japan
in order for the Korean farmer to perform as efficiently as
the Japanese farmer since the tools and labor per unit of
land in Korea are not significantly greater than that of
the Japanese.
The major agricultural machinery consists of motors
for the generation of energy, power cultivators for plow
ing, power sprayers for the spraying of chemical substances
as well as water, power water-lifting machines for the
lifting of water from a river where there is no adequate
irrigation system, power dusters for spraying crops and
other uses, tractors and their accessory equipment for
plowing, seeding, and harvesting, and finally trucks for
transporting the input and output of the agricultural pro
duction.
There is a great deal of difference in the stock
of agricultural machinery relative to the area of agricul
tural land between Japan and Korea.
Table 28 shows the quantity of the above mentioned
motor-driven farm machinery possessed by Japan and by
Korea as of 1963. It shows that Japan has about
$1,685,994,721 worth of farm machinery, whereas Korea has
only about $13,993,479 worth of farm machinery, which is
TABLE 28
THE STOCK OF FARM MACHINERY, 1963
(In United States Dollars)
Machines Price3
Japan Korea0
Quantity Value Quantity Value
Motors $330 2,883,384 $951,516,720 27,160 $9,062,800
Power cultivators 93 1,813,106 168,618,858 148 13,764
Power sprayers 295 438,465 116,397,175 716 211,220
Power dusters 295 136,442 40,250,390 41 12,095
Power water lifting
machines 315 301,642 95,017,230 14,748 4,645,620
Small tractors and
accessories 2,800 136,494 292,988,000 24 24,000
i
Farm tricycles 820 258,614 21,206,348
- - - -
Total monetary value
$1,685,994,721 $13,993,479
VO
TABLE 28--Continued
Sources: Sears, Roebuck and Co., Farm Catalog. 1965 (Los Angeles, Calif.: 1965),
pp. 9, 119, 137, 140, 151.
International Harvester Co., Industrial Equipment. Buyer's Guide. 1965 (Chicago,
111.: 1965); International Harvester Sales & Service, Gardena, California.
Iseki Agricultural Machinery Manufacturing Co., ltd., 10, 2-chome Matuyama,
Japan.
The detailed descriptions of the above priced agricultural machines are as
follows:
Motor: 2500-watt, gas model. (Farm Catalog. 1965. p. 137.)
Power cultivator: 3-HP engine; cultivates a 22-inch wide strip up to 9 inches
deep; weight 83 pounds. (Farm Catalog. 1965. p. 140.)
Power sprayer: 2 cylinder piston pump; 600-lb. pressure valve; 6 HP. (Farm
Catalog. 1965. p. 119.)
Power duster: 2 cylinder high-pressure pump; delivers 2 gallons per minute
at 500 pounds pressure; 3/4 HP. (Farm Catalog. 1965. p. 9.)
Power water-lifting machine: (Farm Catalog. 1965. p. 8.)
Small tractor: 47 HP, International Harvester No. 140 (Industrial Equipment
Buyers1 Guide. 1965. p. 20. Price authority: International Harvester
Sales & Service, Gardena, Calif.)
Farm Tricycle: those used by the Japanese farmer. (Price authority: Iseki
Agricultural Machinery Manufacturing Co., Japan.)
The above priced machines were chosen as the same kinds of agricultural machines
operated by the Japanese farmers by the agricultural expert of the above sources on the
basis of the analysis of numbers of farmers per hectare of agricultural land in Japan
(3 farmers) and the hectare of land per machine listed in this table.
vo
00
TABLE 28--Continued
kjapan Statistical Yearbook. 1965, pp. 88-89,
°Korea Statistical Yearbook. 1964. pp. 87-88.
VO
VO
100
less than 1 per cent of the value of the farm machinery
held by Japan.
Therefore, Korea needs some $558,906,527 worth of
additional farm machinery in order to reach the level of
motor-driven farm machinery used per unit of land in Japan.
The level of irrigation.--Irrigation contributes
to the productivity of land by controlling the degree of
moisture needed for crop growing.
It is estimated that,
In the United States irrigation has made it
possible to increase the crop yield of Western
lands by 50 to 100 per cent . . . [and that] in
some areas where enough water could be furnished
by irrigation, two or three crops a year could be
produced and the crops could be diversified.16
As of 1960, about 3,369,000 hectares, or about 55
per cent of Japanese land was irrigated, whereas the total
amount of irrigated land in Korea that year was 663,000
hectares of land, or about 32 per cent of the total land
17
used for agricultural purposes.
Thus, given the similarity in rainfall between the
two countries, as was shown in Table 16, Korea must
16
Scrimshaw, op. cit.. p. 41.
•^Production Yearbook, p. 10.
101
increase the irrigated land by approximately 471,650
hectares to reach the percentage level of land under irri
gation in Japan.
The cost of irrigation was, on the average, about
$400 per hectare in Korea during the period 1959-1962.^
Assuming the cost of irrigation will be continued at about
$400 per hectare, it would cost approximately $188,660,000
to irrigate 471,650 hectares of land in Korea.
Costs of Increasing Production
The above comparative analysis on the capital
inputs used by Japan and Korea has shown that, in order
for the Korean agricultural sector to reach the level of
agricultural capital inputs per unit of land equal to that
of Japan, Korea must increase the use of the following
items by the dollar amounts shown:
Fertilizers $ 22,623,554
Pesticides 51,110,040
Farm machinery 558,906,527
Irrigation 188.660.000
Total $821,300,121
•^Korea Statistical Yearbook. 1964. p. 89.
102
Total initial cost
Since the gains in output resulting from the in
crease in production per unit of land comparable to that of
the agricultural land in Japan were $460,528,141, the
difference in the production per unit of land between Japan
and Korea was found to be due to the difference in the
amount of capital inputs used by the two countries. Also,
it would cost Korea $821,300,121 to make up the difference
in the use of capital inputs. It therefore follows that
the total initial cost of increasing the flow of agricul
tural output by about $460,528,141 would be about
$821,300,121.
Annual cost of production
The capital inputs in the amount of $821,300,121
are the initial costs of increasing the annual flow of
agricultural output by $460,528,141. In other words, once
the capital expenditure in the amount of $821,300,121 is
made, the annual flow of agricultural output would be
increased by $460,528,141.
The cost of maintaining that flow of output in the
subsequent periods would be far less than the initial cost
due to the durability of capital inputs. Thus, the average
i
L
r 0 T
annual cost of production is equal to the initial cost of
inputs divided by the number of years of serviceability of
the capital inputs plus the annual cost of maintenance and
operation.
The annual cost of fertilizers.--The annual cost
of fertilizers is, of course, $22,623,554. This is so
because the Korean agricultural sector must make the above
amount of expenditure annually over and above the present
annual expenditure on fertilizers in order to maintain the
increased flow of agricultural output.
I
The annual cost of pesticides.— Likewise, the
annual cost of pesticides is $51,110,040, the initial cost
of increasing the use of pesticides, because this initial
amount of pesticides must be used annually to maintain the
increased flow of agricultural output.
The annual cost of farm machinery.— The annual cost
of farm machinery is dependent upon the initial cost of
farm machinery and its life of serviceability.
The initial cost of the farm machinery is
$558,906,527. The length of serviceability of the farm
machinery listed in Table 28 varies according to the kind
of machinery and the intensity of the use of the machine.
However, it is reasonably safe to assume that the machines
would last, on the average, for at least 15 years with a
19
reasonable amount of maintenance servicing. The average
annual cost of the machinery, therefore, would be about
$37,260,435, one-fifteenth of the initial cost of the
machinery.
To this annual cost of the machinery, the annual
cost of operation and maintenance must be added. The cost
of operation, consisting mostly of fuel consumed, and
service maintenance, consisting mostly of repairs, is
dependent again upon the kind and quality of the machine
and the intensity of the use of the machine. For these
reasons, it is extremely difficult to estimate accurately
the annual cost of operation and maintenance of the
machine.
It is estimated, however, that the cost of opera
tion and maintenance of the motor-driven agricultural
l^The life expectancy of machinery as given here
is based upon the interview by the writer with the machin
ery technicians at the International Harvestor Company at
Gardena, California.
It is the opinion of these technicians that the
actual serviceability of the machinery listed in Table 28
would be longer than 15 years, even though the trade-in
105
machinery for the lifetime of 15 years would not, on the
OA
average exceed three times the value of the machine. u
Then, the annual cost of operation and maintenance would
be at most $111,781,305, three times the annual cost of
the machinery. It is assumed here that the annual cost
91
of operation and maintainance would be $111,781,305.
value after that many years would have become a scratch
value.
20
The estimation given here is also based upon the
interviews held by the writer with the machinery technicians
at the International Harvester Company at Gardena, Cali
fornia (see footnote 19).
21
In Japan, the farm household's annual expendi
ture for the maintenance and operation of the farm machines
and the repairing of the farm buildings is, on the aver
age, about 65 per cent greater than the annual expenditure
on fertilizers (Bureau of Statistics, Office of the Prime
Minister, Japan Statistical Yearbook, 1965 [Tokyo, Japan:
The Government Printing Office, 1965], p. 103).
According to the above estimation of the annual
cost of operation and maintenance of the farm machines,
the Korean farm household's annual expenditures on opera
tion and maintenance of the farm machines alone would be
approximately 60 per cent greater than the annual expendi
ture on fertilizers.
Even though the exact value of the Japanese farm
household's expenditure on the repairing of the farm
buildings is not known, it is certain that the value would
be small in comparison with the expenditure on operation
and maintenance of the farm machines because, in addition
to the smallness of the Japanese farm buildings, the rate
of deterioration of the farm buildings as such in compari
son with that of the farm machinery is negligible and,
furthermore, the farm building does not usually need fuel
to operate.
_____ I06
The annual cost of irrigation.— It was estimated
that the initial cost of irrigation was $188,660,000. The
lifetime of the serviceability of an irrigation system
would, of course, be far longer than that of the machinery.
According to the report by the Economic Planning
Board of Korea, the valuation of the irrigation system was
22
made on the basis of 65 years of time. It is, thus,
assumed here that the true life expectancy of an irrigation
system is 65 years.
The annual cost of irrigation, thus, would be
approximately $2,902,461, one-sixty-fifth of the initial
cost of irrigation.
The annual operating cost of the irrigation system
would be very small, inasmuch as it usually does not
require a great deal of repairing. It is assumed here that
the annual operating cost of the irrigation system is $1
It is, then, reasonable to expect that the Japanese
farm household's annual expenditure on maintenance and
operation of the farm machines alone would be about 60 per
cent greater than the expenditure on fertilizers.
Therefore, the annual cost of operation and main
tenance of the farm machinery given above may properly be
regarded as the nearest approximation to the true normal
annual cost of operation and maintenance of the farm ma
chinery .
22
Economic Planning Board of Korea, Quarterly Eco-
jnomic Research. Vol. 9, No. 2 (Seoul, Korea, 1964), p. 20.
107
million, making the total annual cost of construction, as
well as the operation, of the irrigation system approxi
mately $3,902,461.
The above analysis has shown that the annual costs
of capital inputs to increase the level of agricultural
output by $460,528,141 would be $226,677,795, based on
the following specific costs:
Fertilizers $ 22,623,554
Pesticides 51,110,040
Farm machinery 37,260,435
Maintenance and
operation 111,781,305
Irrigation 3,902,461
Since the cost of capital inputs comprises the
entire cost of increasing the annual flow of agricultural
output by $460,528,141 and the annual cost of capital
inputs to increase the agricultural output by that level
is found to be $226,677,795, it follows that the cost of
producing $460,528,141 worth of agricultural products is
$226,677,795, giving a marginal productivity of capital
value of about 2.032. Or, to put it somewhat differently,
the cost per dollar's worth of agricultural output is
about 49 cents.
108
The enormous difference in the value of gains and
costs shows clearly how much cheaper it is to produce the
agricultural products at home than buying them from abroad
at the lowest prices.
CHAPTER V
THE COST OF INCREASING THE SUPPLY
OF FOOD, CONTINUED
The previous chapter was concerned with the esti
mation of the cost of increasing domestic agricultural
production with the exception of fish and meat products.
The present chapter is concerned with the estimate
of the cost of increasing the supply of food as a whole,
including fish and meat products, by an amount equal to
the deficiency in the supply of food in Korea.
The Value of Target Output
The estimate of the cost of increasing the supply
of food by the amount equal to the deficiency in the supply
of food can be made by finding the monetary value of the
increase in the supply of food by the amount equal to the
deficiency in the supply of food.
The monetary value of the increase in the supply
______________________________109______________________
— 110
of food by the amount equal to the deficiency in the total
food supply can be found by multiplying the quantity of
food to be increased by the price of food.
The deficiency in the food supply
It was shown in Chapter II that the per capita
quantity of daily food supply must be capable of yielding
at least 2,191 calories to meet minimum daily food re
quirements, while the actual per capita quantity of daily
food supply in Korea was capable of yielding only 1,795
calories. Thus, there was a deficit of per capita daily
food supply by 396 calories. This deficiency is equal to
about 22 per cent of the actual food supply in Korea.
The required percentage increase.— It was also
shown in Chapter II that the per capita daily food supply
of 1,795 calories was derived from agricultural crops,
fish, and meats.'*'
The per capita daily supply of agricultural crops
yielded 1,740 calories, of which 1,491 calories came from
the domestic crop production and the remaining 249 calories
from the imported crops. And the per capita fish and
^See Chapter II, footnote 15.
Ill
meat supply yielded 38 and 17 calories respectively, for
a total of 55 calories. Thus, the total domestic per
capita daily calorie supply is 1,546.
On the basis of the data given above, it is pos
sible to estimate the percentage value by which the compo
nents of the food stuffs that make up the total food supply
must be increased to meet the minimum food requirements.
As shown above, the per capita daily food
deficiency is 396 in terms of calories. Since the total
domestic per capita daily calorie supply is 1,546, the per
capita calorie deficiency in the amount of 396 is equal
to about 25.5 per cent of the total domestic per capita
food supply.
Therefore, if the present level of food imports
is maintained, the domestic food supply must be increased
by 25.5 per cent of the present level in order to meet
the minimum food requirements of the population.
For the sake of maintaining simplicity in the
subsequent analysis, let us assume that Korea would
attempt to attain the target through a proportionate
increase in the supply of crops, fish, and meats by 25.5
per cent of the present level.
T O
The monetary value of the required
food increase
The estimation of the monetary value of the 25.5
per cent increase in the supply of food can be made
easily by finding the monetary value of a 25.5 per cent
increase in the supply of domestic agricultural crops,
fish, and meat products.
The monetary value of a 25.5 per cent increase in
crops.--Table 18 showed the average annual grain produc
tion during the period 1960-1963.
The monetary value of the average annual grain
production can be derived by multiplying the quantity of
various crops shown in the table by the respective prices
shown in Table 20. This is shown in Table 29.
Table 29 shows that the monetary value of the
present level of domestic crop production is about
$495,226,170. Therefore, the monetary value of a 25.5 per
cent increase in the crop production would be about
$126,282,673.
It should be recalled that the monetary value of
an increase in the crop production which would result from
the increase in production per unit of land comparable
to that of land in Japan was $460,528,141, about 90 per
113
TABLE 29
MONETARY VALUE OF THE AVERAGE ANNUAL
DOMESTIC CROP PRODUCTION
1960-1963
Crops
Quantity in
Metric Tons
Price/kg.
in Cents
Value in
Dollars
Rice 2,519,929.5 15.3 $358,547,213
Barley 826,079.8 4.2 34,695,352
Pulses 175,972.0 15.2 26,747,744
Miscellaneous
grains 95,970.9 4.0 3,838,836
Potatoes 916,276.7 3.6 32,985,961
Fruits 172,305.0 3.6 6,202,980
Vegetables 1,192,892.0 2.7 32,208,084
Total monetary value $495,226,170
Source: The above monetary values of the average
annual domestic crop production are computed on the basis
of the statistical data shown in Tables 18 and 20.
rl4
cent of the present level of crop production in the amount
of $495,226,170 shown above.
The monetary value of a 25.5 per cent increase in
fish.--The average annual fish supply was shown in Table
7. The annual fish supply during the period of 1960-1963
was about 418,045 metric tons.
It is extremely difficult, if not impossible, to
determine the monetary value of the annual fish supply at
the lowest international market prices, primarily due to
the fact that the price per unit of weight differs accord
ing to the kind of fish and the total fish supply is com
posed of many different kinds of fish.
For this reason, the monetary value of the
annual fish supply may be estimated on the basis of the
monetary value of the annual fish supply as determined by
the domestic fish market.
The monetary value of the annual fish supply so
determined would not be greatly different from the total
monetary value determined by the lowest international
market prices because Korea belongs to one of the top 15
nations in fish production in the world and exports
rl5
approximately $3 million worth of marine products annu
ally.2
The monetary value of the quantity of annual fish
production from 1960 to 1^63 shown in Table 7 was approxi
mately $39,529,600, $40,253,800, $55,118,000, and
$47,278,000 respectively.^
Then, the monetary value of 418,045 metric tons of
fish, the average annual fish production during the period
1960-1963, would be approximately $45,544,850, about 11
4
cents for a kilogram. Hence, the monetary value of a
2
Economic Planning Board of Korea, Korea Statisti
cal Yearbook. 1964 (Seoul, Korea: The Government Printing
Office, 1964), p. 288.
3
Ibid., pp. 44, 116, 296. Note: the monetary
value is derived by converting the current monetary value
of fish production shown in page 116 of the above source
into 1955 constant monetary value by using 1955 price
indices shown on page 44 of the above source and, then,
divided the constant monetary value of fish production by
50, the market exchange ratio of Korean monetary units in
terms of United States dollars that prevailed in 1955, as
is shown on page 296 of the above source.
4
The price per kilogram of fish shown above cor
responds more or less to the international market prices
of such kinds of fish as haddock, cod, and herring (see
Food and Agriculture Organization of the United Nations,
Production Yearbook. Vol. 17 [Rome, Italy: 1963], p. 352).
It was stated in Table 10 that squid, anchovy,
Allaska pollock, flatfish, shellfish, and shrimps com
prised more than 50 per cent of all the marine products
in Korea in terms of weight. The prices per kilogram of
---------------------- " T O
25.5 per cent increase in the fish supply would be about
$11,613,937.
The monetary value of a 25.5 per cent increase in
meats.--The average annual meat supply during the period
1962-1963 was shown in Table 6. It was composed of 188-
145.5 heads of cattle, 248,436.5 heads of pigs, and 6
heads of horses.
The monetary value of cattle.--The average live
weight of a beef cattle to be slaughtered for human con
sumption is about 450 kilograms.
The lowest international market price of the beef
cattle is 15.4 cents per live weight kilogram in Argen
tina.^ Then, the price per head of beef cattle is approxi
mately $69.30 and the monetary value of 188,145.5 heads
of beef cattle, the annual supply of be6f cattle for human
consumption, would be about $13,038,483.
those marine products except shrimps would not differ
greatly from that of haddock, cod, or herring.
Thus, the monetary value of the annual fish produc
tion given above may reasonably be regarded as the closest
approximation to the monetary value of the fish supply
determined by the lowest international market prices.
^Production Yearbook, p. 341.
117
The monetary value of pigs.— The average live
weight of a pig to be slaughtered for human consumption is
about 140 kilograms.
The export price of 25.9 cents per live weight
kilogram quoted by Argentina is again the lowest inter
national market price of pigs.** Then, the price per head
of pigs is approximately $36.36 and the monetary value of
248,436.5 heads of pigs, the annual supply of pigs for
human consumption, would be approximately $9,008,307.
The monetary value of horses.— There are no
statistical data whereby the price of a horse can be deter
mined .
However, it can properly be assumed that the price
of a horse is equal to that of a beef cattle because the
number of horses to be valued is only 6. Thus, it is
estimated that the monetary value of 6 horses, the present
level of supply of horses for human consumption, is approx
imately $416.
The above calculation shows that the monetary
value of the present level of meat supply in Korea is
6Ibid.. p. 344.
— — H8
approximately $22,047,106 per annum. Therefore, the mone
tary value of 25.5 per cent increase in the meat supply
would be about $5,622,012.
The summation of the monetary values of a 25.5
per cent increase in the supply of domestic crops, fish,
and meats shown above would give the monetary value of the
25.5 per cent increase in the domestic food supply.
The monetary value of the 25.5 per cent increase
in the domestic food supply would then be approximately
$143,518,622. In other words, Korea needs to have an
additional $126,282,673 worth of agricultural crops,
$11,613,937 worth of fish, and $5,622,012 worth of meat,
for a total of $143,518,622 worth of additional food to
meet the minimum food requirements of the Korean population
as of 1963, assuming that the present level of food imports
is maintained.
The summary of the above analysis is shown in
Table 30.
Cbst of Increasing the Supply
of Food
The cost of increasing the supply of food by 25.5
per cent of the present level is equal to the summation
of the cost of acquiring additional $126,282,673 worth
TABLE 30
MONETARY VALUE OF THE DOMESTIC FOOD
(In United States Dollars)
11'9"
SUPPLY
Value of Value of
Components of Domestic Present 25.5 Per Cent
Food Supply3 Level Increase
Agricultural crops $495,226,170 $126,282,673
Fish 45,544,850 11,613,937
Meat 22,047,106 5,622,012
Total $562,818,126 $143,518,622
Source: The above monetary values are computed on
the basis of the statistical data shown in Tables 6, 7,
18, and 20.
aFor the treatment of other components of the
domestic food supply in Korea, see Table 10, and footnotes
to that table.
12U
of agricultural crops, $11,613,937 worth of fish, and
$5,622,012 worth of meats.
The cost of increasing the
supply of crops
The cost of increasing the supply of $126,282,673
worth of agricultural crops can not be greater than the
cost of importing $126,282,673 worth of agricultural
crops.
The cost of importing $126,282,673 worth of
agricultural crops is equal to $126,282,673 plus the cost
of transporting the agricultural crops from the point of
origin of the export, the United States, since the inter
national prices of crops quoted in Table 20 are f.o.b.
The cost of transporting grains from the United
States is approximately 10 per cent of the monetary value
of the grains.^ Therefore, the cost of increasing the
supply of $126,282,673 worth of agricultural crops would
be at most $138,910,940.
However, the analysis made in Chapter IV showed
that the cost of increasing the supply of agricultural
Economic Planning Board of Korea, Quarterly
Economic Research. Vol. 9, No. 2 (Seoul, Korea: The Govern
ment Printing Office, 1964), p. 23.
. 121
crops would be far smaller by increasing the domestic
agricultural crop production than by importation.
It was shown in that chapter also that the cost of
increasing the domestic crop production was entirely com
prised of the expenditures needed to increase the level
of agricultural capital inputs which had the value of the
marginal productivity of 2.032.
The value of the marginal productivity of agri
cultural capital inputs being 2,032, the cost of producing
$126,282,673 worth of agricultural crops would be approxi
mately $62,146,493, which is less than one-half of the
cost of importing the same amount of agricultural crops.
Therefore, it is estimated here that the cost of
acquiring $126,282,673 worth of agricultural crops in Korea
is approximately $62,146,493.
The cost of increasing the
supply of fish
The monetary value of the increase in the supply
of fish in the amount of $11,613,937 was derived from the
domestic wholesale market value of the fish products sup
plied by the Korean fishery industry. Therefore, the
actual cost of increasing the production of fish by that
much by the Korean fishery industry would probably be far
smaller than $11,613,937.
I
!
!
| There is, unfortunately, no available statistical
!
|information whereby the cost of increasing the supply of
fish by the Korean fishery industry can be computed.
For this reason, and for the sake of giving enough
of a margin of error, it is estimated here that the cost
of acquiring $11,613,937 worth of fish is $11,613,937.
This estimation can be justified by two facts.
First, the average price of fish per kilogram of 11 cents
in Korea shown above is actually one of the lowest inter
national market prices of the kind of fish that makes up
8
the greater part of the domestic fish supply in Korea,
so that any deficiency in the supply of fish can easily be
made up by importing fish products from abroad at the
domestic wholesale price.
i
Second, the monetary value of the increase in the
I
jsupply of fish in the amount of $11,613,937 is a rela-
j
jtively small magnitude of the cost of increasing the supply
i
of food as a whole so that an accurate estimate of the cost
of increasing the supply of fish products by $11,613,937
would not make a great deal of difference in the total
O
Production Yearbook, p. 352.
cost of increasing the supply of food as a whole.
i
j
The cost of increasing the
supply of meats
The cost of increasing the supply of meats by
$5,622,012 can not be greater than the cost of importing
$5,622,012 worth of meats.
The cost of importing $5,622,012 worth of meats
would be equal to $5,622,012 plus the cost of transporta
tion. If Korea were to import meats, she would buy them
from Argentina as was shown above.
It was shown above that the cost of transporting
grain products from the United States to Korea was approxi-
I
mately 10 per cent of the monetary value of grains to be
shipped.
The cost of transporting meats from Argentina
would likely be greater than 10 per cent of the monetary
|value of meats to be shipped, even though the value of
meat per kilogram is greater than that of grain per kilo- !
j |
j gram, due to the fact that the distance from Argentina to !
i
|
Korea is farther than the distance from the United States
to Korea and that transporting meats requires the refriger
ation and other extra services that would normally not be
i
required in the case of transporting' grains.
Thus, it is estimated here that the cost of trans-
j 1
I ' |
jporting meat products from Argentina is approximately 15
i i
Iper cent of the value of meats to be shipped. Therefore, !
the cost of acquiring additional meats to the value of
$5,622,012 is estimated at approximately $6,470,314.
It is, of course, possible that Korea could
increase the domestic meat supply by $5,622,012 at lower
|
costs than stated above.
However, for the same reasons given above in the
estimation of the cost of increasing the supply of fish, j
it is estimated here that the cost of acquiring an addi- j
i
itional $5,622,012 worth of meats is $6,470,314. j
i
l
Thus, the cost of increasing the supply of food
by 25.5 per cent of the present level of the domestic food
supply or by 20 per cent of the present level of total food
|supply would be approximately $80,230,744; $62,146,493
i j
jfor the increase in the supply of crops, $11*613,937 for
| j
|fish, and $6,470,314 for meats. I
j In other words, the Korean economy has to make an
I annual expenditure in the amount of approximately
i
$80,230,744 over and above the present annual expenditure
for food to meet the minimum food requirements of the
Korean population as of 1963, assuming the present level
of food import is maintained.
! - |
I \
The cost of increasing the
food supply without net food ;
imports !
The additional expenditure on food in the amount
of $80,230,744 to meet minimum food requirements is j
I
estimated on the assumption that Korea would continue to
maintain the present level of food imports.
j
j
If Korea can reduce the level of food imports by
increasing domestic grain production, Korea can reduce the
total cost of food supply because the domestic cost of
producing crops is cheaper than buying them from abroad.
Korea can reduce the level of grain imports by
increasing domestic grain production because the supply
of domestic agricultural crops could be increased as much
ias 90 per cent of the present level by increasing the pro-
\ \
■ • i
Iductivity of agricultural land in Korea comparable to that
! '
I of Japan and the required amount of the increase in the
i ’ |
I domestic grain production in the absence of the present |
I ’
|level of grain import, as will be seen later, is only about
32.5 per cent of the present level of domestic grain pro
duction.
j The monetary value of annual grain import.--In
! ■ i
jorder to determine the cost of increasing domestic grain
j j
production by an amount equal to the present level of grain !
imports, it is necessary to find the monetary value of
the present level of grain imports.
i
Table 12 showed the total grain imports during the j
i
period 1953-1963. The monetary value of total grain im- j
ports can be obtained by multiplying the various quantities
of different grains shown in the table by the respective
prices shown in Table 20. This is shown in Table 31.
This table shows that the monetary value of grain
I
imports for the eleven years is approximately $412,802,662.
The monetary value of grain import per annum is, then,
about $37,527,515, approximately 7 per cent of the value
of the present level of domestic crop production in the I
'amount of $495,226,170, shown in Table 29. I
I ' !
| Since the required percentage increase in domestic !
i
i crop production with the present level of grain imports
i I
jwas 25.5 per cent of the present level of domestic crop |
production, it follows, therefore, that the required per
centage increase in the domestic crop production in the
absence of the present level of grain imports would be
approximately 32.5 per cent of the present level of
TABLE 31
MONETARY VALUE OF GRAIN IMPORTS
1953-1963
Grains
Quantity
(Metric Tons)
Price
per kg.
Monetary
Value
Rice 638,072 15.30 $ 97,625,016
Barley 5,457,591 4.20 229,218,822
Miscellaneous
grains 235,191 4.00
9,407,640
Pulses 503,692
15.20
76,551,184
Total $412,802,662
! Source: The above monetary values of grain imports
|are computed on the basis of the statistical data shown in
Tables 12 and 20.
|domestic crop production.
i
f
;
The cost of grain imports.--The cost of importing
j 1
$37,527,515 worth of grains would be equal to $37,527,515
plus the cost of transportation.
Since grains are imported mostly from the United
States, the transportation cost would run approximately
10 per cent of the import value.
When this cost of transportation is added, the
cost of present levels of grain imports would be about
$41,280,266. Thus, Korea is making an average annual
expenditure in the amount of $41,280,266 in order to import
j$37,527,515 worth of grains from abroad.^
■ 9 i
I The actual annual expenditure made by Korea for [
I the importation of grains is somewhat greater than the
lvalue stated above. |
| The discrepancy may be attributed to the following j
(factors: (1) the prices paid for the grains by Korea may j
jnot be the lowest possible prices, as shown in Table 20, j
jsince Korea imports almost all imported grains from the
United States even though some of the grains, such as
rice, can be imported from Thailand at a lower price; (2)
the lowest possible international price itself changes
over a period of time so that fluctuations in the prices
of grains make the discrepancy inevitable, even if the
grains are imported at the lowest prices, because the
prices of grains,upon which the monetary value of grains
is derived in Table 20, are those which prevailed in the
year 1962.
".... ' ' " 129
i
The cost of Increasing domestic grain production.— !
When the above amount of grains is produced by the Korean
. I
agricultural sector rather than imported from abroad, the
|
cost of such an increase in domestic grain production would,
of course, be far less than $41,280,226, the cost of
importing $37,527,515 worth of grains from abroad as was
i
stated above. I
Given a value of the marginal productivity of
capital of 2.032, the cost of producing $37,527,515 worth
i
\
of grains, the present level of grain imports, would
actually be about $18,468,265.
Since the cost of importing $37,527,515 worth of
|grains is $41,280,226 and the cost of producing $37,527,515
worth of grains at home is $18,468,265, the decrease in
|
J the level of grain importation to zero by increasing
! domestic grain production by the amount equal to the pres- j
ent level of grain imports would bring about a net decrease
| i
;in the cost of the food supply by $22,812,001, the differ-
|
ience between $41,280,226, the cost of the present Tevel
of grain imports, and $18,468,265* the cost of increasing
domestic grain production by the amount equal to the
present level of grain imports.
In other words, an increase in the supply of
|domestic grain products to the level of total grain
4
;
requirements without the present level of grain imports
i
(would reduce the cost of increasing the supply of food to
the level of minimum food requirements with the present
level of grain imports by an amount equal to $22,812,001.
It was shown above that the cost of increasing
the supply of food to the level of minimum food require
ments with the present level of grain imports was
$80,230,744 per annum.
The cost of increasing the supply of food to the
level of minimum food requirements would, then, be reduced
to $57,418,743 when the domestic grain production is
I
increased enough to reduce the grain imports to zero.
Therefore, it is estimated that the average annual
j
jcost of increasing the supply of food to the level of
(minimum food requirements of the population as of 1963
iis $57,418,743. That is to say, Korea needs to make an
i
(annual capital expenditure in the amount of $57,418,743
|over and above the present level of expenditure on food in
order to meet minimum food requirements of the population
of 27,226,000.
The annual increase in the
cost of the food supply
The annual capital expenditure needed to meet
i
minimum food requirements would increase as the population
increases.
Given a rate of population increase of 2.8 per
i
cent per annum, the total supply of food after a 22 per
cent increase in the present level of food supply must be
i
. i
increased by approximately 2.8 per cent per annum to
|
maintain the given level of per capita food supply.
Table 32 shows that the monetary value of the total I
!
|
food supply, after a 22 per cent increase in the present j
j
level of food supply, is approximately $743,874,263; j
$659,036,358 for crops, $57,168,787 for fish, and the
i
i
I remaining $27,669,118 for meats. I
i I
1 j
Assuming a proportionate increase in the components
j i
!of the total food supply, a 2.8 per cent increase in the
! I
| supply of food would require an annual increase in the j
supply of crops by some $18,453,018, of fish by $1,590,726,
and of meats by $764,735, for a total of $20,808,479 worth j
; i
of food.
The cost of a 2.8 per cent annual increase in the
supply of food.— Given a marginal productivity of capital
TABLE 32
MONETARY VALUE OF TOTAL FOOD SUPPLY3
Food Components
Monetary Value
in United States Dollars
Grains 659,036,358b
Fish 57,168,787
Meats 27,669,118
Total food supply 743,874,263
-
Source: The above monetary values are computed on
the basis of the statistical data shown in Tables 30 and
aThe monetary value of the total food supply shown :
iin this table is a summation of the monetary value of the
|present level of food supply and that of a 22 per cent
:increase in the present level of food supply.
j - j j !
The monetary value of grains shown here includes
the present level of grain imports in the amount of
;$37,527,515. ;
. “ " 133
of 2.032, the cost of increasing the supply of crops by
$18,453,018 would be approximately $9,081,209.
As was assumed above, the cost of increasing the
supply of fish by $1,590,726 would be about $1,590,726,
the monetary value of the quantity of fish products to be
increased.
The cost of increasing the supply of meats would
be about $879,445, the monetary value of the quantity of
meat products to be increased plus the cost of transport-
!
ing meat products in the amount of a 15 per cent ratio j
i
of the monetary value. j
Then, the cost of increasing the supply of food by <
|2.8 per cent of the total food supply would be approxi- j
mately $11,551,370.
| Thus, if Korea would increase the supply of food
by 22 per cent of the present level in 1963, to meet
minimum food requirements of the population as of 1963,
i i
capital expenditures must be increased by $11,551,370 in
|1964 in order to meet the minimum food requirements of the
j j
population as of 1964 and, thereafter, the annual capital j
| !
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - j
■^For a detailed analysis on the computation of
the cost of increasing the supply of fish and meats, see
the early part of this chapter.
..., X34
expenditure must be increased by an amount equal to the
required increase in the capital expenditure in the previ-
t
i
lous years, plus 2.8 per cent of that value.
It is safe, therefore, to assume that the annual
capital expenditure during the period 1964-1973 must be
increased, on the average, about $12 million every year
to meet the minimum food requirements of the population
during that period.
Cost Reduction Possibilities
The above analysis shows that the cost of increas
ing the supply of food by 22 per cent of the present level
iis approximately $57,418,743.
However, there are several possibilities whereby
ithe cost of increasing the supply of food by 22 per cent
i
j
of the present level may actually be lower than
$57,418,743.
j
I The possible low cost of
jdomestic food supply
! The computation of the cost of increasing the
supply of food in the amount of $57,418,743 was based upon
the following assumptions:
1. The cost of increasing a dollar's worth of
crops is 49,2 cents as the value of the margin-
| al productivity of capital, the only additional
i input needed to increase the grain production,
is 2.032.
2. The cost of increasing the supply of fish is
equal to the average domestic wholesale market
price of fish.
3. The cost of increasing the supply of meats is
equal to the cost of importing meats.
Therefore, if the cost of increasing the supply of
any one of the above food stuffs is actually lower than
(the value stated above, the cost of increasing the supply
I
|of food by 22 per cent of the present level would be less
|than $57,418,743.
i
Possibilities of decreasing cost of grain produc
tion. --The estimate of the cost of increasing the supply of
|grain production was made by using a constant value of
2.032, the value of the marginal productivity of capital.
The value of the marginal productivity of capital
of 2.032 was derived from the assumption that Japan had
reached an optimum level in the employment of the various
agricultural capital inputs and the entire range of the
production function, from the present level of the produc
tivity of land in Korea to that prevailing in Japan, was
i
ilinear.
However, the assumption of a linear production
function may be unrealistic in view of the established
principle of diminishing returns, as it is applied to
agricultural production when the quantity of land is
assumed to be fixed as is the case of the previous analy
sis.
The intensity of the cultivation of the agricul
tural land in Korea as a whole is far less than that of
the agricultural land in Japan as the production per unit
of agricultural land in Japan, with the exception of
rice production, is more than 100 per cent greater than
!that of agricultural land in Korea, as is shown in Table
j 17.
Given the similarity in the quantity and quality
of other accompanying inputs per unit of land between the
|two countries, shown in Chapter IV, Korea should expect
i
|higher returns than $2,032 from $1.00 worth of capital
input applied in the agricultural land when an attempt is
made to increase the level of agricultural production by
only 32.5 per cent of the present level. Therefore, the
cost of increasing the supply of grains can be lower than
the actual value stated above.
i
i
Possibilities of decreasing the cost of fish
supply.--It is highly conceivable that the actual cost of
increasing the production of fish would be far less than
the values stated above, because the above cost of increas
ing the supply of fish was estimated on the basis of the
domestic market price of fish rather than the cost of
producing fish.
Possibilities of decreasing the cost of meat
supply.--It is highly doubtful whether the actual cost of
increasing the supply of meats would be lower than the
I amount stated above, since Korea is not well suited for a
i 3
|
[livestock industry. However, the cost of increasing the
1 supply of meat would not be greater than the value stated
|
above because it is equal to the cost of importing meats.
i
The low cost of food supply
through trading
Aside from the possible low cost of domestic food
production, the cost of increasing the supply of food would
be less than $57,418,743 if at least a part of the increase
in the supply of the various food stuffs is imported by
increasing the exportation of some other goods including
food items whose cost of producing a dollar's worth of
output valued at the international market is lower than
|
that of a dollar's worth of output to be imported.
Such a trading practice would decrease the cost of
increasing the supply of food under the rule of the prin
ciple of comparative advantage.
This possibility of decreasing the cost of food
supply through trading may very well exist in Korea as
the nation exports over 100 different commodities.^
To the extent that it is highly conceivable that |
at least one of several possibilities stated above may
exist in Korea, it is highly probable that the actual cost j
j
i of increasing the supply of food by 22 per cent of the
|
[present level may be lower than $57,418,743.
| Therefore, it is estimated here that the average
annual cost of increasing the supply of food by 22 per
’cent of the present level is at most $57,418,743.
| Finally, it may be mentioned that the cost of an
increase in the supply of food in the amount of
$57,418,743 was estimated on the basis of a proportionate
11
Korea Statistical Yearbook. 1964. pp. 288-289.
. -. • ' 139 ;
increase in the supply of food stuffs that make up the
jtotal food supply.
I
| Therefore, the cost of increasing the supply of
jfood to meet minimum food requirements in terms of calo
ries can be lowered by a greater increase in the supply
of low-priced food stuffs that contain relatively high
quantities of calories.
The Problem of Financing Capital
Expenditures
The above analysis has showed that the Korean
economy would be able to increase the supply of food
sufficiently to meet minimum food requirements of the popu- j
|lation as of 1963 with an approximately $57,418,743 average;
annual expenditure over and above the present level of
J r
|total expenditure on food.
The only question, then (a crucial one), that
j remains to be answered with respect to the solution of the
!
j problem of shortages in the supply of food in Korea is how
i
j the annual expenditure in the amount of $57,418,743 can be
; financed.
Thus, a somewhat detailed analysis on the source
and scheme of financing the capital expenditure needed to
increase the supply of food is given in the following two
chapters.
i
However, there is one important condition with
I respect to financing the capital expenditure that must be
I
known prior to the analysis on the source and scheme of
financing the expenditures.
|
The problem of scarce capital
and its allocation
The amount of capital possessed by a country like
Korea is extremely scarce in relation to the demand for
it. From this fact of imbalance between the demand for
j
and supply of loanable funds arises the problem of allocat
ing capital resources among competing projects.
I
I A decision to finance one project is to frustrate
| |
I another and, consequently, the heated and puzzling question
j ;
| with respect to allocation of capital resources is the
12
"question of what to expand."
In the case of the horizontal production structure,
| . :
ithe question is: should the capital be allocated to the
|
j shoe industry in order to expand the production of shoes
or to the cosmetics industry in order to expand the
^Stephen Enke, Economics for Development (Engle
wood Cliffs, N.J.: Prentice-Hall, Inc., 1963), p. 124.
141
production of cosmetics?
In the case of the vertical production structure,
the question is: should the capital be allocated to the
i
jcapital goods industry in order the expand the production
of the means of production or to the consumer goods indus
try in order to expand the production of consumer goods?
In the case of the sector of social production,
the question is: should the capital be allocated to the
urban industrial sector to expand the industrial production
or to the agricultural sector to expand agricultural pro
duction?
The poor countries of the world, being conscious
11
of their poorness, strive for rapid economic development. J
jit is the general practice on the part of the governments
|of the poor countries to direct the government's economic
i
i
policy to promote the shoe industry rather than the cos
metics industry, to expand the producer's goods industries
as much as possible rather than the consumer goods indus
tries .
Such practices are understandable because such
consumer goods as shoes are more urgently needed goods
I
TO
Gunnar Myrdal, Beyond the Welfare State (New
Haven: Yale University Press, 1960), p. 40.
than cosmetics for the survival of society and the expan-
!
jsion in the producer's goods industries determines the
i
|
potential future of the economic growth.
In addition to these practices, the governments
of many poor countries have adopted an economic policy of
promoting the urban industrial sector rather than the
agricultural sector primarily because of their belief in
the fact that economic development is synonymous with
14
urban industrialization. The Government of Korea has
adopted such a policy.
There is, of course, nothing unusual about neglect
ing the growth of the agricultural industry if it is based
I
upon economic calculations and if the nation is provided
with an adequate supply of food.
| What is unusual about this practice in Korea is
I that the growth of the agricultural sector, as well as the
|growth of an adequate supply of food, is neglected.
The formulation of such an economic policy is due
in the final analysis to the belief that the capital which
is used for the increase in the supply of food, either by
increasing domestic agricultural production or by increas- I
i — _------------------------------------------------------------------------- i
I ^Enke, op. cit., p. 124. j
ing food importation, means the loss of capital for urban
|industrialization. In short, the use of scarce capital to
!increase the supply of food as such is believed to be
|
detrimental to the rapid growth of the urban industrial
sector of the economy.
The consequence of such a belief is a prolongation
of a state of mass hunger and emphasizing the dream of
realizing rapid economic growth.
The use of capital to increase the supply of food
would not decrease the capital available for the urban
industrialization if the increase in the supply of food
i
|resulting from this capital expenditure would increase
| -
i the potential level of saving at least equal to the amount
|of capital used for the increase in the supply of food.
i
| Thus, the important condition with respect to
'financing successfully the capital expenditure in the
i •
!amount of $57,418,743 to increase the supply of food by
i
i
|22 per cent of the present level is that the increase in
the supply of food must increase the potential level of
|saving by at least $57,418,743.
If the potential level of saving would be increased
more than $57,418,743 as a result of a 22 per cent increase
in the supply of food, then the solution to the problem of
food shortages in Korea would, of course, simultaneously
help to solve the problem of industrialization itself,
because the amount of capital available for the industrial
ization of urban areas would, in that case, be increased
as a result of the increase in the supply of food.
CHAPTER VI
OUTPUT, INCOME, EXPENDITURE
AND THE PRICE LEVEL
The question of financing the capital expenditure
needed to increase the supply of food can hardly be an
swered without somewhat comprehensive knowledge of the
magnitudes as well as the general trends of some of the
most important variables of the Korean economy that may
be affected directly by the increase in the supply of food.
Thus, the important facts about the Korean economy that may
I be important in analyzing the effect of an increase in the
supply of food is presented in this chapter as a foundation
|to answering the original question.
i
i
Level of Input and Output
i
I
Labor force
Korea has a labor force of nearly 8 million, work
ing in agriculture, industry, and commerce as of 1963.
i_____________________________.145.____ _____ __________________
146
As Table 33 shows, nearly three quarters of the
[nation's total labor force is engaged in the primary
I
[industries, e.e., agriculture, forestry, and fishing, and
the remaining one-quarter of the labor force is in charge
of the nation's nonagricultural industry, such as mining,
manufacturing, construction, commerce, and service.
Capital and output
With the aid of some W320 billion*' worth of the
nation's capital stock, the labor force produced some W132
billion worth of goods and services in 1963. Hence, the
capital output ratio of the Korean economy as a whole is
2
approximately 2.4.
However, there is a great deal of variation in the
capital output ratio among the sectors as well as in the
The symbol W denotes the Korean monetary unit,
I Won, and the monetary values of capital stock and output
!shown above are expressed in terms of 1955 constant market
I prices. The market exchange ratio between the United
States dollar and the Korean Won in 1955 was 50 to 1 (see
Economic Planning Board of Korea, Korea Statistical Year
book. 1964 [Seoul, Korea: The Government Printing Office,
1964], p. 29$). This ratio of 50 to 1 will hold in the
following analysis as the monetary values expressed in
terms of Won in the following analysis are valued at the
1955 constant market prices.
2
Economic Planning Board of Korea, Quarterly Eco
nomic Research. Vol. 9, No. 2 (Seoul, Korea: June, 1964), [
p. 58._________________________________________; ________ :
TABLE 33
DISTRIBUTION OF THE LABOR FORCE
1963
Industry Number
i
Percentage
Agriculture, forestry 5,631,657 71.6
Fishing 255.269 • 3.3
Agriculture, forestry, and
fishing 5,886,926 74.9
Mining 66,764 .8
Manufacturing 453,836 5.8
Construction 184,091 2.5
Electricity 11.075 .1
Mining and industry 715,766 9.1
Transportation, commerce and
service 1,259,270 16.0
Total 7,861,962 100.0
Source: Economic Planning Board of Korea. Quarterly
Economic Research. Vol. 9. No. 2 (Seoul. Korea: June. 1964)
p. 82.
Note: The total number of the labor force given
above excludes approximately 282,000 national and local
government employees.
industry of the economy, as is shown in Table 34. Thus,
the capital output ratio of the primary industry is 1.54
|whereas that of the nonagricultural industry as a whole is
i
about 3.22, a little more than twice as much as that of the
primary industry.
Within the nonagricultural sector of the economy,
the electrical industry leads in capital output ratio with
11.03, and the transportation, storage, and communication
j
industry follows with 7.09, construction with 3.95, manu- j
facturing with 1.07, and mining with .42.
The capital output ratio of the manufacturing
industry of 1.07--only about two-thirds that of the primary
[
industry--shows clearly the labor-intensive process of
production in the nation's manufacturing industry.
|Industrial origin of gross
national product
! The gross national product in the amount of
JW133.1 billion in 1963 was an all time high since the birth
j
|of the Republic of Korea in 1948. During the decade,
i ‘ ;
1954-1963, the value of gross national product was increased
by approximately 50 per cent, giving about 4 per cent
TABLE 34
CAPITAL-OUTPUT RATIO OF MAJOR INDUSTRIES
1963
Indus try Capital-Output Ratio
Agriculture, forestry, and fishing 1.54
Nonagricultural industry as a whole 3.22
Electricity 11.03
Transportation, storage, and
commerce 7.09
Construction 3.95
Manuf ac tur ing 1.07
Mining .42
The economy as a whole 2.41
Source: Economic Planning Board of Korea,
Quarterly Economic Research, p. 58.
; average annual rate of increase in gross national prod-
juct.^
Industrial origin.— The industrial origin of the
gross national product (GNP) in the amount of W133.1
billion is shown in Table 35. The value of the percentage
distribution given in the table is the average percentage
distribution during the period 1960-1963.
As the table indicates, the largest contribution toi
gross national product comes from the primary industry,
about 37.2 per cent of GNP. The next largest contribution
!
comes from the manufacturing industry, in the amount of
!
W20,364 million, about 15.3 per cent of GNP; followed by
wholesale and retail trades in the amount of W19,831.9
million, about 14.9 per cent of GNP; and the fourth largest
.contribution comes from services, in the amount of W10,-
|248.7 million, approximately 7.7 per cent of GNP.
| Thus, over three-quarters of the GNP originates
|from the nation*s agricultural, mining, trading, and serv-
j ,
|ice industries and, in terms of the sector of the economy,
I
approximately 62.8 per cent of the GNP originates from the
^Korea Statistical Yearbook. 1964, p. 47.
TABLE 35
INDUSTRIAL ORIGIN OF GROSS NATIONAL PRODUCT
(In Million Won)
Origin Value Percentage
Agriculture, forestry, and fishing 49,513.2 37.2
Mining and quarrying 4,061.3 2.3
Manufacturing 20,364.3 15.3
Construction 6,122.6 4.6
Electricity, water, and sanitation 1,064.8 .8
Transportation, storage, and
communications 5,723.3 4.3
Wholesale and retail trades 19,831.9 14.9
Banking, insurance, and real
estate 2,395.8 1.8
Ownership of dwellings 7,986.0 6.0
Public administration and defense 5,457.1 4.1
Services 10,248.7 7.7
Rest of the world 1,331.0 1.0
Total 133,100.0 100.0
Source: Korea Statistical Yearbook. 1964, pp. 46-
47.
Note: The percentage values
of the period 1960-1963.
are the average values
152
nonagricultural sector of the economy and the remaining
37.2 per cent from the agricultural sector.
Product per unit of labor.— Since gross national
product is W133.1 billion and the total labor force is
7,861,926, the value of output per laborer is approximately
W16,929, or about $338 in 1963.
However, the comparison between tables 33 and 35
reveals a significant difference in the value of the output
per laborer between the two sectors of the economy.
The total output contributed by the nation's
agricultural and related workers as a whole was W49,513.2
million, about 37.2 per cent of GNP, but the number of
workers in that sector was approximately 5,886,926, about
74.9 per cent of the total labor force in the country.
iThus, the output per farmer and related workers is about
i
;W8,411, or $168, and that of nonfarm workers is about
W42,321, or about $846 in 1963. Hence, the output per
I
agricultural and related worker is less than one-fifth of
that of the nonagricultural worker.
Income
i
'Per capita GNP
Since gross national product in 1963 was W133.1
billion and the population in that year was approximately
27,226,000, the per capita gross national product in 1963
would be about W4,888, or $97.76. The per capita GNP has
been increasing at the rate of a little over one per cent
4 !
per annum.
Per capita sector income !
It was shown above that the income accruing to the |
nation's agricultural and related industries was W49,513.2
i :
million. Since there was a farm population of 15,266,325
in 1963, the per capita farm income would be approximately
W3,349, or about $65, in 1963.
i
The income accruing to the nation's nonagricultural
|sector in the same year was W83,585.8 million and the
!
numbers of the nonfarm population in that year were approx-
i
| imately 11,959,675. Thus, the per capita nonfarm income
would be approximately W6,989, or about $140. Hence, the
per capita nonfarm income is about 115 per cent greater
^Quarterly Economic Research, p. 45. 1
than that of per capita farm income. To say the same thing
!
|somewhat differently, the per capita income of agriculture
i
!
'and related sectors is only about 46 per cent of that of
i
the nonfarm sector.
Personal disposable income
It may be stated that the personal disposable
income would be equal to gross national product minus
capital consumption allowance and taxes of all kinds, plus
total subsidies and welfare payments.
The provision for depreciation allowances during
the period 1960-1963 was, on the average, 4.5 per cent of
5
the GNP. The ratio of the national tax burden to the GNP
I
g
during the same period was about 12 per cent per annum.
|Total subsidies and welfare payments during the period
! 7
were, on the average, about .7 per cent of the GNP.
Therefore, the personal disposable income would be
I
smaller than the GNP by about 15.8 per cent and, hence,
i
|the personal disposable income in 1963 would be about
|W112,170.2 million.
^Korea Statistical Yearbook. 1964. p. 45.
6Ibid.. p. 353. 7Ibid.. p. 45.
Assuming the distribution of the national tax
|burden, the subsidies and the welfare payments to the two
I
! sectors of the economy in proportion to the respective
i
share of GNP, the personal disposable income of the total
farm population would be about ¥41,690,114,400 and that of
the total nonfarm population would be about ¥70,379,243,-
600.8
Per capita personal disposable
income
The per capita personal disposable income would
also be smaller than the per capita GNP by 15.8 per cent.
Therefore, the per capita personal disposable income would
be about ¥4,116, or $82.32. And the per capita personal
|disposable income of the farm and nonfarm populations
|would be about ¥2,736 ($54.72) and ¥5,985 ($119.70)
|respectively.
J 8
! The actual amount of the personal disposable in
come of the total farm population may be slightly greater
than the value stated above because the per capita nonfarm
income is far greater than the per capita farm income and
the tax structure in Korea contains some progressivity and,
furthermore, the welfare payments per farm population would
tend to be greater than per nonfarm population because of
the lower per capita farm income. However, the difference
between the actual value of the personal disposable income
of total farm population and;the value stated above would
not be significantly great because of the small degree in
Expenditure on Gross National Product
! The expenditures on the gross national product
|
during the period 1953-1963 are shown in Table 36.
Consumption expenditure
As Table 36 shows, the value of the average pro
pensity to consume the GNP in a given year during the
period ranges from about .8 in 1953 to over 1 in 1956.
The fluctuation is more severe in the case of the marginal
propensity to consume the GNP which ranges from as low as
.1 during the period 1956-1957 to as high as 4 during the
period 1961-1962.
However, there is considerable stability in the
values during the period 1953-1963 except for the extreme
cases shown above, so that the values of APC and MPC in
Korea can be found by using the method of least squares.
The figures shown in Table 36 give approximately
|the following values:
i C = W16.3 billion + .8Y
I
i
Thus, it is estimated that the values of APC and
MPC in Korea are .9 and .8 respectively.
the progressivity in tax structure and the insignificant
total amount of the subsidies and welfare payments shown
above.
TABLE 36
EXPENDITURE ON GROSS NATIONAL PRODUCT, 1953-1963
(1955 Constant Price in Billion Wons)
Consumption Investment Export Import NFI
Year
V % GDCF % IS % V % V % NFI %
GNP
1953 81.03 83.03 9.30 10.7 3.66 4.2 2.73 3.1 11.56 13.03 1.69 2.0 86.85
1954 83.21 91.1 11.60 12.7 1.85 2.0 1.89 2.1 8.54 9.4 1.34 1.5 91.35
1955 90.51 95.2 10.72 11.3 1.61 1.7 1.99 2.1 11.17 11.7 1.36 1.4 95.02
1956 96.50 101.4 9.65 10.1 -1.78 -1.8 1.82 1.9 12.20 12.8 1.29 1.3 95.28
1957 97.33 95.0 13.19 12.7 2.66 2.6 2.29 2.2 14.25 13.8 1.31 1.3 103.53
1958 104.14 94.1 14.33 12.9 0.59 0.5 2.90 2.6 12.57 11.3 1.31 1.2 110.70
1959 108.51 93.2 16.35 14.1 -2.17 -1.9 3.36 2.9 10.90 9.4 1.33 1.1 116.48
1960 112.16 94.4 13.60 11.4 0.32 0.3 3.93 3.3 12.46 10.5 1.34 1.1 118.89
1961 109.75 89.2 14.33 11.6 4.18 3.4 5.12 4.2 11.77 9.6 1.43 1.2 123.04;
TABLE 36— Continued
Year
Consumption Investment Export Import NFI
GNP
V % GDCF % IS % V % V % NFI %
1962 117.61 93.9 16.16 12.8 1.09 0.9 6.32 5.0 16.47 13.0 1.06 0.8 125.77
1963 117.73 88.4 19.96 15.0 7.59 5.7 6.77 5.1 20.26 15.2 1.31 1.0 133.10
Source: Korea Statistical Yearbook, 1963. pp. 44-45.
1
NFI = Net factor income from abroad
V ® Monetary value
% = Percentage to GNP
GDCF = Gross domestic fixed capital formation
IS = Increase in stocks
159
Composition of private
consumption expenditure
The total consumption expenditure shown in Table 36
is composed of public and private consumption expenditures.
Table 37 shows the composition of the private consumption
expenditures out of the personal disposable income during
the period 1954-1963.
Total private consumption expenditure in 1963 is
approximately #104.91 billion, which is about 93 per cent
of the personal disposable income of W112,170.2 million in
that year. The total private consumption expenditures
during the period were increased by about 53 per cent.
The expenditure on food, clothing, housing, and
health care, i.e., the necessities for survival, comprises
about 90 per cent of the total personal consumption expend
iture, and the remaining 10 per cent is spent on tobacco,
j
transportation, communication, entertainment, recreation,
i i
land so forth.
j ;
j By far the largest private consumption expenditure
i
(was made on food items. The expenditure on food items
I
I i
occupies, on the average, about 54.5 per cent of the total
private consumption expenditure during the period 1954-
1963. The percentage value is identical during the period |
TABLE 37
COMPOSITION OF PRIVATE CONSUMPTION EXPENDITURE, 1954-1963
(At 1955 Constant Market Prices)
Clothing and Rent, Utilities Household
Food Items Other Personal and Household Operation Others3 Total
Effects Equipment and Health
Value % Value % Value % Value % Value % Value
1954 39.03 53.1 9.11 12.4 7.09 11.0 4.41 6.0 13.86 17.5 73.50
1955 42.86 53.1 10.01 12.4 8.92 11.0 4.89 6.0 14.04 17.5 80.72
1956 46.22 54.1 13.46 15.7 10.26 12.0 6.45 7.6 9.05 10.6 85.44
1957 50.88 58.5 13.07 15.0 9.97 10.4 6.69 7.7 6.33 8.4 86.94
1958 52.03 57.4 13.53 14.9 10.61 11.8 7.29 8.0 7.20 7.9 90.66
1959 53.18 55.7 14.93 15.6 11.41 11.9 7.34 7.7 8.66 9.1 95.52
1960 51.99 52.7 14.23 14.4 12.37 12.7 7.48 7.7 12.48 12.5 98.55
1961 52.49 54.6 13.43 14.0 12.57 13.1 7.09 7.4 10.63 10.9 96.21
i ;
os
©
TABLE 37— Continued
Year
Food Items
Clothing and
Other Personal
Effects
Rent, Utilities
and Household
Equipment
Household
Operation
and Health
Others Total
Value % Value % Value % Value % Value % Value
1962 59.44 57.0 15.50 14.9 13.27 12.6 7.61 7.2 8.40. 8.3 104.22
1963 56.29 53.7 16.44 15.7 14.59 13.9 7.49 8.1 10.10 8.6 104.91
f
Source: Korea Statistical Yearbook. 1964. pp. 48-49. Note: The above table is
condensed from this source.
a
Others include expenditures on transportation, communication, recreation,
entertainment, and the remittance to Korean subjects abroad;
^Total is the total private consumption expenditure.
162
j 1960-1963, so that it is estimated here that the personal
expenditure on food items is 54,5 per cent of the private
consumption expenditure in Korea. The private consumption
expenditure, in 1963 was about W104.91 billion and the total
expenditure on food in that year would have been approxi
mately W57.19 billion, 54.5 per cent of the total private
consumption expenditure.
Since the personal disposable income in 1963 was
about W112.17 billion, the expenditure on food in the
amount of W57.19 billion is approximately 51 per cent of
the personal disposable income. Thus, the expenditure on
food in Korea is approximately 51 per cent of personal
disposable income.
However, for the sake of maintaining simplicity in
jthe following analysis, it is estimated here that the
expenditure on food in Korea is 50 per cent of personal
jdisposable income, rather than 51 per cent. This estima
tion is justified by the fact that the actual expenditure
jon food in 1963 was slightly less than W57.19 billion.
i
Investment expenditure
As shown in Table 36, the level of investment
I
during the period 1953-1963 was, on the average, 14 per
|cent of the GNP. And approximately one-seventh of that
ilevel of investment took the form of inventory investment.
I The level of investment during the first quarter
I :
of the period was in a state of complete stagnation. In
fact, it was only as recently as the period following 1961
that the level of investment really started to increase.
In 1963, the volume of investment was at an all-time high
of W27.55 billion, which was about 20.7 per cent of the
i
GNP of that year.
The impressive increase in the level of investment j
in recent years was due mainly to an "investment promotion j
through forced saving" policy of President Park's adminis- '
tration. i
Exports
i
As shown in Table 36, the average annual exports by
I Korea during the period 1960-1963 was nearly W5.54 billion,
j t
j
lor about 4.4 per cent of the annual value of the GNP during
|that period.
j
The average annual exports in the amount of W5.54
billion is approximately 160 per cent greater than the |
]
value of the average annual exports during the period 1953-j
j
1956, when the value was about W2.ll billion, or about 2.3 j
!
per cent of the annual value of the GNP during the same
i
jperiod.
i Thus, there is a definite trend working in the
economic system of Korea that would increase the nation's
capacity to increase the level of exports.
Imports
The level of annual imports during the period
1960-1963 was, on the average, about W15.24 billion, or
I
about 12.1 per cent of the average GNP during the period,
and is only about 3 per cent higher than the 1953-1956
level of imports, which were in the amount of W10.87
billion, or about 11.8 per cent of the average GNP during
that period.
Like exports, there was a sharp increase in the
i
volume of imports in 1963. The major reason for this is
jthat an increase in exports has necessitated an increase
!in the level of imports in capital equipment as well as
i
|raw materials.
The terms of trade.— The actual dollar receipts j
from exports and payments for the annual volume of imports !
during the period 1953-1963 are shown in Table 38. i
The value of the average annual exports, measured I
TABLE 38
VOLUME OF EXPORTS AND IMPORTS
! (In Thousand United States Dollars)
Year Exports Imports
1953 39,585 345,436
1954 24,246 243,327
1955 17,966 341,415
1956 24,595 386,063
1957 22,202 442,174
1958 16,451 378,165
1959 19,812 303,807
1960 32,827 343,527
1961 40,878 316,142
1962 54,813 421,782
1963 86,803 560,273
j
Source: Korea Statistical Yearbook, 1964. p. 285.
|in terms of actual dollar receipts during the period, was
!
jabout $55 million, and the dollar value of imports per
annum during the same period was about $400 million. Thus,
the payments for the annual imports was about 7.3 times
greater than the dollar receipts from exports. Conse
quently, Korea is suffering from a balance of payments
deficit.
However, during the period 1953-1956, the dollar
value of the average annual imports in the amount of some
$329 million was more than 13 times greater than the
dollar value of annual exports during the same period.
Therefore, the ratio of imports to exports during
the period 1953-1963 actually was decreased by almost one-
half, even though the net imports between the two periods
given above were increased by about $41 million.
This decrease in the imports-exports ratio was
brought about, of course, by increasing the rate of exports
more than that of imports. During the two periods, the
volume of exports was increased by some 120 per cent,
whereas the volume of imports rose only about 22 per cent.
The phenomenal increase in the volume of exports
in recent years, especially in 1963 when the volume of
exports was an all-time high of approximately $86 million,
jwas certainly not an easy goal to attain for a developing
nation like Korea without creating other serious conse-
i
quences.
Behind the rapid rise in the volume of exports
lies the chronic deterioration in terms of trade. The
increase in the value of exports between the two periods
(1953-1956 and 1960-1963) measured in terms of 1955 con
stant market prices was about 160 per cent, but this j
increase was only about 120 per cent when it is measured in i
terms of the actual dollar receipts from the exports. !
Thus, the export prices of commodities that Korea exported j
had decreased by approximately 25 per cent between the two |
| !
periods. Meanwhile, the import price index had increased
by about 50 per cent during the two periods. The details
| ;
|in the change in the terms of trade during the period
11955-1963 is shown in Table 39.
i There are several reasons for the sownward move-
I - !
I 1
ment in the terms of trade, aside from the fact that the
nation is exporting mostly primary products.
The most important reason is the continuous
decrease in the ratio of "aid" imports to total imports !
while the total imports keep increasing.
! i
j . !
i Table 40 shows the indices of total imports, "aid" I
TABLE 39
CHANGES IN THE TERMS OF TRADE
(Base Year: 1960)
Year
Export
Price Index
Import
Price Index
Terms
of Trade
1955 122.5 67.9 180.4
1956 156.2 70.5 221.6
1957 114.5 100.4 114.0
1958 80.7 85.5 94.4
1959 85.5 91.6 93.3
1960 100.0 100.0 100.0
1961 74.0 85.4 86.7
1962 100.5 109.6 91.7
1963 113.9 117.3 91.1
Source: Quarterly Economic Research, p. 25.
169
i
TABLE 40
IMPORTS INDICES
(Base Year: 1960)
Year
Total
Imports
"Aid"
Imports
"Aid" Imports/
Total Imports
1956 112.4 137.9 82.8
1957 128.7 161.3 84.5
1958 110.1 134.1 82.2
1959 88.4 90.9 69.3
1960 100.0 100,0 67.5
1961 92.0 84.9 62.2
1962 120.9 92.2 51.4
1963 163.1 100.3 41.5
Source: Quarterly Economic Research, p. 26.
|
i
_ . . . . . L70
imports to total imports during the period 1956-1963. It
j
ishows that the foreign aid imports comprised almost 85
i
per cent of the entire volume of imports in 1957. In
other words, approximately 85 per cent of the imports in
1957 were paid for by foreign aid funds. However, the
ratio of foreign aid imports to total imports had steadily !
declined ever since the 1957 peak, and the ratio was final
ly decreased to 41.5 per cent in 1963.
This continuous decrease in the ratio of "aid"
imports to total imports, while the total imports them
selves were moving in an upward direction, forced Korea to
increase foreign exchange earnings in order to pay for the j
increased volume of "commercial" imports.
The pressure generated from this situation would
i ;
i !
[weaken the bargaining power of Korea in foreign trade and,
i
consequently, decrease the price of the commodities that
[Korea exports.^ And the increase in the ratio of "commer-
i
icial" imports to total imports means an increase in pay-
I
ments on the part of Korea in importing a given amount of
foreign commodities. From the point of view of the Korean ;
economy, this would mean an increase in the price of
9 i
Quarterly Economic Research, p. 26.
171
foreign commodities even though the prices of these foreign
I j
(commodities themselves were more or less the same.
I j
1 ;
I The combined effect of the decrease in the price
index of the commodities that Korea exports and the
increase in the price index of the commodities that Korea
imports has created a deterioration in the terms of trade,
as shown in Table 39.
The composition of imports-exports.--The relative
composition of the commodity groups exported and imported
by Korea in 1963 is shown in Table 40.
As shown in the table, over 80 per cent of the
!
value of exports was composed of manufactured goods classi
fied by materials such as veneer sheets; cotton fabrics; 1
rock crystal; pig iron; steel plates and sheets; electro-
|lytic copper, brass, and bronze, etc.; inedible crude
materials such as raw silk, natural graphite, fluorite,
i ■ :
|natural steatite, tungsten, iron ore and concentrates,
|etc.; and food and live animals, largely fish and grain
i , _ i o
I products. |
I ;
I Thus, most of the export items are primary products!
^ Korea Statistical Yearbook. 1964. pp. 288-289.
as is the typical case in most of the underdeveloped
I
jnations. However, it should be noted that Korea exported
i
i
| some $4 million worth of machinery and transportation
equipment, about 4.6 per cent of the total value of her
exports, in 1963. During the period 1953-1960, machinery
exports had never exceeded $.2 million in any given year.
It was in 1961, when President Park's administra
tion began a big export campaign, that the value of
machinery exports rose to nearly $1 million and the value
was increased to $1.5 million in 1962. Therefore, there is
a definite trend toward an increase in machinery exports
in recent years.^
In importation, food, machinery, crude materials,
I manufactured goods, and chemical products comprised more
|
j than 90 per cent of the total value of imports. As Table
141 shows, the largest expenditure was made on the importa-
j
|tion of food in 1963, about 21.5 per cent of the total
!
lvalue of imports.
j However, food imports during the period 1953-1963
I were, on the average, about 13 per cent of the total value
of imports. The unusually high ratio of food imports in
11Ibid., p. 287.
TABLE 41
RELATIVE COMPOSITION OF EXPORTS-IMPORTS
BY COMMODITY GROUPS
Commodity Groups
Exports
Per Cent
Imports
Per Cent
Food and live animals 20.5 21.5
Manufactured goods
(classified by materials) 32.2 15.7
Crude materials, inedible 30.4 19.1
Miscellaneous manufactured
goods 7.4
--
Machinery 4.6 20.6
Chemical 14.2
Mineral fuel 2.0 5.1
Others 2.9 3.8
Total 100.0 100.0
Source: Korea Statistical Yearbook. 1964, pp. 284-
288.
1963 was due primarily to a bad crop season that prevailed
!
|in Korea in 1963.^
j
j
Price Level
Perhaps the most well-known fact about the Korean
economy is its "runaway currency inflation."^ Changes
in money supply, velocity, output, and the price level
during the period 1953-1963 are shown in Table 42.
Total output and expenditure
As Table 42 shows, the output to be exchanged for
money during the period 1953-1963 was increased approxi
mately 1.53 times, while the level of expenditures during
the same period increased by more than 9 times. Thus, the
average price level during the 11-year period was increased
by more than 6 times, as is shown in the table, giving an
|annual increase in the price level of about 20 per cent,
i
Money supply and velocity
j Table 42 shows that the total money supply during
i
I — - - - - - - - -
12Ibid.. p. 286.
13
Colin Clark and Margaret Haswell, The Economics
of Subsistence Agriculture (New York: St. Martin's Press,
1964), p. 74.
~ 175
TABLE 42
MONEY SUPPLY, VELOCITY, OUTPUT,
AND THE PRICE LEVEL
(Monetary Values in Million Wons)
Year
Money
Supplya
Velocity
Total
Expenditure
Output
Indexc
Price
Level
Index
1953 3,032 12.8 38,940 100.0 100
1954 5,808 9.7 56,670 105.2 138
1955 9,352 11.6 95,020 109.4 223
1956 12,093 10.1 121,980 109.7 288
1957 14,518 11.2 162,990 119.2 351
1958 19,225 9.0 172,080 127.5 347
1959 20,900 9.0 185,450 134.1 357
1960 21,908 9.0 210,710 136.3 397
1961 31,224 7.9 241,410 141.3 438
1962 36,707 7.7 281,480 144.8 491
1963 37,307 9.8 366,040 153.3 612
aKorea Statistical Yearbook. 1964, p. 304.
bIbid.. p. 47.
°Ibid.
the period 1953-1963 was increased some 12 times, with an
I
I
|average velocity of circulation of about 9.5 per annum.
!
As shown in the table, the velocity of money circu-
i
lation was fairly stable during the period with the
exception of 1953, 1961, and 1962. The velocity of money
circulation in 1953 was the highest during the period due,
perhaps, to the fact that the Korean War was continued
until the middle of 1953. And the velocity in 1961 and
1962 was relatively low, due primarily to the initiation
of the "Save as You Are Paid" plan initiated by President
Park1s administration.
However, the velocity during the period 1953-1963
was, by and large, fairly stable so that it is safe to
assume that the increase in'the price level during the
period was due mainly to the excessive increase in the
!
|supply of money relative to the increase in the output.
I -
j Currency inflation
• t .
The increase in the supply of money was largely
due to the increase in the supply of currency that accel
erated the expansion of demand deposits, as shown in Table
43.
i
j
This table shows that the supply of money during
TABLE 43
TOTAL MONEY SUPPLY, 1953-1963
(In Million Wons)
Year
Total Money
Supply
Currency in
Circulation
Demand
Deposits
1953 3,032 2,233 799
1954 5,808 3,998 1,810
1955 9,352 5,878 3,475
1956 12,093 7,334 4,759
1957 14,518 8,605 5,914
1958 19,255 11,106 8,150
1959 20,990 12,360 8,631
1960 21,908 13,932 7,976
1961 31,224 16,660 14,564 .
1962 36,707 18,002 18,705
1963 37,307 18,250 19,057
I Source: Korea Statistical Yearbook, 1964. pp. 304-
| 305.
178
the period 1953-1963 was increased by more than 13 times
and this increase was brought about by the combination
of more than 7 times an increase of the currency in
circulation and almost 24 times an increase in demand
deposits. Thus, the rate of increase in demand deposits
was almost 3 times greater than the increase in the quan
tity of currency in circulation.
However, the increase in demand deposits was I
closely related to the supply of currency in such a way
that a substantial increase in demand deposits was always j
■
brought about by a substantial increase in the supply of j
currency.
Thus, when the supply of currency was increased, ;
for example, approximately 80 per cent during the period
i ;
i ;
|1953-1954, demand deposits increased some 125 per cent,
• but when currency in circulation was increased by only one
|per cent during the period 1962-1963, demand deposits
during that period increased by only two per cent. This
is true because it is generally the quantity of currency
that determines the extent of credit expansion, given the j
value of reserve requirements and the velocity of circula- |
tion.
It can, therefore, be concluded that the runaway j
inflation in Korea was caused ultimately by the over
I
j issuance of currency.
i
! Since the currency in Korea was issued by the
|
government usually when the stun of revenue and borrowing in
a given year was smaller than the expenditure to be made,
which has been the case every year, it follows that the
inflation in Korea is due to the government’s inability to
increase tax revenues nearly as much as its expenditures.
CHAPTER VII
FINANCING CAPITAL EXPENDITURE
The preceding analysis showed the magnitudes as
well as the general trends of some of the most important
variables of the Korean economy. This should furnish
sufficient data whereby the crucial question posed at the
j
end of Chapter V can be analyzed and answered.
The crucial question was: would the increase in the!
' ' ' i
supply of food by 22 per cent of the present level increase!
the level of the economy’s capacity to save by $57,418,743
so as to enable it to finance the capital expenditure in
|the amount of $57,418,743 needed to increase the supply of
food by 22 per cent of the present level? If it would,
I the problem of increasing the supply of food by 22 per cent
j of the present level could be solved without decreasing ;
i . !
the level of income, consumption of any person, or deter
iorating the growth of the industrial sector of the Korean j
economy.
i
_________ . 1 . 8 . Q ___ !
In order to increase the level of the economy's
capacity to save by $57,418,743 without creating such
|effects, the level of real income must be increased by at
| ;
least $57,418,743 as a result of the increase in the supply
of food by 22 per cent.
Given the level of money income, an increase in the;
supply of food increases the real national income by
decreasing the price of food. Thus, in order to increase
the level of the economy's capacity to save by $37,418,743 '
as a result of the increase in the supply of food by 22 j
I
per cent of the present level, the 22 per cent increase in
the supply of food must decrease the price of food suffi
ciently to increase the level of real income by at least
$57,418,743. j
By how much the real income would actually be
I increased as a result of a 22 per cent increase in the
supply of food depends, of course, upon the elasticity of
the demand for food as a whole and the proportion of the
| expenditure on food to total money income. Therefore, the
first task at hand is to find the approximate value of the j
> !
elasticity of the demand for food as a whole in Korea.
[ The Demand for Food
i
j If one divides total consumption into two
i groups, food and nonfood, one could say that, by
; analogy from the microtheory of consumers' choice,
that the . . . demand for food is a function of
the price of food, the price of nonfood, and the
. . . disposable income.
When the price of nonfood, and the disposable
income are assumed to be constant, the demand for food as
a whole can be regarded essentially as a function of the
price of food.
It is a generally accepted theory that the demand
for food as a whole is quite inelastic in response to
changes in the price of food as a whole.
The inelasticity of demand for food lies in the
(simple fact that man must eat to survive and "there are no
! 2
good substitutes." Thus, the fact that human survival
requires the intake of food that has no good substitutes
!
land the amount of intake of food to survive is essentially
i
| determined by biological necessity makes the demand for
Hi. A. Girshik and Trygve Haavelmo, "Statistical
Analysis of the Demand for Food: Examples of Simultaneous
Estimation of Structural Equations^" Economestrica. XV,
(April, 1947), 79.
2
Campbell R. McConnell, Economics: Principles.
Problems, and Policies (New York: McGraw-Hill Book Co.,
1963), p. 609.
183
food inelastic to the change in the price of food. The
price inelasticity of the demand for food is "an inherent
3
and unchangeable characteristic."
!
I ,
! In the United States, where the per capita daily
caloric intake is over 3,000^ and "the expenditure on food
is about 25 per cent of the total personal expenditure,"'*
with a scheme of income distribution in which "the richest
6 per cent of the population gets over two times as much
as does the poorest 31 per cent," authoritative studies
have concluded that the price elasticity of the demand for
particular food products that have high degrees of substi
tutability with other food products such as pork, butter,
etc., is "about unity or below"7 and, for food as a whole,
A
! Donald S. Watson, Economic Policy (Boston, Mass.:
(Houghton Mifflin Co., 1960), p. 667.
1 /
I Food and Agriculture Organization of the United
Nations, Production Yearbook. Vol. 17 (Rome, Italy: 1963),
p. 253.
5
Harold G. Harcrow, Agricultural Policy of the
United States (New York: Prentice-Hall, Inc., 1953), p.
82.
^McConnell, op. cit.. p. 119.
7Ibid.. p. 609.
it "centers around .25."®
In a country like Korea, where the per capita
daily calorie intake is only about 1,800, the price elas-
I ' '
ticity of the demand for food would certainly be greater
than .25, as is the case in the United States. However,
the arc elasticity coefficient for the range of the demand
i
schedule between the present level of the food supply and
a 22 per cent increase in the supply of food would cer-
i i
tainly be less than 1, due mainly to the income constraint.
It was shown above that the total private consump- I
tion expenditure in Korea was about 93 per cent of the
total personal disposable income and over 90 per cent of
the total private consumption expenditure was made on the
necessities of life, i.e., food, clothing, housing, and
| , {
i :
health care. About 54.5 per cent of the total private
!consumption expenditure, or about 50 per cent of the total
|personal disposable income, was made on food alone.
Thus, most of the households whose consumption
i
8
Harold G. Harcrow. Agricultural Policy of the
United States, p. 83. Note that the price elasticity
coefficient for all farm products--food and nonfood
products combined— is only about .12 (see Gerhard Tintner,
"Multiple Regressions for Systems of Equations," Economet- I
rica, XIV (January, 1946), 34).
...... ‘ ” ~ 185
expenditure is more or less equal to personal disposable
i
income can hardly increase the expenditure on food because
|it would mean a decrease in the expenditures on other
j , i
necessities, i.e., clothing, housing, and health care.
They would be willing to consume 22 per cent more food,
but are unable to do so unless it does not require them to
increase the expenditure for food. The above condition
gives the price elasticity coefficient of 1.
Most of the households in the high income brackets
whose consumption expenditure is significantly less than
|
the disposable income would certainly be able to consume
more food without decreasing the expenditures on other
i j
|necessities, but they would not be willing to consume 22
| per cent more food because their level of income most
likely has already enabled them to attain a sufficient
| level of food consumption for their needs. The above
j ^
|condition gives a price elasticity coefficient of less
j • ;
| than 1.
! . :
]
| Since the price elasticity of the demand for food
i ■ i
for the relevant range of the demand schedule for the lower j
income brackets is likely to be 1, and the coefficient |
| tends to be smaller as the income approaches the higher
I I
i I
^income brackets, it then follows that the price elasticity j
166;
of the demand for food as a whole in Korea would be less
than 1 and, hence, the price elasticity coefficient lies
somewhere between .25 and 1.
Since the increase in the supply of food in this
analysis is only 22 per cent of the present level and the
increase makes it just sufficient to meet minimum food
requirements of the Korean population, it is certain that
the elasticity of the demand for food as a whole within
the relevant range could be closer to 1 than to .25.
It is assumed here, for the sake of simplicity,
!
as well as providing the maximum allowances for a possible j
error in the following analysis, that the elasticity of the
i - ;
demand for food as a whole in Korea is 1 when the supply
of food is increased only by 22 per cent of the present
level.
j
Therefore, when the supply of food is increased by ;
i
|22 per cent of the present level, it is expected that the
j ;
price of food as a whole would be decreased by 22 per cent.;
i
!
Increase in Real Income
", r' 1
When the price of food is decreased by 22 per cent
i
as a result of a 22 per cent increase in the supply of
food, it increases the real income given the level of moneyj
187
Income.
As was pointed out, exactly how much the real
|income would be increased is dependent upon the amount of
expenditure on food out of a given level of money income,
given the percentage decrease in the price of food.
The percentage increase in
the real income
It was shown above that the expenditure on food
comprises, on the average, 50 per cent of disposable income
of the nation's households. Therefore, a 22 per cent
decrease in the price of food would mean a decrease in the
price level of 11 per cent. An 11 per cent decrease in
the price level given the level of money income would lead
to an approximately 12.36 per cent increase in the real
i
!
|income.
| Thus, a 22 per cent increase in the supply of food
|would lead to an approximately 12.36 per cent increase in
I
real income.
The absolute value of the
increase in real income
It was shown above that the total disposable
income of the households in Korea in 1963 was approximately
j
|W112.17 billion. A percentage of 12.36 of the above
, . ■ — - __
T ' ' 188
!
disposable Income of about W13,864,212,000 is approximately
i '
$277,284,240.
| ;
: Thus, a 22 per cent increase in the supply of food ;
in Korea would increase the real income by approximately
$277,284,240.
i
The Process of Financing
Capital Expenditures
It was stated that the level of real income must j
be increased by at least $57,418,743 as a result of the
increase in the supply of food by 22 per cent in order to
enable the Korean economy to finance the capital expendi- j
ture needed to increase the supply of food by that much.
The increase in the real income of $277,284,240 ]
!
resulting from the increase in the supply of food by 22
per cent would be far more than enough to finance the
!
capital expenditure.
| Therefore, the answer to the crucial question of
| ;
jwhether an increase in the supply of food by 22 per cent
|
of the present level would increase the level of the
economy's capacity to save by $57,418,743 so as to enable
i
f
it to finance the capital expenditure in that amount |
I
needed to increase the supply of. food by 22 per cent of \
the present level, is that the increase in the supply of
- - 189
food by 22 per cent of the present level would increase
the capacity to finance far more than the actual capital
expenditure needed to increase the level of food supply by
22 per cent. In fact, it would be capable of financing
additional capital expenditures by some $219,865,497.
The above figures clearly show that the increase
in the level _of real income resulting from a 22 per cent
increase in the supply of food would be more than suffi-
I
cient to finance not only the capital expenditures needed
to increase the level of the food supply by 22 per cent of j
the present level to meet the minimum food requirements of j
i
. i
the population as of 1963, but also the annual increase in i
the level of capital expenditures in the amount of about
$12 million per annum to meet minimum food requirements of
the increasing population during the period 1964-1973.
! Since the increase in real income in the amount of
j
i ’ i
|$277,284,240 comes directly from the 22 per cent increase
!in the supply of food, the sum of $277,284,240 can be taken
!
away from income earners of the Korean economy without
deteriorating the level of real income that the income ]
I
earners had maintained prior to the increase in the supply j
i
of food. In other words, a 22 per cent increase in the ;
i
supply of food would increase the annual tax revenue as j
as much as $277,284,240 without decreasing the purchasing
power of consumers. This is how an increase in the supply
9
of food can increase tax revenues.
Needless to say, the level of taxation need not be
increased as much as the increase in the real income in
order to finance the capital expenditures needed to in
crease the supply of food by 22 per cent of the present
(
level. As is shown above, the amount of capital expend!- j
tures needed is only approximately $58 million and the !
level of increase in the real income resulting from the
increase in the supply of food is over $277 million. Thus, j
strictly speaking the actual increase in the level of taxa- |
tion that would be sufficient to finance the increase in
i
the supply of food by 22 per cent of the present level is j
only about 21 per cent of the increase in the level of real
income of the economy.
The increase in taxation of the upper middle class
of the nation's nonfarm households in the amount equal to
the increase in their real income resulting from the de
crease in the price of food accompanying the increase in
9
W. W. Rostow, The Stages of Economic Growth
(New York: Cambridge University Press, 1960), p. 23.
191
the supply of food by 22 per cent of the present level may
|be sufficient to finance the capital expenditure needed to
|increase the supply of food.
! !
By doing so, the nation's relatively poor income
groups would be able to receive the full benefit resulting
from the increase in the supply of food since the level of
their money income would not tend to decrease as the price
of food decreases. The households of the poor income
|
groups would be able to consume, on the average, at least
22 per cent more food without increasing the expenditure
on food.
1
I
It is only the middle and upper income groups whose
money income would tend to decrease as a result of the
increase in the level of income tax. But their real income I
would stay constant because the increase in the income tax
would be just equal to, or possibly less than, their
increase in the real income resulting from the decrease in
the price of food following the increase in the supply of
food.
Thus, the welfare of the lower income group of the
nonfarm sector and the farm households who are, on the
average, poorer than the lower income group of the norifarm
sector can be.promoted without deteriorating the welfare
of the upper income bracket as a result of adopting this
scheme of financing the capital expenditures.
In any event, the extent of the increase in the
level of taxation following the increase in the level of
real income of the economy would be determined, the the
final analysis, by the Korean government.
The important point to be stressed here is that
an increase in the supply of food by 22 per cent of the
present level would increase the potential level of taxable
capacity of the Korean economy by approximately $277
million, which is far more than sufficient to finance not
only the cost of increasing the supply of food by the 22
per cent of the present level needed to meet minimum food
requirements of the population as of 1963, but also the
!
i
(cost of the future required increase in the supply of food
I resulting from the increase in population during the
i
decade, 1964-1973. However, the annual increase in the
supply of food to meet the food requirements of the
increase in population during the decade would also in
crease the potential level of tax revenue more than the
amount needed to finance the capital expenditures needed
to increase the required amount of food supply during the
decade.
193
Therefore, the increase in the supply of food by
22 per cent of the present level would create an economic
power that would enable Korea to finance an additional
capital expenditure of at least $219,865,497 per annum.
The Economic Burden of the Increase
in the Supply of Food
The above analysis shows that the problem of
financing capital expenditures needed to increase the
supply of food to meet minimum food requirements of the
population during the period 1964-1973 can be solved within
the constraint of the Korean economy without deteriorating
the welfare of any person once the supply of food is
I
increased by 22 per cent of the present level.
Then, the only economic burden of the increase in
the supply of food to meet minimum food requirements for
I the period 1964-1973 is the financing of the capital
i
expenditure in the initial year in the amount--not the
|
level— of $57,418,743 needed to increase the supply of
food by 22 per cent of the present level because the
economic power to finance the capital expenditure to main
tain and increase the level of food supply to meet minimum
food requirements during the period 1964-1973 would be
|
jgenerated, theoretically, after the increase in the supply
„ 194
of food by the amount equal to 22 per cent of the present
amount of the food supply.
I
This means that, in the initial year of increasing
the supply of food by an amount equal to 22 per cent of the
present amount of food supply, the capital resources in
the amount of $57,418,743 that would have been available
for the growth of urban industry must be directed toward
the increase in the supply of food.
Thus, the economic burden of the increase in the
level of the food supply to meet minimum food requirements
during the period 1964-1973 would be equal to a loss of
capital in the amount of $57,418,743 for the industrial
growth in the initial year.
However, as was shown above, this loss of capital
in the amount of $57,418,743 for industrialization on
I
laccount of increasing the supply of food by an amount
i
equal to 22 per cent of the present amount of the food
|supply would be far more than compensated by the increase
in the potential level of tax revenues in the amount of
approximately $277,284,240 per annum that could be avail
able for industrial growth as a result of the increase in
the supply of food. In other words, the process of indus- j
trialization would actually be accelerated as a result of j
195
directing the capital available for the industrial growth
toward an increase in the supply of food.
To put the same thing somewhat differently, an
increase in the supply of food, by directing capital
resources available for industrialization, is one of the
effective strategies for rapid industrialization itself,
aside from the fact that the increase in the supply of food
would lead to the solution of the problem of hunger.
CHAPTER VIII
INCREASE IN THE FOOD SUPPLY
AND ECONOMIC DEVELOPMENT
The preceding analysis showed how the problem of
shortages in the supply of food in Korea during the coming
decade, 1964-1973, can be solved within the constraint of
the Korean economy.
However, the increase in the supply of food by an
amount equal to 22 per cent of the present level would not
/
only lead to the solution of the shortages in the supply
of food during the coming decade, but would also lead to
|the long-run solution to the problem of food shortages as
it helps to solve some of the most difficult problems of
’economic development of Korea. That is to say, the solu-
tion to the problem of shortages in the supply of food
during the coming decade would create favorable economic
effects in sufficient magnitude upon the process of econom
ic development that would enable the Korean economy to
import food by an amount equal to the deficiency in the
197
food supply that might arise after the decade, when and
i
if domestic .agricultural production could no longer be
I :
increased to meet the food requirements of the increasing
population.
Just exactly how the increase in the supply of
food, especially by increasing domestic agricultural
production, can help to solve the problems of economic
development can easily be found by analyzing the economic
effect of the increase in the supply of food upon the
process of industrialization.
Increase in Food Supply
and Industrialization
i
There are several important roles that an increase ;
in the supply of food can play in the process of indus
trialization of the Korean economy.
I Prevent starvation and the
depletion of foreign exchange
i ^
Food is needed to meet the likely rise in
population, without yielding either starvation
j or a depletion of foreign exchange available for
j purposes essential to growth.
i
It was shown in Chapter II that the present level
i
W. W. Rostow, The Stages of Economic Growth (New
York: Cambridge University Press, 1960), p. 22.
* “ ' 198
of food supply in Korea cannot help but starve to death
approximately five million persons, over 20 per cent of the
jtotal population, if the rest of the population eats just
enough food to maintain the minimum food requirements.
No democratic nation can pursue the goal of indus
trialization without first providing adequate food for
the population. It is labor power that enables industrial
ization, and labor power is created by human energy, and
i
human energy is essentially created by the intake of food.
i
Therefore, the first task at hand to initiate the process
of industrialization is to solve the problem of hunger by j
i
increasing the supply of food. j
When this increase in the supply of food is brought;
about by increasing domestic agricultural production, it
|would help to prevent the depletion of foreign exchange
s . '
ithat is vitally needed for industrialization.
!
! The analysis made in the preceding chapters showed
]
|
!that over $150 million worth of food can be produced in
Korea with less than $60 million of additional capital
expenditure. Thus, the Korean economy can "save" some ;
$90 million of foreign exchange per annum in increasing the j
level of food supplies by 22 per cent by increasing domes-
i . ■ 1 _ i
jtic agricultural production instead of importing. I
~ " ' ‘ 199
i
Furthermore, it would not require the Korean
i • - :
economy to make the capital expenditure in the amount of
approximately $60 million in foreign exchange in increasing
the domestic agricultural production.
The previous analysis showed that the entire cost
of increasing the domestic agricultural production was
composed of expenditures needed to acquire capital inputs,
i.e., fertilizers, pesticides, irrigation, and agricultural:
t
tools and machinery.
The capital inputs, with the exception of machin
ery such as tractors, can, in part, be supplied by the
Korean manufacturing sector as the nation already has three
| i
well-known chemical companies that produce fertilizers and j
I pesticides and two motor companies that produce motor- !
I 1
I ;
|driven machinery in addition to automobiles, and hundreds
of factories that produce agricultural tools. Thus, the
expenditure in foreign exchange would be far less than $60
million per annum in acquiring the quantity of capital
i :
|inputs needed to increase the supply of food by 22 per
i !
cent.
In the long run, as the industrial sector of the
economy grows and the agricultural sector increases its
effective demand for agricultural capital inputs, the |
200 I
manufacturing industry of the economy can strongly be
| i
|"built in part on items of capital for agriculture: farm
! 9
|machinery, chemical fertilizers, diesel pumps, etc." In
this way, most of the agricultural capital inputs may be
bought from the urban manufacturing industry rather than
from abroad.
In short, an environment of rising real
incomes in agriculture, rooted in increased pro
ductivity, may be an important stimulus to new
modern industrial sectors essential to the take
off.^ |
This is especially true in view of the fact that
Korea has been suffering from a deterioration in the terms j
I
of trade. It was shown above that the deterioration in the:
terms of trade in Korea was in part due to the "forced" i
j
export resulting from the increased need for foreign
exchange.
I ;
The terms of trade would certainly be worsened if
the nation attempts to increase the supply of food by
importation through export of the industrial output. The
|deterioration in the terms of trade is a deterrent to the
industrial sector as it depresses the commodity prices in j
the international market.
2Ibid.. p. 23. 3Ibid.
_ __ 201
Increasing capital formation
i ,
j Perhaps the most important economic role of an
jincrease in the supply of food in the process of indus-
r
trialization of an economically underdeveloped nation with
plenty of hungry people like Korea is that of increasing
the level of capital formation.
The increased level of capital formation is essen
tial for industrialization and growth as it determines the i
i
extent of the productive capacity of the economy.
As was shown above, a 22 per cent increase in the
i
|
supply of food can increase the potential capacity to save
i
i
by about $277,284,240 per annum. Subtracting about
$57,418,74,3 for the expenditure needed to acquire capital j
I
inputs to increase domestic agricultural production, a net ;
capital formation of about $219,865,497 is possible as a
result of the increase in the supply of food.
1
i :
I Given the capital-output ratio of 3.22 in the
i ' :
I ;
i
ination's industrial sector, an annual increase in the flow
!of capital in the amount of $219,865,497 would increase
i
the productive capacity of the Korean industrial sector
capable of producing almost $70 million worth of indus- j
trial output annually. j
As long as the increase in aggregate effective j
demand is equal to the increase in the flow of industrial
[output,, industrial output would continue to increase $70
(million annually as the flow of the capital increases
$219,865,497 per annum.
This increase in the annual flow of capital would
make it possible in due time to expand the nation's manu
facturing industry so as to enable it to supply most of
the agricultural capital inputs needed by the nation's
agricultural sector.
It was pointed out in Chapter V that the supply of
food must be increased by 2.8 per cent per annum after a
22 per cent increase in the intial year to meet the minimum
food requirements of the increasing population and the
monetary value of a 2.8 per cent increase in the food sup
ply was, on the average, little more than $20 million.
Therefore, the annual increase in the industrial
output in the amount of some $70 million would be more
than sufficient to import food by the amount equal to the
food requirements of the increase in the population when
and if domestic agricultural production can no longer be
increased to meet the food requirements of the total popu
lation after the decade.
203;
Increasing gross national product.--Assuming that
j
the value of MPC in Korea will continue to be .8 and the
i
iflow of investment expenditures in the amount of some
$277,284,240 is maintained annually, the level of the GNP
may eventually be increased by almost $1.4 billion, more
than 50 per cent of the present level of GNP.
However, there would be a little problem of keep
ing the effective demand up with the increase in the
I
productive capacity of the economy in an underdeveloped |
country like Korea if the capital resources are efficiently!
allocated. Thus, the industrial output would continue to
increase as long as the productive capacity keeps increas- i
ing.
Increas ing indus tria 1 emp loyment. - ?-As suming that
i
)
;the output-labor ratio of the Korean industrial sector
|would continue to be 846 as was shown in Chapter VI, the
annual increase in industrial output by $70 million would
!
increase the level of industrial employment by some 80,000
annually, almost 4 per cent of the total volume of present
i
industrial employment of the nation.
Needless to say, all the estimations given above
are based upon the assumption that the state would increase!
the level of taxation by some $277 million and use it to
I
i
increase the flow of industrial output. Thus, if the
level of taxation would not be increased by $277 million,
which would be the likely case, as was explained in Chap
ter VII, then the flow of industrial output would not
increase as much as $70 million per annum and, consequent
ly, the GNP as well as the industrial employment would not
be increased as much as the values stated above.
i
However, an important finding that must be stressed i
is the fact that the increase in the supply of food to meet j
the food requirements of the population during the period
1964-1973 by increasing domestic agricultural production
I I
would create a sufficient leverage power whereby the
industrial output of the Korean economy can be increased
sufficiently to make it possible to import food to meet
|the food requirements of the increase in the population
|
when and if such an import is needed after the period.
t
Promoting economic stability
i :
| There is another important economic role of increasq
in the supply of food in the process of industrialization.
An increase in the supply of food contributes to
i -
j :
jthe process of industrialization by promoting economic |
stability through creating powerful deflationary forces
jagainst the powerful inflationary forces in Korea
It was shown above that the Korean economy has had
a runaway currency inflation due mainly to the government's
inability to raise revenues more or less to match its
expenditures. In fact, the collection of taxes in an
amount more or less equal to its huge expenditure needed
to maintain some 600,000 "unproductive" soldiers in addi
tion to running the nation where mass starvation has been a j
i
constant threat is an extremely difficult, if not impos-
j
sible, task.
I
The economic evil of a runaway currency inflation
such as has been experienced in Korea need not be pointed j
!
]out in detail. The soaring domestic inflation makes
| J
!money a useless store for wealth," stops "indirect invest-
i
'ment by means of any contract denominated in money terms,"
j
makes investment only where "some prospect of a good and
\
I quick capital gain is seen," transfers "funds out of the
I country in some illegal way,"^ and stops "voluntary
„5
saving.
■ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ■ i
^Stephen Enke, Economics for Development (Engle
wood Cliffs, N.J.: Prentice Hall, Inc., 1963), p. 530. j
5
Bernard Okum and Richard W. Richardson, Studies j
Furthermore, the food price stands atop the general !
| .
jincrease in the price level once inflation gets started.
I
j Thus industrial goods tend to sell domesti
cally at worsening terms of trade with agricul
tural commodities. This not only requires
rationing of higher priced food in the cities but
also tends to hold peasants in the rural areas."
In addition, the international consequences of such
national currency depreciation was the introduction of a
rigid foreign exchange control.^
The foreign exchange rate was rigidly controlled
by Korea by an official exchange rate upon which all
foreign transactions were carried out. The official
I
exchange rates have been revised but seven times during
the period 1953-1963, one of which covered the period of !
1955-1960, in the face of constant currency inflation
|
(almost day by day.®
i
This means that, at the official exchange rate
between domestic and foreign currencies, external
| in Economic Development (New York: Holt, Rinehart and
j Winston, 1961), p. 445.
| g
Enke, op. cit., p. 531.
7Ibid., p. 473. (
8
Economic Planning Board of Korea, Korea Statis
tical Yearbook. 1964 (Seoul, Korea: The Government Printing1
Office, 1964), p. 296.
207
prices come to appear relatively low because they
| have not risen as domestic prices have already
i done. Imports are increasingly substituted for
I domestic output. Moreover, producers who used to
| export will now find local prices more profitable
and will shift sales from foreign markets to
domestic markets . . . The combined effect of
reduced exports and growing imports is of course
to worsen the balance of trade and instigate a
drain upon the foreign exchange reserves.*
This has been the principal reason for the ever-increasing
volume of imports of Korea without appreciable increases
in the volume of exports, as was shown in Chapter VI.
In short, a self-sufficient and sustained economic
growth can not be attained with runaway currency inflation..
i
The increase in the supply of food would help to |
j
|promote economic stability in two ways. First, as was j
I !
|shown previously, the increase in the supply of food would !
I ;
j increase the potential source for tax revenue which would
I . ;
reduce the pressure for the necessity of issuing currency
i
I to meet the government expenditure requirements. In
|other words, it counterattacks the very root from which
|the currency inflation in Korea sprang.
E ‘ !
j
| Secondly, as was shown above also, the increase in j
j |
the supply of food would decrease the price of food, the
q
op. cit.. p. 473.
leader in the increase in the general price level in the
i :
process of inflation, at least as much as the increase in
the supply of food. It was shown that a 22 per cent in-
!
crease in the supply of food in Korea would decrease the
price level as much as 11 per cent as the price of food
weighs about 50 per cent in the determination of the
general price level in Korea. Thus, the increase in the
supply of food counterattacks the leading source of the
process of inflation in Korea in addition to the root of
j
the currency inflation. !
i
Thus, the increase in the supply of food is one
way, perhaps the easiest one, of attaining the goal of ■
maintaining "a reasonable economic stability in the face j
of long-run inflationary pressure,11' * ' ® generated princi-
! !
jpally by the responsibility of maintaining such a huge
military force in such a poor country, without jeopardiz
ing the life of the population.
! The above analysis shows that an increase in the
supply of food plays several strategic roles in the process;
j '
of industrialization of the Korean economy aside from the
original role of "feeding" the population which, j
i
i
• i
i
l®Okura and Richardson, op. cit.. p. 449.
unfortunately, has to eat to survive.
In short, the increase in the supply of food and
i ;
|industrialization are complementary, with the former assum
ing the leading role as that the process of increasing the
supply of food would in no way be a deterrent to the proc
ess of industrialization.
Increase in the Food Supply and
Its Impact upon the j
Agricultural Sector
Just as the increase in the supply of food creates
an impact upon the process of industrialization, it also j
i
creates an impact upon the Korean agricultural sector. j
!
Constant money income and j
increasing cost of production |
Even though the real income of the Korean agricul- *
;tural sector would be increased as a result of the increase
I
i
|in the supply of food, the money income of farmers would
be more or less constant due to the nature of the elastic- ;
ity of demand for food as a whole. Thuis, in spite of the
j :
increase in the production of agricultural products, there i
f
r
would be no appreciable change in the money income of the
!
|
farmers. In other words, total revenue accruing to the
L
nation's agricultural sector would be constant at least for!
210
J
J
a year when the supply of food is increased by 22 per cent
of the present level.
Even though the increase in the supply of food
would not change the total revenue of the farmers, the
total cost of production would be increased as the physical
output increases because, as was shown above, more of the
capital inputs--in the form of fertilizers, pesticides,
I
machinery, etc.--must be used in order to increase the |
i
level of agricultural production. !
If this increase in the cost of agricultural product
\
j
tion was asked to be paid by the farmer in monetary units,
the farmer's financial position would actually be worsened j
I
on account of the increase in the agricultural production.
I
This is so because the total cost of production tends to
I !
! increase and, meanwhile, the total revenue stays constant.
In such a case, the Korean economy can hardly expect the
nation's agricultural sector would increase the agricul
tural production even if all the capital inputs necessary
to increase the level of agricultural production are pro
vided to the farmers.
j
Thus, the objective of increasing the level of
domestic agricultural production sufficient to meet the
minimum food requirements of the population can not be |
_ - . 211
i
realized as planned unless a sort of innovation is intro-
| ;
duced whereby the farmer's money cost of production is kept
constant at least for the time being with the increase in
the agricultural production.
A possible solution
There may be various ways by which the farmer's
money cost of agricultural production can be kept constant
i
while increasing the level of production.
One way to solve this problem would be to intro-
i
duce a sort of system whereby a public organization, pos- !
sibly an agency in the Ministry of Agriculture of the
i
Korean government, procures the agricultural capital inputs
4
and sell them on credit or rent to the farmers at the
lowest possible charges to be paid in terms of agricultural;
;products the farmer produces rather than cash.
j
i
i By asking the farmer to pay for the use of agri
cultural capital inputs in terms of agricultural products,
i
; i
the farmer's money cost of production would not be increased
as a result of increasing the agricultural production. Andj
the farmers would be able to pay in agricultural products
j
because the use of capital inputs increases agricultural
1
production.
Introduction of such a system, especially in the
use of the motor-driven agricultural machinery, is vitally
needed in view of the state of land distribution prevailing
in Korea.
The statistical data on the state of land distri
bution detailed in Table 44 reveals that the average area
of cultivated land per farm household, the economic unit
of agricultural production in Korea as well as Japan and
most of the other countries, are less than 1 Jeong. or
about 2.1 acres of land.
This value of the average area of cultivated land
per farm household immediately reveals that it is a matter
I
|of economic impossibility for the average Korean farm
household to procure the agricultural machinery, such as
|tractors, that can effectively farm more than one hundred
acres of land. Thus, the use of agricultural machinery on
a rent-per-unit-of-time basis would probably be the only
practical solution.
The average value does not, of course, reveal the
actual distribution of cultivated land to the farm house
holds because the cultivated land is not evenly distributed
among the nation's farm households.
The actual land distribution in the table shows
213
TABLE 44
DISTRIBUTION OF CULTIVATED LAND, 1963
Area of
Cultivation
Numbers
of Farm
House
holds
Per Cent
to Total
Farm
House
holds
Area of
Cultiva
tion (in
Jeong3)
Per Cent
to Total
Area of
Cultiva
tion
Under .3 Jeong
(.735 acre) 489,653 20 114,335.4 5
.3 - .5 Jeong
(.735- 1.225
acres) 519,585 21 220,663.8 10
.5-1 Jeong
(1.225-2.451
acres) 761,015 31 601,337.3 31
1 - 2 Jeong
(2.451-4.901
acres) 497,398 20 760,160.2 36
2 - 3 Jeong
(4.901-7.352
acres) 138,999 5 348,950.0 16
3 Jeong and over
(7.352 acres and
over) 8.943 3 34.120.2 2
Totals 2,415,593 2,079,556.9
Source: Korea Statistical Yearbook, 1964, p. 64.
al Jeong = 2.45072 acres.
,
that the area of land distribution per farm household
ranges from less than three-quarters of an acre to more
than seven acres of land. Approximately 20 per cent of the
nation's farm households has less than three-quarters of an
acre of cultivated land, and the combined area of cultivated
land operated by the farm households belonging to this
group is only about 5 per cent of the total cultivated
land. In other words, 20 per cent of the total farm house-!
holds operates about 5 per cent of the total cultivated
land.
j
At the other extreme, only about 3 per cent of the i
total farm households operates more than seven acres of j
land and the combined area of cultivated land operated by
the farm households belonging to this group is only about
I 2 per cent of the total area of cultivated land. There-
I fore, approximately 77 per cent of the total farm house
holds operates cultivated land ranging from three-quarters j
i 1
of an acre to about seven acres, and most of these farm
households operate one to five acres of land.
| • . !
In any event, the pertinent fact that bears the
important short-run policy implication as to the procure- !
ment and disposition of the agricultural capital inputs,
i
especially the motor-driven machinery, is that approxi-
mately 97 per cent of the total farm household operate
;
less than seven acres of cultivated land and the area of
cultivated land operated by these farm households com
prises about 98 per cent of the total area of cultivated
land in Korea.
This important statistical fact on the distribu
tion of cultivated land in Korea clearly suggests that the
j
public or government procurement and ownership of the j
agricultural capital equipment, especially motor-driven
i
machinery, and the usage of the equipment by the farmer on j
a rental basis to be paid in kind, would be an ideal eco- j
nomic solution to the problem arising from the increase in
the use of capital inputs and the subsequent increase in j
agricultural production."^ j
i In doing so, the deterioration in the terms of
!trade of the agricultural products resulting from the
I increase in the agricultural production does not affect ;
f f
f
appreciably the financial position of farmers while the
real income of the farmer increases.
i
]
11 *
Japan, faced with the same kind of problem, j
adopted this kind of institution to solve the problem. See j
Table 25 and Bureau of Statistics, Office of the Prime
Minister, Japan Statistical Yearbook. 1965 (Tokyo, Japan: j
The Government Printing Office, 1965), p. 93. j
- 216
In the long run, the increase in population would
increase the demand for food, so that the money income of
jthe farmer would tend to increase and the nation's agri-
i
cultural sector would, in due time, be able to finance the
cost of increasing the agricultural production by itself.
This tendency would be accelerated when the urban indus
trial sector, through its own growth, provides the employ
ment opportunities, especially for those farmers who oper
ate a relatively small acreage of land,
When this process begins, the cultivated land per
farm household would increase and the increase in the
cultivated land per farm household would bring about an
increase in the efficiency in the agricultural operation
as well as an increase in the per farm household income.
i
|
[Thus, the financial position improves as the total revenue
!
of a farm operation increases due both to the increase in
the demand for food and the increased acreage of cultivated
land, while the average cost of production would tend to
i
|
[decrease due to the increase in efficiency brought about
by the use of machinery and the increase in the scale of
agricultural operation.
| The Role of the State
i
| The government of Korea, the owner and operator of
jthe nation's major industries--i.e., salt, cigarettes,
railroad and maritime transportation, mining, electricity,
water, dams, fertilizers, pesticides, cement, public hous
ing, major hotels, the banking system, and many others —
can assume several important roles in the process associ
ated with the increase in the supply of food to meet the
i
food requirements of the population. J
I
The major role to be assumed by the Korean govern- j
|
ment is in the field of procurement and disposition of !
agricultural capital inputs and an effective tax system to !
finance the capital expenditure to increase the supply of
food as well as the industrial output.
i In fact, such a role has already been discussed in
jthe preceding analysis. Thus, only a summary of the role
|of the state that was pointed out in the preceding analysis ;
would be sufficient to meet the original objectives of this
dissertation.
I r
( !
Procurement of the agricultural j
capital inputs j
i
i
The economic and financial position of the Korean
agricultural sector is too weak at the present time to
|procure the agricultural capital inputs needed to increase
j
agricultural production. Therefore, the state has to
assume a major responsibility in procuring the agricultural
capital inputs, at least in the short-run.
Since Korean manufacturing industry is still in
its infant state, the major part of the supply of the
needed agricultural capital inputs would have to be depend
ent upon importation. This is especially true in the case
of agricultural machinery. Thus the government of Korea
must become an active business agent in procuring the
deficient quantity of the agricultural capital inputs that
the Korean manufacturing sector is unable to supply.
Disposition of the agricultural
capital inputs
There are many ways through which the agricultural
capital inputs— i.e., fertilizers, pesticides, tools,
machinery, etc.— procured by the government can be dis
tributed to the farmers.
In adopting a particular scheme of distributing
I
the agricultural capital inputs, the government must give
a great deal of consideration to the fact that the money
i income of the farmers tends to be constant, at least in
| :
j
!the short-run, when the quantity of the agricultural
~ ' ' 219
i
production is increased due to the nature of the demand for
food. Thus, the particular scheme of distributing the
inputs adopted by the government must be the one that would
not increase the money cost of production on the part of
farmers. If it did, the financial position of the farmers
would tend to be worsened on account of increasing the
agricultural production.
There are several ways of distributing the agri- I
cultural capital inputs without increasing the money cost |
of production on the part of the farmers. The following j
i
one may be the most plausible and practical solution to the ;
i
i
problem. I
j
I Disposition of fertilizers and pesticides.— The !
i 1
j government would distribute such agricultural inputs as
jchemical fertilizers, pesticides, etc., to the farmers
! through the market at the price determined by the market
|demand for those inputs at that quantity of supply of
i
| inputs in order to insure that the required amounts of
i ' I
these agricultural inputs needed to increase the target !
j
quantity of agricultural production is used by the agri- |
cultural sector. In other words, the government would
i
release the required quantity of fertilizers, pesticides, I
220
tools, etc., per unit of time to the market irrespective
j
of either the supply price or the market price of the
inputs. This would make the supply schedule of the inputs
perpendicular and let the price of the inputs determined
by the forces of market demand, i.e., at the point of in
tersection between the perpendicular supply schedule and a
negatively sloped demand schedule. Then the quantity of
the inputs released by the government to the market would
be distributed completely to the farmers.
This process of distributing the inputs to the
farmers would not increase the money cost of production of
the farmers as a whole, because the price of the inputs is
essentially determined by market demand and the market
demand schedule for the inputs as a whole would have an
elasticity coefficient of 1 or less than 1, due mainly to
|the money income constraint of the farmer.
i
I
Distribution of machinery.— As for the distribution
l
and disposition of other agricultural inputs, especially
the heavy agricultural machinery including the motor-
driven plowers and cultivators, etc., the distribution
scheme must be different from that of fertilizers, pesti-
i
jcides, etc. This is due primarily to the fact that (1)
} there is no established market for such inputs in Korea
and the economic position of the Korean farmer is too weak
to form one as the supply price of these inputs is too
high for the average Korean farmer to acquire them; (2) the
cost of procuring these inputs is too high to let the
market demand force alone determine the price of these
inputs; and (3) the area of cultivated land of most of the
Korean farm households is so small that the average farmer
would not need to own such inputs. Thus, the distribution
of these inputs through the market channels would not only |
j
be difficult but it would also create the potential possi
bility of inefficient use of these inputs.
| :
One possible solution to the problem would be to
t
let the farmer use these inputs on a time-rental basis with j
the public ownership of these inputs and ask the farmers
|who use them to pay the rental in terms of agricultural
iproducts at the end of an agricultural season.
i
i The amount of rent to be paid in kind would be
j :
(determined by the demand for these inputs at that level of
supply of the inputs, which is determined by the government
irrespective of the market price in order to insure the j
efficient use of these inputs.
i
i
This process of distribution would not increase the
222
money cost of agricultural production because the rent
i
iwould be asked to be paid in the agricultural products that
the machine and tools had helped to produce rather than in
cash.
I ■
I
The disposition of rent
The agricultural products that the government col
lects as rent may be disposed of in several ways. Some
part of the agricultural products may be distributed among
the nation's poor income brackets so as to assure that the
low income group would not be starved. The rest of the
agricultural products may be kept by the government for
emergency purposes.
In a "normal" year, the food emergency occurs just
prior to harvest time as the stock of agricultural products
produced in the previous season tends to be exhausted by
jthat time. It usually lasts about three to four months
|
! every year. The prices of grains during this period
i
jusually increase more than 100 per cent of the level pre-
! 12
vailing right after the time of harvest. This would be
the right time for the government to release the agricul
tural products.
^ Korea Statistical Yearbook. 1964. p. 274.
' 223
Financing capital expenditure
j to increase the food supply
j
i As was pointed out, the economic position of the
i
!
Korean agricultural sector would not be able to finance the
capital expenditures needed to increase the agricultural
production. Furthermore, capital expenditures can hardly
be financed by loans from the banking institutions because
the credit standing of the farmer is generally low and,
consequently, it is imperative that the major part of the j
i
13 '
capital expenditures be financed by the government. In ,
short, this is the case where "farmers produce too little j
■ j / j
and are too poor to buy anything." j
It was shown above that the government, through I
i ■ ■ 1
ithe use of an effective tax policy, can finance the capital
j :
jexpenditures as a result of a 22 per cent increase in the
level of the food supply. It was also pointed out that
taxation of the first upper-half income class of the natiaik
nonfarm sector in the amount equal to the increase in their
|
real income resulting from the decrease in the price of
i
i-------------------------------------------------- !
I i
13 I
The Bank of Korea, Annual Economic Review. 1956 I
(Seoul, Korea: The Bank of Korea, 1956), pp. 1-48. j
14 ^
William D. Grampp and Emanuel T. Weiler, Economic
Policy (3rd ed.; Homewood, 111.: Richard D. Irwin, Inc.,
1961), p. 310.
food would probably more than suffice to finance the capi
tal expenditures.
The exact amount of the increase in the tax revenue
!
would, of course, be determined by the government, depend
ing upon the need for the increase in the tax revenue on
the part of the government.
Financing initial capital
expenditures
The foregoing scheme of financing capital expendi
tures would not, of course, create any economic burden of
|
increasing the supply of food. j
However, as was pointed out above, the increase in
real income will be realized only after the initial increase;
t
in the supply of food. Thus, the .initial capital expendi
ture needed to increase the supply of food by a 22 per
jcent increase.of the present amount of the food supply
i
! ;
I !
would have to be financed by the capital resources that
might, otherwise, have been used for the growth of the |
nation's industrial sector. Consequently, the initial
capital expenditure needed to increase the supply of food j
J
creates an economic burden. The magnitude of the burden
would be equal to the amount of industrial output lost on |
account of directing capital resources for the increase in
............ “.... " 225
I
|
the supply of food rather than the increase in industrial
|output.
! Even though the potential increase in the annual
flow of capital available to the nation's industrial sector
after the increase in the supply of food is far more than
the amount of capital resources used for the initial
j
increase in the supply of food, the Korean government must
!
attempt by all means to minimize the burden of financing
the initial capital expenditure. j
I
The Korean government may choose any one or com- !
I
bination of the following five schemes and sources of rais-j
ing funds to finance the initial capital expenditure. The j
five schemes and sources are listed in the order of the
ease with which the expenditure may be financed, in terms
of the magnitude of the economic burden.
| :
I !
Foreign aid.--There will be no economic burden of
financing the initial capital expenditure if the Korean
j government is able to receive the needed capital inputs in i
| ‘ ;
i
the form of foreign aid. This is not an impossible one
i
in view of the fact that the initial capital expenditure
!
in the amount of some $60 million is only about one-quarter\
of the annual amount of foreign aids Korea receives from !
the United States.Thus, an increase of about one-third
i
of the present amount of annual foreign aid for a year
would be sufficient to meet the initial capital expendi
tures .
Borrowing from abroad.--If the Korean government
were unsuccessful in receiving additional foreign aid
sufficient to finance the initial capital expenditure,
borrowing from abroad would be the second alternative.
Financing through borrowing abroad would not create
an immediate economic burden. It only creates future
economic burdens in the form of repayments of the principal
as well as the interest. However, this future burden can
Jbe borne easily because the increase in the supply of food
j
I resulting from the use of capital inputs acquired by the
|borrowed funds would increase the economic capacity.to save
I I
far beyond the amount needed to pay the debt.
i
j
i Borrowing from within.— If the above two sources
I
fail to raise funds sufficient to finance the initial
|capital expenditure, the government of Korea may then
i ”
attempt to borrow from the domestic capital market.
^ Korea Statistical Yearbook. 1964. p. 294.
To the extent that some of the borrowing from the
domestic capital market may be the capital that would have
been used for industrial growth had it not been borrowed by I
the government for the increase in the supply of food, the
borrowing from the domestic capital market would involve an
economic burden.
However, the Korean government can reduce the
i
economic burden to its minimum by attempting to utilize all :
of the nation's "hidden" capital in the form of private j
savings that is not offered to the capital market due to
the underdevelopment of financial institutions in Korea. j
[ i
i
j
i
Increase in taxation.--If the above three sources
fail to finance the initial capital expenditure, the gov-
i |
jernment of Korea may raise funds by increasing the level
! . • i
|of taxes.
N An increase in the level of taxes would, of course,
[ .
I |
deteriorate the well being of the tax payer. However, the ;
temporary deterioration would be far more than compensated
for by the increase in real income when the supply of food j
i i
is increased as a result of the increase in the level of
taxes.
Furthermore, an effective utilization and
jinanipulation of such tax instruments as the increase in
'
excise tax and the progressivity of income tax rates that
would least affect the well being of the general public
would make it possible to reduce the economic burden to its
minimum.
Deficit financing.--If the above four sources fail
to raise funds sufficient to finance the initial capital
expenditures9 then the Korean government may use the fiscal !
instrument of deficit financing to meet the initial expend!- j
ture requirements. This would, of course, aggravate the j
problem of runaway currency inflation in Korea.
However, such deficit financing can, at least, be
justified on the grounds that the increase in the supply
|
|of food resulting from this deficit financing would create
I i
!
a powerful anti-inflationary force.
Financing capital expenditures
to increase the industrial
! output
I ■ ;
It was pointed out that the flow of capital result- I
ing from the increase in the level of the food supply to j
meet food requirements during the decade 1964-1973 would j
i
i
be capable of increasing the level of industrial output so j
sufficiently as to enable the Korean economy to import food j
|when and if domestic agricultural production could no long-
j
er be increased to meet food requirements of the increase
j
|in population after the decade.
The Korean government must formulate and execute a
comprehensive economic plan whereby the Korean economy
would actually realize a sufficient increase in the flow
of industrial capital as well as output during the period
j
so that the long run problem of food shortages would even- j
tually be solved. The attainment of such an objective
would, of course, require an increase in the level of taxa-;
i
i
tion more than the amount actually needed to increase the
supply of food to meet food requirements of the population,
but far less than the level of increase in real income I
resulting from the increase in the supply of food, as was
i
pointed out above.
|
| But the growth of the industrial sector should
! i
jbe aimed not only at increasing the flow of industrial
i 1
1 output; it should also be aimed at providing employment
|opportunities for those farmers who operate relatively
j ' • !
j small acreages of land so as to be able to increase the
scale of farm operations as well as income per unit of
i
farm operations.
; i
i j
{ Furthermore, a part of the comprehensive economic
230
plan must contain a long-run program of increasing the flow
I
|of the production of agricultural inputs--such as ferti-
|
lizers and pesticides, in addition to tools and motor-
driven machinery--so as to make it possible for the
nation's agricultural sector to procure a major part of
the agricultural capital inputs from the domestic market
in due time.
The increased scale of farm operations, combined
with the use of machinery and improved tools, would make
it possible also for the nation's agricultural sector to
increase its efficiency in agricultural production by
decreasing the average costs of agricultural production.
When all of these processes have taken place, the
nation's agricultural sector would transform its primitive
| .
I characteristics in the process of agricultural production
F
!
into a modern industrial sector and would gradually make
it possible to procure the agricultural capital inputs by
| itself without a great deal of assistance from the govern-
i
! ment.
The growth of the industrial sector resulting from
the growth of the agricultural sector would not only enable
the agricultural sector to procure the inputs from the
domestic market, but would also enable the Korean economy
to procure food from abroad when and if the Korean agri
cultural sector would be unable to increase the supply of
food as much as the increase in the population in the
remote future.
CHAPTER IX
SUMMARY AND CONCLUSIONS
Summary
j
The arguments presented in this dissertation may
j
be summarized as follows: i
1. Korea has had an acute problem of food short-
i
ages for many years. The supply of food must be increased j
i
by about 22 per cent of the present level in order to meet
minimum food requirements of the Korean population of
$27,226,000 as of 1963.
I ;
2. Korea can hardly increase the domestic grain
i ;
! production--which comprises more than 90 per cent of the
| ;
total food supply in Korea--by increasing the area of land |
cultivation, because most of the available land in the
nation is already in use for agricultural production.
However, if the production per hectare of land in
Korea were increased as much as that of the land in Japan, j
i
the agricultural production of Korea could be increased by |
i
as much as 90 per cent of the present level, measured in j
233
terms of monetary value.
j
I 3. This increase in the level of agricultural
i
|
|production would make it possible for the Korean economy
to meet the minimum food requirements of about a 35 million
population without incurring net food imports.
Given a population increase of 2.8 per cent per
annum, it would take a decade to reach a 35 million level
• i
1
of population. Therefore, the Korean agricultural sector, j
through the increase in the production per hectare of land i
comparable to that of land production in Japan, can solve |
the problem of shortages in the supply of food for at least|
ten years. |
I
4. It would require approximately $58 million in
capital expenditures in order to increase the level of the
food supply sufficiently to meet minimum food requirements !
!of the Korean population as of 1963. Thereafter, the
|annual capital expenditures must be increased, on the
!average, about $12 million every year, over and above the
I
j initial increase in the level of capital expenditures in
the amount of $58 million, in order to meet the minimum
food requirements of the increase in the population during I
j
jthe ten-year period, 1964-1973. ■
! i
! ' i
I Thus, the problem of shortages in the supply of I
I food during the decade would then be solved if the Korean
economy could find the way to finance the capital expendi
tures needed to increase the supply of food through an
increase in domestic food production.
5. The problem of financing the capital expendi
tures can be solved effectively when the supply of food is
increased to meet minimum food requirements of the popula
tion . j
I
The 22 per cent increase in the supply of food j
that cost $58 million would increase the potential capacity!
. j
i
of increasing the level of tax revenues as much as $277 !
]
million per annum through the increase in the level of realj
|
income. Thus, the 22 per cent increase in the supply of j
food would make it possible not only to finance the capitalj
expenditures of some $219 million per annum without deter-
! :
iorating the well being of any person.
j _ |
| This increase in the economy's capacity to finance
I *
an additional capital expenditure of some $219 million per
annum is, of course, far more than sufficient to meet the
annual increase in the level of capital expenditures in j
the amount of $12 million to meet the minimum food require-|
i
ments of the 2.8 per cent annual increase in population j
during the period 1964-1973. j
However, as in the case of the 22 per cent increase
in the supply of food to meet minimum food requirements of
the population as of 1963, the annual increase in the
supply of food to meet the minimum food requirements of the
increase in population during the period would itself
increase the potential level of tax revenues more than the
amount needed to finance the capital expenditures in the
amount of $12 million needed to increase the supply of
food.
Therefore, the increase in the supply of food to
meet minimum food requirements of the Korean population
during the period 1964-1973 would make it possible not
j
only to finance the cost of increasing the supply of food,
but also to finance an additional capital expenditure of
at least $219 million per annum.
6. After the decade 1964*1973, the expenditure on
i
I
I food must be increased by little more than $20 million
i
i
|every year to import food when and if domestic production
|can no longer be increased to meet the minimum food re-
! •
quirements of the population beyond the 35 million level.
The annual increase in the level of capital forma
tion in the amount of $219 million could increase the flow
of industrial output as much as $7(1 million and industrial
jemployment by 80,000 annually.
The annual increase in the level of industrial out
put of $70 million would make it possible to realize $20 !
million annual increase in the level of food supply, by
importation, to meet minimum food requirements of the
increase in population after the decade.
In short, the initial increase in the supply of
food by 22 per cent of the present level to meet minimum j
food requirements of the population as of 1963 would create ■
i
an economic power sufficient to enable the financing not !
only of the capital expenditures needed to increase the !
i
supply of food by that much, but also the additional ex- !
|
penditure needed to meet the food requirements of the
l
future increase in the population.
7. The only economic burden of increasing the
supply of food to meet the minimum food requirements of
/
the Korean population at the present as well as the future
level is, therefore, the financing of capital expenditures
in the amount of approximately $58 million needed to
realize the initial increase in the supply of food by 22 j
per cent of the present level. And this economic burden |
t
would be compensated quickly when the ensuing increase in j
I
|the supply of food made it possible to increase the j
potential tax revenues as much as $277 million within a
|
fiscal year.
i
| 8. There are several important roles that the gov
ernment of Korea can and should assume in the process of
increasing the supply of food.
Since the economic and financial position of the
Korean agricultural sector is too weak at the present time
to procure the agricultural capital inputs, the government i
i
must assume the major responsibility of procuring the !
capital inputs needed to increase the supply of food. j
The capital inputs procured by the government may !
be distributed to the farmer in such a way as not to
increase the money cost of production on the part of the ;
farmer since, in the short run, an increase in the agri
cultural production would not be likely to bring about any
appreciable increase in the money income of the farmers,
i
due to the nature of the demand for agricultural products
as a whole.
i
i ’
j Thus, the major part of the agricultural capital
i
inputs other than machinery may be distributed through the
market at the price determined by the market demand. The
i
distribution of the agricultural machinery may be made on j
\a time-rental basis, and the rental charge may be deter-
; mined by the demand for the input at that level of supply
jto be payable in agricultural products.
| The rent so received may be earmarked for distribu-
i ;
tion to the poor and for the release to the market during
the time of food "emergency1 * that regularly occurs during
the preharvest season.
The government must also collect taxes to finance
the capital expenditures needed not only to increase the
i
supply of food, but also to increase the flow of indus- j
trial output sufficiently so as to be able to import food j
in the event that domestic agricultural production can no j
|
longer be increased to meet the food requirements of the
I
increase in the population beyond the 35 million level.
Meanwhile, the government must attempt to minimize i
I •
j the economic burden of financing the initial capital expend-*
!iture by raising funds, as much as possible, from one of
;the sources that would least disturb the normal flow of
| ;
capital to the industrial sector of the economy, i.e.,
| foreign aid funds, borrowing from abroad, or domestic
"hidden" savings.
Finally, the government must execute the population!
! !
control plan to help to solve the long-run problem of the
food supply. |
To sum this up, the maximization of the economic
jeffects arising from the increase in the supply of food
i
i • ;
jwould make it possible to bring about a strong and modern
ized Korean agricultural sector as well as a strong indus
trial sector, and the actual realization of such a goal
requires the formulation as well as the execution of a
comprehensive government economic plan.
i
Conclusions
HI. I — - — -
I
I
The above analysis shows that there is definitely
a way to solve the problem of food shortages in Korea I
|
within the constraint of the Korean economy without deter- I
i
iorating the welfare of any person and/or the long-run
growth of the industrial sector of the economy.
In fact, the road to solve the problem of food
I shortages directly leads to the industrialization of the
i ;
|Korean economy. Thus, solving the problem of food short
ages does not only simply solve the problem of ''feeding"
the population. It would perhaps lead to an opening up
j 1
of most of the secrets associated with the economic devel- j
opment of Korea. !
Ironically, it was precisely the overeagemess on |
the part of the leaders of the nation to industrialize the !
backward economy of Korea that was primarily responsible
not only for the negligence in providing an adequate supply i
of food, but also for the frustration in the realization
i ■ ■
of the target of industrialization, primarily because of
the near starvation level of the food supply.
Therefore, industrialization without supplying
adequate food would conceivably be self-defeating so that
neither industrialization nor an adequate supply of food
!
could be attained. Meanwhile, the consequences are to
j
create a state of near starvation, as was shown in the j
previous analysis. j
As was pointed out, no economic problem is more
i
persistent and urgent than providing an adequate supply of
food and, if the solution to the problem of food shortages !
leads to industrialization itself, there is no compelling
|reason why an all-out effort must not be given to.the
!increase in the level of the food supply. It would "hit
!
;two birds with one stone.
"A country is poor because it is poor," said
\
Professor Nurkse, in describing the so-called "vicious j
i
circle of poverty" that attempts to explain the cause for j
|
the persistent poverty prevailing in the poor countries of j
the world.^
j
| At least in Korea, a more correct conclusion as to
the cause of the persistent poverty would be that Korea is
j
poor not because it is poor, but because it makes a wrong
diagnosis as to the cause for the persistent poorness and
subsequent wrong action to cure the cause.
I
I
i
I
j
i
\
1 1
Ragner Nurkse, Problems of Capital Formation in j
Underdeveloped Countries (Oxford: Basil Blackwell, 1953), }
pp. 4f.
!
BIBLIOGRAPHY
[
i
i
i
BIBLIOGRAPHY
Public Documents
Bank of Korea, The. Annual Economic Review. 1956. Seoul,
Korea: The Bank of Korea, 1956.
i
________ . Economic Statistics Yearbook. 1963. Seoul, j
Korea: The Bank of Korea, 1963.
j
i
Bureau of Statistics, Office of the Prime Minister. Japan !
Statistical Yearbook. 1965. Tokyo, Japan: The j
Government Printing Office, 1965. j
Economic Planning Board of Korea. Korea Statistical Year- j
book. 1964. Seoul, Korea: The Government Printing I
Office, 1964.
______. Quarterly Economic Research. IX, No. 2. Seoul,
| Korea: The Government Printing Office, 1964.
!
|Food and Agriculture Organization of the United Nations,
Forward Appraisal of FAQ Programs. 1959-1964.
Rome, Italy: 1959.
|_______ . Possibilities of Increasing World Food Produc-
| tion. Rome, Italy: 1963.
________ . Production Yearbook. Vol. XVII. Rome, Italy:
1963.
________. Technical Conversion Factors for Agricultural _
Commodities. Rome, Italy: 1960.
________ . Third World Food Survey. Rome, Italy: 1963.
243
■f
244
Korea Information Office. Korean Report. Vol V, No. 2.
Washington, D. C.: 1965.
United States Department of Agriculture. Composition of
Foods. Agriculture Handbook, No. 8. Washington,
D. C.: Agricultural Research Service, 1963.
________ . Food; The Yearbook of Agriculture. Washington,
D. C.: The Government Printing Office, 1959.
________. Food and Life: Yearbook of Agriculture. 1939.
Washington, D. C.: The Government Printing Office,
1939.
Books
Clark, Colin, and Haswell, Margaret. The Economics of
Subsistence Agriculture. New York: St. Martin's
Press, 1964.
Cottrell, Fred. Energy and Society. New York: McGraw-
Hill Book Co., 1955.
iEnke, Stephen. Economics for Development. Englewood
| Cliffs, N. J.: Prentice-Hall, Inc., 1963.
Grampp, William D., and Weiler, Emanuel T. Economic
Policy. 3rd ed.; Homewood, 111.: Richard D. Irwin,
Inc., 1961.
Harcrow, Harold G. Agricultural Policies of the United
States. New York: Prentice-Hall, Inc., 1953.
Higgins, Benjamin H. Economic Development. New York:
W. W. Norton & Co., 1959.
McConnell, Campbell R. Economics: Principles. Problems,
and Policies. New York: McGraw-Hill Book Co.,
1963.
Meier, Gerald M. and Baldwin, Robert E. Economic Develop
ment: Theory. History. Policy. New York: John
Wiley & Sons, Inc., 1957.
Myrdal, Gunnar. Beyond the Welfare State. New Haven:
Yale University Press, 1960.
________ . Rich Lands and Poor. New York: Harper & Broth-
! ers, 1957.
Nurkse, Ragner. Problems of Capital Formation in Under
developed Countries. Oxford: Basil Blackwell,
1953.
Okum, Bernard, and Richardson, Richard W. Studies in
Economic Development. New York: Holt, Rinehart
and Winston, 1961.
Rostow, W« W. The Stages of Economic Growth. New York:
Cambridge University Press, 1960.
Scrimshaw, Nevin S. Technology and Economic Development.
New York: Alfred A. Knopf, Inc.j 1963.
Watson, Donald S. Economic Policy. Boston, Mass.: Hough
ton Mifflin Co., 1960.
Journal Articles
Girshik, M. A., and Haavelmo, Trygve. "Statistical Analy
sis of the Demand for Food: Examples of Simultane
ous Estimation of Structural Equations," Econom-
etrica, XV (April, 1947), 79.
;Tintner, Gerhard. "Multiple Regressions for Systems of
Equations," Econometrica. XIV (January, 1946), 34.
Business Publications
International Harvester Co. Farm Catalog. 1965. Los
Angeles, California: 1965.
Sears, Roebuck and Co. Farm Catalog. 1965: Buyer's Guide.
1965. Chicago, 111.: 1965.

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Asset Metadata

Creator Kim, Sun Kee (author)

Core Title A Solution To The Problem Of Food Shortages In Korea

Degree Doctor of Philosophy

Degree Program Economics

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag Economics, Agricultural,OAI-PMH Harvest

Format dissertations (aat)

Language English

Contributor Digitized by ProQuest (provenance)

Advisor Elliott, John E. (committee chair), Anderson, William H. (committee member), Barker, Edward H. (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c18-193116

Unique identifier UC11359745

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Document Type Dissertation

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Rights Kim, Sun Kee

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the au...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus, Los Angeles, California 90089, USA