Japanese colonialism and Korean development: an institutional perspective

The impressive performance of South Korea’s economy since the 1960’s has drawn the attention of development and economic history scholars alike. As Kohli (1994) notes and is the case in other places of the World that have dealt with foreign conquerors, colonial legacy is among the causes often assessed as possible explanations of divergent income levels. In particular, and after Acemoglu et. al. (2001), the nature of institutions left by the colonizers has been found to have major impacts in the development paths of former colonies. In this tradition and for the case of Chōsen, this essay aims to address the question of the kind of colonial institutional heritage left by the colonizers and its implications for later economic development in Korea. To accomplish that and after a brief literature review, this work analyzes historical and social relations that arose under Japanese rule in Korean territory from 1910 to 1945 and the type of interactions they led to, as well as their relevance for the later development of capitalism in South Korea. The emergence of non-extractive relations and their persistence after the violent 1950’s allow for the conclusion of a Nippon ancestry in one of East Asia’s economic success stories.

Colonialism, economic development and Chōsen

According to North (1981), institutions can explain large differences in incomes across countries: strong property rights, rule of law and non-distortionary policies lead to higher investment in physical and human capital, as well as a more efficient use of those production factors. Under this framework, Acemoglu et. al (2001) rationalize the different paths followed by former colonies, even when they were colonized by the same colonizer –for instance, French and English territories in North America vis-à-vis their counterparts in Africa. In particular, it is argued that there were different types of colonization policies across territories that led to different kinds of interactions: on one side and in places such as Latin America and India, European powers set up extractive states, characterized by weak property rights and lack of protection against government expropriation, because the main objective of those colonial missions was to transfer as much resources as possible to the metropolis. On the other side and in countries like the United States and Australia, Europeans migrated massively and established settlements where they tried to replicate their homeland inclusive relations, with their strong emphasis on private property and limits to government power. The either extractive or inclusive nature of the colonization was, in turn, influenced by the feasibility of settlements: places where the disease environment was favorable to colonizers were more likely to witness the development of European styled institutions. Furthermore, those power arrays and rules of the game are likely to persist as local elites –after independence and once in control of power- usually do not have incentives to alter the nature of political arrangements that govern interactions between individuals and organizations[1]. Summarizing, the set of relations briefly outlined above implies that current institutions –essential to current performance, according to North- are closely related to their early counterparts due to persistence. These, in turn, were the result of very particular colonizing strategies that were determined by the prospect of long-term settlements. Thus, colonial institutional legacies are central for discussions regarding economic development in the context of colonization[2].

Perhaps following this debate and the later rise of the South Korean economy, the Japanese involvement in Korea has been object of debate among scholars. Narratives of exploitation, such as in Choi (1970), underline the parasitic nature of colonial relations and the exploitive nature of the Japanese presence. Others, as in Haggard et. al. (1997), suggests its relative irrelevance for later economic growth as important discontinuities –namely, the violent events of the 1950’s- imply that the success that started in the 1960’s can not be explained by the events that took place between 1910 and 1945. Some research, as that of Buzo (2002), recognizes the colonizer’s record in terms of quantitative economic growth. Using the theoretical framework provided by Acemoglu et. al (2001), this essay aims to deepen this discussion by exploring the nature of the Japanese involvement in Korea and its implications for one of Asia’s economic growth miracles.

The occupation

As Schmid (2002) notes and following years of indirect involvement in Korean affairs, Japan formally annexed Korea in the summer of 1910. Its rule, which lasted until 1945, had multiple facets and effects that continue to be object of debate[3]. Among those and following the discussion above, the nature of the relations that emerged under Japanese occupation is of particular interest to this inquiry. This question has no immediate answer as, opposed to the majority of cases of former European colonies and as Delissen (2000) notes, Chōsen was neither a conventional settlement nor a command-only territory: even if the number of settlers and migrants from Nippon was substantially higher than in any contemporary colony in Asia, it lagged behind comparable figures for other settlement imperial enterprises. For instance, the Japanese individuals living in the peninsula –excluding military personnel– oscillated around 3% of the total population in the 1940’s while the comparable figures for other territories under Dutch or French rule in Asia never exceeded 0.4%[4]. Thus, more definitive conclusions regarding the nature of the Japanese institutional heritage demand a deeper study of other relations that emerged between 1910 and 1945.

Several reasons point out to a long-term interest of Japan in Korea. Among those –and perhaps the most recurrent in the reviewed literature- is its high strategic value in the context of Japan’s struggle for territorial integrity and Western imperialism in Asia. As Buzo (2002) and Pyle (2007) underline, the relevance of the Korean peninsula for the Nippon strategic planners can be explained by its geographical location and proximity to the Japanese mainland[5]. In particular, the possibility that foreign powers set foot in Korea was a particular source of concern for Japanese elites as, they feared, this could jeopardize their country’s independence by providing a base for attacks against Japan. As McClain (2002) points out, this anxiety was exacerbated by Korea’s modernization program relative lack of success as it implied that Koreans, by themselves, would be unable to deal successfully with the alien threat. The conjugation of these elements, as McClain and Buzo suggest, show the structural relevance of the Korean affaire for Japan and, as consequence, the long-term nature of its importance in the Nippon struggle to remain an independent country. Thus and as per its strategic importance, Korea was a well-rooted and long-term matter of unease for Japan.

Perhaps associated with the rise of the imperialist mentalité among Nippon elites that McClain (2002) claims, the notion that Korea could become an integral part of Japan started to emerge. As Buzo (2002) and Kohli (1994) comment, Tokyo intended that the peninsula –in the long run- would cease to be a colony and become a territory ruled as another common prefecture. This aspiration led to the application of forced assimilation policies that aimed to demonstrate the historical inevitability of the annexation and extinct Korea as a separated, identifiable and autonomous nation. The strategies the Japanese used to culturally integrate their subjects included the mandatory surrender of Korean surnames and the elimination of Korean language classes. However, and as disturbing as it can be, the envisioned integration to the mainland implied that the kind of institutions implemented would be compatible with those previously existing in Japan. As both Kohli (1994) and Buzo suggest, the modernization effort of Korea under Japanese rule was based on the highly successful experience of the Meiji reform after the overthrow of the Tokugawa bakufu. This development, in the context of colonial institutional heritage discussion, is relevant as it recalls process followed by European colonizers in places where inclusive or non-extractive relations emerged. As Acemoglu et. Al (2001) underline, Neo-Europes - the colonies where many Old World individuals migrated and settled and that include, among others, the United States, Canada and Australia- were characterized by the attempt to replicate European institutions such as private property and checks against government power in the economy. In Korea, and as per its structural relevance and long-term nature of the Japanese commitment, the stage for similar developments was just set.

If Japan’s long term pledge to and expectation of permanent rule in the Korean peninsula paved the way for the emergence of non-extractive relations, what finally determined the inclusive nature of the institutional relations that arose in Korea was the notion that the new colony would have to pay its own way: As McClain and Buzo (2002) suggest, at the time of annexation, the fiscal position of the Japanese government was relatively weak as it had to deal with the debts of previous wars. Contrary to other countries in Latin America and Africa, and as Aviles (2009) underlines, Korea had no immediate mean of paying its own way as it lacked major natural resources or relevant tax income that could finance its modernization. As a result, a way to pay for the Korean transformation had to be found. In particular and as Seth (2006) emphasizes, the first step in this direction was the implementation of an extensive land survey that would detail individual holdings and be the base for the enactment of a land tax that eventually would pay for the public administration and the provision of public goods such as infrastructure and education. As Yoo & Steckel (2010) suggests, in this process, the colonial state not only developed managerial capacities[6] and the ability to expand itself efficiently but also defined clearly private property in Korea’s most relevant production factor by the time: land. Also, and as Buzo points out, increased revenues allowed for the creation of a Police Force whose function would not be limited to essential law enforcement -as it extended also to the delivery of essential social services such as education, health and flood control. These developments -with their strong emphasis in property rights, rule of law and provision of public goods- allow for an inclusive characterization of the institutions that emerged under Japanese rule in Korea.

This non-extractive nature of the colonial heritage led to concrete improvements and relevant developments. For instance, the establishment of private property and the rule of law, as Kohli (1994) and Yoo & Steckel (2010) suggest, paved the way for the development of the financial sector in Korea as it improved the enforcement of contracts and suddenly endowed Korean farmers with an asset they could pledge as collateral when applying for a loan to, say, build an irrigation canal. Also, as Kohli and Seth (2006) underline, the reforms developed and acquired capacities under Japanese rule transformed the government from a predatory, highly personalistic, unpredictable and weak polity to a Meiji-inspired, efficient, professional and dense bureaucracy[7] that was able to lead social and economic transformations. In particular and with the implementation support of the Police, the colonial administration significantly improved the provision of public goods and social services. As Buzo (2002), Pratt (2006) and Seth (2006) show, railroad networks expanded substantially and the number of children in schools rose from roughly 10,000 to about 1.7 million between 1910 and 1941. Furthermore, informal institutions such as cooperative arrangements between corporations and the public sector started to emerge in this period of time. As Kohli affirms, these developments would lay the basis for South Korea’s developmental state –one of the key structures associated with the later economic rise of South Korea.

In the argument briefly outlined at the beginning of this essay, institutional persistence is relevant as it links current institutions with their early colonial counterparts. Usually, this inertia is explained by political economy equilibrium where elites are either reluctant or unable to alter power arrangements. In the case of South Korea, this is not immediately clear as the occurrence of some events –war, the American occupation, etc.- that may have led to relevant discontinuities that would imply, to some degree and as Haggard et. al. (1997) point out, the irrelevance of the colonial heritage to the later success of the South Korean economy. However, this concern may be overstated as structures and capacities that emerged between 1910 and 1945 remained relatively intact after the violent developments of the 1950’s: as Kohli (1994) and Cumings (1984) argue, a later American occupation had no choice but to keep the prevalent institutional legacy as different choices would have led to massive nationalist uprisings. Thus, it was Japan’s creation that persisted later in history.


Institutions are central to economic performance. In the context of colonization, the institutional heritage left by the colonizers is of capital relevance as early institutions determine their later counterparts due to persistence. In particular, the either extractive or inclusive nature of the colonial legacy is essential to understand income paths of former colonies. In the Japanese intervention in Korea, inclusive interactions emerged as a result of its strategic relevance, expectation of permanent rule and full integration to Japan and –in particular- the self-financing approach to colonization in the context of a relatively poorly endowed country. These interactions led to the emergence of private property rights, rule of law and a state capable of providing public goods such as education and infrastructure. Even after the ferocious occurrences of the 1950’s in the Korean peninsula, those institutions persisted and became the building blocks of the developmental state. Further narratives concerned with the Japanese colonial legacy in Korea should not leave this behind.


Acemoglu, D., Johnson, S., & Robinson, J. A. (2001). The Colonial Origins of Comparative Development: An Empirical Investigation. American Economic Review, 91(5), 1369-1401. doi:10.1257/aer.91.5.1369

Aviles, A. (2009). Impacts of Japanese colonialism on state and economic development in Korea and Taiwan, and its implications for democracy. (Unpublished master's thesis). Naval Postgraduate School.

Besley, T., & Persson, T. (2009). The Origins of State Capacity: Property Rights, Taxation, and Politics. American Economic Review, 99(4), 1218-1244. doi:10.1257/aer.99.4.1218

Buzo, A. (2002). The making of modern Korea. London: Routledge.

Choi, H. (1969). The Strengthening of the Economic Domination by Japanese Colonialism (1932-1945): Statistical Analysis. Yonse Taehakkyo Taehakwon, 349-378.

Cumings, A. (1984). The Japanese colonial empire: 1895-1945 (pp. 478-496) (R. H. Myers & J. Zhen, Eds.). Princeton, NJ: Princeton University Press.

Delissen, A. (2000). Denied and besieged: The Japanese community of Korea, 1876–1945. In R. A. Bickers & C. Henriot (Eds.), New frontiers: Imperialism's new communities in East Asia, 1842-1953. Manchester: Manchester University Press.

Haggard, S., Kang, D., & Moon, C. (1997). Japanese colonialism and Korean development: A critique. World Development, 25(6), 867-881. doi:10.1016/S0305-750X(97)00012-0

Kohli, A. (1994). Where do high growth political economies come from? The Japanese lineage of Korea's “developmental state”. World Development, 22(9), 1269-1293. doi:10.1016/0305-750X(94)90004-3

McClain, J. L. (2002). Japan, a modern history. New York, NY: W.W. Norton & Co.

North, D. C. (1981). Structure and change in economic history. New York: Norton.

Pratt, K. L. (2006). Everlasting flower: A history of Korea. London: Reaktion.

Pyle, K. B. (2007). Japan rising: The resurgence of Japanese power and purpose. New York: Public Affairs.

Schmid, A. (2002). Korea Between Empires. New York: Columbia University Press.

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[1] Acemoglu et. Al. (2001) argue that if elites inherit extractive institutions, they have incentives to become the new exploiters. When the heritage is inclusive and property rights enforcements are on place, it may not pay for elites to switch to extractive institutions as the costs of inclusive institutions have been already assumed by the colonial powers. 

[2] The empirical exercise developed in Acemoglu et. Al. (2001) backs this claim as, once institutions are accounted for, developing economies are not poorer than their developed counterparts. 

[3] As Snyder (2014) points out, episodes -such as the confort woman- that took place under Japanese rule continue to affect today’s Japan-Korea bilateral relation. 

[4] In a similar note, 3% is a small number when compared with the figures of Australia and New Zealand, where migrants and settlers became a major part of the total population. 

[5] According to Buzo (2002), Korea was in Prime Minister Yamagata’s strategic advantage line. This implies that by the late 1880’s, the Korean peninsula was already among the primary concerns for Japan. As a result Japanese involvement in Korea did not began with the annexation but can be traced back to earlier times. 

[6] The link between taxation, development of capacities and state building is in Besley & Persson (2009). Usually, taxation demands the creation of public administration skills –registries, territorial knowledge and mapping, etc.- that lead to higher capacities. 

[7] Figures in Seth (2006) show that there was roughly one Police officer for each 800 households, while the total amount of bureaucrats reached 87,552 in 1937. Comparatively and in per capita terms, there were as much as 15 times more colonial officials in Korea than in French Indochina.

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