relatively slow between 1918 and 1931, increasing rapidly only in the later
1930s. They also question the legacy of this for longer-term industrialization in
South Korea as colonial industry was dominated by the Japanese. In 1941 the
Japanese owned nearly 60 per cent of all firms in Korea and accounted for over
90 per cent of all paid-up capital. These figures were even higher in heavy and
more technologically advanced sectors. The Japanese, for example, had 98 per
cent of paid-up capital in the metal industry and 99 per cent in the chemical
industry. The Japanese even dominated in light manufacturing, having 93 per
cent of paid-up capital in food, 80.3 per cent in rice mills and 85.4 per cent in
textiles. Korean firms tended to be small, and their average size even declined
during the colonial period. For the top ten or fifty (South) Korean business
groups in 1983 the most important start-up period was between 1945 and 1960
(Haggard et al. 1997:876). Colonial industrialization made little impact on
employment. In 1940 only 5.4 per cent of workers were employed in manufac-
turing. By contrast economic growth from the 1960s was based on large,
Korean-owned firms generating rapid increases in employment. In addition the
areas that became North Korea housed the bulk of heavy industry. Finally, as
was the case with agriculture, much of this industry was destroyed. According
to one estimate total industrial output fell by 80 per cent between 1940 and
1948 and between 1945 and 1949 industrial employment declined by 60 per
cent (Haggard et al.,1997). But even without physical production facilities it
is easier (as Germany and Japan found) to rebuild after a war using an accumu-
lated body of modern skills, education and experience than to make an original
shift from agriculture to industry. The South Korean elite were among the very
few in the developing world for whom a developmental state model and indus-
trial skills were readily available from their own historical past (Kohli, 1997).
From Marx to neo-colonialism: a changing debate
The rich tradition of thinking relating to colonialism that has come from a
Marxist perspective includes works by Marx, Lenin, and the dependency
scholars Baran and Sweezy, and Warren.
Marx famously argued that Asiatic society was based on a village economy
and a hereditary division of labour, and lacked private property in land. Asiatic
geography required large-scale irrigation works to create a flourishing agricul-
ture and this, he argued, strengthened the powers of central government (the
only organization capable of mobilizing and managing such a large investment
project). The resulting strong state was then able to drain a surplus from agri-
culture. Chapter 7, for example, gives an estimate by Maddison (1971) that the
Mughal Indian state raised taxes on agriculture and land equivalent to about a
third or more of gross crop production, representing about 15–18 per cent of
GDP which was large by historical European standards. The argument here is
that geography determines the nature of institutions, which echoes the
Acemoglu et al.thesis discussed earlier in this chapter. What Marx called the
194 Patterns and Determinants of Economic Growth