In addition to its many important bilateral relationships, South Korean power has also grown in its involvement and influence in international organizations and multilateral cooperation. As South Korea has grown, so too have the interests that it has at stake in multilateral venues as well as the tools to achieve its goals in these forums. Moreover, South Korean economic growth, aided over the years by large amounts of international assistance, created a sense of responsibility among its leaders and the public to play a larger role in maintaining international peace and security. In a 2011 address before the UN General Assembly, President Lee Myung-bak maintained:

The South Korean government is thus involved in numerous multilateral organizations and is determined to be a leader in UN Peacekeeping Operations (PKO). Currently, Seoul participates in 8 UN PKOs along with several other multilateral operations to bring security and development to troubled domains. South Korea also became a member of the OECD’s Development Assistance Committee (DAC) in 2010 to help less developed countries reduce poverty and assist development.

The story of South Korea transforming itself from an aid recipient to a donor shows how economic success can lead to increased international involvement and influence in international organizations. This chapter examines South Korea’s increasing involvement and influence in global multilateral institutions and the role its economic development played in these efforts by examining three specific areas: contributions to foreign aid and development assistance; involvement in the United Nations and international peacekeeping operations; and participation in Combined Task Force (CTF) 151, the multilateral counter-piracy operation in the Gulf of Aden.

Since the division of the country, the relationship between the two Koreas has fluctuated. In general, the inter-Korean relationship can be divided into four different periods based on the characteristics of the relationship: (1) antagonistic period: from the Syngman Rhee administration to the Chun Doo-hwan government, 1948–1987; (2) period of coexistence: the Roh Tae-woo and the Kim Young-sam administrations, 1988–1997; (3) engagement policy period: the Kim Dae-jung and Roh Moo-hyun administrations, 1998–2007; and (4) conditional engagement policy period: the Lee Myung-bak and the Park Geun-hye administrations, 2008 to present.

Four factors have affected South Korea’s policy toward North Korea: economic development, democratization in South Korea, the end of the Cold War, and North Korea’s nuclear weapons program. Among them, South Korea’s economic development played a key role in changing its approach toward North Korea because economic development led to democratization, which gave way to political elite changes and subsequent policy changes. Furthermore, democratically elected leaders implemented their North Korean policy with confidence thanks to political legitimacy and economic superiority. In this chapter, we study the effects of economic development on South Korea’s policy toward North Korea.

According to legend, an Indian princess Suriratna from Ayodhya in northern India sailed in the first century AD to Gaya, an ancient Korean kingdom, and in AD 48 married King Kim Suro, the monarch of Gaya. She had left India at the urging of her father who had a dream that the King was unmarried and searching for a wife. Suriratna did indeed marry the King and took the name Heo Hwang-ok while bearing the King several sons, two of whom kept her family name. Many Koreans trace their lineage back to Queen Heo and King Kim, including one of the co-authors of this book.

Despite the long history of close relations this love story might suggest, modern ties between South Korea and India have been relatively modest. During most of the Cold War, Seoul and New Delhi viewed each other with a fair degree of suspicion. However, in the early 1990s ties between them began to grow, and while having a great deal of promise, particularly on the economic front, at this point in time lack depth. In the political and security realm, both sides have some clear common interests, but it is uncertain how deep these ties can grow beyond the usual surface-level statements of cooperation and mutual concerns. Yet, the potential for greater cooperation remains.

South Korea’s economic development has had a strong impact on its relations with the major powers in the international community. Equally transformative has been the effect on Seoul’s relations with the developing world. South Korea was once a member of this group, but through its policies, hard work, and ability to adapt, it has been able to climb into the ranks of the developed OECD member states. As a rising middle power with few natural resources, South Korea has sought closer ties with the resource-rich countries of the developing world, along with increased market access for its manufactured goods and world-class high-tech products.

South Korea has also done much to assist developing countries in working toward sustainable development by expanding its foreign aid programs while organizing and participating in various regional forums to help promote development. The developing world has looked to South Korea as an economic role model to help chart a course for further growth. Indeed, many in the region view South Korea as less predatory and a force to balance the big outside economic players – China, the United States, and Japan – that seek market access and influence. Having once been a poor country that struggled to develop, South Korea is now an important player and sought-after economic and security partner in the developing world.

South Korea’s most important bilateral relationship with regard to security and economics is with the United States. When the ROK–US alliance began formally after the Korean War, the relationship was a highly asymmetrical patron–client one. In the years that followed, Washington was the primary guarantor of ROK security and sponsor of its economy. In turn, South Korea had a difficult time opposing US wishes as Washington could wield heavy economic and military leverage to coerce Seoul’s compliance.

As South Korea’s economy developed, so too did its power and position within the alliance. South Korea developed a formidable military that assumed a greater share of its own defense while also contributing to US and international security operations. The ROK economy ended its dependence on US economic and military aid, becoming a major economic power in its own right. Seoul was able to push the limits of the alliance for greater freedom of movement and the ability to pursue ROK interests as its leaders saw them.

In the 1950s South Korea was one of the poorest countries in the world, with a per capita GNP of approximately $60 and about half of its government budget coming from US aid. Five decades later, South Korea is an economic powerhouse with the twelfth largest economy in the world at $1.156 trillion. In 1996 South Korea joined the Organisation for Economic Co-operation and Development (OECD), and it became a member of the prestigious OECD Development Assistance Committee (DAC) in 2009. South Korea is the only country in the world that has transformed itself from an aid recipient to an international donor.

The success story of South Korea has attracted significant scholarly attention in political science and economics alike. The majority of studies have focused on how South Korea achieved such fast economic development and what factors drove its phenomenal growth. Another body of literature has explored the relationship between economic development and democratization in South Korea. Yet, despite the plethora of studies, few have investigated how South Korea’s economic development has affected its foreign policy and international relations. Thus, in this book we have developed a theory to explain the relationship between economic development and foreign policy and applied that to the South Korean case.

After Korea was divided into two in 1945, the Soviet Union was North Korea’s patron throughout the Cold War period. China also became North Korea’s close ally after a Chinese communist regime was established in 1949. When the Cold War ended, however, the relationship between South Korea and these two countries started changing, largely because South Korea’s economy rose to the twelfth largest in the world, making the ROK an attractive economic partner even at the expense of their ties with Pyongyang.

In 1990 Russia established normal relations with South Korea. Trade between the two countries increased annually and reached $22 billion in 2012. The political relationship has also improved. After normalization, South Korea provided $1.5 billion in loans to the Soviet Union in 1991 and later another $1.5 billion to Russia. As part of the loan repayment, Russia, the successor to the Soviet Union, provided weapons systems to South Korea. This arms transaction is unique because it was done between two former adversaries without commercial benefits or ideological solidarity, the typical motives of an arms transaction. This relationship was possible thanks to South Korea’s economic prosperity.

When asking Japanese teens about their favorite music, answers will often include the K-pop music phenomenon of all-girl or all-boy bands from South Korea. In addition, some of the most watched television shows in Japan are Korean dramas such as Winter Sonata and Love Rain. Yet despite this element of cultural affinity, deep feelings of distrust and animosity permeate the ties of these two countries separated by a body of water whose name, East Sea or Sea of Japan, evokes sharp disagreement. According to a joint survey conducted in April 2013 by a South Korean and a Japanese newspaper, 78 percent of South Koreans believed relations were bad between the two countries, an increase of 14 points since the survey was last taken in 2011. Japanese feelings for South Korea had deteriorated even further; 71 percent thought relations were bad up from 27 percent in 2011.

South Korea and Japan have a long relationship that goes back centuries but it has often been a difficult one. On several occasions, Japan invaded Korea either to conquer the peninsula or as a thoroughfare to reach China. From 1910 to 1945, Japan occupied Korea, a brutal period in Korea’s history that continues to form the backdrop for a relationship that is often strained. South Korea and Japan normalized relations in 1965 during the early years of the ROK economic takeoff, and economic ties have grown significantly. Furthermore, both are democracies and share important security interests, in part as treaty allies with the United States. Yet despite these commonalities, the relationship has remained delicate due largely to the legacies of history, and the ongoing dispute over the islands Koreans refer to as Dokdo and the Japanese call Takeshima. Relations hit a particular low point in fall 2012 and have shown few signs of improvement.

The relationship between politics and economics is one of the oldest issues studied in both political science and economics. It has been widely examined and the general conclusion is that they have a significant impact on each other. For instance, the modernization perspective maintains that economic development usually leads to the transition to democracy, although people will also tolerate authoritarian governments in exchange for economic prosperity. At the same time, the types of government/regime have different implications for economic growth. Some scholars argue that democracy may be beneficial for economic growth thanks to its political stability and protection of individual property rights, which in turn enhance private investment. Others contend that democracy is potentially harmful because of the likely activity of interest groups who prioritize their parochial interests ahead of the national interest. In addition politics influences the economy through resource allocation, including tax policies, defense budgets, social welfare programs, and stock market performance. Economic performance also affects voting behavior, elections, and foreign policy. In fact, economic behavior, such as increased trade and foreign direct investment, is believed to be able to reduce the possibility of international conflict. Thus, the intertwined relationship between politics and economics is well established in the literature.

However, previous studies on the politics–economics nexus have focused on the relationship between economic development and democratization, the defense–growth connection, the link between regime types and economic performance, and the association between the economy and voting behavior. As a result, there is a void in the literature when it comes to the question of how economic development affects a country’s foreign relations, with the exception of studies on the relationship between trade and interstate conflict. Economic development can influence a country’s foreign policy behavior in a number of ways because as a nation develops its economy, changes in domestic politics occur and citizens expect more from the government.

In this book we seek to develop a theory that explains how economic development affects a state’s power and foreign policy in international relations. We begin here by laying out that theory with a description of the potential changes that come to foreign policy as states develop their economies. Next, this chapter places the theory in the context of previous literature on economic development, political modernization, democratization, and foreign policy. While we use South Korea as a case study to examine the theoretical implications of the nexus between economic development and foreign policy change, this study is also applicable to other rising economic powers.

A theory of economic development and foreign policy change

Economic development can influence a country’s foreign policy behavior in a number of ways because as a nation develops its economy, changes in domestic politics occur and citizens expect more from the government. Economic development often leads to the transition to democracy, which occurs through a number of channels, including better education, industrialization, and a growing middle class. Democratization brings in elite changes. The new elites may interpret national interests differently, and make policy changes, such as shifting the focus in foreign policy, and changing relations with other states may follow, reflecting the new assessment of national interests. Thus, the transformation of political elites and type of government often leads to changes in a country’s foreign policy and international relations.

The relationship between South Korea and Europe had been limited until the 1990s. To Europeans, South Korea was merely a poor country in East Asia. With scarce natural resources and underdeveloped industries, South Korea did not have much to offer and European countries did not see the need to expand their relations with South Korea. As a result, in the 1960s South Korea’s trade with Europe was only about 5 percent of its total trade volume and political contact between them was minimal.

However, economic development in South Korea along with fast growth of the other Asian tigers, Taiwan, Hong Kong, and Singapore, changed Europe’s view of East Asia. As South Korea became an economic powerhouse in Asia, economic exchanges between South Korea and Europe gradually increased. Political contact between South Korea and Europe also began to increase in the 1980s. For example, in 1983, a ministerial meeting between South Korea’s Foreign Minister and the European Community (EC) Executive Committee was held for the first time. Since then, the two sides have met annually ever since the European Union (EU) was created.