Friday, December 07, 2012

Tale of a Tiger

The story of the South Korean economy is a rather remarkable one. It terms of size, it ranks fifteenth in the world. The country of 56 million people is the seventh largest exporter and the tenth largest importer of goods. South Korea dominates the shipping building industry and has become a major player in consumer electronics and automobiles.

There’s a lot of angst expressed in the United States about how “everything is made in China,” but how many Americans could name a single Chinese consumer brand name? Meanwhile, Kia, Hyundai, LG, and Samsung are global brands known for their quality. We have a Kia minivan, an LG television in our living room, and a Samsung TV downstairs. If China-with twenty-five times the population-ever comes close to South Korea’s levels of design and innovation then we might actually have something to worry about.

The amazing thing about South Korea’s economic emergence is that they could have had plenty of excuses for not developing. From 1910 until 1945, Korea was essentially a colony of Japan. When the Korean War ended in 1953, the country was devastated, destitute, and divided. And ever since then, the South has had to deal with an almost constant threat from the North and endured a variety of outright attacks and acts of intimidation. Yet here South Korea is today, successful, affluent, and prosperous.

Other than a military conflict with the North, the biggest threat to the future prosperity of South Korea is demographics. They have one of the world’s lowest birth rates and are at risk of falling into the same type of no growth stagnation that Japan has.

During my recent visit to Seoul, a Korean colleague asked me how many children I had. She was surprised when I told her that I had three sons. She explained that in Korea, “only the rich can have three children” because of the high costs of raising and educating them. This emphasis on the importance of education is no doubt one of the reasons that South Korean has become the economic tiger that is today. But if the cost of that education is also one of the reasons that South Koreans are having fewer children, it could result in a muted roar.