Then and now
The author is a professor at Korea University.
South Korea remains a poster child for all developing economies. It remains unrivalled in its miraculously fast transformation from one of the poorest countries to a developed economy. A World Bank-sponsored symposium held in Abidjan, Cote d’Ivoire or Ivory Coast, on June 14-15 was devoted to learning from the South Korean experience.
The country on the southern coast of West Africa aspires to learn everything from South Korea — the core industries, training systems, transportation, telecommunications and power infrastructure construction. It has a keen interest in the political leadership and economic planning that enabled the industrialization and economic advances Korea saw.
Until the early 1970s, the country’s per capita income was similar to that of South Korea as the world’s biggest producer of cocoa. But civil war and instability slowed industrialization, keeping per capita income stagnant at around $1,600.
A government official at the symposium showed particular interest in recent developments in South Korea. The official had accompanied President Alassane Ouattara on his visit to Seoul in 2014. He asked why all the presidents in Korea end up in jail and if corruption in Korea was as bad as in African states.
He also wondered what would happen to Samsung and asked if Korea will remain as rich and successful in the future given the internal conflicts and repeated political vendettas. I told him those concerns were exaggerated, but could not go on elaborating the upsides of Korea these days.
Korea’s economic policies are often mentioned by international organizations as risks to the economy. The income-led growth policy designed to raise base wages and increase workers’ incomes and ameliorate inequalities in distribution to stimulate spending and growth was pushed too fast without paying heed to labor productivity and economic conditions and ended up hurting employment.
The International Monetary Fund (IMF) noted that steep increases in the minimum wage had a negative impact on low-skilled and low-productivity workers. Korea’s minimum wage went up 16.4 percent in 2018 from the previous year to reach 58.6 percent against the median wage of the country, among the highest among Organization for Economic Cooperation and Development (OECD) countries.
The ratio in Japan was 42 percent. Compared with another 10.9 percent increase this year in Korea, Japan’s minimum wage went up by 5 percent, higher than the average 3 percent in past years. The increase was meant to compensate for a planned sales tax increase in October. There are voices in Japan calling for faster increases, but others warn of the impact on the small and mid-sized sector in regional areas with lower productivity. The Nikkei called South Korea an example of the negative consequences of overly steep minimum wage increases.
The Korean economy has expanded quantitatively through fast growth, but its industry and income structures have become imbalanced, resulting in wide social discrepancies. The problem is not limited to Korea.
All governments must combat inequalities through improvements in systems and adequate policies. President Moon Jae-in in this year’s New Year’s address claimed Korea had the worst economic and wealth inequalities in the world. He hurt the pride of the people and national dignity by citing misleading information. Hasty actions and overdramatization of the problem could end up causing greater pain to the people.
Korea’s international status has sharply risen together with its economic strength. Korea joins discussions with leaders of the United States, China, Japan and Europe on international affairs and argues for its national interests. Korea hosted the Group of 20 summit in 2010 for the first time in Asia.
It led the agenda on reining in trade protectionism and championing green growth. But it has failed to move beyond and trails behind the mid-tier group that includes India, Indonesia and Australia. The liberal government has devoted itself to ensuring peace on the Korean Peninsula, but no tangible results have been made. North Korea is close to becoming a nuclear arms state by buying time. Meanwhile, Korea’s relationship with Japan and other traditional allies has worsened.
Korea faces a recession and increased social conflict at home. On the external front, it must deal with nationalistic global trade powers and heightened geopolitical risks. Past wrongdoings must be punished and corrected.
But at the same time, the country needs to move forward. It is imperative for the leadership to show a national vision, adopt the best possible economic and social policies and unite the people towards a common goal.
Moon has promised a communicative and connected government, but he has not proved to be listening to others in politics and business. Korea will be envied by emerging economies when it continues to stay focused on economic, diplomatic and security challenges and improve living standards and its national status.
Translation by Korea JoongAng Daily staff
JoongAng Ilbo, June 27, Page 31