[Column] Crisis and opportunity in a grand transition

Cho Yoon-je
The author is a professor emeritus at Sogang University and a member of the Monetary Policy Board of the Bank of Korea.

Above all, the driving force behind transition is the emergence of new technology. The market participated in by scientists, businessmen and the public has led it. New technology opens up a new form of life, and the new form of life produces new desires and social conflicts. When new technology travels across border, it becomes a global conflict, and it will eventually become the driving force behind new changes of the world. Leaders are those who coordinate the conflicts to pave the way toward a new direction. And countries from around the world need bright leaders now more than ever. I had many thoughts after visiting South America recently. Argentina was the fifth largest economy in the world at the beginning of the 20th century, with a higher per capita income than the United States. Many people from Europe including Italy, Spain, France and Germany migrated to the land of opportunity, and most of today’s citizens of Argentina are their descendants. This country, however, recorded nine sovereign bankruptcies over the past five decades. Today, it is in a crisis where it has no idea where to start to restore internal and international confidence and resolve economic problems.

Starting from the late 1950s, the Argentine economy began to decline. Argentina is often remembered as a country that failed due to welfare populism called “Peronism,” but in my opinion, the current economic crisis of the country resulted from its failure to find a proper national policy direction during the transition period of global economy. Members of a community must live together. In a country where over 40 percent of its population is poor, the government must increase spending to improve the distribution structure in order to stabilize the society and unite the people. But the country failed to secure welfare funds when it was wealthy. The problem was that it increased welfare spending by relying on fiscal deficits and printing more money.

The more fundamental cause was that Argentina failed to transform its industrial structure when the world economy was shifting from the primary industry trades centered on farms, livestock and minerals to manufacturing. After the Bretton Woods system and General Agreement on Tariffs and Trade (GATT) were established in the mid-1950s, the global economy began changing its trade structure to focus on industrial goods through several rounds of tariff reduction negotiations. Korea, which had nothing but human resources, was able to take advantage of this opportunity to rise as a new exporter of manufactured goods.

Argentina and South America, despite their far more advantageous economic footing than Korea, failed to transform themselves into manufacturers. They relied on exports of primary industry products. This was the decisive reason why their national prestige has fallen. More broadly, we can say that the political chaos of the countries was responsible for their current situations as their national leaders failed to pay attention to the transition and were deterred by the resistance of their establishments.

How you responded to the transition period made a huge difference in national prestige over the past half a century. The world is now facing yet another grand turning point. The world is in a great turmoil of challenges and changes as human communication and lifestyle were largely changed by the digital revolution; as the West and East are rebalancing their power; as the new Cold War era has opened and U.S.-China conflict is growing; as production methods and industrial structures change due to climate change; and as population structure has changed.

In this time of massive transition, Korea is facing crisis and opportunity at the same time. If it fails to change, it will fall into a crisis. But the time can actually offer a good opportunity for a second leap. The country has superior infrastructure for the era of digital revolution and it is also capable of playing an important role for the convergence of civilizations of the East and West. It is a strong power in semiconductors and the internet. It has sent the highest number of students to the U.S. to study abroad. While it advanced Neo-Confucianism more than China, it has an overwhelmingly larger Protestant population than any another major Asian country and absorbed Western systems and cultures.

Although its depth of independent knowledge may not be deep enough, it can play a significant role in the process of Eastern and Western civilizations’ convergence and rebalance of powers between the East and West. The tragedies the Korean people have suffered during the first half of the 20th century served as the driving force for the country’s economic miracle in the second half of the century and as the soil of producing the K-culture appreciated by the world today. If we work properly, Korea can rise as a central country in the international community.

Will Korea seize this opportunity or let our future generation witness a fallen national status after wasting this time with perennial internal divisions and conflicts? Establishing integration and cooperation, rational decision-making in all areas of our society and fierce and fair competition to use our potential fully is the most important task of our time.

Translation by the Korea JoongAng Daily staff.