After
writing so much about travelling, the time has come to take a closer look at
South Korea – but this time from an economic perspective. Thus, graphs will replace
pictures and facts impressions, but it is in my opinion a really impressive
history that South Korea has to show. And as many Western are not aware of many
details, I’d like to provide some insights.
As most
people know, Korea has been in a war from 1950 until 1953. Actually, the war is still - 60 years later - not over yet as North Korea and South Korea have only signed
an armistice agreement but not a peace treaty.
As in most
cases, the country that just suffered a war is pretty much at the bottom and
has to start from there again, which means that there is no infrastructure
available, people live in poverty and due to the many casualties during the war,
the (male) workforce has also decreased. It was exactly like that for South Korea as
well. For the next 20 years North Korea was even in a better position and was
developing faster and more successfully than the South – a fact that seems a
bit surprising from today’s perspective – as most of the natural resources were
up in the North and thus, lucrative industries like mining were located there.
The South on the other side was mainly active in agriculture.
One of the most
crucial events and the starting point in South Korea’s successful economic
development was the election of President Park in 1961. Under his
dictatorship-like regime, the first 5-year economic development plans were
established, the bank nationalized and Chaebols, the large Korean company
structures, founded. This ‘iron triangle’ consisting of the government, the
banks and the Chaebols made the successful development possible. The government
was focusing on several industries during each of the 5-year plans. First the
shoe and textile industry, later on the chemical, steel, the automobile or
shipbuilding industry and then of course also the semi-conductor business since
the 90s. The Chaebols played thereby a crucial role: Chaebols are large
conglomerates of highly diversified businesses and the most famous companies in
South Korea. Examples therefore are Samsung, SK, LG or Hyundai. These Chaebols
are family-owned and originated from the strong connections between their
founders and the government in the early postwar period and their growth was
based on monopoly-like positions in the market. It is clear that the families
behind the big Chaebols are both, very rich but also very powerful in South
Koreas economy. To provide a little example of how big and important these
Chaebols for South Korea’s economy are, here some figures: The 10 biggest
Chaebols today are responsible for approx. 76% of South Korea’s total GDP! (Ich
glaube, die WeKo in der Schweiz hätte da noch ein Wörtchen einzulegen bei
solchen Kräfteverhältnissen!)
But let’s
have a look into South Korea’s economic development in the last 50 years.
Below, you see the development of the GDP per capita in USD, measured in price
power parity (PPP):
As one can
see, the growth is very impressive, even though there were two short periods of
a declining GDP per capita during the Asian financial crisis in 1997 and the
US/European financial crisis in 2007/2008.
Now, what’s
the source or secret for this very impressive development and achievement that
is also known as ‘the miracle on Han river’? On the one hand, Confucian
roots can be seen as one part of the fundament this miracle was built up on.
Confucian rules praise endurance and hard working – two skills that were
definitely needed to build up a country, as it was the case after the war. On
the other hand, K-Strategy can explain the success of the Korean firms,
mainly the big Chaebols, when competing on the global markets, according to a
guest lecture we had from a Korean Professor here at SNU. K-Strategy consists
of four elements that are the source for Korean firms' success: Agility (speed
and precision), Benchmarking (global standard and imitation), Convergence
(mixing and synergy-creation) as well as Dedication (diligence and goal-orientation).
After living in Korea for almost four months now and with a little insight
into the Korean mindset and corporate world, I can definitely confirm that
there is a lot of truth in these four elements. For example speed: ‘Pali, pali’
– apparently one of the most often used words by Koreans meaning ‘fast, fast’
explains the fast pace and short product cycles in Korea’s capital
pretty well. Koreans strive for having always the newest gadget and speed is
very crucial. Furthermore, dedication and also the described endurance become
visible when looking at South Korea’s working hours, as they are the highest
among all OECD countries. In addition, dedication is also visible in my daily
life at SNU, as Korean students put a lot of effort into their education – but
hey, Swiss efficiency and effectiveness are two factors that should not be
undervalued ;)
I’m totally
aware that this was just a very short outline about South Korea’s economic
development. However, I hope it was enough to provide you with an idea on which
factors this development is based on and why it is interesting as a business
student to live in such a country. However, this successful development was not
something that was for free and Koreans definitely had to make a lot of sacrifices.
And still today, it seems as ‘not everything that shines is gold’ in my
opinion. But I guess this will be the content of another blog entry one day…
