South Korea: The Paradox on the Han River
August 31, 2022
A spreading malaise
It’s been called “the miracle on the Han River,” South Korea’s meteoric rise from one of the world’s poorest countries in the 1950s to one of the world’s richest today. In a single generation, Korea became a leader in manufacturing and technological innovation, with global brands such as Samsung going head-to-head with Apple and other major companies. From the television survival drama Squid Game to the chart-topping girl group Blackpink, Korean popular culture is breaking new ground and reaping international awards. Its global cultural influence has spread to India, a nation of 1.4 billion people (compared to Korea’s 50 million), where Korean is the fastest-growing language and is taught in secondary schools. Despite tensions with its northern neighbor, for much of the world, South Korea has become cool.
But many young Koreans find this global admiration puzzling next to the painful realities at home. The stories and songs that have propelled Korea’s recent fame—such as Squid Game, “No More Dream” by the boy band BTS, and the Oscar-winning film Parasite—are actually cries of protest against the social injustices and barriers to social mobility in Korean society. Surveys since 2015 have shown that many young adults want to emigrate; they liken the present to the feudal class system of the Joseon period before 1910; they call their country “hell.”
A whole generation in their 20s and 30s were wryly labeled the sampo or “three-abandoning” generation for giving up on courtship, marriage, and children that they could not afford. Now they’re the N-po generation, despairing of N number of life’s milestones, from meaningful employment to owning a home. Korea now has the lowest fertility rate in the world. Annual births reached a new low of 272,000 in 2021, compared to one million in the 1970s, and at the time of this writing it has shattered its own record once again. In sharp contrast to the optimism and hope of previous generations, data from the World Values Survey shows that Koreans’ belief that they have “freedom of choice and control over their lives” has been declining since 1990. Paradoxically, Korea’s world-conquering filmmakers and artists are portraying a crisis of hopelessness in significant segments of society.
There is no simple explanation for this “paradox on the Han River,” but what the country will do about it is an increasingly urgent question, especially for the next generation. Perhaps Korea will attempt to just muddle through until it reaches a boiling point. History has not been kind in such circumstances; the French Revolution and the Arab Spring come to mind. Or perhaps Korean society will choose a proactive path. The nation’s future depends on how it responds to this existential challenge, whether it finds a road to shared prosperity for the next generation or tragically fails to resolve its social divisions.
In The Moral Consequences of Economic Growth, Harvard economist Ben Friedman observes that economically growing societies view the future with positive outlooks such as hope and optimism. Vietnam, for example, is relatively poor, but anyone visiting Ho Chi Minh City today, amidst an economy that is growing at rates similar to South Korea in the ’70s and ’80s, can sense the vibrancy and hope, in contrast to Seoul with its visible material wealth but flattening growth and growing despair among the young.
After four decades of annual growth at a spectacular rate of 6–9 percent, Korea’s annual economic growth has plateaued at 2–3 percent or less since 2012. While slower growth is common in advanced economies, South Korea also has structural vulnerabilities: it relies substantially on one main export product (semiconductors), manufactured by one or two major companies (e.g., Samsung), dependent on a single major market (China), and reliant for critical raw materials on a country with which it is still in a trade war (Japan). Low growth rates also reflect South Korea’s demographic malaise, for which there are few good answers absent major changes in birthrates.
One ray of hope might come from new areas of economic vitality and interest among younger Koreans to which foreign talent can also be attracted. Although I am of Korean descent, I lived much of my life in other countries before landing in Seoul in 2018. What most surprised me was the vibrancy of Seongsu-dong—the “Brooklyn of Seoul”— and Pangyo Valley, the home of Korea’s high-tech startups and social entrepreneurs. The innovation and creativity in these places were infectious, almost as if they were part of a different Korea. They broke the stereotype that Koreans, due to Confucian social norms, are most successful in hierarchical corporate structures like the chaebol.
A vibrant, innovation-based, startup economy could be a game-changing source of growth for South Korea. The country needs more players like Naver, Korea’s Google, which made the list of the nation’s top 10 companies for the first time in 2020. But stories like Naver are few and far between. Entrenched barriers to startup culture, such as Korean society’s generally low tolerance for risk, still hinder Korean innovation and entrepreneurial energy.
Moreover, there is evidence of policy distortions, including fiscal policies and government aid, that create negative incentives for smaller firms to grow, according to studies by the KDI School of Public Policy and Management and the Organization for Economic Cooperation and Development (OECD).
Finally, common practices of large companies, such as squeezing short-term profits from smaller suppliers at the expense of long-term investment in the supply chain, create substantial impediments to small-business growth. There are some important current initiatives to address this challenge, such as promoting mutuality in the Korean and Asian corporate value chain, but more is needed, especially from Korean corporate leaders.
If such barriers were removed, South Korea could become a world-class startup and investment destination, attracting a new generation of global business and entrepreneurial talent, complementing its growing reputation as a global cultural hub.
How will South Korea choose to respond to internal social conflicts and inequality?
Two decades of development work around the world, including with the World Bank, have taught me that economic growth is necessary but insufficient to create an inclusive society with prospects for upward mobility. Shared prosperity is essential to a society’s long-term flourishing.
While Korea benefitted from decades of rapid economic growth, the results have been uneven. Smaller businesses are squeezed by large corporations, which capture most of the profits and talent, resulting in one of the largest wage differentials by firm size among OECD countries. Skyrocketing real estate prices, fueled by speculators and distorting policies, have narrowed a key entry point for wealth-building and social mobility for younger generations. There is a growing sense of limited social mobility among the young and the disadvantaged and a general perception that many are being left behind.
Here, it is worth mentioning the concept of “public intermediaries,” agents, drawn from many facets of society, who seek the common good, from social workers, human rights advocates, artists, and religious groups with a history of serving the marginalized, to responsible leaders in the corporate sector. The country is at a crossroads: the rise of corporate responsibility in South Korea—particularly the explosive growth of environmental, social, and governance (ESG) awareness—could either become a massive greenwashing exercise or provide a once-in-a generation opportunity to channel capital and expertise for social benefit. One recent example is a working group of public, private, and civil society leaders who came together to develop ESG policy reforms for the South Korean government.
A new Korean social contract is needed. What model of economic growth and shared prosperity will balance people, profits, and planet? What future can the country offer to the many different voices in Korea today? Put simply: what is the Korean ideal of a good society? How South Korea responds to these questions will determine whether the “paradox on the Han River” can be solved, and the next generation’s right to a future secured.
Kwang W. Kim is The Asia Foundation’s country representative in Korea. He can be reached at [email protected]. The views and opinions expressed here are those of the author, not those of The Asia Foundation. This essay appeared previously, in slightly different form, in the Korea Herald
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