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The South Korean Economy

gyeongbokgung palace south korea

South Korea is one of the most successful economies in East Asia, only falling behind Japan, Taiwan, and Singapore in terms of economic prosperity. South Korea has grown from a rural economy focused on food exports and intern markets in the past five decades. 

Now South Korea, despite having nearly no natural resources like iron ore, is one of the most dynamic economies in the world and a significant exporter of manufactured goods. 

South Korean Economy is now home to internationally recognised companies such as Samsung, LG, Sk Hynix and Hyundai that export products all around the globe ranging from cutting-edge technology to industrial machinery. 

It is incredibly remarkable after suffering from 35 years of Imperial Japanese occupation, and a bloody civil war between the communist North and capitalist South Korea has gone from a dictatorship and transformed itself into a democracy with a thriving economy. 

The growth of industrialisation and urbanisation in South Korea has led to the move away from families maintaining themselves through their farms to sustain themselves and towards an urban economy, manufacturing focus and providing services has led to the decline of its population and the lowest birthrate on the planet.

seoul signage  South Korean Economy
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The South Korean Economy is 20 Years Ahead of the World

South Korea, like China, Japan, Russia, and Germany are, in many ways ahead of the rest of the world due to their declining and, in some cases collapsing demographics because by 2040, most of the Boomer generation will be dead and sadly due to industrialisation boomers did not have a replacement generation of which is called the millennials. 

The Boomer generation was born in the post-war period, which began post-1945; the Boomer generation tends to be regarded as those born after 1945 until 1960. 

This It necessary because South Korea, China and other East Asian nations started industrialisation or, in the case of Japan, reindustrialisation after World War II and the global order created by the United States, which enabled global trade, which meant each nation could go on the road specialisation. 

In layperson’s terms, industrialisation means that people move away from the farms towards living in industrial and more economically productive cities, with children living in cities becoming, at best, an expensive accessory or, worse, a drain on household income. 

If we look at the example of Great Britain, the first nation to go down the industrialisation process, the UK went from 80% of its population working on farms or in farming communities.

Nowadays, UK farmers and people working in the farming industry make up less than 4% of the U.K.’s population, which in 2021 is over 67 million people. 

For countries to be successful, they must be global corporations even if they outsource the manufacturing and other labour costs abroad; an example is B&W which is based in Germany.

B&W’s manufacturing base is not actually in Germany; it is located in South Carolina in the United States of America which uses components shipped out of Mexico and components from Brazil and Canada which are sold across the rest of the world and not a single German is employed apart from the executives. 

As for manufacturing production lines, other necessary assets are employed by people in the United States, Canada and Brazil. 

You may be thinking, what is this has to do with economics, and how does this benefit Germany and, in turn, benefits the South Korean economy? If a global company is based in a nation, all its profits will be taken in by the company, and in turn, a whole country will receive tax revenue from the companies like B&W. 

The world as we know it is not the historical norm but has been the new normal since World War II when all nations allied to the United States of America during the Cold War surrendered willingly or begrudgingly; in the case of the French, their foreign policy and security concerns America. 

What this meant was that all nations trade with each other without the threat of foreign privateers or that other bad actors would disrupt free trade. 

Furthermore, the USA made it possible for all nations to become specialists rather than having manufacturing, financial services, and other industrialise including technologies and farming production; in the home countries, each nation becomes a specialist. 

The hyper-specialisation that is part of our modern world has enabled such technological advancement and prosperity since the end of World War II and continues until the present day. 

Still, it does appear that the old system or more accurately, the new system of globalisation, is breaking down. 

South Korea is taking advantage of globalisation like German companies such as B&W. 

In the case of South Korean companies, Samsung, Hyundai, Daewood, and LG have operations similar to B&W, where the manufacturing, sales and production lines are happening outside of Korea. 

Also, like different parts of the world, South Korea is the world’s sixth largest steel exporter, even though within its territories, no substantial iron deposits warrant the existence of the industry within South Korea. 

This exists because of global hyper-specialisation and the existence of globalisation, which security is currently backed by the Navy of the United States of America to protect international shipping for everybody. 

The primary method of global trade is by the ocean, with around 90% of traded goods being carried over the waves in giant tankers, according to OCED in 2022. 

Apart from the continent of Europe, all other landlocked nations are severely poor due to the transportation costs of global trade being far too expensive and inefficient without access to oceans or internal rivers. 

According to the Economics Explained Leaderboard, South Sudan, Chad and Niger, the Central African Republic, Bermuda, and Mali are the poorest landlocked countries. 

Parts of Europeans get away with being landlocked because nations like Switzerland managed to develop their economies before globalisation. 

However, places like Africa have geographical limitations that prevented their development before globalisation. 

Civilisations like China, India and other places managed to develop their economies because of their access to internal river systems that enabled early civilisations to grow, with the most famous being Egypt’s with its famous River Nile helping to spark one of humanity’s early civilisations.

people walking on street  South Korean Economy
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South Korean Economy Trading

South Korea is practically an island with enemies to the North in the forms of China and North Korea. This means the South Korean Economy depends upon international global trade, oceans free of privateers or pirates in layperson’s terms, to keep its economy running. 

For this reason, South Korea is home to the four biggest transportation shipping companies on the planet: Hyundai heavy industries, STX offshore and shipping, and the SME and Samsung heavy industries. 

Access to chips and shipping is necessary for South Korea to function in its current form as a modern and hyper-specialised economy, just like China, Japan, and a host of other nations around the globe. 

South Korea depends on global free trade and the protection of the USA’s Navy. 

The fear by economists and geopolitical strategists with American withdrawal from international affairs is that the globalised system is breaking down and that nations are bringing their manufacturing bases home, which means the end of economies like South Korea. 

In the old world order before 1945, if the nation did not have access to coal and steel, that nation did not industrialise in a post-almost dystopian world order without globalisation and free trade; this means specialisation like South Korea will no longer be possible. 

The same applies to advanced economies; for instance, the United Kingdom is hyper-focused on financial services, and Germany, a major manufacturing nation, will no longer be able to maintain the status quo without the current global economy.

aerial shot of city  South Korean Economy
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South Korean Economy Culture and Branding

It is crucial to always appreciate a country’s soft power, especially with Korean pop culture spreading around the globe and the awareness of South Korea and the relevance of soft power, which is cultural power and its ability to influence others. 

People don’t just buy goods and services because they are expensive, but the value is intrinsically tied to people’s perception of worth we do not spend money on a Swiss watch because it is a watch but due to the watch being Swiss. 

This is where the link between real value, market value, and perception meets people buying expensive watches from Switzerland rather than China. 

This attitude can change if China is perceived as wealthy or product is successful and conveys status. 

South Korean economy is known for exporting Korean fashion, Korean cosmetics, Korean music, Korean holidays, and even Korean plastic surgeries are becoming highly demanded products because they are associated with South Korea. 

Branding is vital; this is why I mentioned B&W in one of the earlier paragraphs because B&W is now more of a brand with its car manufactured mainly outside of Germany. New cars in South Korea and Japan are much better cars than their German counterparts. 

But what keeps Germany in the game is that companies like B&W of built brand recognition which can be more valuable than the cars themselves, but it is the brand that is associated with success, which in turn leads to more customers due to the customers trust in the brand.

city during golden hour  South Korean Economy
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Sources and Bibliography

Columbia University KEY POINTS across East Asia—by Era 20th CENTURY 1900-1950 IMERIALISM, WAR, REVOLUTION IN EAST ASIA China link

Britannica Korean War 1950–1953 link

Economics Explained Is South Korea’s Economic Bubble About to Burst? | Economics Explained link

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