As an economist regularly engaging with South Korea and its businesses, two things become apparent. First is that South Koreans are very critical of their country. The second is that this is good news.
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Critical self-evaluation is a virtue. South Koreans’ attitude might come from Confucian self-cultivation or a utilitarian motivation. Either way, South Korea is an example of how continuous improvement works. Nothing is taken for granted; flexibility is the norm. Through this continuous process, difficult challenges can be met and overcome.
South Korea’s accomplishments merit acknowledgment. It is one of the few countries that escaped the middle income trap. Other nations, such as Japan or Germany, were rich before World War I. After losing their wealth they eventually found new vigor.
South Korea’s story is different. Seoul had to invest in building up industry and services from scratch. It also had to make sure that its populace became educated. Through a constant drive to educate its workforce, South Korea’s citizens became better off.
South Korea is more than just an exemplary economy. It has an important diplomatic and cultural influence in the world. Seoul has discovered diplomatic niches where it has significant leverage. Being a rich non-superpower has unique advantages. Countries in Central or Southeast Asia, which frequently find themselves at the crux of tensions between global juggernauts, are happy and relieved to engage with a country of South Korea’s stature.
South Koreans’ own self-critique points to the challenges the country faces. On the economic level, shrinking export markets are becoming a problem. So too is the loss of productivity in some sectors of the economy. On a political level, the security situation in Asia is worsening.
The most pressing problem, however, is how the above might impact Seoul’s policy direction. Most of South Korea’s success is based on its open, free-market economy. If the country starts to shut the door on free trade or if the government starts to intervene more in the economy, it could jeopardize the very factors responsible for its success so far.
However, there is more good news than bad. First comes education. South Korea’s system of continuous education can make the workforce more productive and critically, more flexible. Productivity makes people better off, while flexibility empowers them to adapt to changing economic circumstances.
Second is the country’s free-trade policy. The free market promotes innovation, which creates new markets and makes society better. In its openness to free markets and innovation, South Korea is better equipped than many other countries to diversify (even more) and become less dependent on exports to China or Japan.
The third “good news” factor is trust. Trust is a value ingrained in South Korean culture. People trust their future to themselves and to small groups around them, such as their family. It also means that people trust themselves to become educated, productive, well-off members of society.
And that may even be the best news of all.