Friday, November 25, 2011

South Korea is an Economic Miracle – It Grew From Poverty to Prosperity and Recovered Faster from the Recession than Others

So What Does That Tell Us?

The country of South Korea came into existence after World War II and was firmly established as a legal country following the Korean War, which permanently (?) divided the peninsula of Korea into North and South.  Here is what happened in the last 50 years.

In 1960, in the aftermath of a devastating war, the exhausted south was one of the poorest countries in the world, with an income per head on a par with the poorest parts of Africa. By the end of 2011 it will be richer than the European Union average, with a gross domestic product per person of $31,750, calculated on a basis of purchasing-power parity (PPP), compared with $31,550 for the EU. South Korea is the only country that has so far managed to go from being the recipient of a lot of development aid to being rich within a working life.

How did this happen?  Well for one thing South Korea is a triumphant result of American foreign and military policy.  The U. S. fought to keep South Korea as South Korea, and massive U. S. economic and military aid has kept the country safe and has contributed to its prosperity.  History may record the Korean war as a stalemate, but history should record the Korea War as a mighty success for the United States and for the South Korean people. 

Furthermore the fact that the U.S. provides much of Korean national defense frees government resources to invest in the domestic economy.  Defense spending doesn't do all that much to help economic growth so it is really good if someone else is doing the spending for you. 

There are of course some lessons for the Unites States from South Korean economic prosperity.  For example

South Korea Has Learned Lessons from the
U. S.; Lessons the U. S. has Forgotten

Korea has combined growth with equity. Between 1980 and 1997, its Gini coefficient, a measure of income inequality, fell from 0.33 to an exceptionally low 0.28, before rising back up during the 1997-98 Asian crisis. In 2010, the level was 0.31, a bit worse than Scandinavian countries, a bit better than Canada.

Yes, when you have economic gains going largely to the middle and lower income groups prosperity takes place for all, including the higher income groups. 

And there is also this

The government also initiated a public-works scheme that is mopping up over 2% of the labour force. It introduced an old-age pension and began, then expanded, an earned-income tax credit. All this from President Lee Myung-bak, who was once chief executive officer of Hyundai Construction and is widely assumed to be excessively friendly to big business.

So South Korea is growing and prospering by implementing policy that would be considered unacceptably liberal in the United States and heavily denounced by Conservatives.  Well at the rate income is growing in South Korea they will soon have a level equal to or above the United States.

If the Korean economy goes on growing at 4.5% a year and America’s at 2.5%, Korea would overtake America (in PPP terms) only a few years later.

Maybe then the Conservatives will look around and see that someone doing policy they oppose is doing better than the U. S.  Or maybe not, after being a Conservative means never ever having to say you were wrong.

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