The best economic indicator South Korea (KOSPI) produces is the energy on the streets of Seoul, whether you’re navigating the throngs of young hipsters in Myeongdong, the glitzy boutiques in Apgujeong or the nightclubs full of foreign tourists in Itaewon.
Korea’s per-capita income now rivals New Zealand’s, Israel’s and Greece’s, and the economy is growing about 3 percent a year even as Europe crashes. South Korean companies are chipping away at Apple Inc.’s global smartphone domination; the nation is a world power in automobiles, shipbuilding and steel; and its soft power is being advanced by “K-pop” bands, movies and television dramas as the population nears the 50 million mark.
Why, then, are South Koreans the second-most-unhappy people?
In a recent life-satisfaction study of 32 countries in the Organization for Economic Cooperation and Development by the World Values Survey Association, South Korea came in 31st. Surveys by Korean research institutes find that happiness among teenagers is the lowest in the OECD. The nation also is at the top of global league tables for suicides.
The disconnect is worth exploring because of South Korea’s role-model status. Its post-Asian-crisis reforms increased living standards and raised competiveness to an extent that has Japan looking over its shoulder. Yet Korea also serves as a template for countries trying to avoid the “middle-income trap” that afflicts too many developing nations.
Malaysia, the Philippines and Thailand are examples of nations that had impressive income gains, only to stall. Some economists predict that China is headed for a similar fate. In contrast, observers view South Korea as an exemplar for peers in Asia.
The country’s achievements are largely a consequence of investing in human capital. Achieving a high-quality education has become a national obsession, and curriculums encourage creativity, science and technology. South Korea also is working to transform Seoul into an international financial center and a model for eco-friendly growth.
Since the 1997 Asian crisis, deregulation opened markets to the demands of Western shareholders. Increasing productivity became a national mission. But one can’t help wondering if these changes were unleashed too quickly, without the shock absorbers to buffer a society subject to such dramatic change.
“The problem is that we Koreans are now too much focused on competing with each other,” says Kim Yong Duk, a former deputy finance minister who teaches at Korea University Business School. “Always seeking to be best makes people too tired and stressed. Now it’s time to hug each other.”
Economists tend to dismiss “gross national happiness” as a quirky economic barometer from Bhutan, taking it no more seriously than the length of women’s hemlines, the Big Mac Index or the idea that new skyscrapers presage financial crises.
Yet South Korea demonstrates some unappreciated glitches in the journey from poor to rich. If this model economy suffers from acute growing pains, why would we expect China to fare any better?
South Korea’s free-market revolution gave companies incentives to dump full-time workers in favor of lower-paid contract workers. It meant less focus on building social safety nets needed to catch workers unable to quickly adapt to job obsolescence. Fear of unemployment has South Koreans working some of the longest hours anywhere.
A glimpse of any map shows why Koreans are so anxious; they are sandwiched between wealthy Japan and low-cost China (not to mention belligerent North Korea) and must find a way to stand out. Living costs are too high to compete with China, and, demographically, Korea has more in common with aging Japan. Also like Japan, Korea underutilizes its female workforce in ways that hold back the economy.
South Korea’s response has been extreme pressure to excel. Cram schools for children lead to obsession with college- entrance exams that have outsized sway over one’s future. Next comes striving for employment at a large, brand-name company such as Hyundai Motor Co., LG Electronics Inc. or Samsung Electronics Co. Such goals are driven less by passion than by cultural norms.
“For us, the pressure to succeed has become like a sport all its own,” says Theresa Seung Yun Rah, co-chief executive officer at consulting firm Oratio and communications director of the bid committee for the 2018 Winter Olympics, which will be in Pyeongchang.
South Korea needs less stress and more dreaming. It must innovate in ways companies have yet to try. Samsung (005930), whose global reach is the pride of modern-day Korea, is a case in point. Its phones and tablets are incredible pieces of technology, and they are eating into Apple’s market share. But its products are variations on the iPhone and iPad. It’s time for Korea to come up with its own game changers.
Fast broadband speeds and hyper-connectivity haven’t made the country more innovative. Nor has rapid growth. That must come from Koreans themselves. For all the reforms since 1997, a handful of family-run conglomerates focusing largely on exports tower over the economy. The absence of a comprehensive welfare state reduces risk taking and drives workers into safe industries.
That deprives Korea of the kind of scientists and engineers who strike out on their own, press forward without regard to the mainstream and come up with a world-beating idea. No quick fix exists, but cultivating small- and midsized businesses is the surest way to boost entrepreneurship.
The global slowdown reminded us that for all of South Korea’s gains, it’s still too much of a one-trick economy. And an unhappy one at that.
(William Pesek is a Bloomberg View columnist. The opinions expressed are his own.)
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