Korea’s state-led approach to economic development survived the transition to democracy in the late 1980s, but, in the aftermath of the 1997-8 Asian financial crisis, bad debt from over-investment forced free-market reforms. Now South Korea can now boast an extremely effective government apparatus.
South Korea’s post-war development model prioritised saving over consumption, and built up its competitive advantage by managing trade and focusing on certain areas, such as high-tech exports. After a dramatic rebound following the financial crisis, South Korea has settled into steady growth, backed by significant capital investment and a constant flow of foreign direct investment.
Large manufacturing conglomerates, or chaebol, are reacting to Chinese competition by engaging in significant levels of research and development (as well as situating new facilities in China, the United States, and even North Korea, at least partially to avoid union militancy). The high number of patents filed in South Korea is a testimony to the strength of this sector, and illustrates the dynamism of the country as a whole. South Korea is a market leader in information communication technology (ICT), with the highest rate of broadband penetration in the world.
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South Korea’s outstanding economic performance has resulted in high average incomes, which have increased the prosperity of most South Koreans. South Korea’s economic miracle is attributable, at least in part, to the sacrifices of the post-war generation, which tolerated authoritarian governance and generated productivity through long hours. The average South Korean works nearly 50 hours per week, the highest in the OECD, resulting in a poor leisure score. As in Japan, the social costs of long hours are beginning to come to light. For instance, some have claimed a link with South Korea’s high suicide rate, which is more than double that of the United States.
However, attitudes are changing and there is increasing pessimism that those that work hard will get ahead. Only 52%g of Koreans now believe that work is the route to success, according to the Gallup World Poll. A high average healthy life expectancy compared to other countries in the region has not led to individual satisfaction, with 67%g of South Koreans dissatisfied with their personal health. However, because rising incomes enable people to protect themselves against the cold, the chilly climate in South Korea has a more limited impact than it would for a poorer country.
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