5 ms·

South Korea scrambles to avoid going the way of Japan

68 points by starpilot 8y ago

thoughtstheseus 8y ago
The Chaebol situation is certainly a unique position to be in. The Economic rise post-war is amazing.
- gumby 8y ago
  Is it unique? Seems a lot like the zaibatsus of prewar Japan (which became today's kairetsus), hence their concern.
  - devonkim 8y ago
    Part of the differences between chaebol and zaibatsu is in the restrictions on banking that may have helped Korea keep chaebol from collapsing. You’re correct that chaebol are far closer to preWW2 zaibatsu overall. Keiretsu are professionally managed and more decentralized though than family-owned and managed chaebol. It’s not really clear if Japan would have fared much better by staying centralized or if South Korea could be doing even better with decentralization. I have my doubts that Samsung could have made it to where it is on an international brand scale if it was forcibly decentralized (Korea has the most bizarre record when it comes to branding arguably due to lack of innovation).
wgerard 8y ago
Super interesting, and definitely seems smart of SK to be that forward-thinking. Has anyone really ever dug into what happened to Japan's economy (i.e. what caused the stagnation)? A cursory Google search returns a lot of well thought-out speculation, and I realize cause/effect is often difficult to establish with global economies, but curious if there's anything more rigorous out there.
- mc32 8y ago
  Japan's problem is multi-faceted. What the facets are and which one had more impact, I don't know. From the top of my head: Low pop growth, high savings-low domestic consumerism (low investment), reliance on exports, reliance on economic intermediaries (friction), relatively closed markets (reducing competitiveness), recent-graduate hiring system, private-public industry ties (misallocation), gender bias in labor (low labor part by one gender), political system which does not foster long-term strategies from gov't., etc.
  - adventured 8y ago
    > high savings Japan has an extremely low savings rate. They had a high savings rate 20 years ago. The broader economic decline has coincided with their savings rate dropping to nearly zero. https://i.imgur.com/j4jZPIb.jpg https://i.imgur.com/j4jZPIb.jpg That's also why the Japanese Government had to shift to debasing the Yen instead of continually borrowing from domestic savings to fund their debt. There is no domestic savings to buy up the debt issuance. The whole process is resulting in the wipe out of the Japanese standard of living. It's their debt that is entirely responsible, it's plundering their ability to invest in the private economy effectively. There's no reason the Japanese shouldn't be capable of a GDP per capita on par with Sweden, the Netherlands or Denmark. Instead they're continually falling further behind. When all of your money is going to service debt, you can no longer properly invest into growth opportunities. We see this effect at the household level, at the corporate level, and at the national level. Japan already had nice infrastructure when they went on a debt-laden public works bonanza to try to prop up their flailing economic growth, so the return on that investment in real terms is plausibly extremely negative. Not only did they make the mistake of massively over-investing into infrastructure right when their population was set to begin declining, not only did they use debt to do it (which they'll never stop paying for), but now they have to try to maintain it. Put simply, they misallocated their wealth to extravagant public works spending that they didn't actually need, and did so at exactly the wrong time.
    - Camillo 8y ago
      Interesting post, thanks. Was the investment in infrastructure considered a Keynesian policy at the time?
graeme 8y ago
Originally a financial times article, incidentally. I thought they stole it but it seems they have a partnership. Good to see this get a wider readership, it was a good article.
browsercoin 8y ago
> The bleak outlook is borne out across the country as industrial hubs shed tens of thousands of jobs. Ulsan, home to Hyundai’s heavy and automobile industries, was once South Korea’s fastest-growing and wealthiest city. Today, it represents the nation’s rust belt, the human toll of economic decline evident in the increasing spate of suicide attempts (nearly 200 so far this year). Young people are also fleeing: Having quadrupled since the 1970s, the population of Ulsan began to decline in 2016. Ulsan is just one of nine regions the government has dubbed “industrial crisis zones” and earmarked for almost $1 billion in support. Seoul is also in the process of implementing a $3.5 billion supplementary budget to create jobs and tackle youth unemployment, which remains intractable at about 10 percent. I never expected to read about my hometown on HN lol. "Republic of Hyundai" is what Ulsanites jokingly called it because they own the province. The hospitals, public school, textbooks sponsored by Hyundai that needs to be closely studied to do well on exams that will ultimately lead them to follow their father's footsteps as a Hyundai employee, in order to afford Hyundai built apartment complexes and drive to work in a Hyundai car. At one point, Ulsan had the highest median salary in Korea. I remember hearing stories of a Hyundai employee who came to work in a KIA car (before they were acquired by Hyundai) and unfortunately was witnessed by the wife of a major stakeholder in Hyundai and proceeded to rat him out and fire him. Entire apartment complexes would be quiet with only housewives and elderly in them because the men are all at Hyundai, the kids are at a Hyundai built school who are brainwashed to accepting the system, one that promises to award rote memoization and standardized tests to determine your place in what I coin here as an Absolute Corporatocracy. There were other weird incidences in Ulsan. Chinook helicopters landing in our elementary school yard at night, pamphlets raining down on kids in playground and air sirens announcing the beginning of civil defense exercise to simulate a North Korean air raid. The day after Kim Il Sung died we wrote about how unification was just around the corner and were rejoicing until North Korean submarines started showing up in fish nets triggering a nation wide manhunt.
- bane 8y ago
  Thanks for the first person stories! I'd love to read more. I've been all over South Korea, but have yet to make it to Ulsan for some reason (I've been in much of the area nearby touring historic sites, but never Ulsan). I think it's examples like this that really make one understand why Cyberpunk authors, in describing the future Corporatocracy, often centered their stories in Asia. Most of them missed South Korea for some reason, but there are times when I've been there that I've literally felt like I was in a Cyberpunk future, more than anywhere else in the world I've been.
Animats 8y ago
"You've got a duty to die and get out of the way. Let the other society, our kids, build a reasonable life." - Colorado Gov. Richard Lamm, 1984. (He's 83 now and still alive.) That's one approach. [1] https://www.nytimes.com/1984/03/29/us/gov-lamm-asserts-elderly-if-very-ill-have-duty-to-die.html https://www.nytimes.com/1984/03/29/us/gov-lamm-asserts-elder...
- mcny 8y ago
  I once talked to a radiologist who said something similar but not about the elderly. He claimed there is a lot of money being fruitlessly spent on the last six months of a patient's life. He explained that a problem is that we don't know before hand when someone will die but in hindsight it is obvious that a lot of the money to keep someone alive is waste. Then I started hearing about the death panels. I sincerely thought death panels are a great idea. If it costs to much to keep someone alive with little or no chance of a recovery, it might be better to put someone down. Thankfully, most people are more sensible than I am. Turns out there was no death panel. I still think about this issue though. I read somewhere that we spend about 18% of our GDP on healthcare. Maybe we just need slightly different priorities and try to go for most bang for the buck. Thoughts?
  - repsilat 8y ago
    If there's a limited amount of money to be spent, "most bang for your buck" is a moral imperative. We do it to some extent -- measures like the "QALY" ("quality-adjusted life-year") attempt to quantify "bang", though I'm not sure how rigorously we apply them in determining whether to follow some course of treatment. (It's also fairly standard to give a QALY some fixed dollar value. Uncomfortable, perhaps, but again -- necessary from a moral perspective, at least if you're a utilitarian deciding what to spend on healthcare.)
emsy 8y ago
Is GDP stagnation actually a problem or is it made out to be a problem (for a first world country)?
- sandworm101 8y ago
  It is a problem when savings, retirement, is based on the assumption that the economy will continue to grow. A shrinking economy throws the entire live-off-investments retirement rubric out the window. Any government back plans, social security etc, become unstable and/or have to increase the contributions (taxes) paid by those still working. It isn't as much a problem for people who earn money for actual work, as opposed to investors. Those earning wages may see those wages increase as labor becomes scarce. Unless of course they find themselves having to carry everyone else.
XalvinX 8y ago
I've lived in South Korea for a long time. It has deep, deep cultural issues that are bound to drag it down eventually. Until the education system completely changes, the political system reforms, and people's attitudes change about many things, it will be doomed to be a small-time player that continues to make copies and continues to have a handful of large conglomerates that support the economy. I could write a book about it.
pcurve 8y ago
SK has serious culture problem. It has always been a culture of keeping up with the Jones, where perception of wealth matters a great deal. Last year, BMW sold more 5 series in Korea than Japan, Germany, or China. Mercedes S-class' third largest market is Korea, after China and the U.S. Naver's Q&A site is full of people in their 20s and 30s making $30-$50k inquiring about purchasing German cars that exceed their annual salary in cost. What's more disturbing is, going into deep debt and mortgaging your future to finance this type of YOLO life style has become socially acceptable. It's quite astounding to see such rapid transformation cycle of a country, its rise and stall in just matter of a few decades.
- mrtksn 8y ago
  I see this as a pattern in any society getting wealthy because the blueprint seems to be about the same across the board. When you are financially successful, you buy a nice car and clothes to display that success. You travel to Europe and the world and post pictures from iconic places. At some point getting a nice car or travelling to places no longer impresses anyone because these days everyone can do it, so you seek other things like education, art, philanthropy, title etc. In ex-soviet countries, for example, it used to be that your college degree would not impress anyone because everyone can get one and end up in a low-paying job as a medical doctor or nuclear physicist but a pair of western brand shoes went long way for a while until they became widely available. I wouldn't judge people on their way of displaying success. Each culture has its own ways that come and go out of fashion as things are getting hard or easy to obtain.
  - bane 8y ago
    This is really insightful. I've been dealing with South Korea for almost two decades, and the changes there are absolutely incredible. I don't just mean in terms of the visible, but in how people live their lives. For example, when I first started going there, "foreign" food was hard to find and expensive (I still remember the "steak and spaghetti" places), nobody really had meaningful hobbies, there weren't all that many chain stores and restaurants and most places were mom and pop, everybody smoked, and the idea of having animals as pets was still kind of new. Fast forward to today and you can find tacos and American BBQ, Pho and Curry -- hell churros are pretty popular. Tons of people have all kinds of hobbies, cafe culture is huge, there's large and mature domestic and foreign chains, but also a renewed "indie scene" for coffee shops and hang outs and the sort. Lots of the more questionable street stalls have moved in doors and come under better safety regulation, smoking is on the way out and the pet craze is virtually out of control. There definitely was a period (and to much of an extent still is) of over leveraged young people driving luxury cars, first domestic now foreign (several of my acquaintances had SsangYong Chairman cars, now they all have foreign cars), and people dipping into "hobbies" like photography buying $20,000 starter camera kits and other such clumsiness. But the society is maturing incredibly rapidly. I think what really showed off this level of maturity was the way they handled the recent Presidential protests, removal from office, criminal probe, and new election. It was incredibly civilized, democratic and an example to the world for how a stable, thoughtful and intelligent society should deal with big, difficult issues. I'm unsure if my own country, or most of the Western world would handle it as well.

68 points by starpilot 8y ago

thoughtstheseus 8y ago

The Chaebol situation is certainly a unique position to be in. The Economic rise post-war is amazing.

gumby 8y ago
Is it unique? Seems a lot like the zaibatsus of prewar Japan (which became today's kairetsus), hence their concern.
- devonkim 8y ago
  Part of the differences between chaebol and zaibatsu is in the restrictions on banking that may have helped Korea keep chaebol from collapsing. You’re correct that chaebol are far closer to preWW2 zaibatsu overall. Keiretsu are professionally managed and more decentralized though than family-owned and managed chaebol. It’s not really clear if Japan would have fared much better by staying centralized or if South Korea could be doing even better with decentralization. I have my doubts that Samsung could have made it to where it is on an international brand scale if it was forcibly decentralized (Korea has the most bizarre record when it comes to branding arguably due to lack of innovation).

wgerard 8y ago

Super interesting, and definitely seems smart of SK to be that forward-thinking. Has anyone really ever dug into what happened to Japan's economy (i.e. what caused the stagnation)? A cursory Google search returns a lot of well thought-out speculation, and I realize cause/effect is often difficult to establish with global economies, but curious if there's anything more rigorous out there.

mc32 8y ago
Japan's problem is multi-faceted. What the facets are and which one had more impact, I don't know. From the top of my head: Low pop growth, high savings-low domestic consumerism (low investment), reliance on exports, reliance on economic intermediaries (friction), relatively closed markets (reducing competitiveness), recent-graduate hiring system, private-public industry ties (misallocation), gender bias in labor (low labor part by one gender), political system which does not foster long-term strategies from gov't., etc.
- adventured 8y ago
  > high savings Japan has an extremely low savings rate. They had a high savings rate 20 years ago. The broader economic decline has coincided with their savings rate dropping to nearly zero. https://i.imgur.com/j4jZPIb.jpg https://i.imgur.com/j4jZPIb.jpg That's also why the Japanese Government had to shift to debasing the Yen instead of continually borrowing from domestic savings to fund their debt. There is no domestic savings to buy up the debt issuance. The whole process is resulting in the wipe out of the Japanese standard of living. It's their debt that is entirely responsible, it's plundering their ability to invest in the private economy effectively. There's no reason the Japanese shouldn't be capable of a GDP per capita on par with Sweden, the Netherlands or Denmark. Instead they're continually falling further behind. When all of your money is going to service debt, you can no longer properly invest into growth opportunities. We see this effect at the household level, at the corporate level, and at the national level. Japan already had nice infrastructure when they went on a debt-laden public works bonanza to try to prop up their flailing economic growth, so the return on that investment in real terms is plausibly extremely negative. Not only did they make the mistake of massively over-investing into infrastructure right when their population was set to begin declining, not only did they use debt to do it (which they'll never stop paying for), but now they have to try to maintain it. Put simply, they misallocated their wealth to extravagant public works spending that they didn't actually need, and did so at exactly the wrong time.
  - Camillo 8y ago
    Interesting post, thanks. Was the investment in infrastructure considered a Keynesian policy at the time?

graeme 8y ago

Originally a financial times article, incidentally. I thought they stole it but it seems they have a partnership. Good to see this get a wider readership, it was a good article.

browsercoin 8y ago

> The bleak outlook is borne out across the country as industrial hubs shed tens of thousands of jobs. Ulsan, home to Hyundai’s heavy and automobile industries, was once South Korea’s fastest-growing and wealthiest city. Today, it represents the nation’s rust belt, the human toll of economic decline evident in the increasing spate of suicide attempts (nearly 200 so far this year). Young people are also fleeing: Having quadrupled since the 1970s, the population of Ulsan began to decline in 2016. Ulsan is just one of nine regions the government has dubbed “industrial crisis zones” and earmarked for almost $1 billion in support. Seoul is also in the process of implementing a $3.5 billion supplementary budget to create jobs and tackle youth unemployment, which remains intractable at about 10 percent. I never expected to read about my hometown on HN lol. "Republic of Hyundai" is what Ulsanites jokingly called it because they own the province. The hospitals, public school, textbooks sponsored by Hyundai that needs to be closely studied to do well on exams that will ultimately lead them to follow their father's footsteps as a Hyundai employee, in order to afford Hyundai built apartment complexes and drive to work in a Hyundai car. At one point, Ulsan had the highest median salary in Korea. I remember hearing stories of a Hyundai employee who came to work in a KIA car (before they were acquired by Hyundai) and unfortunately was witnessed by the wife of a major stakeholder in Hyundai and proceeded to rat him out and fire him. Entire apartment complexes would be quiet with only housewives and elderly in them because the men are all at Hyundai, the kids are at a Hyundai built school who are brainwashed to accepting the system, one that promises to award rote memoization and standardized tests to determine your place in what I coin here as an Absolute Corporatocracy. There were other weird incidences in Ulsan. Chinook helicopters landing in our elementary school yard at night, pamphlets raining down on kids in playground and air sirens announcing the beginning of civil defense exercise to simulate a North Korean air raid. The day after Kim Il Sung died we wrote about how unification was just around the corner and were rejoicing until North Korean submarines started showing up in fish nets triggering a nation wide manhunt.

bane 8y ago
Thanks for the first person stories! I'd love to read more. I've been all over South Korea, but have yet to make it to Ulsan for some reason (I've been in much of the area nearby touring historic sites, but never Ulsan). I think it's examples like this that really make one understand why Cyberpunk authors, in describing the future Corporatocracy, often centered their stories in Asia. Most of them missed South Korea for some reason, but there are times when I've been there that I've literally felt like I was in a Cyberpunk future, more than anywhere else in the world I've been.

Animats 8y ago

"You've got a duty to die and get out of the way. Let the other society, our kids, build a reasonable life." - Colorado Gov. Richard Lamm, 1984. (He's 83 now and still alive.) That's one approach. [1] https://www.nytimes.com/1984/03/29/us/gov-lamm-asserts-elderly-if-very-ill-have-duty-to-die.html https://www.nytimes.com/1984/03/29/us/gov-lamm-asserts-elder...

mcny 8y ago
I once talked to a radiologist who said something similar but not about the elderly. He claimed there is a lot of money being fruitlessly spent on the last six months of a patient's life. He explained that a problem is that we don't know before hand when someone will die but in hindsight it is obvious that a lot of the money to keep someone alive is waste. Then I started hearing about the death panels. I sincerely thought death panels are a great idea. If it costs to much to keep someone alive with little or no chance of a recovery, it might be better to put someone down. Thankfully, most people are more sensible than I am. Turns out there was no death panel. I still think about this issue though. I read somewhere that we spend about 18% of our GDP on healthcare. Maybe we just need slightly different priorities and try to go for most bang for the buck. Thoughts?
- repsilat 8y ago
  If there's a limited amount of money to be spent, "most bang for your buck" is a moral imperative. We do it to some extent -- measures like the "QALY" ("quality-adjusted life-year") attempt to quantify "bang", though I'm not sure how rigorously we apply them in determining whether to follow some course of treatment. (It's also fairly standard to give a QALY some fixed dollar value. Uncomfortable, perhaps, but again -- necessary from a moral perspective, at least if you're a utilitarian deciding what to spend on healthcare.)

emsy 8y ago

Is GDP stagnation actually a problem or is it made out to be a problem (for a first world country)?

sandworm101 8y ago
It is a problem when savings, retirement, is based on the assumption that the economy will continue to grow. A shrinking economy throws the entire live-off-investments retirement rubric out the window. Any government back plans, social security etc, become unstable and/or have to increase the contributions (taxes) paid by those still working. It isn't as much a problem for people who earn money for actual work, as opposed to investors. Those earning wages may see those wages increase as labor becomes scarce. Unless of course they find themselves having to carry everyone else.

XalvinX 8y ago

I've lived in South Korea for a long time. It has deep, deep cultural issues that are bound to drag it down eventually. Until the education system completely changes, the political system reforms, and people's attitudes change about many things, it will be doomed to be a small-time player that continues to make copies and continues to have a handful of large conglomerates that support the economy. I could write a book about it.

pcurve 8y ago

SK has serious culture problem. It has always been a culture of keeping up with the Jones, where perception of wealth matters a great deal. Last year, BMW sold more 5 series in Korea than Japan, Germany, or China. Mercedes S-class' third largest market is Korea, after China and the U.S. Naver's Q&A site is full of people in their 20s and 30s making $30-$50k inquiring about purchasing German cars that exceed their annual salary in cost. What's more disturbing is, going into deep debt and mortgaging your future to finance this type of YOLO life style has become socially acceptable. It's quite astounding to see such rapid transformation cycle of a country, its rise and stall in just matter of a few decades.

mrtksn 8y ago
I see this as a pattern in any society getting wealthy because the blueprint seems to be about the same across the board. When you are financially successful, you buy a nice car and clothes to display that success. You travel to Europe and the world and post pictures from iconic places. At some point getting a nice car or travelling to places no longer impresses anyone because these days everyone can do it, so you seek other things like education, art, philanthropy, title etc. In ex-soviet countries, for example, it used to be that your college degree would not impress anyone because everyone can get one and end up in a low-paying job as a medical doctor or nuclear physicist but a pair of western brand shoes went long way for a while until they became widely available. I wouldn't judge people on their way of displaying success. Each culture has its own ways that come and go out of fashion as things are getting hard or easy to obtain.
- bane 8y ago
  This is really insightful. I've been dealing with South Korea for almost two decades, and the changes there are absolutely incredible. I don't just mean in terms of the visible, but in how people live their lives. For example, when I first started going there, "foreign" food was hard to find and expensive (I still remember the "steak and spaghetti" places), nobody really had meaningful hobbies, there weren't all that many chain stores and restaurants and most places were mom and pop, everybody smoked, and the idea of having animals as pets was still kind of new. Fast forward to today and you can find tacos and American BBQ, Pho and Curry -- hell churros are pretty popular. Tons of people have all kinds of hobbies, cafe culture is huge, there's large and mature domestic and foreign chains, but also a renewed "indie scene" for coffee shops and hang outs and the sort. Lots of the more questionable street stalls have moved in doors and come under better safety regulation, smoking is on the way out and the pet craze is virtually out of control. There definitely was a period (and to much of an extent still is) of over leveraged young people driving luxury cars, first domestic now foreign (several of my acquaintances had SsangYong Chairman cars, now they all have foreign cars), and people dipping into "hobbies" like photography buying $20,000 starter camera kits and other such clumsiness. But the society is maturing incredibly rapidly. I think what really showed off this level of maturity was the way they handled the recent Presidential protests, removal from office, criminal probe, and new election. It was incredibly civilized, democratic and an example to the world for how a stable, thoughtful and intelligent society should deal with big, difficult issues. I'm unsure if my own country, or most of the Western world would handle it as well.