It is time to start learning from South Korea
August 20, 2020 @ 14:21 +03:00
On August 11, the OECD signaled that it would be revising its 2020 real (inflation-adjusted) GDP forecast for South Korea from -1.2% to -0.8%, adding to the confidence that the country is faring better economically than any other OECD member. On average, the group’s 37 member states are projected to experience a real GDP contraction of 7.6%.
In late January, it became one of the first countries to report COVID-19 infections outside China, and the risk of a major outbreak was no lower than anywhere else. But unlike Italy – another early victim – South Korea has prevented a disruptive nationwide epidemic, containing occasional flare-ups as they have arisen. Moreover, insofar as the OECD forecast is correct, South Korea’s 2020 contraction is nothing compared to what the country experienced following the 1997-98 Asian financial crisis.
Back in mid-March, many respected commentators focused on the fact that the UK was just two weeks behind Italy, making almost no mention of South Korea. In the event, both Italy and the UK went on to suffer especially deep crises, relative to other countries. Why did South Korea – a major trading country – manage the novel coronavirus so much better, and what early lessons might have been taken from its experience?
To my horror, between the writing and the publication of that commentary, South Korea had begun to experience its first COVID-19 outbreak. I feared that events on the ground would soon refute all my praise for the country. But I shouldn’t have worried. Almost six months later, it is clear that South Korea has once again acquitted itself well.
More broadly, South Korea has become a model for other countries for two simple reasons. First, over the past 40 years, it has been the only medium- to large-size (by population) “developing” or “emerging” economy to have increased its per capita income to the level of the advanced economies. When I was entering the workforce in the early 1980s, South Korea was about as wealthy as most African countries, on average. Today, it is as wealthy as Spain.
Second, South Korea has not only grown; it has also climbed the economic ladder by embracing technology. When I was Chief Economist at Goldman Sachs, I presided over the creation of a sustainable development index for more than 180 countries. We found that, in addition to ranking among the top ten on most indicators, South Korea scored especially high on measures of technological adoption and diffusion – higher even than the US.
South Korea is highly open to world trade, and it reports its trade data on the first of each month. The data for July show that its export performance has improved notably (which is to say that it is not declining as sharply as in the preceding months).
This improvement may or may not be a harbinger of what awaits the global economy as it recovers from a historic collapse. But it is clearly another sign that South Korea has managed the crisis well, particularly compared to the ridiculous displays of bravado, denial, and incompetence in some of the world’s advanced economies. It is time for everyone to start learning from South Korea.
South Korea on Top Again, Project-Syndicate, Aug 20