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HomeOpinionFighting civil war to exporting soft power—What's behind the South Korean miracle

Fighting civil war to exporting soft power—What’s behind the South Korean miracle

South Korea’s transformation into a manufacturing powerhouse has been incredible. But its current transition to a digital innovator and cultural epicenter could be as momentous.

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South Korea is justifiably called the Miracle on the Han River. Japanese colonisation from 1910 to 1945 and the Korean War from 1950 to 1953 left the country splintered and broken. More than three million people lost their lives during the Korean War and millions were left destitute and traumatised. Seventy years later, South Korea is a vibrant democracy, an industrial powerhouse, a provider of foreign aid, and a leading exponent of soft power because its music, movies, food and culture are passionately embraced by people across the world. Its per-capita gross national income of $47,490 (in purchasing power parity terms) is roughly at the same level as those of France and the United Kingdom.

Most countries take a century or more to go from low-income to high-income—if they do it at all. How did South Korea do it in four decades?

The short answer is that a combination of events, countries, and people made the Korean miracle possible. The seminal event that shaped South Korea’s fate was the Cold War that pitted the Soviet Union (and its allies) against the United States (and its allies). When Japan surrendered to the Allied forces in 1945, the Soviet Union and the US agreed to divide the Korean peninsula at the 38th parallel with the northern zone controlled by forces allied with the Soviet Union and the southern zone controlled by forces allied with the US.

In June 1950, Kim Il Sung, North Korea’s leader, initiated the Korean War by sending his tanks and troops into the southern zone. Over the next three years, more than a million troops from North Korea and China fought against troops from South Korea, the US and twenty other nations. Momentum in the war ebbed and flowed with each side on the verge of taking over the entire peninsula. By the time the fighting ended in an armistice agreement in July 1953, the two sides were more or less where they had started.

Having lost upwards of 33,000 soldiers during the Korean War, the US was determined to see South Korea emerge as an independent, capitalistic country. Between 1953 and 1976, the US spent approximately $35 billion in reconstructing South Korea’s physical infrastructure (roads, railways, power grids, sanitation, etc.) and human capital (education, health, etc.).

Access to US markets was the game changer because it exposed South Korea’s firms to a large and sophisticated customer base and accelerated the process by which they adopted modern technologies and management practices. The South Korean people played their part. Among them were determined (though often dictatorial) political leaders, competent bureaucrats, resourceful business leaders, and a disciplined workforce.

As incredible as South Korea’s transformation from a primarily agrarian economy to a manufacturing powerhouse has been, its current transition to digital innovator and cultural epicentre could be as momentous.

Also read: After K-pop, K-drama, K-food, Indian fans are now getting married the Korean way

Chaebol, all about scale and scope 

The Chaebol are family-controlled conglomerates that operate in every large segment of the South Korean economy. The big five—Samsung, Hyundai, SK, LG and Lotte—and their subsidiaries account for 70 percent of the value of the top 3,000 companies listed on South Korea’s stock markets.

Most people know Samsung as one of the world’s preeminent consumer brands. In fact, Samsung is a major player in more than 80 industries including ship building, insurance, entertainment, travel and hospitality, health care, and more. Astonishingly, Samsung Electronics has annual revenues equal to 13.5 percent of South Korea’s GDP.

Hyundai is best known in India for its cars. It is the world’s third biggest automobile producer today. But it is also a major player in ship building, equipment manufacturing, electronics, retail, hospitality, and financial services.

SK Group started off as a textile manufacturer but has diversified into energy, chemicals, financial services, and construction. One of SK’s subsidiaries is the world’s second-largest producer of memory chips and another is the largest wireless carrier in South Korea. LG started as a producer of chemicals and plastics but has diversified to become a leading player in the telecomm, power generation, retail and sports industries. Lotte is famous for owning the Lotte Tower, the tallest building in South Korea. It is a leader in the food, retail, and entertainment sectors.

While South Koreans acknowledge that the Chaebol have played a vital role in the country’s transformation, there is the widespread sentiment that the Chaebol abet a culture of corruption, nepotism, and opacity. Korean politicians (of all stripes) rely on the Chaebol for financial support, especially during elections. In turn, the Chaebol lobby politicians for favourable regulatory and tax policies. One consequence of this nexus has been a series of scandals involving embezzlement, tax evasion and bribery.

In 2018, South Korea’s then President, Park Geun-hye, was given a 24-year prison sentence for corruption and abuse of power. Samsung’s vice-chairman, Lee Jae-young, was sentenced to prison for bribing President Geun-hye. Whereas Geun-hye spent time in prison before receiving a presidential pardon, many Chaebol’s leaders have paid fines to avoid serving time in prison.

The Covid-19 pandemic has been something of a lifeline for the Chaebol. While South Korea’s small and mid-size firms struggled to survive, the Chaebol reaffirmed their indispensable role in the economy by converting their facilities into vaccine production hubs. Public sentiment is shifting again, this time in favour of the Chaebol.

Also read: 10 top rated best Korean Dramas’ list 2022-2023

Startups propagate an innovation culture 

Until a decade ago, South Korea was considered a difficult country to launch a startup. Capital was hard to come by, businesses were loath to work with firms without reputations and connections, and talented employees were reluctant to bet their careers on startups. Much has changed. Whereas most startups relied on government funding a decade ago, today’s startups can pitch their business plans to almost two hundred venture funds. In 2021, venture funds invested $6.4 billion in over 300 firms. As of August 2022, South Korea has 23 unicorns (private firms that have a value greater than $1 billion)—the third most in Asia behind China and India.

Entire areas of capital Seoul are now dominated by startups. Seong-su dong, the Brooklyn of Seoul, and Pangyo Valley, Seoul’s Silicon Valley, are home to thousands of high-technology startups and social ventures. Between the Gangnam subway station and the Samsung subway station—a distance of 8km—there are a dozen (or so) innovation parks that host incubators and accelerators, R&D hubs, startup campuses, tech festivals, networking events, job markets, and more.

The success of startups is also leading to a change in the mindsets of young Koreans. Whereas a decade ago, many Koreans desired a career at a Chaebol, many young Koreans today are exploring opportunities in the startup world. Surveys show that young Koreans want to work in companies that are less hierarchical, flexible, and purpose driven.

Startups are thriving because people are open to trying out new products and services. They play video games developed by Krafton, order fashion items from Musinsa, order food through apps developed by Woowa Brothers, transfer money through apps developed by Toss, entertain children using apps developed by Pinkfong, and travel around the country using apps developed by Yanolja. 

Also read: Rocket-launch club just got bigger as South Korea places satellite in orbit, all on its own

Creator communities build South Korea’s soft power 

Joseph Nye, the American political scientist, coined the term ‘soft power’ to describe the non-coercive methods that countries use to exert their power and influence over others. Soft power exists when a country’s political values, policies, and culture resonate with foreigners.

South Korea’s soft power comes from its creator communities—musicians, actors and actresses, writers, directors, cinematographers, producers, broadcasters, and more. K-pop, K-drama, K-beauty, K-cuisine, Korean, and K-culture (Hallyu) more generally, have captured the imagination of people around the world.

K-pop bands such as BTS, Blackpink, and others have fanatical fan followings worldwide. BTS, a boy band, whose music is a potpourri of languages, musical and dance styles, was the first Korean band to reach #1 on the Billboard Global 200 and the first non-English speaking band to play to sold-out audiences at the Wembley Stadium in England and the Rose Bowl stadium in California, US.

K-dramas such as Squid Game, Crash Landing on You, Extraordinary Attorney Woo, and others have introduced legions of people to Korea’s movie stars, language, cultural norms, cuisine, landscape, and more.

K-dramas are successful because the stories are captivating, the actors are outstanding, and the complementors—the musicians, the script writers, the cinematographers, and others—are excellent. K-dramas explore themes that resonate with people everywhere—love, family, money, and the search for meaning in a complex world. Actors and actresses such as Song Kang-ho, Gong Yoo, Lee Byung-hun, Song Joong-ki, Jun Ji-hyun, Kim Hye-soo, Son Ye-jin, and Song Hye-kyo have huge fan followings in South Korea and across the world.

Squid Game was (and is) the most-watched TV show on Netflix because it cleverly taps into the zeitgeist. It depicts life as a game in which the rules are written by (and for) the upper-classes and where the winners take all. Survival for the underclasses in a hyper-capitalistic world demands a “kill or be killed” mindset.

Angela Killoren, the CEO of CJ E&M America, a company whose mission is to promote K-culture in America, has posited that K-dramas have captivated the world because they are the antitheses of Hollywood. Whereas Hollywood is unreservedly male-oriented, K-drama is what she calls “female gaze entertainment.”

Journalist Sheila Kumar concurs by noting that K-dramas are “…largely by, for, and of women.” Indian women, she notes, have taken to K-dramas because their aspirations and dilemmas mirror those of the women in K-dramas: “We understand their caution, their hesitation, their longings. We understand these women. Because they are us, speaking another language.”

Also read: K-dramas can teach Bollywood a much-needed lesson on romance

Personal reflections 

In October, my son and I had the pleasure of traveling to South Korea. Our experiences there were delightful, educational, and inspirational.

The food and drink are brilliant (disclosure: My son and I are vegetarians so we were restricted to eating at vegan restaurants, pizzerias, and cafes), the cities and towns are neat, clean and organised, and the hotels and transportation systems are super efficient.

But more than anything, we were bowled over by the politeness, charm, and ethos of the Korean people. Etiquette is highly prized so the practice of bowing and the musical sounds of Annyeonghaseyeo (hello) and Gamsahabnida (thank you), are commonplace. Dressing well is a cherished social norm and Korean men and women are fashion forward, often using accoutrements to express their personalities.

Resourcefulness and resilience are prized virtues. Because South Korea is small—at 100,032 square km, it is smaller than Telangana—land prices are high. In urban Seoul, matchbox size rooms double as kiosks, coffee shops, restaurants, salons, and specialty service providers. Outside of Seoul, land is intensely farmed and sustainable agricultural practices are widespread.

There’s an expression (and a hand gesture) that Koreans often use with each other during moments of adversity—“fighting.” It is a wish of “good luck” as well as a word of encouragement (“you got this”) that every person needs to hear during difficult moments.

Ram Shivakumar is a Professor of Economics & Strategy at the Booth School of Business at the University of Chicago. Views are personal.  

(Edited by Prashant)

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