Following bad example
Should Korea be second Japan in failure, too?
Amid relatively minor ups and downs, Japan is finding it hard to get out of two decades of economic slump. The latest media reports say the world’s third-largest economy is even relapsing into another, if short, recession, after which Tokyo’s growth pace will fall back to pre-2008 levels. The drastic downsizing and plant shutdowns by such one-time household names as Sony and Sharp are creating a somewhat chaotic atmosphere.
Korea, once called little Japan, can ill afford to remain an idle spectator of what’s going on across the East Sea. All the more so, as report after another gloomy report concludes that the nation will follow the example of its advanced neighboring country, not just in its economic rise but in its fall as well.
In a recent example, Professor Daniel Altman of New York University wrote in his contribution to Foreign Policy that Korea is “first in line to look like the Land of Rising Sun and Falling Expectations,” referring to Japan. “In some ways Korea is already on the same track as Japan’s, which stopped growing after exhausting the economic engines of urbanization and low-cost exports, and now may be slipping into recession again,” the U.S. expert said.
Tokyo has long been Seoul’s benchmark model, since ex-President Park Chung-hee started his nation-building project based on what he had learned in the military academy of Imperial Japan.
The problem is Park and his successors failed to distinguish gems from pebbles when copying their former colonizer.
So Korea is following in the footsteps of Japan on such less desirable aspects as the lagging financial sector, asset bubbles, relationship-oriented social structure and even the rapidly aging society. However, this country does not have many of the advantages that Japan has, such as the latter’s strong small- and medium-sized businesses that turn out world class parts and components, and advantages in basic science and technology, as proved by the 16 Nobel laureates in natural science compared with Korea’s none.
Worse yet, Korea always suffers from a geopolitical risk in the northern half of its divided peninsula, and the savings rate of the Korean families, reeling from snowballing household debts, is far lower than that of their Japanese counterparts.
And Korea has what Japan doesn’t have or has in a far weaker form: the corporate behemoths known as chaebol here, and keiretsu in Japan. It is against this backdrop that Prof. Altman’s advice should come home to the hearts of presidential candidates. ''At the very moment that Korea needs dynamic small and medium-sized businesses to flourish, the private sector as a whole is becoming more dominated by lumbering oligopolies.” As the U.S. scholar said, the silver lining out of these gloomy prospects is that Korea has the opportunity to see and learn from Japan’s mistakes, which failed to reinvent its economy when it had the chances to do so.
Will Korea’s political leaders be different from their Japanese counterparts? Unfortunately the answer appears not very positive, as Koreans watch the governing party’s candidate withdraw from her reform programs of the family-controlled conglomerates and stick to the status quo.