Nation faces Greek tragedy with twist
Many Koreans scoff about Greeks being overwhelmed by an economic crisis, remembering how they had staged a nationwide gold-donation campaign to overcome the 1998 currency crisis in a record two years.
They shouldn't. It is doubtful that Koreans today would unite like they did 17 years ago and pull off the same feat. Besides, the nation now faces a bigger and more complex problem for which unity is only part of the solution. We are living in the age of "Korea Discount 2.0."
The term originally referred to the undervaluing of Korean stocks because of risk factors, translated into a low price-earnings ratio. They included North Korea's nuclear weapons, corporate governance and unpredictable political leadership, among others.
In the 2.0 world, these same factors have mutated so much so that they demand a totally different solution. There are new challenges as well.
All told, Korea of today is a place where nothing can be done because of inter-locking and competing external and internal interests.
Before, the North was the biggest problem.
Now, Korea is running multiple risks of becoming an economic hostage to China, by far its biggest trading partner, making an irreconcilable enemy out of Japan under nationalistic Prime Minister Shinzo Abe and being overlooked by the U.S. in its pivot to Asia.
As a result, Korea appears increasingly isolated between China on one hand, and the U.S. and Japan on the other. Ultimately, Korea may be forced to choose between the two, or worse will have to forgo a choice altogether.
When these external factors meet internal gridlock, it could yield a perfect storm that may create an existential challenge.
At the heart of this internal gridlock is an aging society with the world's lowest birthrate. Young people delay marriage and, when they do, are reluctant to have children, meaning a young workforce will not replace the outgoing older generation.
Alas, the normal supply-and-demand principle doesn't work, either. The new pattern of low growth triggers competition between the young and old generations for fewer jobs. Young people are losing out, but the old are not winning. Lost in the battle is a debate on how to reverse the aging trend, but the nation appears less than willing to open up to immigration.
In this nation caught in a standstill, old problems are coming out of dormancy.
Chaebol, now on a generational transition, are showing their limits as the economic engine of Korea Inc. For example, the ongoing battle between father and son over the control of Lotte is gaining headlines for its nasty, melodramatic elements, but the real issue is the lack of transparency that still shows the fifth-largest conglomerate is still run like a mom-and-pop store.
Even Samsung's victory over Elliott Associates, a vulture fund, has two sides. On one side, the nation felt good about helping "one of us" against an outsider, but the victory could prove costly since it reinforced Korea's stereotypical image of xenophobia. Can Korea, with its small domestic market and heavy reliance on exports, afford to repeat it?
So is there a way out for Korea? Yes.
(To be continued)
Many Koreans scoff about Greeks being overwhelmed by an economic crisis, remembering how they had staged a nationwide gold-donation campaign to overcome the 1998 currency crisis in a record two years.
They shouldn't. It is doubtful that Koreans today would unite like they did 17 years ago and pull off the same feat. Besides, the nation now faces a bigger and more complex problem for which unity is only part of the solution. We are living in the age of "Korea Discount 2.0."
The term originally referred to the undervaluing of Korean stocks because of risk factors, translated into a low price-earnings ratio. They included North Korea's nuclear weapons, corporate governance and unpredictable political leadership, among others.
In the 2.0 world, these same factors have mutated so much so that they demand a totally different solution. There are new challenges as well.
All told, Korea of today is a place where nothing can be done because of inter-locking and competing external and internal interests.
Before, the North was the biggest problem.
Now, Korea is running multiple risks of becoming an economic hostage to China, by far its biggest trading partner, making an irreconcilable enemy out of Japan under nationalistic Prime Minister Shinzo Abe and being overlooked by the U.S. in its pivot to Asia.
As a result, Korea appears increasingly isolated between China on one hand, and the U.S. and Japan on the other. Ultimately, Korea may be forced to choose between the two, or worse will have to forgo a choice altogether.
When these external factors meet internal gridlock, it could yield a perfect storm that may create an existential challenge.
At the heart of this internal gridlock is an aging society with the world's lowest birthrate. Young people delay marriage and, when they do, are reluctant to have children, meaning a young workforce will not replace the outgoing older generation.
Alas, the normal supply-and-demand principle doesn't work, either. The new pattern of low growth triggers competition between the young and old generations for fewer jobs. Young people are losing out, but the old are not winning. Lost in the battle is a debate on how to reverse the aging trend, but the nation appears less than willing to open up to immigration.
In this nation caught in a standstill, old problems are coming out of dormancy.
Chaebol, now on a generational transition, are showing their limits as the economic engine of Korea Inc. For example, the ongoing battle between father and son over the control of Lotte is gaining headlines for its nasty, melodramatic elements, but the real issue is the lack of transparency that still shows the fifth-largest conglomerate is still run like a mom-and-pop store.
Even Samsung's victory over Elliott Associates, a vulture fund, has two sides. On one side, the nation felt good about helping "one of us" against an outsider, but the victory could prove costly since it reinforced Korea's stereotypical image of xenophobia. Can Korea, with its small domestic market and heavy reliance on exports, afford to repeat it?
So is there a way out for Korea? Yes.
(To be continued)
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