Notes on a Visit to Korea

I’ve been lucky enough to visit South Korea twice over the past year, and unlucky enough to encounter extreme weather both times: bone-chilling cold in December and a late-August heat wave so intense that I was drenched in sweat after walking three blocks. These days, the mood is as uncomfortable as the weather.

As the country’s two largest trading partners, the United States and China, heave thunderbolts across the Pacific, the chaebol, the giant conglomerates that dominate Korea’s economy, feel caught in the middle. They want to keep their customers in China, but they don’t want to antagonize the United States. U.S. industrial policies have been particularly disconcerting to the chaebol, which fear being excluded from the U.S. market or from the subsidies Washington is handing out to makers of semiconductors and electric vehicles.

That’s not the only depressing news. Korea’s population is falling—2020 was the peak year—and its fertility rate is the lowest in the world. Despite an official unemployment rate of only 2.8%, young people struggle to find jobs that pay a living wage in a country where incomes and wealth have become far more skewed than just a few years ago. Economic growth is running at a barely perceptible 1.5%, and shipments through the vast container port at Busan, one of the country’s main economic engines, have been flat for five years.

One of the things that may be holding Korea back is overreliance on manufacturing. Factories and shipyards made Korea rich, and they generate more than a quarter of its output—about the same share as in China and more than twice the proportion as in the United States. But factories aren’t likely to provide a prosperous future, especially when they must bring in workers from China, Vietnam, and Thailand to take jobs Koreans don’t want. In a world where intangibles are becoming more important than goods, Korea lags even such industrial powerhouses as Japan and Germany in developing high-value services. My guess is that taking better advantage of its highly educated workforce to strengthen its service sector could do a lot to help Korea revive its economy.

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