Ready for Prime Time 27/142

www.li.com www.prosperity.com PROSPERITY IN DEPTH: SOUTH KOREA Ready for Prime Time By Mark Russell 2012 LEGATUM PROSPERITY INDEX™ RANKING: SOUTH KOREA 27/142 GLOBAL TRANSITIONS PROSPERITY STUDIES THE LEGATUM INSTITUTE Based in London, the Legatum Institute (LI) is an independent non-partisan public policy organisation whose research, publications, and programmes advance ideas and policies in support of free and prosperous societies around the world. LI’s signature annual publication is the Legatum Prosperity Index™, a unique global assessment of national prosperity based on both wealth and wellbeing. LI is the co-publisher of Democracy Lab, a journalistic joint-venture with Foreign Policy Magazine dedicated to covering political and economic transitions around the world. PROSPERITY IN DEPTH To complement the annual Legatum Prosperity Index, we regularly commission specialists—economists, political scientists, journalists— to provide additional analysis of selected countries. In each case they represent highly original work by distinguished experts that adds depth and insight to the statistical analysis of the index. THE LEGATUM INSTITUTE FOREWORD South Korea’s modern history is one of extremes: harsh colonial occupation, near-total destruction by war, crony capitalism, brutal dictatorship, episodic sabre-rattling by its heavily armed neighbour—and, of course, the triumph of democracy and lightning rise to a level of affluence approaching that of Japan. It shouldn’t be surprising, then, that South Koreans continue to struggle with their past and worry much about their future, realities reflected in the country’s mixed rankings on the 2012 Legatum Prosperity Index. While it gets high marks on sub-indices for entrepreneurship and opportunity (19th out of 142 countries), education (7th), and health (24th), it ranking surprisingly low for a rich democracy on safety and security (40th), personal freedom (56th), and social capital (51st). Hence the importance of a phenomenon often dismissed with a smile by outsiders: Korea’s role as provider of pop culture to the world rivalling that of Hollywood. For one thing, its culture exports have given the country a global identity disproportionate to its population and GD P. More important, pop culture is a source of pride and cohesion in a land divided by geopolitics and Darwinian market competition, not to mention its legacy of corruption and problematic struggle for political stability. Mark Russell offers the perspective of an outsider with strong ties to Korean culture, both personal and professional. A Canadian journalist now living in Seoul with his Korean spouse, he spent a decade in Korea covering pop culture for Billboard and The Hollywood Reporter. He is the author of Pop Goes Korea, arguably the first book by a non-Korean to capture the broader import of what’s now commonly referred to as the “Korean Wave”. Peter Passell, Editor www.prosperity.com SOUTH KOREAN STAND AT THE SHANGHAI EXPO ABOUT THE AUTHOR Mark Russell is a Canadian journalist now living in Seoul. He spent a decade in Korea covering pop culture for Billboard and The Hollywood Reporter. He is the author of Pop Goes Korea. ABOUT THE EDITOR Peter Passell is a senior fellow at the Milken Institute and the editor of its quarterly economic policy journal, The Milken Institute Review. He is a former member of the New York Times editorial board and was an assistant professor at Columbia University’s Graduate Department of Economics. 2 | www.li.com THE LEGATUM INSTITUTE South Korea: Ready for Prime Time here is an old Korean proverb, rendered cliché by overuse in It took Seoul’s more Tcontemporary media: “In a fight between whales, the shrimp gets recent achievements crushed.” The whales in question are the great powers, while South Korea is the lowly crustacean. For even after its stunning economic in winning hearts rise from hardscrabble backwater to Asian-Tiger-on-steroids in two generations, Koreans consider their nation to be a powerless prawn in and minds abroad the games played by the United States, China and Japan. for its citizens to gain Or, rather, they did. South Koreans are beginning to look at themselves from a very different perspective. And one surprising reason for the the level of condence change has been the unique success that Korea’s home-grown pop and economic reach culture has enjoyed in recent years around the globe. commensurate with “Gangnam Style”, the silly but irresistible dance track by Psy (a.k.a. Park Jae-sang), marked the triumph of Korean pop culture in the its outsize energy. West. Since its debut last July, it has racked up more than 1.6 billion YouTube views, making it nearly twice as popular as the next most watched video (Justin Bieber’s “Baby” with 850 million). Psy’s follow- up single, “Gentleman”, was streamed 22 million times the day it was posted and a viewed a total of 200 million times in its first nine days. Less well known but arguably more important, Korea has been building “soft power” through its engrossing, aspirational TV soap operas, which point the way forward for other developing nations hoping make a parallel leap to modernity—and creating brand identity for Korean goods in emerging markets in the process. The I MF may have reclassified South Korea as an “advanced” economy as far back as 1997. But it took Seoul’s more recent achievements in winning hearts and minds abroad for its citizens to gain the level of confidence and economic reach commensurate with its outsize energy. South Korea’s economic successes are well documented. I n the 1960s, it was one of the world’s poorest places with a living standard comparable to that of Haiti or Sudan. Today its GDP is the 12th largest on the planet (measured in terms of purchasing power) and the world’s sixth largest exporter. The average living standard is slightly higher than that of the European Union (when one includes the late arrivals from eastern and southern Europe). www.li.com www.prosperity.com | 3 BUILDINGS IN SEOUL Korea is the world’s leader in shipbuilding, mobile phones, computer memory chips and LCD screens for laptops and TVs, as well as the As Korea’s presence fifth largest auto manufacturer, and sixth largest steel maker. And in global pop culture while it leaned on deficit spending to weather the financial crisis (like most other developed economies) it’s debt-to-GDP ratio is still has grown, so too just 34 percent—less than half that of France, Germany, or Canada. have seemingly Culture exports (entertainment and related services) have surged in recent years, climbing an average of 25 percent a year from unrelated exports— 2007 to 2011 to top $4.1 billion. That’s a tiny fraction of Korea’s $550 billion in exports in that latter year. But it plainly has a halo in particular, exports effect: As Korea’s presence in global pop culture has grown, so to emerging markets. too have seemingly unrelated exports—in particular, exports to emerging markets. In 2011, more than half of Korea’s exports went to developing countries, with China alone spending $134 billion. Trade with Peru, where 13 Korean TV dramas have aired since 2006, has increased six-fold over the past six years, reaching $3.3 billion in 2011. 4 | www.li.com THE LEGATUM INSTITUTE Think of pop culture as a form of branding for everything Korean. I n a 2012 survey by the Korean Chamber of Commerce and I ndustry, more than half of the 300 80 percent of companies queried reported that pop culture identity had helped increase their a sampling of sales abroad. Another survey, this one by the Korea International Trade Association in 2011, found that 80 percent of a sampling of consumers in Japan, China, Taiwan, consumers in Japan, and Vietnam said that familiarity with Korean entertainment led them to buy Korean goods. China, Taiwan, It helps that Koreans themselves have long been enthusiastic consumers of pop and Vietnam said culture—and that it has served as a buffer against externally imposed conformity. In the 1920s and ’30s, an era in which Korea was under the yoke of Japan, the that familiarity country had a disproportionate appetite for Hollywood movies, while Western pop with Korean music and jazz developed large followings. The Korean War (1950–53), a proxy war between the United States and Mao’s China that followed on the heels of World War entertainment led II, left the peninsula destitute. But as South Korea rebuilt under the US-supported dictatorship, movies and music once again flourished—this time with a home- them to buy grown element. Korean goods. The reality that pop culture was a potential rallying point for dissidents was not, however, lost on the military regime of Park Chung Hee, which over the course of his 18 years in power (1961–1979) asserted increasing control over Korea’s culture business. The movie industry peaked in 1969 with 173 million admissions and 229 local films made. Thereafter, government censorship and regulation led to a long decline, with the vacuum only partly offset by the rise of Korean television. In 1975, the music industry was gutted under the guise of a crackdown on marijuana use and loose morals. Independent TV stations were forced to merge, and to toe the government line on content. E ven comic books were caught in the web of repression, as early as in 1967 being labelled one of the “six evils” of society. But in the 1990s, spurred by the economic growth and political liberalization that followed the 1988 Seoul Olympics, Korea’s cultural industries rebounded. Increased competition among broadcasters in the new environment of freedom led to a proliferation of TV dramas.

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