Noble Lies to Promote Korean Trade Agreement?
The prospect of a new trade agreement with the United States has prompted mass opposition within South Korea, as demonstrated by large and angry protests. The International Herald Tribune (IHT) appears to be rising to the occasion, going all out to push the new pact.
The article includes a variety of facts that are supposed to demonstrate the need for the trade agreement. It begins by noting that South Korea’s growth “averaged a torrid 8 percent a year in the 1970’s and 1980’s, has slowed in recent years.” Wow, they can’t sustain an 8 percent growth rate – disaster looms. In fact, South Korea’s per capita GDP growth has been averaging about 3 percent a year over the last few years. This is very good for a country with European standards of living. (Post NAFTA Mexico would be euphoric if it ever achieved this growth rate.)
The article then reports that Korea’s share of the U.S. export market has fallen to 2.6 percent from 3.3 percent a decade ago. And this is supposed to matter, why?
Then the article tells readers that Korea faces challenges like “a rapidly declining birth rate and an aging population,” Hmmmm, less crowding and longer life expectancies, this is really frightening.
And the kicker – “economists say the country must restructure its economy to keep growing for the long term.” Sure – I would like to find one economist who claims that Korea is about to stop growing if it doesn’t “restructure” in the manner advocated in this article. There are no economists cited in the article who offer this opinion.
The fact is that South Korea is an incredible success story. It went from Sub-Saharan living standards in the 50s to European living standards at present. It succeeded by pursuing policies that defied the conventional wisdom among economists. That’s too bad for the economists who apparently do not understand development. Their ignorance is not Korea’s problem, or at least it is not Korea’s problem as long as they are not able to impose their policies on the country.
Oh yes, the IHT felt the need to call the trade pact a “free trade” agreement.
The article includes a variety of facts that are supposed to demonstrate the need for the trade agreement. It begins by noting that South Korea’s growth “averaged a torrid 8 percent a year in the 1970’s and 1980’s, has slowed in recent years.” Wow, they can’t sustain an 8 percent growth rate – disaster looms. In fact, South Korea’s per capita GDP growth has been averaging about 3 percent a year over the last few years. This is very good for a country with European standards of living. (Post NAFTA Mexico would be euphoric if it ever achieved this growth rate.)
The article then reports that Korea’s share of the U.S. export market has fallen to 2.6 percent from 3.3 percent a decade ago. And this is supposed to matter, why?
Then the article tells readers that Korea faces challenges like “a rapidly declining birth rate and an aging population,” Hmmmm, less crowding and longer life expectancies, this is really frightening.
And the kicker – “economists say the country must restructure its economy to keep growing for the long term.” Sure – I would like to find one economist who claims that Korea is about to stop growing if it doesn’t “restructure” in the manner advocated in this article. There are no economists cited in the article who offer this opinion.
The fact is that South Korea is an incredible success story. It went from Sub-Saharan living standards in the 50s to European living standards at present. It succeeded by pursuing policies that defied the conventional wisdom among economists. That’s too bad for the economists who apparently do not understand development. Their ignorance is not Korea’s problem, or at least it is not Korea’s problem as long as they are not able to impose their policies on the country.
Oh yes, the IHT felt the need to call the trade pact a “free trade” agreement.
posted by Dean Baker @ 11:04 PM
5 Comments:
At 7:14 AM,
Anonymous said…
Dean,
I'm intrested in how S.Korea achieved that developement. Could you explain a bit furthur? Generally, what kind of policies were followed that resulted in development from third world to first world?
Thanks,
Murali
At 9:00 AM,
PGL said…
The Club for Growth crowd is similarly worried that a reduction in US population growth to somewhere around 0.5% per year means we can't sustain real GDP growth of 3.5% per year. It's comical.
At 9:58 AM,
dale said…
Would a shrinking population tend to be more egalitarian over time?
Seems like there would be structural pressures towards higher wagers.
Perhaps thats why so many fear declining population. It offends cheap labor types.
At 4:39 PM,
Anonymous said…
dale wrote, Would a shrinking population tend to be more egalitarian over time?
In one way, yes. Historically, one of the greatest causes of economic inequality is unequal distribution of land wealth.
The lower the population density, the less of a problem this is.
At 11:32 PM,
Dean Baker said…
Murali,
Korea had very extensive government involvment in the economy over much of this period. They favored certain sectors by providing low interest loans, protection from foreign competition, and other forms of assistance. The government also severely restricted international capital flows.
The orthodox view of these policies is that they were generally bad and the South Korea would have grown even faster had it relied more on the market and less on the government.
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