Choices

The global environment has become very difficult to forecast. The traditional textbook relationships of macroeconomic variables are breaking down everywhere. For example, many countries are experiencing record low interest rates since the World War II. Yet, the outlook for the global growth is still very gloomy. On top of that, there are issues like deflation, regional geopolitical conflicts and tensions, and terrorism that are casting additional layer of uncertainty on the global picture. The best guess for the global economic outlook is a modest and probably a less-than-expected growth.

In spite of this gloomy global environment, Korea is facing an opportunity of a generation to increase its living standard two to three-fold in coming decade. To do so, Korea needs to wake up and see the big global picture, challenge the ¡°normalcy¡± of how things are done in Korea, and implement changes. Korea can choose to take advantage of the current global environment or remain status quo. The economic and geopolitical consequences of a right decision will be significant. Korea just needs to go back three decades to see how profound impact a right economic decision can make. Just imagine what Korea¡¯s economy and geopolitical standing would look like today if Korea did not adopt the export-led growth model thirty years ago. The global economic growth engine is once again changing. Korea once again has a choice to make.

Changing Engine of Global Growth Korea is perceived in the global community as a hard working country who rises to difficult challenges. It is a well-known fact that the foundation of modern Korean economy was laid by the blood, sweat and tear of those who built a mighty export manufacturing base without abundant resources. The hard work was only half of the contributing factor that generated the ¡°Miracle of Han River.¡± The other significant factor was the timing. The global environment was ripe for an efficient producer of manufactured goods to gain significant market share. Those Southeast Asian countries that adopted the same macroeconomic growth plan ten to fifteen years after Korea did not have similar results. There is a huge premium to identifying the right global environment to maximize the return on one¡¯s hard work.

Korea knows painfully well the cost of missing an opportunity presented by a changing engine of global growth. Towards the end of the Yi Dynasty, Korea chose not to welcome Western technology and chose not to participate in global growth spurt driven by the industrial revolution. The subsequent cost was devastating for Korea. A simple decision to reject an opportunity to take advantage of changes in source of global economic growth resulted in one of the darkest periods in Korean History.

The engine of growth for global economy is once again changing. The time is now for Korea to reassess what factors will drive global and domestic economic growth next. With emergence of China as a powerful manufacturing base and excess capacity relative to sluggish demand in all tradeable goods sectors globally, the manufacturers will continue to face declining margin trends. If the past 50 years of global economy is described as an era of ¡°muscle power¡±, the next 50 years of global wealth creation will depend on ¡°brain and money powers.¡± In this global environment, one trait is that the inefficient countries and companies will lose relative wealth standing and market share, and the efficient countries and companies will capture bulk of global wealth creation. This is where the story gets interesting for Korea. Korea already possesses the factors needed to fully take advantage of the new sources of global growth. All is needed are vision, collective understanding, and reallocation of resources.

If the corporations, labor, government and media work together to fully debate the choices for the future and consequences of various decisions in the global context, Korea has an opportunity to take advantage of the current uncertain global environment and raise its living standard significantly. Ultimately, Korea needs to choose. Will it be content with what it has now, or will it take advantage of the current global environment to significantly improve Korea¡¯s living standard. There are no right or wrong decisions. Only that for the sake of the future generation, the decision should be made after fully debating and studying the consequences of not raising its living standard. Korea, the choice is yours.