The government projects that per capita income this year will reach 20,610 U.S. dollars, up 20 percent from last year based on an economic growth forecast of 5.8 percent and the rising value of Korean won. The currency has appreciated from 1,276 won against the dollar last year to around 1,200 won this year. Per capita income exceeded the 10,000-dollar mark for the first time in 1994 at 11,432 dollars. After plummeting to 7,355 dollars in the aftermath of the Asian financial crisis in 1997, it recovered to the level of 10,000 dollars in 2002. Excluding 2007, when the abnormal rise in the wons value resulted in per capita income exceeding 20,000 dollars, Korea failed to reach the mark of 20,000 dollars for 16 years.
The country has achieved rapid economic growth since the early 1960s. Per capital income was 83 dollars in 1960 but jumped 138 times to pass the 10,000-dollar mark in 1994. Korea needed more time, however, to reach the 20,000-dollar threshold than advanced economies such as Japan (four years), the United Kingdom (eight), the United States (10) and Germany (11). Koreas challenge is to tackle the counterintuitive decline in growth momentum following political democratization.
After the economy achieved a certain level of growth, companies were reluctant to make new investment and entrepreneurship withered in the face of stronger regulations. An anti-entrepreneurial mentality and militant labor did not help, either. As a result, labor productivity fell 60 percent below that of the U.S. Despite per capita income of below 20,000 dollars, people popped the champagne too early by spending as if they earned 40,000 to 50,000 dollars. The mindset and practices of less developed economies were also prevalent with the public, who wanted freedom without responsibility and ignored the rule of law.
If Korea is to achieve per capita income of 30,000 or 40,000 dollars, it must strengthen soft power in institutions, mindset and practices to the level of advanced economies. While maintaining a competitive edge in key manufacturing sectors such as electronics, shipbuilding and steelmaking, it should generate competitive advantage in other industries. The government without delay must deregulate high-end service sectors such as medical services, tourism and education, which provide decent jobs and create new growth momentum. Another task is to reduce the impact of anachronistic ideologies in labor and education that hinder economic growth.
Economic growth and rise in per capita income translate into a better quality of life for people. Given the rising desire for wealth equality, however, it is also critical to ensure a "compassionate" market economy that distributes as much benefits from growth as possible to all people. In other words, policy measures must support the more vulnerable members of society who are at a disadvantage in competing with others. Excessive social disparity and inequality and exacerbating isolation could give rise to sociopolitical unrest. While nurturing the wealth pie, the government should strive to reduce the income gap and give people the hope of equal opportunity. That would be the ideal picture of a society with per capita income of 20,000 dollars working toward the threshold of 30,000 dollars.