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The Continuing Importance of Growth

Posted July. 08, 2010 14:53,   


The country’s nominal GDP was 832.5 billion U.S. dollars last year, remaining at 15th place in the world for the second straight year. Though South Korea fared well in the aftermath of the global economic crisis, the economy grew a mere 0.2 percent, the won’s value did not gain as much as expected against the U.S. dollar, and inflation remained relatively low. These three factors failed to boost the nation’s nominal GDP ranking. Per capita income also declined five notches to 54th place.

The economy was the world’s 11th biggest from 1994 to 1996 and from 2002 to 2004. It fell to 12th in 2006 and 13th in 2007, however, and went further down to 15th in 2008 amid the eruption of the global financial crisis. While China, Brazil, India, Russia and Mexico have boosted their economic power by focusing on a growth-oriented policy and riding on surging natural resource and energy prices, South Korea has relatively fallen behind partly because the post rapid-growth era created a loose social mood.

Economic growth has a huge influence on life that can be easily understood when comparing the two Koreas. Over the past five decades, the gap between South and North Korea has widened considerably in quality of life, physical health and life expectancy. While South Korea’s pursuit of a market-friendly and growth-oriented policy since the 1960s has bore fruit, the North saw a massive decline due to incorrect political and economic decisions. American economist Gregory Mankiw said that GDP might not be the perfect measure of welfare but is certainly closely related to quality of life. This is a time-tested truth.

Countries are implementing growth-boosting policies. Not only emerging market economies including China but also advanced ones such as the U.S., Japan and Europe are moving forward quickly. As a small country with little natural resources, South Korea must not fall behind and break away from obsolete systems, policies, human resource investment and public consciousness. Fortunately, the economy is showing signs of momentum with GDP projected to grow around six percent this year and per capita income to break the 20,000 dollar mark. Yet the country still has long way to go.

Going forward, the Republic of Korea will need huge capital. Reunification costs should be prepared to guard against a sudden change in the North, while support is needed for the underprivileged including the disabled, orphans and low-income senior citizens. The economy needs to create a buffer to deal with the low birth rate and rapid aging that will ultimately lead to a decline in the working population. Growth is important to ensure an affluent and warm society and to cope with uncertainty. Job creation is another important factor to consider.