Book review: The New Korea

With this post I review The New Korea:  An Inside Look at South Korea's Economic Rise, by Myung Oak Kim and Sam Jaffe.

I noted after reading that the authors are right up the street from me in Evergreen, Colorado.

This book attracted me for two closely-related reasons.  First, I have never read a book about Korea and one of my personal goals is to expand my body of knowledge.  Second, Korea is rarely mentioned outside of the Korean War, and I wondered why this was so.

The book speaks directly to my second reason:  Korea has the world's fifteenth largest (!) economy, yet its "brand" ranks 33rd in name recognition.  The Lee Myung-bak administration, in power since 2008, has launched a program to bring that rank up to 15.  The reason given for Korea's relatively poor ranking is its cultural bias against outside influences.  In the United States business people are generally willing to provide introductions to other business people.  Cold-calling, while often unpleasant for the caller and the callee, is an accepted business practice that occasionally results in sales.  In Korea, it is virtually impossible to make contact with a new business without a personal introduction from an insider.  This practice extends to government; the authors complained about the government's unwillingness to provide helpful information while they were writing this book.  Given this cultural bias, Korea's name recognition is not surprising.  It is sometimes said that "there is no such thing as bad publicity".  Plainly, Koreans do not believe that to be true.

The book devotes two chapters to North Korea (the bulk of the book speaks to South Korea, which is called simply "Korea").  Three things were of particular interest to me was:

1) Westerners have trouble understanding the negotiations between North and South because Korean culture views any negotiation as long-term, very long term.  Imagine negotiating of the price of a car.  As the authors put it,r

[T]he North Koren approach is to wait for the first move by the seller of the car, then to douse the car in gasoline, set it afire, and make a counteroffer.

The buyer (South Korea) makes an initial offer publicly.  Then it privately ... offers to actually provide ten times the amount for the car and to throw in ten more free cars to make up for the seller's ... loss.

And, while it may seem demeaning to the South to act in this fashion, many from the South secretly admire those from the North who are willing to sacrifice so much for so little.

2) Moving from Mexico to the United States is trivial compared with the effort necessary to move from North to South Korea.  Needless to say, given the heavy fortifications between the North and South one cannot try to run across.  And, the book does not mention bribery as an option at this border.  The other countries bordering North Korea are China and (a small sliver of) Russia.  The book does not mention Russia as a possible destination.  To get from North Korea to China requires bribing a border guard (unclear whether this is a Chinese or North Korean guard) or running undetected over a frozen Yalu River (the same Yalu River that MacArthur unfortunately decided he should cross during the Korean War).  Should you be detected running across the river you will be shot in the face by the Chinese, shot in the back by the North Koreans, or apprehended by the North Koreans so that they may hang you in front of your family.  Assuming one arrives in China safely, one faces years of waiting there until one can find a (reputable) smuggler to arrive in Laos or Cambodia.  While waiting, citizens of China can collect a $100 honorarium (about a month's salary) for exposing you to the police.  During this time employment opportunities are scarce; women face additional risks of sexual exploitation.  Even after making it to South Korea you are treated as an outsider; even though you are of the same ethnic stock as the natives, you are usually identifiable by your stature, a few inches shorter because of typical malnutrition in the North.

3) China is sensitive to North Korean emigration.  A few people here-or-there is of no concern, but China (and for that matter, the rest of the world, excepting North Korean citizens) prefers a stable North Korea.

The U.S. and South Korea are nominally allies, but excepting the demilitarized zone they have few shared interests.  South Korea is another low-cost, high-quality competitor to U.S. industry.

Three chapters cover specific companies:  Hyundai (automobiles), Samsung (just about everything imaginable) and LG (mostly electronics and machines).  I found these chapters the slowest, but I was struck by how hard the Korean people are described as working and also struck by the large role of the government in industry:  providing funds and picking winners and losers.  The U.S. does not profess to operate this way, though how it actually operates is rumored to be different than the professed method.  The Korean word chaebol parallels the Japanese word keiretsu, both meaning official government sanction and support for certain large conglomerates.  The Korean version started after the Korean War, whereas the Japanese version started 200 years ago.  Korea officially abandoned its support of such conglomerates ten years ago, though the conglomerates continue to pressure the government to resume the support.

Korea is wired, via cables and radio waves.  By 2000, 9 of 10 Koreans had high-speed internet access, and such access is nearly universal today.  Subway commuters watching TV on handheld device is a common sight.  Again government intervention is common, in large part responsible for these successes and others in memory chips and wireless phones.  On the other hand, the Korean government pushed satellite TV hard, launching in 2005, but never succeeding, in large part because Koreans already had terrific access to content via high-speed internet.

The remainder of the book spoke to Korean culture and predictions for the future.  It is a we-focused culture, as opposed to a Western me-focus.  In the office that means everyone arrives at work at the same time (early).  Everyone eats in the cafeteria.  Workers compete to leave the office latest.  Every feels pressure to drink alcohol to oblivion.  Subordinates are subservient to superiors, rarely offering opinions or feedback.  Promotions are largely based on age.  Unions are weak.  All of this sounds unpleasant to the Western ear, yet there are (at least) two redeeming features.  One, they work hard and accomplish a lot.  The Korean war ended in 1953, with the country in shambles, and in 57 years Korea has vaulted to the 15th largest economy.  Two, the Confucian principles that require subservience to elders also requires elders to take seriously their mentorship roles.

I found the Koreans' obsession with golf humorous.  I view gold as Mark Twain did:  "A good walk ruined".  The sport is seen as prestigious, and a good way to cement business relationships.  Successful Korean golfers on the PGA or LPGA are viewed as national heroes.  All this in a tiny country where land is scarce.

In much the way the U.S. is a magnet for young workers from Latin America, Korea is a magnet for young workers from Southeast Asia with minimal prospects in the native lands.  Korea was nearly homogeneous, and is still largely so, but the influx of non-Koreans brings the same pressures, problems and benefits that immigration yields here.

The book described childhood for some Koreans as unpleasant.  Students compete fiercely for the best three schools, as attendance assures membership in an elite social crowd, and as explained above relationships in Korean business are critical to success.  The book describes Yoo-bin, a five-year-old girl, as attending a $1,000/month English preschool at age four.  At age five she started one-on-one tutoring.  Now seven, she attends elementary school during the day and hakwon in the evenings.  Every year all high school seniors take the college entrance test on the same day.  On that day the non-seniors stay home so as not to distract.  Businesses close or shift hours to clear road traffic; airlines re-route planes and the military delays exercises.  Taxi drivers provide free rides and parking near the school is outlawed.  Nearly 100% of students graduate high school and Korea ranks near the top countries in student achievement.  On the other hand, families limit the number of children so as to concentrate their financial resources; Korea is aging rapidly as a result.

As modern as Korea is becoming, many Korean women seem to be stuck in the 50s.  When Hillary Clinton visited, during the question-and-answer session with elite female high-school students she was asked about her relationship will Bill and her experiences raising Chelsea and nothing about foreign policy.  Women make 64.2 cents for every dollar that a man makes in a similar position.

What can we expect from North Korea, other than the unexpected?  Perhaps another war, perhaps started by North Korea with no warning.  The most reasonable strategy would be a full-scale push, with the hope of capturing substantially all of South Korean territory before the U.S.-led or -supported troops mobilize.  North Korea's Air Force consists of planes from the 1960s operated by airmen with about twenty hours of training (U.S. airmen cannot fly combat missions without 600 hours of in-flight training).  The scariest prospect is the North's presumed/estimated possession of six nuclear weapons.  And, what would China think, and do?  China is interested in stability to its South, first, and no elevation in U.S. power in the region.  Hopefully, the U.S. and China have already discussed the issue.

Perhaps the North Korean regime will collapse, as has been predicted since the 1950s.  By whatever method (army, intelligence agencies, Korean Workers Party) chaos could very well ensue as Northerners attempt to flee to the South.  Southern forces might move into the North to provide stability, but some elements of the North's military forces might object.

Perhaps the countries might peacefully re-unify.  Already, the two countries have established a shared industrial zone on the border.  More than 30,000 North Koreans work for South Korean managers, earning more than they could in the North, even after the North Korean government takes it cut.  For the South, even that wage is considerably less than what would be paid in the South.  Is this, then, just cheap immigrant labor?

Or, perhaps nothing will change, with the North behaving erratically and the South paying hush money.

Besides its relationship with the North, one of the South's most pressing issues is energy.  It possesses few domestic sources of energy and its manufacturing economy is particularly reliant on cheap energy.  Korea currently generates 20% of its electrical needs from nuclear power, not enough of its energy budget to protect against increasing oil costs.  The authors urge Korea to devote more resources to wind energy, both for domestic consumption and as a technology to be sold abroad; they are especially enthusiastic about Korea's opportunity here, given its past successes with automobile and electronics manufacturing.