South Korea and its consumer-driven economy
Source of picture: KeystoneUSA-ZUMA/Rex Features
By John Richardson
MEASURING demand growth cannot involve merely assuming that the future will be the same as the past, as this increasingly complex world continues to tell us.
There are a myriad of social, political and environmental factors that will determine the rate of chemicals and polymer consumption-growth, now that the Supercycle is over.
It limited freedom of expression, the development of a civil society, and the innovation crucial for any country to escape the middle-income trap.
It wasn’t until the election of Roh Tae-woo in 1987 that South Korea removed the last remnants of authoritarian rule. This seems to have been a significant in South Korea becoming a consumer-driven economy, and in being able to manufacture world-beating branded goods.
Support for our arguments is provided by an article by Tom Miller, managing editor of the China Economic Quarterly (CEQ) and author of China’s Urban Billion (Zed Books, 2012).
China could be at a similar crossroads today, but as Miller points out in the December issue of the CEQ: “Investment’s share of GDP (in China) shot up from 35% in 2000 to 49% in 2010, while household consumption’s share shrank from an already measly 46% to just 34%.
“No other country has ever grown with such a high share of investment and such a low level of consumption – not even South Korea or Taiwan, whose experience of economic take-off China most resembles.
“China’s investment-driven model of economic development is widely viewed as wasteful, and even the country’s leaders agree that it is unsustainable. Over the coming decade, investment growth must slow.”
Miller’s comparison is with how Taiwan has developed over the last two decades.
He writes: “For all its enormous development, China still lacks genuine civil society – a space where people can form associations and, should they so wish, spend their money together.
“Public events in China, such as music festivals, are routinely cancelled because they fail to meet official stipulations. “Chinese cinema is bland and unappealing because films must pass the censor.
“Private charities do not exist, because they are deemed a threat to government authority. In Taiwan, by contrast, citizens may associate freely.
“In October 2012, 50,000 people marched through Taipei in support of gay rights; the city has many bars and shops, even bookstores, specifically catering to gay customers.
“In China, non-mainstream interests–especially those without official approval–struggle to exist at the margins.
“Taiwan’s experience shows how political liberalisation helps to nurture private consumption. China’s rigid political system is no barrier to much greater consumption: as its citizens grow wealthier, they will spend more.
“But by reducing the opportunities to consume, social repression is a drag on consumption’s full potential. Like self censorship, it is insidious and hard to spot–yet the economic impact is considerable. China’s consumer economy will remain stunted.”