Today we're going to talk about South Korea, or as Kim Jong Un would call it, the BAD KOREA. You've probably heard of this country because it's probably where your mobile phone, your TV screen or possibly even your car was manufactured. Or perhaps because it's the place where the most watched YouTube video of all time came from. Yes, South Korea is a big power, not only at the cultural level but also at an economic one.
I'm sure every one of you watching this video have at least one product from Samsung, Hyundai or LG around you. South Korean companies are on fire. And this is a surprise given that in the 1960s, South Korea was an extremely poor country. And no, we're not talking about relative poverty here. Other countries like Gabon or Zimbabwe were more developed at this time.
Nonetheless, in just one generation, South Koreans went from starvation to one of the most prosperous societies in the world. And so now comes the big question… what exactly did South Korea do to become quite so rich? And hold on a second… Well, I'm sorry to disappoint you or not, but the story of South Korea is a bit different.
Of course, compared with their neighbors to the north, South Korea is a free paradise, but their economic model has one peculiarity that sets it apart from the rest of the world. So then the question is, what are the reasons that explain this incredible progress in South Korea? And why? And more importantly, why was Gangnam Style so controversial in South Korea? Both of these questions are related, I promise, and these are the questions we're going to answer in today's video.
As you probably know, in 1953 the Korean peninsula was split into two halves after a war which killed over 2 million people. At that moment, we could actually say that South Korea was the country that was in more trouble economically. The North had all the industries and companies, while the South was agricultural and underdeveloped. Schools had no desks and most of the children got the majority of their nutrition from powdered milk that was given to them.
by the US and Europe. This is why, in 1960, after many protests, General Park Chun-Hee organized a coup d'etat and took power. This is how the first South Korean dictatorship started.
During the following 27 years, the country had three different dictators. All of them came into power in a violent way by overthrowing the previous one. Nevertheless, despite the political instability, in those times, the South Korean model was Korean. And hold on a minute, because this economy is not as free as it seems.
In fact, a free market is organized in a bottom-up fashion. The private businesses decide how, when and what they want to sell. Then the state comes in and regulates all of that activity through various laws.
Well, Park Chung Hee's system was quite the opposite. This was a top-down system. His policy was to meet with the most important families in the country who controlled most of South Korea's industries.
This group included the founders of Samsung and LG. So this is Essentially, he put them in a room and said, look, from now on, I will give you whatever you need to grow. If one year you cannot pay your taxes, it's okay, I'll forgive you.
Do you need some grants? Well, here you go, you can have it. You need to borrow some money from abroad? Well, the government is going to back your loan.
Even if you can't pay your debts, the state is going to help you. If we are weak, our country will be in jeopardy. In order for a country not to fall, it must cultivate its own strength. Nonetheless, unlike other countries like France… South Korea didn't put up any barriers to international trade. Actually, since that very first moment, the government guaranteed rule of law and low taxes for all businesses, regardless of where they came from.
But not only that, Park Chung-hee gave all kinds of tax incentives for companies and individuals to invest and save money. In other words, the big conglomerates like Hyundai or Lotte got to compete in an open market with other corporate juggernauts from Japan, or the United States. But at the same time, they also had help from the government. Since South Korea has no natural resources but a big population, those companies put a focus on industries that required a large workforce, and that's manufacturing. And this was the beginning of… THE CHAIBAL NATION Imagine the life of one of the 100,000 workers employed by Samsung in South Korea.
In South Korea, he gets up in the morning in a house built by CYT, the construction company run by the Samsung Group. When he eats breakfast, he watches the latest VisualPolitik video on his Samsung Galaxy phone. Then he takes his Renault Samsung car… yep, you read that right, Renault cars are manufactured by Samsung in South Korea.
And guess where he has his car insurance? Yep, you're getting the trend here… he gets it from Samsung. Long after a hard day working at… yeah, you're getting the picture now. Now, our South Korean man wants to go get some beers with his colleagues, so he goes to the canteen at… yes, again, you're getting the picture. And the weekend comes and our friend wants to spend some quality time with his wife and children so he decides to take them to a park.
Where do you think he'd go? Yep, he goes to Samsung's very own Disney-style theme park. In other words, if you work for Samsung, the company is everything to you. We're talking about the biggest Kaiball in all of South Korea.
And now you might be wondering, what exactly is a Kaiball? Kaiballs are big conglomerates supported by the state. Some of them, like they're already defunct Daewoo were started by the administration itself. Others like Hyundai were born in the 1940s. Most of them started being family owned but as they grew they became public companies and all of them have a number of different business lines and products.
For example LG is famous for their TVs and their mobile phones but in South Korea they are also the distributors of Coca-Cola. In total, there are around 100 kybals and they are the biggest asset in the South Korean economy. As I said before, the government places a red carpet under their feet but this doesn't mean they have a blank cheque. This is why when a kybal as big as Daewoo went bankrupt, no one came to bail them out. And this is a clear incentive for these companies to be on the edge of innovation.
For instance, in 2008, Sony, the Japanese firm, wanted to create the first OLED TVs. But this technology wasn't advanced enough and the screens were pretty expensive, even in price. too high for most of the luxury market.
So the Sony guys put the project on hold and they never got back on to it. South Korean LG had the same technology and the same problem. So what did they do? Well, they launched OLED mobile phones with a much smaller display. This way, they took advantage of their assets and, what is more important, they learned how to work with this new technology.
This is why, in a very short amount of time, they found ways to produce affordable OLED TV screens. Now, hold on for just a minute, because there's another, more important part, which helps explain this very innovative culture. SOUTH KOREAN EDUCATION We all know it, South Korean children have always had a lot of fun.
had one of the best marks in the international PISA test. The whole country stops during university entrance exams and South Korean schools spend whatever they need to guarantee the best education for their boys and girls. The flip side of this coin is that those kids have the biggest suicide rate in the world.
In fact, all of South Korea has a problem with suicide, the country having the second highest suicide rate per capita in the world. Since the beginning, the government has understood that Kybals would need high-skilled workers. So they designed an educational system that worked in line with the nation's companies.
This explains why South Korean children are incredibly good at maths and have excellent memorization abilities. Further, their respect for authority and hierarchy is almost religious. And this is why none of them want to start a company.
The dream of every South Korean is to wind up working in one of these kaibals. If they work hard, they might even become a manager and get a house in that paradise on Earth that is a famous destination. district of Seoul with a name that's going to sound pretty familiar to you. Yep, I'm talking about the Gangnam district. Gangnam Style A human and warm girl during the day, a classy one, someone who knows how to enjoy the freedom of a cup of coffee, but when the night comes down, her heart gets warmer because she is a girl with two faces.
Hey, sexy lady, your big brother is Gangnam Style. This is an extract from that famous song that became so popular back in 2012. Even led to their main singer Psy getting into some trouble with the authorities due to the lyrics having inappropriate content. content.
For a society that's obsessed with respect for authority, size aesthetics are something as radical as the hip movements from Elvis back in the 1950s. But the truth is that a hierarchical economy, one which relies on a few big corporations, is not a good recipe for a stable economy. In fact, South Korea, big as it is in the manufacturing industry, lags behind in other fields such as services or finance.
And since the economy depends so much on governmental and kybal decisions, there is almost no space for entrepreneurs. Think about it, I mean, even if you wanted to start a company, it's pretty hard to compete when your competitors are supported by the government. But not only that. hierarchical structures are not as efficient as you might think.
In fact, most of the Kybals have become bureaucratic behemoths that require lots and lots of money to work. This firm leads the sales of mobile phones in the entire world, however, they make almost no profit. And that is a problem.
Anyway, things are starting to change. A lot of South Korean youngsters have been educated in Europe or America and now they are coming back to their country of origin with a new and more critical mindset and a more entrepreneurial spirit. This generation is creating the roots for a new generation. a startup ecosystem. But there is still a lot of work to be done.
Anyway, whether you like it or not, we must admit that this top-down model has been successful in South Korea. But despite all the hype, there is still a lot of work to be done. of this, there are still some questions that must be answered.
What would happen if a country like Samsung collapsed? What would happen to the country as a whole? And not only that, but this marriage between politics and business has created lots of incentives for corruption on a massive scale. But that's something we'll cover in a future video. In the meantime, check out this other video we made about the rising Asian middle class.
And don't forget to check out our Reconsider Media Podcast, where you can hear the voice that isn't my voice on this video. And now the big question is, do you think this crossover between hierarchy and the free market could ever work in other countries? And what's your opinion about the South Korean system? Please leave your opinion in the comments below. We'd love to hear from you.