Economic Power of South Korea

The purpose of this research is to assess the economic power of the Republic of Korea (South Korea; hereinafter referred to as Korea) as a threat to Japan's status as an economic power. The following discussion reviews Korea's economic progress since the late1970s. This review is followed by an assessment of Korea as an economic threat to Japan.

From 1965 through 1985, Korea's per capita gross national product (GNP) increased by an average 6.6 percent per year.1 As dramatic as this growth rate is, it tends to understate that which has occurred more recently. During the 10year time period 19781987, per capita GNP increased from US$11602 to US$34503a 197.4 percent increase in 10 years. GNP growth in 1987 was 12.5 percent, and annual forecasted growth for the 19881991 time period is 7.3 percent.4

1The World Bank, World Development Report (New York: Oxford University Press, 1989), 203.

2J. Paxton, (Ed.), The Statesman's YearBook, 118th ed. (New York: St. Martin's Press, 1982), 786.

3J. Paxton, (Ed.), The Statesman's YearBook, 126th ed. (New York: St. Martin's Press, 1989), 780.

When it was developing into an industrial and economic power, the United States relied primarily on an expanding domestic market. In the postSecond World War period, Japan's rise to economic superpower status relied heavily on the development of external markets. In its surge into and almost through the ne

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s theoretically sound, and it is one desired by American economic planners and managers. On the other hand, however, the won loses only 0.22 percent of its value against the dollar for each onepercent the dollar gains in value against the yen. This relationship is not consistent with a freely operating flexible exchange system, and is indicative of effective monetary management on the part of the South Korean economic planners and managers. The refusal of the South Koreans to permit the won to fluctuate according to market conditions against the dollar in international currency exchange has distorted all of the economic relationships involving the relative values of the two currencies. This situation has caused economic hardship for the United States, while creating significant economic benefits for South Korea, as the trade deficit of the United States with South Korea attests. This state of affairs is not generally acceptable to the United States government, nor is it looked on with favor by the Japanese. One result of this situation is that Korea faces the future threat of trade sanctions imposed by the United States. As the United States becomes less wary in the rapidly changing environment of the socalled communist

Category: Economics - E