North Korea and South Korea: Different Perspectives on Globalization and Its Effects

1. North Korea and South Korea: Different Perspectives on Globalization and Its Effects Andras Konya Adam Schlegel Amanda Baldwin

2. Introduction • Compare the effects of globalization (or lack thereof) on two comparable countries with similar culture, history, and definite point of separation. • Pinpoint strengths/weaknesses of globalization • Method, not apples/oranges

3. History: Korean War • Soviets and Americans decide to divide Korea into their own sphere of influence • North and South (1948) • Secretary of State Dean Acheson neglected to include Korea in the US sphere of influence in Asia. • Kim Il Sung took initiative to invade the South (1950) • not Stalin but Stalinist • War ends ends in stalemate, 38th parallel, DMZ • Both countries are ruined in the similar manner • Ideal comparison • Each embraces different ideology: totalitarian vs. authoritarian

4. Path to Globalization • Following the Korean War, a decade of political turmoil begins • First President Syngman Rhee ousted from office (1960) • rigged elections for vice president cause student riots • Democracy not initiated • military coup d’etat, Park Chunghee takes over • Park Chunghee begins to build South Korea into economic power • stablity but still not democratic • tool: chaebol

5. Chaebol System • Conglomerate • large corporation with many unrelated subsidiaries • centrally planned though private • lack of input from minor shareholders • financial security for all companies involved

6. Park’s Economic Plans for Chaebols • creation of export-oriented industries • creation and fostering of heavy industry • maintenance of anti-union behavior • protection of domestic market • pegging won to dollar • chaebols are major force in the South Korean economy • 1960’s to 1990’s • big enough to utilize limited resources effectively • government contracts and subsidies

7. Top Chaebols in South Korea • Hyundai • Automobiles • Engineering, construction, shipbuilding and industrial activity • Finances • Samsung • Electronics • Petrochemicals • Construction (Petronas Towers in Malaysia) • LG • Home appliances and electronics • Petrochemicals and chemicals

8. Emerging Globalization (Advantages) • Through the chaebols, South Korea emerged as an export leader of the world • Import raw materials to manufacture exports • Industrialization and Service Economy • Higher standard of living • better education • more material possessions • increased leisure time • GDP skyrockets from third world equivalent to Western European standards

9. Emerging Globalization (Disadvantages) • Profits appease populace as long as they are positive • economic downturn leads to civil disobedience and revolution • no democratic process or structure to deal with problems • political stability dependent on economic situation • authoritarian until 1987, numerous revolutions, undemocratic • chaebols are undemocratic by nature

10. Decline of Chaebols • Ultimate decline of chaebols • Too big to manage effectively • Core competency (unrelated industries) • Decline • rise in labor cost • standard of living • competition from other Asian countries (China) • cheaper workforce • Effect • lower of standard of living to match competitiveness • contributed to South Korea’s economic crisis (1997)

11. Globalization (Financial Crisis) • Convergence of misfortunate economic events • banking sector was burdened with non-performing loans • excess debt • lower credit rating • chaebol oversight and accountability low • Democracy swiftly corrected recession • 1998: GDP: -6.6% • 1999: GDP: 10.8% • 2000: GDP: 9.2% • allowed for greater input of populace

12. South Korea Conclusion • Globalization • started to higher wages • demands for social reforms • South Korea became less competitive • Ironically, the good of globalization caused the bad

13. History: North Korea • After Korean War, Kim Il Sung takes over • Nationalization versus Chaebol • “people’s” property versus the highly private chaebol • while abuses in both, higher standard of living obvious only in one • Juche (self-reliance) • closed all capital flow • "the hermit kingdom” • Militarization versus Chaebol • to secure power Kim Il Sung diverted a third economy for military instead of economic reform (South Korea, 3%) • 22 million population, 1.2 million military • wastes the most able-bodied men of society with unproductive job • famines every year, starving people

14. North Korea: Economics • Refusal to join global markets through Juche • lower standard of living • police state: complete lack of democratic institutions • army needed for government’s lacking legitimacy: massive famines • Notable exceptions to global markets • Drugs • Arms Trade • Significant portion of GDP • used for making the military bigger, not food

15. Conclusion • North Korea is control group for complete nonacceptance of globalization • While South Korea experienced problems, it is now on a democratic path with an economy that is substantially better in every aspect