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Assignment: Pakistan in 2010

Assignment: Pakistan in 2010

Assignment: Pakistan in 2010


The Economy: Down but Not Out

Although China now has the world’s second largest national economy, South Korea’s per capita national wealth (GDP) was roughly six times mainland China’s and twenty times that of Pakistan in 2010. To put South Korea’s achievement in even better perspective, South Korea’s GDP per capita is far larger than that of Chile, the richest country in Latin America, and more than double that of Brazil.

It has come very far in the half-century since World War II and the Korean War left its economy in a shambles and its people traumatized and destitute. But it has a long way to go to catch up with Japan. Indeed, Japan’s GDP per capita ($45,680 in 2013) still far exceeds that of South Korea ($24,590).

In the 1990s, huge industrial conglomerates and largely unregulated big banks dominated South Korea’s economy. These special interests had become powerful and entrenched, stifling competition.

Although Asia’s financial crisis of 1997-1998, known as the Asian flu, did not start in South Korea, it had a devastating impact there. Big banks had been lending money to big business without regard to the underlying financial condition of the borrowers. This situation, as well as the general need to revitalize the country’s economy, compelled the government to intervene aggressively—not to put the state in control of the economy but to give greater play to free-market forces.

Seoul launched a program of bold reforms in the late 1990s. The reforms proved to be a tonic: South Korea’s economy grew 4% a year on average between 1995 and 2008. The country’s resilient export-driven, trillion-dollar economy was slowed by the 2008 global recession but bounced back quickly thanks in no small part to a $38 billion economic stimulus program. South Korea’s economy has slowed in recent years, averaging 3–4% annually.