Thanks to the antics of Kim Jong-un, the Korean peninsula is hot yet again. North Korea's nuclear technology is closer to being able to strike the U.S. according to a new Pentagon report submitted to Congress last week. I do think we should take this threat seriously; however, as officials from the U.S., South Korea, China, among others, scramble to defuse the most immediate crisis, we are at risk of losing sight of the deeper, longer-term danger to the region. The crisis that has receded to the background is an economic one -- and we should not ignore it.
Now we all know that South Korea has been quite the rock star of emerging markets. It is one of the rare examples of countries that emerged from war, poverty and the inevitable "middle-income trap." It multiplied its GDP three-fold in just 20 years. It was the first nation that went from being an OECD aid recipient to joining the OECD donor committee. Today, Korean brands lead not only in "hidden" products such as LCD technology and memory chips, they are also integral to the global cultural zeitgeist: smartly designed Samsung smartphones give Apple a run for its money and K-pop star, PSY, is the monster hit of YouTube.
But, South Korea's charmed decades may end soon. It is possible that its future may resemble that of its neighbor, Japan, and its "lost decades." This, to my mind, is the real crisis on the peninsula. The current escalation of tensions with North Korea masks the real crisis and even contributes to deepening it. Most importantly, it takes leadership attention and focus off of the real crisis.
Like Japan, South Korea has a population that is aging rapidly. South Korean women had fertility rates of 1.21 between 2005 and 2010, one of the lowest in the world. An aging society has proven to be among Japan's most profound challenges; for South Korea the aging challenge promises to be even more acute.
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