Getting entrepreneurial in Korea (Summer School)

**SPEAKER_1** (0:01)
This is Planet Money, from NPR.

**Robert Smith** (0:16)
Welcome back, everyone, to Planet Money Summer School World Tour, the only international economics degree where the currency of interest is frequent flyer miles. And so far, including this episode, we have circled the globe and racked up 46,289 miles.
Double diamond. I think we deserve an upgrade.
And why not? We should fly first class into today's destination, Seoul, South Korea, a country that has experienced quite an upgrade itself. Last week in Argentina, we learned about a very rich country that had lost its shine. Today in South Korea, we see the opposite. A country that has written the playbook for rising from poor to rich.
When the Korean War hostilities ended in 1953, Seoul was a city in near total ruin. People were living in rubble and shacks, going hungry. Things were grim. Now Seoul, South Korea, is a glittering modern city. The country is home to Samsung, Hyundai, and the hot semiconductor company, SK Hynex. Not to mention the silky song stylings of BTS. Hope this brings more young people to the podcast. Bora Hey, new listeners. So, how did Korea pull this trick off? And can other countries follow this same playbook? Sounds like a question for international economists like ourselves and for our guest professor today, Oliver Kim. Hey, Oliver.

**Oliver Kim** (1:43)
Great to be here, Robert.

**Robert Smith** (1:44)
Oliver is an economist who studies how countries climb the development ladder as a research fellow at the Philanthropy Coefficient Giving. Oliver, your parents are Korean, but you were born in Hong Kong, right?

**Oliver Kim** (1:56)
That's right. I grew up in Hong Kong and Singapore. And I should also add that my parents were both children of diplomats. So they actually grew up not just in Korea, my mom also in Zaire, in what is now the DR Congo. So they kind of saw developing societies from sort of different lenses.

**Robert Smith** (2:10)
All of which gives you some great experience to talk about our big question today. It's really the biggest question in economics. How do poor countries get richer?
And how do the lessons from South Korea work for the rest of the world? I just gave the world's most basic recap of the tremendous success of South Korea, including a gratuitous mention of BTS.
How do economists like yourself look at this development?

**Oliver Kim** (2:33)
The story that most people are familiar with is that, let's say the starting point is around the post-war. If you just look at the GDP numbers, South Korea was roughly at the same income level, in some cases lower than countries in sub-Saharan Africa.
In the following decades, unlike sub-Saharan Africa and other parts of the world, South Korea, Taiwan, Singapore, and Hong Kong, what were known as the East Asian Tigers, pulled away from the pack and converged very quickly in terms of their incomes to the industrialized West.

**Robert Smith** (2:59)
It was incredible. But I wonder, did these Tigers have some sort of existing economic advantage before they took off dramatically?

**Oliver Kim** (3:08)
They had relatively high levels of education. They had relatively good infrastructure. But still, this transformation is remarkable. And in some sense, every developing country today is trying to emulate that experience.

**Robert Smith** (3:20)
So what happened? Was it good decisions by the governments? Was it aid from the United States? Was it just being in the right place at the right time?

**Oliver Kim** (3:29)
Yeah, it's a nexus of all these different factors. One sort of set of initial policies that occurred was land reform. So in poor societies, the main thing that people do is they farm.
And that sort of unites South Korea, Taiwan, that formation of agriculture and the promotion of agricultural activities.

**Robert Smith** (3:46)
So by giving everyone land, some economists have argued that this increased the amount of food that could be grown, that it created more markets, more money for everyone, and then more demand for factory goods. Essentially that land reform is the first step on the ladder to an industrial economy.

**Oliver Kim** (4:03)
I think there's like mixed evidence on that. But what I would highlight actually is this more macro story. If you have a terribly unequal income distribution, where there are some people at the top who have so much more than people at the bottom, it perverts incentives, I think, in terms of what you're going to do and in terms of investing in your society.
I think one remarkable characteristic of these countries is that the income distribution was relatively level when they were beginning this period of takeoff growth. That meant that everybody had a stake in the long-term development of the country.