When I visited South Korea in the spring of 2018, everybody was talking about the breakthrough with North Korea. A year later, everybody is talking about the economy.
Small business owners, in particular, are worried about sluggish consumption and rising costs. People in large firms worry about job security and retirement. Most people believe that South Korea has fallen into a Japanese-style slump that will be difficult to overcome.
Since the Korean economy began to grow in 1960s, citizens have become accustomed to economic growth. People who entered the workforce as the boom began are now in their 70s, which means that most Koreans have no memory of the sluggish post-Korean War economy.
The long boom was punctuated by major downturns in 1979-1980 after the assassination of President Park Chung-hee and in 1997-1998 during the Asian financial crisis. In both cases, the economy recovered quickly and entered a new phase of growth. Most people at the time assumed that the can-do spirit that had driven growth would triumph and that the economy would quickly return to its normal state of growth.
Talking with South Koreans about the economy this year, I have found that the optimistic can-do spirit has given way to hopelessness. The 50-year boom is now viewed more as a historical era than reality. The “386 generation” that benefited most from the economic boom is looking darkly at retirement and worrying about the world its children will inherit. Subsequent generations feel even more insecure.
Recent short visits to Daegu and Daejeon helped to put the problem in perspective. During most of the boom years, Daegu was Korea’s third-largest city, but has now fallen to fourth as suburban growth propelled Incheon into third place. Dongseongno, the historic center of Daegu, remains one of the liveliest shopping streets in Korea, but other parts of central Daegu have empty shops and light foot traffic.
Daejeon benefited greatly from the long boom because of its central location. For most of the period, it was the sixth-largest city in Korea, but recently overtook Gwangju to move into fifth place.
Unlike Daegu, the historic center of the city has suffered from a long hollowing out as “new cities” were built on what were once the outskirts of the town. Parts of the city center are crowded with people, but empty shops with “for rent” signs are everywhere. The recent growth of nearby Sejong City has affected it negatively as people and business have moved there.
Both cities show how broader social changes are affecting the “street economy.” Some of the reduced consumption is because of the aging population. As in other parts of the world, retirees on fixed incomes in Korea spend less than wage earners. The situation in Korea is worse, however, because retiree incomes are lower than in many other advanced countries.
Much of what appears to be reduced consumption may be changed consumption. Korea was an earlier adapter of e-commerce and it continues to grow. E-commerce and the spread of corporate box stores has made it difficult to for small shops to compete, forcing many out of business. Many owners are old and find it difficult to start a new business, but e-commerce creates new jobs.
Rapid economic growth may not return but social changes will create new opportunities for growth. Green shoots can be found in Daegu and Daejeon.
The area near Dongdaegu Station in Daegu where KTX trains and highway buses stop is booming with new construction. Aside from a new department store near the station, most of the construction is of hotels and officetels. People want to be near transportation hubs and similar patterns of growth can be found throughout Korea. The increased population density is bringing people to what was once a run-down area. Though the population of Daegu is declining slightly, the number of households continues to increase, which is driving the demand for new housing.
In central Daejeon, several grocery stores catering to migrants have appeared. In the most run-down area, a Filipino restaurant has opened nearby restaurants run by Korean hipsters. This suggests that, as in Europe and North America, migrants and young people are new sources of growth in Korean cities.
What appears to be hopelessness is really the stress of a paradigm shift from the boom years to something new. Technology, migrants, and changing lifestyles will increasingly drive growth as the shift gains momentum.
Robert J. Fouser
Robert J. Fouser, a former associate professor of Korean language education at Seoul National University, writes on Korea from Pawtucket, Rhode Island. He can be reached at email@example.com -- Ed.