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Lessons from South Korea

Korea’s long-run growth was driven by sustained investment in education.
Apr 03,2017
Donald Trump’s signature expression — Make America Great Again — is backward-looking. Its implication: the U.S. is in decline and its stature needs to be restored. In doing so, President Trump could learn some lessons from Korea’s economic development, particularly about the importance of investing in human capital.

What great past is Trump looking to? The answer can be found in Trump’s political base, which includes a substantial majority of America’s white working-class voters. In the early post-World War II period, an American teenager could graduate from high school and move into a well-paying manufacturing job in autos, steel, consumer electronics and other industries.

The last 35 years have not been kind to this group, and particularly those who did not pursue college education. Wages for high school graduates in the United States have not held steady; they have actually fallen over this period.

Trump likes to blame globalization and trade with East Asia and Mexico and new studies provide some support for these claims, particularly with respect to China. But the real story is the march of technology, which has been relentlessly demanding of skills. Inequality between the more and less educated in the United States has grown much more rapidly than in Korea, and with it the resentments and polarization that are choking American politics.

Trump is a property developer, and his approach to problems reflects his focus on building. He wants to build a wall on the southern border. He wants to build a bigger and better military. And above all, he wants to bring back manufacturing and extractive industries such as coal.

To be blunt, this is not going to happen. The share of employment in manufacturing has dropped in all of the advanced industrial states; in the U.S. it is now below 15 percent. Korea is somewhat of an anomaly, because as manufacturing employment has fallen, the share of value-added in manufacturing remains unusually high. But the general trend is clear: we have long since entered a post-industrial world in which services dominate.

The question is whether such service employment will rest on high- or low-skilled work. The education and basic health of the workforce will matter mightily in this regard, and in both areas United States leadership is faltering.

Some comparisons between the United States and Korea are telling. Korea and the United States rank close to the top of the advanced industrial states in the share of 25-64 year olds with college education; indeed Korea — at number five — just edges the United States on this metric. But on other indicators, Korea far exceeds the United State. Korea ranks 6th among rich countries in secondary school graduation rates. In the United States, high school completion rates started to stall about two decades ago and the United States is now 25th on this measure. To be sure, America faces headwinds in having a larger immigrant population. But inflows of foreigners are an advantage if they bring skills or move easily through the educational system.

The quality differences are also well known. On standardized tests of science literacy, Korea ranks 11th among a sample of about 70 countries. America ranks 25th. On math Korea is 7th, the United States 40th. And the problem is not just in science and math. On reading, Korea ranks 7th, the United States 24th.

The picture on health is even more dire. The United States outspends all other advanced industrial states on healthcare, yet life expectancy remains well below the OECD average. A stunning new study by Ann Case and Angus Deaton shows that the country’s health problems are concentrated precisely in Trump’s base. As they put it, middle-aged whites in the United States are “dying of despair.” An earlier version of the study highlighted rising white mortality from drug and alcohol abuse, suicide, and chronic liver diseases and cirrhosis. But an update shows that middle-aged whites are dying at higher rates from virtually all other major diseases as well. While mortality rates have been declining in virtually every rich country — including Korea — the United States is getting left behind.

Education and health reform are hard to do, and Korea has its own problems on both fronts. Unemployment rates among the college educated in Korea are among the highest in the OECD. The challenge now is how to move college graduates into the workforce. That will take reforms that reach well beyond the education sector, but the basic lesson is clear. Korea’s long-run growth was driven by sustained investment in education.

After the transition to democratic rule in the mid-1980s Korea gradually developed universal health care as well. Again, Korea has its own problems, including big gaps in the mortality of men and women and a puzzlingly high suicide rate. Some Koreans — and particularly men — are dying of despair, as well. But If Donald Trump truly wants to “make American great again,” how about investing more heavily in the skills and health care that will be needed for tomorrow’s workforce? Conservative critics of social policy in both countries miss the lessons from their own country’s long-run growth, which ultimately rests on an educated and healthy workforce.

*The author is the Krause Distinguished Professor at the Graduate School of Global Policy and Strategy at the University of California in San Diego. He is the author with Marcus Noland of the Witness to Transformation blog at https://piie.com/blogs/north-korea-witness-transformation.

Stephan Haggard