Rethinking Export-Driven Economy

Korea has pursued export-driven economy since the early days of industrialization, utilizing its low priced labor. For instance, the Korean high tech firms entered the high tech business by exporting what’s left of the economic food chain in the scale-intensive high tech industry. The typical example was semiconductor. As they accumulate technological competence, they have moved up to the next level of the economic food chain to some degree. And yet, the export-led economic orientation and promotion of large-scale industry as major industry has remained relatively the same: steel industry since 1970s, electronics industry since 1980s, and IT industry since 1990s.

The export-led economy has sustained since the volume of consumption in the Western large economies has held up. In exchange for exports to the States, Korea like other Asian Rim countries has purchased U.S. treasuries. Now that the Western large economies are faltering, the export-driven Asian Rim economies have contracted as well.

Korea’s drive toward export-driven policy for economic growth has been predicated on the Japanese model Korea has adopted. And yet, the Japanese has experienced a lost decade economy-wise in the recent history. Why can Korea and the rest of the world learn from the Japanese experience? The answer to this question involves many complex issues including the political economy, the expansion of the middle class, the close-knit relationship between government and business, changes in policy ideas and development strategy, and so on.

Exports are a huge percentage of their sales among the major Korean high tech firms. Since they are facing dwindling purchasing power in larger economies, what would be the alternative strategy they need to employ?