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Far away, but closely related

The Friedrich Naumann Foundation for Freedom has been present in the South Korean capital for 30 years - with an office on the campus of Hanyang University. To celebrate this anniversary, a conference on the challenges of globalization and digitization took place in Seoul - with a view to Korea and Germany. Our deputy chairman of the board, Professor Karl-Heinz Paqué, took part. A special pleasure for him, as he has also been an active member of the Korean-German consultation committee of the two governments on questions of reunification for several years. Paqué sees striking parallels between the two countries.

It's amazing. If you look at the current data for the OECD countries, they are very similar for two countries, although they belong to very different regions of the world economy: Germany and (South) Korea. Both have solid government surpluses, both huge surpluses in the current account, both low unemployment and inflation rates. Both have been extremely successful export nations for a long time, for the same reason: They have a competitive and innovative industry that has been able to expand its position on the world market over the past two decades. So: no focused de-industrialization and no one-sided concentration on services as in the USA and Great Britain.

All of this looks like an unqualified success story for the past two decades in both countries. And indeed: Germany went from being the "sick man" of Europe at the beginning of the millennium to becoming a powerful export power that it has always been since the 1960s. And South Korea overcame the severe East Asian financial crisis of the late 1990s, which temporarily threatened the rise of the most industrialized of the four so-called Asian tiger nations. So everything is fine?

Not at all. Both countries suffer from three fundamental weaknesses that threaten their economic dynamism in the long term. Their population is aging and shrinking, which not only jeopardizes the social systems but also the innovative strength. Both countries lack a dynamic start-up culture that could even come close to competing with American standards. And in both countries too little is invested, because the current account surplus is not only the result of the frugality of the population, but also the consequence of a lack of profitability of investments in the country itself. Result: private capital flows abroad and does not help the production capacity in Expand domestically.

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It is paradoxical: Both countries live on substance and at the expense of the future, even if their key economic data at first glance suggest the greatest possible seriousness and solidity. So there is a need for reform in both countries. The basic direction is identical: promoting the immigration of young skilled workers and an education offensive; Deregulation and de-bureaucratisation as a start-up aid for a strong start-up culture around efficient scientific and research institutions, which are abundant; and expansion of the most modern communication networks into rural regions. The bottlenecks differ in detail, which is why the political priorities must also be differentiated: in Germany more on immigration and the expansion of communication networks, in Korea more on educational reform that encourages young people to think creatively, entrepreneurially beyond the mere acquisition of Knowledge motivates.

But the basic direction is the same. And that is no coincidence: In many respects, South Korea, as an industrial latecomer, has orientated itself to Germany's model since the 1970s - with an Asian variant of the social market economy that is quite similar to the German model of industrially based "Rhenish capitalism". However, this also has a problematic side, namely the dominance of a few companies and trade unions, which deprive the labor and product markets of the flexibility they need and only allow the really intense competition to take place on world markets. At the same time, the country has not yet succeeded in creating the broad commercial middle class that guarantees economic power, especially outside of the highly urbanized centers in Germany. In the course of hasty industrialization, modern South Korea has become a strongly centralized country in which the capital Seoul alone has 10 million inhabitants and its metropolitan region Sudogwon 25 million, half of South Korea!

This may also explain that, despite its track record, the country has still not quite achieved the level of per capita income that has become the standard for us in Germany. The last 20 to 30 percentage points to the top are still missing - depending on the measurement - and this remaining gap cannot be closed by a few global corporations such as Hyundai, LG and Samsung alone. This broadly requires that innovative strength that has grown in the German province over a long period of time since the 19th century and is partly based on technical skills and commercial practices that are much older. So the trees do not grow into the sky in the south of the Korean peninsula either.

This is all the more true as Germany has already mastered the task that a divided Korea may still have to face: reunification. Admittedly, the thought may seem absurd in the face of current events in which North Korea's young dictator Kim is driving the neighbors more and more into the perspective of nuclear threat scenarios - and his own country more and more into economic misery that can hardly be surpassed in cruelty. But history has often taken a completely surprising and dramatic turn.

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One thing is clear, however: In the event of such a turnaround, Korean reunification would be even more difficult and expensive than German reunification after 1990. There are objective reasons for this. First of all, quite simply the size: around a third of the approximately 75 million Koreans live in the communist north, while only a fifth of the 80 million Germans in 1990 were citizens of the GDR. Even more important: The economic gap is much greater in the case of Korea, the period of division is much longer, the psychological distance is much greater than it was in Germany - after all, North and South Korea were waging a war against each other that cost a million lives. The task could therefore become a particularly heavy fiscal, economic and social burden for some time to come.

But there are also positive parallels. Like West Germany at the time, South Korea now has enough reserves to mobilize capital for rebuilding: with low debt, high creditworthiness and surpluses in the state budget and, above all, in the current account. And South Korea has strong, globally competitive industrial groups that could invest in the new part of the country. In this respect, too, there is a strange Korean-German similarity or even kinship. Perhaps this also has to do with the fact that peoples of nations, who still have a great unfinished business ahead of them, are smart enough to put on a store of values ​​that they can fall back on if the worst comes to the worst.

Is that absurd, naive and incorrigibly optimistic? Many South Koreans are now skeptical about the fact that young people in their country are no longer interested in reunification. I always answer: Dear Korean friends, it was no different in Germany in the 1980s!

So let's wait and see what happens: When freedom breaks, the skeptical generation will join in too. It was the same in Germany after the fall of the Berlin Wall in 1989. The result - in the long run - is a different country: bigger, more colorful, more exciting, but also more fascinating than the old West Germany. Maybe it could be the same in Korea.