'Korea has another decade of growth, and then we'll start down Japan's path." So declares a prominent Korean economist to an American visitor.
President Lee Myung-bak, who is in the last months of his administration, may be President Barack Obama's favorite Asian leader. But his 30% approval rating at home reflects frustration with rising inflation, his cozy ties to business groups, and public fears of a growing wealth gap. The likelihood that a left-wing candidate will capture the presidency next year portends a turbulent future for U.S.-Korea relations as well as the Korean economy.
The precipitous chill in U.S.-Japan relations after the Democratic Party of Japan came to power in 2009 should offer a sobering warning to Korean and American officials. As close as Tokyo and Washington have traditionally been, heated domestic rhetoric and policy miscues quickly damaged the relationship, which is still recovering.
Alarms should be going off in Washington after far-left political activist Park Won-soon's victory in Seoul's mayoral elections last month. The radical Mr. Park opposed the landmark Korea-U.S. free trade agreement, which has just been ratified by the U.S. Congress after four years in limbo and must now be approved by Korea's National Assembly.
Mr. Park, a wild card in Korea's already turbulent politics, is emblematic of the strong current of discontent on the peninsula. He was not even originally allied with the main opposition Democratic Party, which fielded its own candidate. Instead, he found support from a political outsider-the popular, and populist, Software entrepreneur Ahn Chul-soo.
The kind of political change augured by Mr. Park's rise spells trouble for U.S. interests. Many observers believe that the inclination of Koreans to turn to China will reassert itself. Furthermore, while the quick conviction of an American soldier for the recent brutal rape of a South Korean high-school girl was handled deftly enough to avoid mass anti-American rallies, the inherent social criticism of U.S. forces remains. The threat of an erratic and nuclearizing North Korea has kept military coordination between the allies tight over the past decades, but the political relationship has often been under significant strain.
By contrast, internationalist Koreans still see Mr. Lee's time as a golden age for the country. Mr. Lee has brought new prominence to South Korea, not least through his close personal relationship with Mr. Obama. Seoul hosted the G-20 summit in 2010 and will be the organizer of the second Nuclear Security Summit next year. Over 100,000 Koreans are studying in the U.S., and the two governments are cooperating to deliver aid to Africa. Companies such as Samsung and Hyundai have reached global status.
Economically, South Korea has almost completely conquered its tragic past. Shattered by war in the 1950s and then ruled by military strongmen until the 1980s, the country today is a stable democracy and a model of development for emerging nations. The economy has been growing at a healthy rate, registering a 6.2% increase in 2010. Per capita GDP is also climbing, reaching around $30,000 last year.
Despite all these achievements, Korea faces challenges. The oncoming ideological shift could destabilize the country's politics and harm an economy facing numerous challenges.
The left is fragmented among a number of parties that are increasingly taking radical positions in response to populist pressures, including opposition to the free trade pact with the U.S. The ruling party is perceived as a corrupt, business-dominated entity ruled by an ossified oligarchy under the daughter of the country's former autocratic leader, Park Chung-hee. Voters swing between two extremes when casting ballots in national elections, leading to an ever-shrinking political middle.
Curiously, the country's emerging economic problems mirror those of its giant neighbor, Japan. Perhaps most urgent is the severe demographic crisis.
Korea's birth rate is among the world's lowest, dropping to just 1.15 babies per woman in 2010, lower than in Japan. Without a national pension system, many argue, South Koreans will face an uncertain future in which ever-fewer children support elderly parents. As South Korea's labor force shrinks, moreover, businesses will be hard pressed to fill their needs, leading to difficult questions about whether to move operations offshore or import workers.
Similarly, Korea's agricultural sector, like Japan's, is inefficient and heavily protected from international competition. Korea ranks near the bottom of food self-sufficiency and is second to Japan among Asian importers of grain. Its politically powerful agriculture lobby is actively demonstrating against ratification of the Korea-U.S. free trade agreement, leading to the pact being held up for now in the National Assembly.
Many South Korean farmers work tiny plots, largely growing rice, which prevents economies of scale and the use of advanced farming techniques and technologies. This leads to vastly inflated prices for daily commodities, further fueling the political dissatisfaction that imperils President Lee's legacy.
If there is an upside to all these problems, it is that vibrant social discourse in Korea seems to be starting to address these issues, in part by looking at Japan. An international conference this week in Seoul hosted by the Asan Institute for Policy Studies (at which this writer was a speaker) took as its theme "Japan in Crisis." If they don't begin tackling their problems today, South Koreans may be holding a similar gathering in a decade or so to try and save their country.