The South Korean government spent 279.9 trillion won to address the low birthrate issue from 2006 to 2021, yet it had little effect. In March this year, only 19,669 babies were born, a 7.3% decrease compared to the same period last year. This marked the second consecutive month that births did not exceed 20,000, the lowest number since 1981 when related statistics began. Despite this, the South Korean government continues efforts to raise the birthrate to counter low birthrates and an aging population. Both past and current administrations have introduced various financial support measures and attempted to change economic and social structures that discourage childbirth.
The first step to solving any problem is to analyze its causes. To address South Korea’s ‘low birthrate,’ we need to understand what has led to this decline. In “The End of the World Is Just the Beginning,” author Peter Zeihan, an expert in geopolitics and global population and security, explains that globalization, initiated by the U.S. at the end of World War II, spurred global economic development and industrialization for the first time in history. This wave of progress led to urbanization and significant demographic changes.
Based on Zeihan’s analysis, the country’s urbanization and subsequent declining birthrate mean that in a de-globalized world, South Korea will have fewer people to support its economy, let alone develop it. “South Korea’s economy would not exist without globalization, and it will not be able to maintain its capital structure or labor productivity without a recovery in fertility rates,” Zeihan claims.
Now that the U.S. is moving towards de-globalization, countries that have thrived under globalization are facing economic and demographic crises. South Korea exemplifies this challenge. Its economy, heavily reliant on exports and imports, has benefited significantly from globalization. However, according to Zeihan’s analysis, South Korea’s urbanization resulting from globalization has led to a declining birthrate, meaning that in a de-globalized world, the country will have fewer people to support its economy, let alone further develop it. Zeihan asserts, “Without globalization, South Korea’s economy would not exist, and without a recovery in fertility rates, it will not be able to maintain its capital structure or labor productivity.” Indeed, South Korea has declared the declining birthrate a ‘national emergency.’
“Koreans possess the creativity, technology, tenacity, and determination to tackle the obstacles of de-globalization,” Zeihan notes in his series of books, emphasizing the “strength of Korea.” This reflects his belief that Korea can overcome the crisis of low birth rates.
Given this perspective, ChosunBiz conducted a Zoom interview with Zeihan, who resides in Denver, Colorado, on June. 19. Zeihan remarked, “Koreans have demonstrated their ability to confront reality and completely transform their economic model within three to four years.” He emphasized that “Koreans have always created something new and almost always succeed.” In the interview, he highlighted the necessity for economic integration with Mexico, Indonesia, and Vietnam, stressing the importance of developing a new economic structure to address the low birthrate crisis
In the book, you stated that “the industrialization and urbanization driven by U.S.-initiated globalization have led to demographic collapse.”
“By the end of World War II, the United States had built the largest military alliance in history to deter, contain, and defeat the Soviet Union. To solidify this new alliance, the U.S. established a global security environment that allowed allies to trade with anyone, anywhere, at any time, and to join supply chains to obtain any commodity. This created what we now refer to as free trade or globalization. As a result, economic development and industrialization have spread to every corner of the world, forming a mass-consumption society and generating a global trade boom. This phenomenon has transformed global demographics: economic development and industrialization have increased life expectancy, while urbanization has accelerated.”
Are you saying that urbanization is the cause of the declining birthrate?
“In rural areas, children provide ‘free labor’ to their parents by working on farms or in family businesses, making it economically viable to have many children. However, as people moved to cities, this economic incentive disappeared. In urban settings, children are viewed as an ‘expense.’ This shift is why countries like South Korea and Germany, which have globalized rapidly, have experienced dramatic declines in their populations.”
Why has the U.S. chosen to de-globalize? Could it be due to the diminishing benefits it receives from globalization?
“U.S. involvement in globalization was never purely about economics; it was a strategic reward for the security cooperation essential during the Cold War. Globalization served as a ‘bribe’ to secure alliances and bring other nations on board. The U.S. did not uphold the global economic structure for its economic benefit. While globalization involved opening up the U.S. market to the world, it did not necessarily result in U.S. allies reciprocating by opening their markets. Trade constitutes roughly 15% of the U.S. gross domestic product (GDP), which is a third of South Korea’s. When excluding trade with Mexico and Canada, this figure drops to about 8% of GDP. Thus, the impact of globalization on the U.S. economy has never been profound. Over the past 30 years, since the Cold War’s end, the U.S. has gradually retreated from global engagements. No other country possesses the military capability to ensure global security and, consequently, global trade. As a result, the U.S.-led world order is giving way to increasing disorder.”
In a world where the U.S. is pulling back from globalization, is a trade-dependent country like South Korea destined for nothing but tragedy?
“I would say no. The future looks grim for countries like Italy, Germany, and China, which depend heavily on trade and face declining birthrates. However, I believe South Korea is different. Over the past century, Koreans have challenged their circumstances and successfully reinvented their entire economic model time and again. Koreans have consistently made things happen and have almost always succeeded. While it’s hard to predict exactly what South Korea will look like in ten years, it will adapt and develop a new economic model to reach emerging markets.”
Can South Korea overcome its low birthrate problem?
“For the past 50 years, South Korea has had the third-lowest fertility rate worldwide. To address this issue, the country would need to triple its fertility rate next year and sustain it for 30 years. However, barring a massive human cloning effort, I don’t see a viable solution. Cultural factors also contribute to the problem. In South Korea, the women’s movement has prioritized social equality over political or economic equality. This focus has led many women to resist ceding control of their lives to men, creating an environment not conducive to having many children. Additionally, single motherhood remains a significant challenge. While an immediate solution isn’t in sight, South Korea is uniquely positioned to tackle this issue.”
In the book, you mentioned that Japan, which faced a declining birthrate before South Korea, has addressed its labor shortage by relocating production facilities. Additionally, you urge South Korea and Taiwan to move state-of-the-art facilities to the United States. What is the rationale behind this recommendation?
“Japan identified its shrinking population early on and proactively began relocating production facilities abroad, well before this demographic challenge was widely recognized. Since 2006, Japanese companies have shifted the majority of their production to other countries, utilizing local labor to manufacture and sell goods in those markets. They repatriated a portion of the profits to support their aging population. Japan understood that the U.S. was averse to the practice of dumping goods into its market, so it spent decades developing the capability to produce goods within its target markets. This industrial strategy has enabled Japan to manage its aging population more effectively. Only a select few nations, including South Korea, Taiwan, Singapore, and the United Kingdom, have the skilled labor and capital necessary to offshore industrial facilities in a manner similar to Japan. While South Korea has relocated some of its production offshore, it remains hesitant to move high-valued industries. For South Korea to fully benefit from this strategy, a shift in economic mindset is required.”
Do you mean that moving production bases to the U.S. is necessary?
“Global consumer demand is declining, and with aging populations, much of this demand will disappear within the next 15 years. For South Korea and Taiwan, the primary export markets are North America and Southeast Asia. However, as Southeast Asia increasingly falls under the influence of the U.S. and Japan, it’s crucial for them to move in a way that doesn’t compromise U.S. security and economic interests. In the coming years, countries like Germany, Italy, Poland, and the Netherlands will also need to relocate production, increasing competition and costs. Therefore, it’s essential to establish agreements with nations experiencing strong population growth, such as the U.S. and Mexico. While the U.S. remains the largest market, it’s not the only option. Access to American consumers is facilitated by the North American Free Trade Agreement (NAFTA), which includes the United States, Canada, and Mexico. This makes Mexico an attractive option, although much of the labor force in northern Mexico has already been absorbed by U.S. companies. Consequently, central Mexico presents new opportunities. Canada also offers significant potential, with its substantial population and well-developed infrastructure in areas such as the Prairies. Leveraging these markets will be key to navigating the challenges posed by a shrinking global consumer base.”
What other countries could be considered for relocating production facilities outside of North America?
“Outside of North America, India is the largest consumer market, but doing business there can be quite challenging. India consists of 30 distinct economies that are only loosely connected, which is why the notion of ‘1 billion consumers’ can be misleading. Instead, I believe Vietnam and Indonesia present better options. Vietnam’s economy has transformed from an agricultural base to a heavy industrial center and is now progressing towards becoming a high-tech manufacturing economy. Notably, 40 percent of Vietnamese university graduates hold degrees in STEM (science, technology, engineering, and math) fields. Indonesia also shows great promise. Although it currently has a lower skill level, its labor force of over 2.5 billion people provides fertile ground for the elements Korea needs right now. In many respects, Indonesia offers advantages over China, particularly in areas like assembly.”
Are you suggesting that, since it is difficult to prevent the decline in birthrates, we should establish an economic system that anticipates a shrinking population?
“South Korea’s economic model relies on mass-producing high-value goods with a highly skilled labor force at lower costs, and exporting these goods for consumption by younger populations. However, this model is not sustainable. There has never been a case in the past century where a declining population has rebounded to the replacement fertility rate of 2.1 children per woman, which is necessary to maintain the population at its current level. Therefore, a new economic model is needed. South Korea aims to keep many manufacturing processes within the country, but this approach may not be viable in the long run. Instead, South Korea should consider integrating its economy by subcontracting production to countries like Mexico, Indonesia, and Vietnam. As the population ages, establishing these international economic partnerships will become increasingly important.”
