This year’s Nobel Prize in Economics was awarded to Daron Acemoglu (57), Simon Johnson (61), both professors at the Massachusetts Institute of Technology (MIT), and James Robinson (64) from the University of Chicago, three scholars who analyzed the causes of national success and failure through the lens of political and economic institutions. In a phone interview with the Chosun Ilbo on Oct. 14, the day of the announcement, Robinson said, “South Korea seemed to have no basis for becoming a kind of modern, successful, innovative, industrial economy. People thought South Korea could never escape poverty, but in the end, they did.”
Professor Robinson noted the export-led development policies during President Park Chung-hee’s era as one of the key factors behind South Korea’s economic success. “Those policies were extremely successful in Korea, and you could say that they could be successful in other countries if implemented properly with the right institutions,” he said. “I think he was a dictator, but I also think it’s undeniable that he had a project to develop his country.” He added, “South Korea made the transition to a flourishing democracy [after his regime], which was critical for sustaining the burst of economic development that occurred under President Park.”
Robinson said, “What’s so exciting about South Korea is ‘cultural explosion, and that reaches beyond trade policy or outsourcing. My son thinks South Korea is just the coolest place in the world.” Below is the Q&A session.
In your book, “Why Nations Fail,” you explained in detail about South Korea’s economic success, but there are growing concerns about challenges facing the economy.
”I think all countries go through cycles like this [success and stagnation]. If you looked at South Korea historically, in 1970, what did they export? Apparel. Clothes, plywood, 10% of exports was wigs made of human hair. South Korea seemed to have no basis for becoming a kind of modern, successful, innovative, industrial economy. But it has dealt with a lot of problems through the East Asian financial crisis in 1997.”
What stands out to you in South Korea’s economy today?
”When I look at South Korea, I see creativity. And I don’t mean just Samsung and Hyundai. Think about music, K-pop, movies, and television. Korea is a cultural phenomenon. For me, that’s about creativity. [South Korea] has found a way to unlock all that potential in their people [through culture]. So I’m very optimistic that South Koreans will be able to solve these new economic challenges. The most exciting part about South Korea is this cultural explosion.”
South Korea also grapples with significant challenges, such as an aging population.
”You often hear about the aging population, but this is the era of robotics, where there are technological solutions for the lack of young people and the declining labor force. Of course, there are challenges and problems [even with new technologies], but when I look at the big picture of what I know about South Korea, I’m very confident that the country will be able to deal with these issues.”
What are the key lessons other developing nations would take from South Korea’s success?
”At the moment, I’m doing a lot of research on the export-led development policies of the 1970s under President Park. I think those policies were extremely successful in Korea, and you could say that they could be successful in other countries if implemented properly with the right institutions. There is divergence between North and South Korea. In North Korea, they created a society with very extractive economic and political institutions. It’s run by a personalistic dictatorship that concentrates all power and resources in the Communist Party at the expense of the majority of North Koreans, who are impoverished, subject to famine, and lack freedom. In contrast, South Korea developed an extremely inclusive society in the 1960s and 1970s through massive investments in education, leading to a flourishing of entrepreneurship and innovation, sure, with the help of the government. In every economic success story, the same principle holds true. The key takeaway is straightforward: there is a fundamental difference in the institutional frameworks and the rules that shape incentives and opportunities for people. South Korea established institutions that nurtured talent and creativity, while in North Korea, that potential was stifled.”
Some view former President Park as a dictator, while others view him as one of the nation’s greatest leaders for his significant contributions to the country’s economic development.
“I believe he was a dictator, but it’s undeniable that he had a clear vision for South Korea’s development. When I visited the museum dedicated to him in Seoul, it was evident how focused he was on export growth and advancing the country. While many leaders aim to boost their nations’ economies, true success stories like his are rare.”
What do you think made South Korea different?
“Institutional changes were essential for South Korea’s economic success and for it to evolve into the advanced nation it is today. South Korea’s success wasn’t simply due to one dictator’s efforts, but rather the country’s transition to a thriving democracy with more inclusive political institutions. This shift was crucial for sustaining the economic growth achieved under President Park. Credit should be given to Park for pushing the country forward, but the real genius of the ‘South Korean model’ lies in how these advancements were institutionalized rather than relying solely on individual leadership.”
What steps must South Korea take to maintain social stability and ensure continued economic prosperity?
“Democracies are far better at discovering what works through a process of experimentation. It’s not for me to predict how things will unfold in South Korea, but I believe the country has the institutions in place to allow for progress in a way that is legitimate for its people. For economists like me, development is fundamentally a political issue. It can’t be solved by economists introducing new policies or waving a magic wand. True economic success always comes from within. Though people naturally aspire to prosperity, the real challenge is building the right institutions, which is a political task that must be addressed internally.”
Is the rise of automation and AI an opportunity or a threat to South Korea?
“AI can help address some of the challenges posed by an aging population, declining birth rate, and shrinking labor force. Like many new technologies, AI has the potential to significantly boost human productivity, improve living standards, and deliver a range of positive outcomes. So far, the ‘pure profit motives’ of companies have largely aligned with broader social benefits in AI development. However, since we can’t predict the future direction of corporate interests, it’s crucial that AI is regulated. This is a critical issue that requires careful oversight.”
With current global shifts in trade, geopolitics, and technology, where do you see South Korea positioned economically over the next decade?
“We’re witnessing a retreat from globalization, and while South Korea has benefited greatly from it, this shift could negatively impact the country’s growth by weakening some of its key export markets. To navigate this, South Korea needs to diversify its exports and reduce its heavy reliance on China.”
What are your thoughts on the increasing cooperation between authoritarian states like North Korea, Russia, and Iran?
“Extractive institutions in authoritarian states, like Russia and Iran, do not foster economic dynamism or innovation. Russia relies solely on its natural resource wealth, and the same is true for Iran. They are unable to produce products that people genuinely want to buy. While I sympathize with the people of Russia and North Korea, I don’t believe their cooperation poses an existential threat to the world. Their national institutions don’t promote innovation or technological advancement that could significantly impact global stability. Yes, North Korea can launch missiles, but it doesn’t possess the same capabilities as South Korea.”