Globalization is one of the major characteristics that have brought tremendous change in most economies around the world. Globalization is the local and international integration of the world economies which results in changes in the economic and political developments of different countries. With globalization, a countries economic resources such as labour, capital, finance and technology are allowed to move freely to other economies and this brings out a lot of beneficial relationships to the involved countries (Lim, p. 16).
Globalization in South Korea has resulted in commendable economic growth in South Korea. Since 1980, the country has experienced tremendous improvements in its economic growth. The biggest emphasis on the economy has been on the developments in trade, investments and also labour. South Korea lacks natural resources for economic development and, therefore, relies on the importation of raw materials for its products. The backbone of the economy lies with its export sector. The economy has developed since the 1980s but this has been through fighting various challenges. The period of the 1980s saw the country struggle with its economy due to the effects of the second oil crisis, bad performance of the agricultural sector and also the political instability following the assassination of President Park (Sakong, p. 23). From the period of 1990s, the economy started rising following the global integration with other economies. During the period of the 1980s, the country faced a lot of financial problems due to a lack of extensive savings. This led the country to rely heavily on foreign capital for its development. The country embarked on extensive research and development into its industrial sector and it became one of the leading countries in the export of manufactured goods. Research and development have also been extended in supporting sectors such as infrastructure, telecommunications, technology, education and other institutions. Today South Korea focuses on the development of its human resource since its economy is largely labour intensive (Chung, p. 29). It has invested a lot in its educational institutions and other supporting infrastructure for the export sector. South Korea boasts of its high technology, especially in telecommunications. It is the leading exporter of very quality automobiles, machinery, electronics, computers, ships among other products. It has very good roads and many modernized airports that largely support its export sector (Kuznets, p. 35).
Business cycles refer to periods of recessions and booms in the economy. A recession is a period when the economy is depressing in performance while booms refer to periods of high performance. South Korea like other economies has experienced periods of booms and recessions in its economy. In early 1980, the country experienced recessions owing to the effects of the second oil prices and also the political instability in the country. As the oil prices came down in 1986, the economy started rising reaching its peak in the 1990s. In 1997, South Korea experienced another recession after the international funds from the IMF and the World Bank were withdrawn. It suffered a great financial challenge that affected its export sector. This was then followed by an economic boom from the period of 1999 to 2004 (Sakong, 52). The recession affected very many sectors due to the financial crises that followed.
South Korea has been well known for the use of trade barriers to protect its market. It for example places barriers on the US manufactured goods such as beef and cars. South Korea also uses trade barriers to reduce the imports in the country and this helps to reduce the cost of production. The barriers include high tariffs on the products that the country wants to prevent their entry into its market. Such barriers prevent free trade between countries. Since the 1980s South Korea has been reducing the trade barriers and this has resulted in more market liberalization as different economies integrate into the trade. Non-tariff barriers are however still common in South Korea (Kuznets, p. 68).
Due to a lack of natural resources, South Korea is a labour-intensive economy. It has invested in its education system and with the growth of the economy, South Korea today’s records very low levels of unemployment among the high-income economies. South Korea has also been involved in the outsourcing of labour especially from china. This has the advantage of obtaining cheap, labour for the economy and this reduces the cost altogether. The big gaps that the country experienced in the rates of unemployment in the 1990s have now been minimized owing to high economic growth (Lim, p. 28).
Exchange rates are important factors in the South Korean economy due to heavy reliance on the export sector. The stability of the exchange rates was disrupted due to the 1997 financial crisis in Asia. After the financial countries like South Korea which were hard hit changed to flexible exchange rate systems. This system includes a free and managed floating system. The monetary system just like many other countries is controlled by the central bank. The central bank holds the sole responsibility of issuing notes and coins and also the implementation of the policies related to the monetary system. There is a monetary policy committee whose prime function is to oversee the credit and monetary policy. Central Bank of South Korea uses the interest rates to control the level of inflation which is maintained at a level of 3% (Chung, 53).
Work cited
- Il Sakong.Korea in the World Economy.U.S, Institute for International Economics, 1991, pp. 23-53
- Paul W. Kuznets. Korean Economic Development: An Interpretive Model Praeger Publishers, 1994, pp. 34-76
- Timothy C. Lim. Korea’s Globalization. New York, Cambridge University Press, 2000, pp. 16-44
- Young-Iob Chung. South Korea in the Fast Lane: Economic Development and Capital Formation. USA , Oxford University Press, 2007, pp. 26-54