Tuesday, 12 October 2021

Squid Game and the steel industry


In the mid-20th Century South Korea was an economic minnow. It was a war-ravaged country with a largely pre-industrial economy.

In 1960, if you divided the total economic activity of South Korea by its population (GDP per capita) it amounted to just $79 per person, but within sixty years, this figure has multiplied to over $47,000 per person, which makes it one of the most prosperous large economies on earth, above large developed nations like Japan, Italy, Spain, Argentina, and Russia.

This remarkable period of economic growth in South Korea is known as the Miracle on the Han River, and it started off in the early 1960s when their government initiated the first of the country's 5 year economic plans.

The objective was to modernise the South Korean economy through full employment, and strategic investment across numerous sectors, including infrastructure (roads, rail, ports), core industries (steel, fertilizer, cement, petrochemicals ...), science, and technology.

South Korea's rapid climb up the world development rankings is proof  of how astonishingly successful their strategic investment agenda has been.

Steel industry

When South Korea set about building their first modern steel production plant they were derided by the so-called experts. Why would a country like South Korea make their own steel, when they could just import it from countries with established steel industries?

Well, South Korea ignored the heckling and derision, invested in their own steel industry, and rose from absolutely nowhere in steel production, to become the 6th largest steel producer in the entire world in 2020. 

From having no modern steel industry at all half a century ago, they've soared past countries with long-established steel industries like Germany, France, and the UK.

In 2020 South Korea produced almost ten times as much steel as the United Kingdom! 

A country with a population of just 51 million people produced almost as much steel as economic giants like Russia (146 million), Japan (125 million), and the United States (331 million).

Not bad for a country that were laughed at when they first proposed developing their own steel industry eh?

Having their own government-owned steel industry gave South Korea a huge economic advantage, allowing them to provide cheap steel to other industrial sectors they wanted to develop, especially ship building, electronics, civil engineering, and road vehicle production.

This ready supply of cheap steel helped turn small South Korean firms like Samsung, Hyundai, Kia, and LG into globally recognised brands.

Thanks in a large part to the development of their own steel industry, South Korea is now the world's largest ship-builder, with 40% of the global ship-building market!

Only China even comes remotely close to the shipbuilding power of the South Koreans.

Strategic investment, and the deliberate nurturing of core industries turned South Korea from an economic backwater into an absolute powerhouse over the course of just a few decades.

While developed countries like the UK were deliberately de-industrialising their economies and outsourcing production overseas, South Korea rocketed past them by modernising their core industries and establishing themselves as the premier high-tech, high-skill, hyper-productive economic workshop of the world.

Creative industries

Having learned from their strategic investment in core industries, the South Koreans have recently begun investing in their cultural industries too, with the objective of establishing their nation as one of the creative powerhouses of the world.

The results have already been spectacular:

You'd have to have been living in a box for the last few weeks to have not heard of the South Korean survival drama Squid Game, that's absolutely smashing streaming records across the world.

But the hit Netflix show Squid Game is far from the first massive South Korean cultural export. 

In 2020 the South Korean boy band BTS absolutely dominated global music sales, securing first and second place in the IFPI album sales chart.

Then there's Bong Joon-ho's black comedy thriller Parasite, which became the first non-English language film ever to win the Oscar for best picture in 2019.

Either it's a massive coincidence that South Korea has come from nowhere to suddenly deliver worldwide smash hits in television, music, and cinema, or maybe could have something to do with their deliberate policy of investing in their cultural industries?

Investment vs Austerity

South Korea have proven twice over that strategic investment is the key to delivering future economic prosperity, but certain western nations seem determined not to learn this lesson, especially the increasingly-parochial United Kingdom.

The UK was home to the industrial revolution, and pioneered all kinds of industries from steel foundries, through railways, to ship building.

It's all gone now, thanks to the deliberate neoliberal policy of de-industrialisation that's been pursued for the last four decades.
  • The country that invented the modern steel industry is no longer even in the top 20 world steel producers, and the remnants of its privatisation-wracked steel sector is now owned by Jingye Group, which is a state-owned Chinese regional bank.
  • The country that invented the railways no longer has a single train manufacturer.
  • The country that once "ruled the waves" deliberately tore down its own ship-building industry as part of a demented radical-right war on trade unionism (destroy the entire industry and the trade union dies with it).
As South Korea has stormed up the world rankings thanks to their strategic investment policy, the United Kingdom is falling away thanks to policies like de-industrialisation, under-investment, and austerity.

And there's a big danger of the same kind of sectoral decline happening in the UK cultural industries.

The UK is still an undisputed world leader in the creative industries, punching miles above its small island status in music, film, television, sport, and arts, but the process of decline is already underway.
  • And just to make his utter contempt for the wellbeing of Britain's £111 billion cultural industries unmistakable, Boris Johnson has recently appointed the notoriously thick, radically right-wing, culture war grifter Nadine Dorries as Britain's culture minister!
South Korea showed the UK the way on industrial strategy, but the Brits ignored it and did the polar opposite, which means South Korea is now an industrial powerhouse, and the UK seems locked into in terminal industrial decline.

South Korea is busy showing the UK the way on cultural strategy too, but once again the British government is doing the opposite, slashing away at cultural funding, when strategic investment is obviously the key to success.

The UK has already reduced itself from industrial pioneer to absolute minnows in industrial sectors that they themselves invented, and if there's not a rapid change in direction, the UK is going to see its position as cultural world leaders eroded away by the same myopic agenda of austerity cuts, and radical-right 'leave it to market forces' ideology, while other countries like South Korea surge ahead by actually investing for the future.


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10 comments:

Matt Buxton said...

This is an absolutely fantastic article, well researched, well written, thank you.

Unknown said...

This excellent article illustrates how this country has been degraded by short term union bashing get rich quick dogma by all parties for decades.It is all coming home to roost now but sadly I see no party coming forward with any plans to change things.A despicable waste of our talent on the alter of neo liberalism.

Mr. Magoo said...

According to the IMF (that's the International Monetary Fund, not the Impossible Missions Force), the UK is the 10th biggest economy in the world and South Korea is the 14th biggest (ranked by GDP-PPP). What about GDP-PPP per capita (that's a lot of Ps!), I hear you cry? South Korea:- $47,027; the UK:- $47,089. One more thing, $79 in 1960 money converted to today's money is $730.13.

Tell me, Thomas, are you anchored to the ground to stop yourself from floating away? You know, because you're full of hot air.

Unknown said...

The UK has a bit more money than South Korea, but its all in the banks of the rich. What the article is about is investment in ones own country.
Magoo, you missed the point entirely.

Unknown said...

Way to miss every single point in the article, Mr Magoo... Impressive.

Thomas G. Clark said...

You're trying to make out $47,027 is not all that much of an improvement on $730 (two dollars a day, in today's money) ... and you reckon I'm the one who's full of hot air!

And for some reason you're refusing to acknowledge the fact SK has dramatically closed the gap in the UK, in the space of a few decades.

Quite a self-awareness fail, wouldn't you say?

Non Omnis Moriar said...

The UK government made the strategic decision in the 80's to move from a production based to a finance and service lead economy.

The cost of modernising aging factories was deemed too expensive and not worthwhile when it was known that emerging economies with completely new, modern and more efficient infrastructure (and much lower labour costs) would massively diminish returns in retooling in the long term.

Essentially the investment would never itself pay off.

Instead the UK focused on:
- Finance - funding these type of projects around the world
- Technology / IP - creating the designs that other would make (See ARM, Surrey Satellite Technology etc...)
- Education sector - especially in attracting foreign student and talented academics
- Weapons - for obvious reason everyone wants them and creating ingenious way to kill is a British speciality

The UK's output and returns of this type of production aren't immediately obvious to the casual observer (especially considering this https://www.iab.org.uk/uk-overseas-territories-top-list-of-worlds-tax-havens/).

But it is obvious that the UK isn't scratching around for cash.

A good example of this is how the Queen went from the richest person in the UK in the 90's to 372nd in 2020, where did the money go? She didn't lose it down the bookies.

Mr. Magoo said...

First of all, I've been following your blog for 7 years and this is the first time I've come into contact with you; so I'm a little star struck.

Anyway, South Korea showed up very late to the Industrial Revolution (just like many other Asian countries), so of course they have seen huge economic growth relatively recently.

On the Inequality-Adjusted Human Development Index, the UK is in 16th place and South Korea is in 24th place. The reason I quoted that statistic isn't to say the UK is the land of milk & honey and South Korea is a hellhole; it's to show that the former is doing better than the latter despite 60 years of Keynesian economics over there, and 40 years of neoliberalism over here.

"Small theatres, galleries, arts centres, museums, and music venues across the country have been shut down in their hundreds as a result of absolutely ruinous Tory austerity cuts to local government budgets." - Yes, it was surely spending cuts that resulted in that. I'll give a million pounds to anyone who can name something else that has had a terrible impact on the entertainment industry.

What's the best thing a government can do to end and recover from a recession? Invest or cut? The answer is...nothing. Governments should just let the market sort itself out.


Scrotox said...

"Anyway, South Korea showed up very late to the Industrial Revolution (just like many other Asian countries), so of course they have seen huge economic growth relatively recently."

Yes, they showed up late, and have almost caught up with the UK, which has been a dominant power in the world for several hundred years...precisely because of the Keynesian investment you dismiss at the end of your ill-thought through statement.

There's no beed to get into a protracted debate about it though...simply watch as they and similar nations pass us on our way down...because we "let the market sort things out".

You are full of hot gas, but it ain't air.

Anonymous said...

When people say *let the market sort things out* and *government should do nothing*. They seem to forget that this certainly never has been true with regards to the UK. The British government does interfere with *the market* all the time, but not in a way that seem to have particularely helpful outcomes for the majority of people living in the UK. So what market is *the market*? Nobody really knows, we just left the EU, remember BREXIT? So not part of that market anymore. New trade deals; not of significance. What does it mean to trade *freely* in the world while being excluded from all major *markets*? Our government has successfully managed to bring forth a situation where we do not have any trade deal with our major trading partners. It is no better if we look at our *internal market*. See infrastructure, train, water, electricity, gas etc; not to mention broad band; a regulatory mess which, compared to our main trading partners in the world is definitively in a state creating a *competitive disadvantage*. So yes market, but which market is referred to, and looking at how UK governments have interfered and continue to interfere then certainly there is no such thing as *let the market sort things out* when the market boundaries are detrimentally regulated by our own government. And continue to be sabotaged instead of supported.