Economic Growth and Genuine Progress of South Korea

This article discusses the economic growth and genuine progress of South Korea, highlighting the driving factors behind the country's progress and the need for government policies to promote genuine progress. It also explores the limitations of GDP as a growth indicator and the relevance of the Genuine Progress Index in measuring progress. The article suggests policies to decrease income inequality, control inflation, protect the environment, and improve work conditions.

Running head: EAST ASIAN ECONOMIES
East Asian Economies
Name of the Student
Name of the University
Author Note

1EAST ASIAN ECONOMIES
Table of Contents
Answer 1....................................................................................................................................2
Answer 2a...................................................................................................................................3
Answer 2b..................................................................................................................................4
Answer 3a...................................................................................................................................5
Answer 3b..................................................................................................................................6
Answer 4a...................................................................................................................................7
Answer 4b..................................................................................................................................7
Answer 5....................................................................................................................................8
Answer 6..................................................................................................................................10
References................................................................................................................................12

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Answer 1
The Gross Domestic Product of a country, measuring the total value of the final
commodities and services produced in the boundaries of the same, within a particular period
of time, is the most popular indicator of economic growth (McAuliffe, 2015). However,
Feeny et al. (2013), question the validity of GDP alone as an adequate indicator for the
genuine progress of South Korea. This is because, although the concerned indicator measures
the growth in the economic productivity of a country and the cardinal aspects associated with
the same, it does not consider the overall welfare of the majority of the population as well as
the country itself arising out of the economic growth (MacKenzie, 2015). In simpler words,
the GDP of a country, shows the total economic growth, but fails to show the skewedness in
the distribution of the income growth, the income inequality in the country as well as the
other aspects like social and environmental conditions of the country, which also contribute
robustly in the overall growth of the country and in the level of welfare of the population of
the same (Nielsen, 2016).
As can be seen in the case of South Korea, the GDP of the country, over the years has
shown impressive and upwards dynamics, which indicates towards rapid growth of the
economy of the country. However, the growth has costed the environment as huge loss of
resources has been recorded and also the income inequality of the country has increased in
the contemporary period (Chang, 2013). The level of inflation in the country has also
increased, which has costed the overall population of the country, especially those who did
not receive the fruits of the economic growth of the country. However, these aspects are not
considered in the GDP, thereby indicting towards its inadequacy as a genuine growth
indicator.

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Answer 2a
There have been considerable literary works on the aspects of the primary factors
which have contributed to the economic growth of South Korea in the last few years, as can
be seen from the impressive GDP dynamics of the country. The main factors, in this context,
as highlighted by different scholars are as follows:
 The most important factor contributing to the economic growth of the country is that
of the presence of robust human capital, as can be seen to measured in terms of high
educational attainment or in terms of high numbers of enrolments of students in
secondary schools and universities (Shin, 2013).
 Another crucial factor contributing to economic progress of South Korea has been the
accumulation of physical capital. The country has experienced high investments in
industries and has also resorted in the path of immense export promotion.
 Another reason behind the economic growth of South Korea, has been the inherent
capacity of the country to adapt quickly to the continually changing technological
aspects in the global framework and also the capability of the country to explore and
take advantages of new opportunities (Henderson, Storeygard & Weil, 2012).
 The increasing liberalisation and the free trade approach taken by the government of
the country, has also contributed considerably in the growth of the economy of the
concerned country as can be seen from its GDP growth dynamics.
 As pointed out by several literatures the shock adjustment capacity and ability to
maintain an equitable income distribution by the entrepreneurs have also contributed
in the economic growth of the country (Park & Hong, 2013).
 The growth of the economy of South Korea has also come at the cost of the loss of
huge amount of natural resources, thereby leading to decline in the quality of the

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environment, which has resulted in the decline in the quality of life of a major section
of the population of the country (Rodrik, 2014).
Answer 2b
From the above discussion, it is evident that the economic growth of South Korea can
be attributed to a considerable number of factors, including that of growth of human capital,
physical capital, investment, export-oriented policies, high liberalisation, free trade, ability to
quickly adapt to changing environment and other aspects (Kong, 2013). Some of these factors
are expected to be positive to the overall welfare and development of all the aspects of human
life while some may have detrimental effects on the same.
As can be seen from the literary assertions, the primary factor of economic growth
being the growth of the human capital, the same is expected to contribute to all aspects of
human life positively. This is because with increasing educational attainment, the skills of the
people as well as their chances to land up in better and lucrative career prospects increase,
which thereby increases the economic and overall welfare of the people. However, there are
also negative aspects of other contributing factors.
The huge export-oriented strategy taken up by the government, is expected to increase
the level of income in the hands of a section of the population of the country, increasing their
economic welfare and purchasing power, which coupled with increasing aggregate demand is
expected to raise the overall price levels in the country (Shin, 2013). This can be seen to be
evident from the high inflation rates, which are detrimental to the welfare of the
underprivileged population. The increasing economic activities and industrial development
can also be seen to be degrading the environmental balance of the country and the social
tensions within families as well as the society can also be seen to be increasing as is evident

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from the high divorce rates and crime rates (Sachs, 2012). These indicates towards a
degradation of the life quality of the population in terms of environmental and social aspects.
Answer 3a
The standard Genuine Progress Index, in general, has 25 components within the three
broad sub-groups of economic, environmental and social components of progress of a
country, which can be seen to be as follows:
Figure 1: Components of Genuine Progress Indicator
(Source: Kubiszewski et al., 2013)

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However, in their work, Feeny et al. (2013) includes only 18 components to measure
the genuine progress of South Korea. The positive and negative components taken by the
authors for measuring the overall progress of South Korea are highly relevant and significant
for measuring the progress of the country. However, the list put forward by the authors,
although seems to be adequate but do not seem to be totally exhaustive as there are several
other factors which may have impacts on the progress of the country (Bagstad & Shammin,
2012). On one hand the list contains the factors like that of distribution index (which is
required to study the inequality in the distribution of income), air and waste water pollution
(which are required to take into account the environmental degradation of the country) and
other aspects which reflects on the overall consumer welfare, the index lacks more
sophisticated aspects like that of the work pressure felt by the labour force of the country and
their effects on the overall social conditions of the country in the recent period.
Answer 3b
The Genuine Progress Index, which has been taken into considered by Feeny et al.
(2013), has various relevant components which are required for measuring the actual progress
and overall welfare of the population of the country, especially in the contemporary period of
considerable social dynamics. However, it would have been more robust if few other
components of GPI could have been included in the measure adopted by the concerned
authors. One such example is that of loss of leisure hours which is not considered by the
authors. Although it does not seem to have any rapid or short-term effect, however, in the
long run, this may create feeling of dissatisfaction and depression among the pressurised
employees, affecting their family lives and social lives. The net capital investment also needs
to be incorporated as it shows the positive aspects of economic progress of the concerned
country. The development of industries and businesses, number of employment generation,

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overall income of the population of the country and inter-generational welfare of the
population of the country considerably depend on these aspects. Thus, inclusion of these
components of standard GPI would have been helpful in making the model adopted by the
authors adequate (Lawn & Clarke, 2008).
Answer 4a
The analysis of Feeny et al. (2013), reflects at several factors which are found to be
crucial driving components of the GPI index constructed by the authors for the purpose of
measuring the overall and genuine progress and development of the country in the recent
periods. Of these, as per the assertions of the authors, the first and foremost driving factor of
the GPI of the country is that of the private consumption expenditure occurring in the country
over the period of time. This constitutes of the bulk of the aspects developing the GPI.
However, apart from this factor the distribution index, cost of air pollution, value of the non-
paid household labour and similar components like that are also seen to carry weightage in
the GPI per-capita measurement by the concerned authors. The GPI per capita of the
concerned country can also be seen to be considerably related to the inflation dynamics of the
country and human capital and per capita exports also play considerably crucial roles in the
aspects of driving the dynamics of the GPI formed by the concerned authors for South Korea
in their research paper.
Answer 4b
The dynamics of the GPI per capita for South Korea, for the last three decades, as per
the findings for the work of Feeny et al. (2013), can be seen to be considerably differing from
that of the dynamics of the GDP per capita of the concerned country within the same period

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of time. For instance, although private consumption expenditures are crucial factors
incorporated in both the GPI per capita and the GDP per capita indices of South Korea,
differences can be seen with respect to the components of the same included in both the
measures. Like the private consumption expenditure on the durables are not taken as driving
factors for the GPI per capita but are considerably important for the purpose of calculation of
the GDP per capita of the country (Nelson, 2012).
The primary reason behind this difference between the driving factors behind both the
measures is that while the calculation of GDP is done, it is assumed that the benefit and
welfare of consumption or purchase of the commodities and services are accrued to the
concerned consumers, fully, at the time of purchase only. For this purpose, the aspects like
that of expenditure on consumer durables are included in the GDP per capita measure (Bleys
& Whitby, 2015). However, in case of the GPI calculation, it is taken into consideration that
not all benefits of the products are not accrued to the consumers immediately at the time of
purchase and can be received by the consumers over time. Thus, these are not the driving
factors of GPI at the time of purchase. Again, aspects like air pollution and similar domains
are not included in the GDP but are driving factors of GPI as the latter considers economic,
social and environmental aspects unlike that of the former which considers only income
growth and total productivity of the country (Giannetti et al., 2015).
Answer 5
From the above discussion and from the data and literary evidences present in the
domain of the economic and overall development and progress of South Korea, it can be seen
that there lies a noticeable anomaly in the domain of economic and overall progress of the
country (Giannetti et al., 2015). On one hand, while the GDP statistics show impressive

9EAST ASIAN ECONOMIES
progress of the country over the last three decades, thereby reflecting towards an expected
increase in the overall welfare of the overall population of the country, on the other hand,
considerable gaps and loopholes can be seen in these aspects as the fruits of the economic
progress do not seem to be percolated among all sections of the population of the country and
the aspects of high inequality, environmental damage and social tensions can be seen to be
crippling the progress of South Korea over time.
Keeping this into consideration, it can be asserted that for the purpose of promoting
greater genuine progress of South Korea, the government needs to concentrate on aspects
other than the growth of the GDP of the country. Particularly, the government needs to focus
on the following policies and their proper implementation:
 The government of South Korea needs to focus on decreasing the level of income
inequality which exist in the country over the last few years and which can be seen to
be increasing with the increasing economic progress in the country.
 The government also needs to implement contractionary monetary policies in order to
decrease the level of inflation in the country, which can be seen to be increasing with
the increasing aggregate demand in the country due to concentration of high income
and purchasing power in the hands of a small section of the population of the country
(Kates, 2018).
 The government also needs to strengthen and impose stricter environmental policies
for the purpose of protection of the environment and for proper and fair utilisation of
the natural resources of the country, so as to increase the overall welfare of the people
of the country.
 Government of South Korea also needs to look into the aspects of work conditions
and work stresses of the labours in the country and also needs to device and
implement policies to develop the living standards of the overall population of the

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country in order to reduce the social tensions and crime rates of the society (Bauer,
2013).
These policies are not necessarily expected to increase the GDP per capita of the
concerned country, directly (although it can have indirect positive impacts on the same), but
these policies, if implemented correctly and monitored appropriately, are expected to increase
the overall welfare of the population of South Korea, thereby contributing to greater genuine
progress of South Korea.
Answer 6
The Genuine Progress Indicator of South Korea, unlike most of the East Asian
countries, can be seen to be consistently increasing over the last three decades, along with the
growth of the GDP per capita index of the concerned country. The more or less consistent
growth in the GPI of the concerned country, as shown in the work of Feeny et al. (2013), can
be attributed to several discrete factors and reasons.
Firstly, the human capital of the country has been improving and increasing
impressively (in terms of skill, technological adaptability, educational attainments and other
human attributes), which in turn can be seen as one of the primary factors behind the
impressive industrial development of the country, which in turn has resulted in higher
employment generation and increase in overall quality of life to some extent (Talberth, 2012).
Apart from the same, the aspects of high technological adaptability and a responsive and
flexible as well as liberal mindset and work process of the government of the country have
also contributed to the same to the development and robust progress of the GPI of the country
as can be seen from the GPI per capita of the concerned country over the last few decades.
However, some of the positive aspects can be overestimated due to the way in which the

11EAST ASIAN ECONOMIES
authors calculate the GPI in their paper and the GPI per capita dynamics can be affected to
some extent if factors like loss of leisure hours and aspects similar to that are included in the
measurement of the GPI per capita of the concerned country (Bartelmus, 2013).

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