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Thread: Why South Korea GDP per capita is such low?

  1. #1 Why South Korea GDP per capita is such low? 
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    Gdp is complete crap (and the monetary system is steaming pile of anachronistic bullshit)

    www.youtube.com/watch?v=77IdKFqXbUY

    happy new year btw


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    It's not just the measurement - it's standardising the currency on any given date. Australia's position is also a bit off, not because of our GDP itself, but because our currency is high for the time being. I have no idea what South Korea's currency fluctuations are like.

    Economists and statisticians might give valid arguments about the way the numbers are reported, but that doesn't mean they're a good guide to any particular thing for any ordinary citizen.
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    You may compare South Korea with other Asian Tigers.

    Four Asian Tigers - Wikipedia, the free encyclopedia

    The values of their Human Development Indices are similar.
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    well you gotta see GDP PPP per capita. South Korea's exchange rate fluctuates a lot. It was traded at 930won/1$ in 2007 (at that time GDP per capita at nominal was $21000) but after financial crisis happened in Europe its currency heavily depreciated to 1120won/1$ in 2012. Thus, in 2012, it was only $23000 in Nominal term. Austrailia for instance exchibiited huge increase in GDP per capita at Nominal (not in PPP) due to its overvalued currency. Usually, if U.S or European market crashes, investors invest their money in energy sectors. Thus demand for Austrailian $ increases. In GDP ppp (which eliminated the difference in exchange rate accross the nations based on their price levels) South Korea's PPP exchange rate should be around 810won/1$ in 2012 according to IMF. GDP per capita at PPP can simply increase by deflation effect but South Korea never experienced deflation since 1997. So, its GDP per capita in local currency has been always increasing. (10million won in 1996 ---> 26million won in 2012. About 2.6 times increase in GDP per capita in Won but in U.S$ it was only about 1.8 times due to weak currency.) Hence, its GDP ppp per capita in 2012 was around $32000 while UK was around $36000 and U.S is $50000. So in real term, it is wealthier than nominal term. Economy of South Korea - Wikipedia, the free encyclopedia In similar approach, if you look at Average Wage in PPP, List of countries by average wage - Wikipedia, the free encyclopedia South Korea is not that bad. Btw, U.S is still extreamly richer than any other country in the world. Thus you shouldn't be surprised by how poorer South Korea is compared to U.S. Or, you have too much expectation in South Korea. (It is very industrialized country tough but not as much as U.S) Hope it solves your question.
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    The latest figures show that the average GDP figures for South Korea are certainly on the rise, along with the popularity of it's products. What you have to remember though is much of the nations income is heavily dependant on manufacturing. They just don't have the same types of revenue sources of other countries for example with well developed tourist industries. Also what we need to remember here is South Korea's prosperity is a relatively recent development, it was still a country that depended on financial aid throughout the 80's and even into the beginning of the 1990's. So todays GDP figures look pretty impressive when viewed from this perspective. Lastest GDP figures below:

    GDP in US $ (Per Capita) PPP South Korea

    $30,722 (2012) source: World bank

    $32,272 (2012) source: IMF

    $32,800 (2012) source: CIA


    http://en.wikipedia.org/wiki/List_of...PP)_per_capita
    Last edited by Ascended; August 16th, 2013 at 05:38 PM. Reason: added link
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  10. #9  
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    Quote Originally Posted by Stanley514 View Post
    It is very industrialized country tough but not as much as U.S
    I'm surprised to know that U.S. is very industrialized country. Do you mean industrial production per capita produced or some type of virtual economy? List of countries by motor vehicle production China = 19,271,808 annually. U.S. = 10,328,884. S. Korea = 4,557,738. In total 2.3 times more in U.S. than in S. Korea. But not per capita. Populaton of U.S. = 316 mln; S. Korea = 50 mln. 6 times more. World shipbuilding countries by market share 1) China = 45%. 2) S. Korea = 29%. 3) Japan = 18%. European Union = 1%. Rest of the world = 7%. http://en.wikipedia.org/wiki/Shipbuilding Aluminum production by country: 1) China = 18,000 millions of tons anually. 2) Russia = 4 mln. of tons. 3) Canada = 2.9 mln of tons. 4) U.S. 1.9 mln of tons. http://en.wikipedia.org/wiki/List_of_countries_by_aluminium_production Crude steel production by country in million of tonnes: 1) China = 716 2) E.U. = 162 3) Japan = 107 4) U.S. = 88 5) India = 76 6) Russia = 70. S. Korea = 69 http://en.wikipedia.org/wiki/List_of_countries_by_steel_production Global Chemical Shipments by Country/Region (billions of dollars) 1) Asia Pacific = 1291 2) Western Europe = 1,076 3) North America = 774.6 http://en.wikipedia.org/wiki/Chemical_industry List of countries by cement production in millions of tonnes: 1) China = 2,000 2) India = ? 3) Iran = 72 4) U.S. = 68 5) Turkey = 64 6) Brasil = 62 7) Russia = 52 8) Vietnam = 50 9) Japan = 47 10) S. Korea = 46 http://en.wikipedia.org/wiki/List_of_countries_by_cement_production
     
     
    Well, what I meant was U.S is still more more productive at least in GDP. That was what I was trying to say.

    But yes you are right that S.Korea is very efficient despite of small population. It is definately one of the most industrialized countries in the world. South Korea is all about producing industrial products such as cell phones, computers, cars and etc. Very well pointed out analysis by the way though. It was a different point of view.

    For further analysis, I advice you to look at IMF data.

    To summarize my point early on.



    From IMF

    South Korea 1996

    Local currency: Won 10,125,336
    US$: $12,586
    PPP: $13,294
    GDP deflator: 79


    South Korea 2012

    Local currency: Won 26,037,469
    US$: $23,112
    PPP:$32,000
    GDP deflator:118



    Austrailia 1996

    Local Currency: $29,488
    US $: $23,000
    PPP: $22,777
    Deflator: 62

    2012

    Local currency: $65000
    US $: $67000
    PPP: $42640
    Deflator: 100
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    Last edited by Stanley514; September 6th, 2017 at 09:35 PM.
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  12. #11  
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    Quote Originally Posted by Stanley514 View Post
    It is very industrialized country tough but not as much as U.S
    I'm surprised to know that U.S. is very industrialized country. Do you mean industrial production per capita produced or some type of virtual economy? List of countries by motor vehicle production China = 19,271,808 annually. U.S. = 10,328,884. S. Korea = 4,557,738. In total 2.3 times more in U.S. than in S. Korea. But not per capita. Populaton of U.S. = 316 mln; S. Korea = 50 mln. 6 times more. World shipbuilding countries by market share 1) China = 45%. 2) S. Korea = 29%. 3) Japan = 18%. European Union = 1%. Rest of the world = 7%. http://en.wikipedia.org/wiki/Shipbuilding Aluminum production by country: 1) China = 18,000 millions of tons anually. 2) Russia = 4 mln. of tons. 3) Canada = 2.9 mln of tons. 4) U.S. 1.9 mln of tons. http://en.wikipedia.org/wiki/List_of_countries_by_aluminium_production Crude steel production by country in million of tonnes: 1) China = 716 2) E.U. = 162 3) Japan = 107 4) U.S. = 88 5) India = 76 6) Russia = 70. S. Korea = 69 http://en.wikipedia.org/wiki/List_of_countries_by_steel_production Global Chemical Shipments by Country/Region (billions of dollars) 1) Asia Pacific = 1291 2) Western Europe = 1,076 3) North America = 774.6 http://en.wikipedia.org/wiki/Chemical_industry List of countries by cement production in millions of tonnes: 1) China = 2,000 2) India = ? 3) Iran = 72 4) U.S. = 68 5) Turkey = 64 6) Brasil = 62 7) Russia = 52 8) Vietnam = 50 9) Japan = 47 10) S. Korea = 46 http://en.wikipedia.org/wiki/List_of_countries_by_cement_production
     
     
    If you look on the side bar under the heading "external", you can see that over 50% of the USA's exports are capital goods, and industrial goods.


    Economy of the United States - Wikipedia, the free encyclopedia



    Basically the USA is making the machinery that is used in the factories that build those cars and ships. The rest of the world is making the actual cars and ships.

    So, every time a new technology emerges, they have to upgrade their factories. Which means business for the USA. So how can Ukraine break out of the cycle? Answer: they need to start making factory equipment. Then just watch how angry the USA gets trying to defend its exclusive reign over that market. It won't be pretty. (But it would mean they were getting somewhere.)
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    Last edited by Stanley514; September 6th, 2017 at 09:35 PM.
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    All my information said was "capital goods". The breakdown for exports was

    1) "Capital Goods" 27.9%

    2) "Industrial Supplies and Materials " 24.8%

    and then

    3) "Consumer Goods (Except Automotive) 11.8%

    4) "Automotive Vehicles and Components" 9.4%

    And there were more things after, but the percentages kept getting smaller and smaller. Not sure why they broke #3 and #4 into two things. My guess would be that it's because not all the vehicles are "consumer" vehicles.


    So in total the first two comprise 52.7% of all of America's exports. Consumer goods and automotive comprise 21.2% after that.

    A "Capital Good" is anything that is used to make something else. Not just machining tools. A tractor on a farm might be considered a "capital good", or the conveyor belt in a factory.

    Here I found something that describes it a little better. America is actually only the #2 biggest exporter in the world. It seems they use different categories than Wiki did, though, so I don't know how the two line up.

    http://www.worldsrichestcountries.co...s_exports.html
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    The thing you must remember Stanley, is that the one who makes the most money in any manufacturing process is whoever is doing the job the others can't. Whoever's role is most critical - but who is actually doing the least work.

    When a factory in Korea makes TV sets, they may be paying quite a lot of their money to another country for one or two crucial, but extremely sophisticated machines. Of course that's just a couple of machines in a huge factory that's full of other more basic machines. But those two machines might cost as much as the rest of the factory combined. Willing workers to work in the factory are even less scarce than basic machines, but basic machines are less scarce than highly sophisticated machines. It's like a pyramid. The most scarce object is at the top.

    They guy at the top is basically able to walk up to the factory owner and demand as big a share of that guy's profits as he wants, or the whole factory would be shut down. (Because it's useless without his super machine.)


    I found another article which suggests that chemicals are the USA's 2nd biggest export (which makes sense because many chemicals are "industrial supplies".

    Chemicals are America’s second largest export category this year, but ‘Big Chemical’ want to restrict natural gas exports? | AEIdeas


    Perhaps it all comes down to one word "Patents". The maker of the patented machine is the one who can extort. Everybody else hast to compete for the lowest price.
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    Actually, I don't know why machinery is even related to this topic.. I think the analysis has been heading towards different direction.

    Anyway, GDP per capita being low or high is not simply determined by how machine is home-made or foreign-made. That can be part of the reason but at least for South Korea, I do not think that is the main reason. I think working quality or productivty matters more. (Of course, productivity is related to your machine technology and I bet South Korea has capability to make their own machines anyway.)

    More realistic reasons will be things like lacking resources and simply devalued currency. South Korea lacks resources first of all. And secondly, as I pointed out from IMF data, its currency is heavily devalued since 1996 (and even compared to 2007 it is devalued). Comparing it to other economies in Asia, South Korea exhibitied more growth in terms of local currency than Taiwan and definately Japan. Despite of this, Taiwan and South Korea have similar GDP per capita level at Nominal level in US$. (Taiwan grew by 1.7 times since 1996 and Japan did not grow since 1996 when South Korea grew by 2.6 times in 2012) Taiwan pretty much has similar currency strength compared to 1996 level and Japanese yen became appreciated from 110 yen to 80 yen where as South Korean won lost its value by more than 30% since then. If you trace back its currency movement, you can see these things:


    South Korea

    800Won = $1 in 1996
    1300~1400Won =$1 in 1997 (Asian Financial Cirsis)
    930Won=$1 in 2007 (Going back to normal)
    1200~1300Won=$1 in 2008 (Bam! Financial Crisis happend in Europe)
    1120Won=$1 in 2012


    Taiwan

    TWD 28= $1 in 1996
    TWD 29= $1 in 2012


    Japan

    110yen = $1 in 1996
    80yen = $1 in 2012

    Despite of substial growth, if GDP in $ term is not increased substantially that means currency is simply devalued.
    As I already pointed out, South Korean Won is very sensitive to Business Cycle in the World unlike Taiwanese $. (Japanese Yen is usually overvalued especailly during Global Economic Crisis due to its unique usage as "safe" currency.)

    In GDP PPP, it is over $30,000 with population over 50million along with 6th largest export volume. So I do not think GDP is that low anyway.

    One thing to add, being industrialized is not the only way to increase GDP. Strong currency can also increase your nominal GDP (given the assumption that export sector is still solid even with stronger currency), abundant resources and strong service sectors can also increase your GDP. In next couple of years, probably in 5 years, you will see South Korea's GDP per capita at nominal term will dramatically increase mainly due to currency appreciation. This kind of pattern also happened when European countries adopted Euro currency and Japan agreed on Plaza agreement. And lastly, you should remember that comparing South Korea to small european countries is not very good idea. Any economy with population less than 20 million can easily increase their GDP per capita. So you should not even question as to why South Korea's GDP per capita is lower than Northern European countries.

    http://en.wikipedia.org/wiki/Human_Development_Index

    One last thing to point out, according to HDI, U.K is far behind Japan, South Korea and U.S so South Korea, in fact, has better standard of living than at least U.K these days. Things are changing and U.K is declining and South Korea has already emerged.

    Methodology:

    A long and healthy life: Life expectancy at birth
    Education index: Mean years of schooling and Expected years of schooling
    A decent standard of living: GNI per capita (PPP US$)





    3. U.S
    10. Japan
    11. Canada
    12. South Korea
    27. U.K
    Last edited by ejd01; August 20th, 2013 at 12:42 AM.
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  19. #18  
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    Quote Originally Posted by Stanley514 View Post
    When a factory in Korea makes TV sets, they may be paying quite a lot of their money to another country for one or two crucial, but extremely sophisticated machines.
    It would be better find out info in particular companies and particular production. As well as total cost of their production.
    I'll see what I can come up with.

    Where I have the most direct experience is working on a construction project for Intel in one of it's microprocessor "clean rooms". Each machine in that building costed an average of 5 million dollars, and there were a good number of them. The chemicals they worked with were very dangerous, and if you got any on you they'd take you into a cold shower room and haul your clothing off for chemical analysis. I had it happen once. Fortunately it was some mundane chemical that wasn't dangerous. Another guy once got hydrochloric acid on his forehead and they had to give him shots of calcium to prevent it from damaging his skull.

    These were not "machines" like the kind that have motors. They were really delicate. If you exposed one of them to a few grains of copper dust, it would be ruined forever.


    I would be very surprised if there were two companies in the world that can make those machines.
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  21. #20  
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    Quote Originally Posted by Stanley514 View Post
    Where I have the most direct experience is working on a construction project for Intel in one of it's microprocessor "clean rooms". Each machine in that building costed an average of 5 million dollars, and there were a good number of them.
    Still production of very "high technologies" is still not a largest part of economy and hardly will be in any foreseeable future. I think that an average American family spend for gasoline more money than they spend for personal computers and appliances to them. And spend more money for food, drinks and gasoline combined than for any product of high technologies they have including computers or microelectronics.

    Do you actually live in the USA, Stanley? It's true that gasoline prices are killing our economy, but electronics are a pretty big part of peoples' consumer purchases here.

    Also, it's not always the electronic devices themselves. My sister works for Amazon.com in their tech support department, supporting the Kindle devices. She told me that Amazon actually sells the Kindle itself at a loss. They make most of their money selling apps and media designed to be used on the Kindle by people after they've bought one.

    The same goes for the internet cell phones. I bought mine for 100 dollars, but I had to agree to subscribe to internet service for three years. When I lost my phone, I realized that in order to buy another one it would cost me 300 dollars (because I couldn't agree to the subscription twice.) Fortunately I was able to find a used one for 170 dollars. And also it turned out I had bought insurance on the phone, so if I ever lose this one I can replace it for only 100 dollars.



    Obviously, the total price of machinery used to produce products of high technologies cannot be higher than total price of products themselves, otherwise production wouldn't be self-worthy.
    You're right that it can't be higher. But it can be close. Just so long as it doesn't exceed it.

    The people who actually produce the cars, TV sets, and etc aren't necessarily the ones making most of the money off of the sale of those cars, TV sets, and etc. They might be keeping only a small sliver of the money.



    And unless it is highly sponsored by government like in military industry. I've heard such info, but do not know weather it is true, that Boeing receive more money for making military orders for government than they make by producing passenger planes. But still government need to take those huge money somewhere to pay for military orders, but where?.. Such type of economy resembles to me some animal which is attempting to bite its own tale.
    Lol. Good point. And true.

    It's extremely bad in the agriculture industry, where the government pays a subsidy to corn farmers. It's like a tariff, only in reverse. Instead of taxing the corn, they pay them for producing the corn. That allows American farmers to sell their corn outside the USA at a cheaper price, such as in Mexico. Even though Mexican farmers can produce corn at a cheaper cost, the subsidy allows American farmers to sell at a lower price than Mexican farmers can.
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