Stewart Langdon: South Korea's path to success shows what can be done

South Koreas family firms, such as Samsung, have grown into multi-million pound global technology businesses. Picture: Saul Loeb/AFP/Getty Images

In fact, a less contrived connection between our two nations exists. On Monday, Edinburgh University hosts the annual Yun Posun Symposium, celebrating an alumni who became a prominent freedom activist and eventually South Korea’s second president. Yun retained a lifelong fondness for Scotland. He often said his experiences in Edinburgh taught him the democratic beliefs that defined his career.

Today, we might reasonably reflect on what South Korea can teach us in return. That is because Yun’s presidency fired the starting gun on the most remarkable economic expansion and improvement in living conditions that any country has experienced in the last century.

The Miracle of the Han River began around 1960, the year Yun became president. In the aftermath of the Korean War, the vast majority of the population lived in dire poverty. But by 1995, South Korea’s economy had expanded by an astonishing multiple of 140 times, or at an average rate of growth of 15 per cent per year.

It has barely slowed since, expanding a further three times in the past two decades. It remains one of only two big economies to have transitioned from low income to high income status, despite being endowed with few natural resources and living in permanent existential threat.

Most people naturally think of China as Asia’s great economic miracle. But in the period since 1979, when Deng Xiaoping opened China to the world, its GDP has expanded at less than half the rate the Koreans managed in their 35-year bull run.

In Scotland, our stats are a little less spectacular. The Scottish Fiscal Commission recently forecast growth would be less than 1 per cent for the next five years. That’s to say nothing of a range of structural challenges, including a budget deficit of 8 per cent .

What might we learn from the Korean miracle makers? Broadly speaking, there were four critical factors behind the country’s dizzying rise.

First, economic growth was an overwhelming priority of its leadership. A series of five-year plans mobilised domestic capital for investment and made the country more competitive.

Second, to support this growth the government invested heavily in education. Spending increased by an average of 27per cent in the 1960s, and literacy rates rose from 22 per cent to 88 per cent in 25 years. Today, Korean children typically rank at the top end of global education studies. A total of 69 per cent of Koreans attend tertiary education, compared to 49 per cent in the UK.

Third, the government embraced the private sector, in particular the “chaebol” family businesses. These were allowed to become not just successful, but very, very large. Samsung is now worth around $500bn and accounts for around around 20per cent of South Korea’s GDP. LG, Daewoo and Hyundai are all multi-billion-pound international powerhouses, providing export revenues, tax income and employment to the Korean economy.

Finally, the chaebols themselves have positioned Korea at the forefront of technological change. Samsung took advantage of the boom in cloud computing to generate $70bn in operating profit from that division alone last year. LG Group has become a $90bn company by innovating relentlessly in LCD screens.

The Korean model is not one to be uncritically admired. Corruption is endemic. Workers have struggled to establish their rights. Most unsettling of all, the suicide rate is the highest in the developed world.

It is also true that Scotland today is not South Korea in 1960. Growth is harder for higher income countries. But still, the Koreans pulled off the great economic miracle of our times by focusing on economic growth, education, embracing the private sector and leading in technology.

That sounds like a coherent and achievable agenda for our country. Yet we focus on debates about Brexit to the exclusion of almost everything else, including the economy. When it comes to education, the last PISA league tables saw our ranking decline across subject lines.

Technological change may offer more grounds for optimism. The number of patents filed by Scottish firms last year grew by nearly 10 per cent, far ahead of the rest of the UK.

But usually such businesses are sold to foreign firms without becoming really large. Skyscanner and FanDuel are recent examples. It remains difficult to imagine a Samsung emerging here. If it did, it is even harder to imagine the public showing much gratitude. After all, big business is no longer regarded as a source of pride, tax revenue and job creation.

There is much to learn from South Korea and from other countries following in their footsteps across Asia. Isn’t it time Scotland pursued an economic miracle of its own?

Stewart Langdon is a partner at LeapFrog Investments and a trustee at the Asia Scotland Institute. Follow him at @stewart_langdon