April 25th, 2012
08:00 AM ET

Sharma: Five decades of five percent growth

Editor's Note: Throughout the week, Ruchir Sharma will be posting thought-provoking questions with answers and explanations on CNN.com/GPS.  Be sure to check out his excellent new book Breakout Nations: In Pursuit of the Next Economic Miracles.

Question: What are the only two countries that have grown at an average annual pace of more than 5 percent for the last five decades in a row?

Answer:  South Korea and Taiwan

Explanation: South Korea and Taiwan are the gold medalists of global competition, because their economies continued to grow at a rapid pace even after they grew rich, when the scale and difficulty of the challenge becomes much more daunting. With per capita incomes greater than $20,000, the half-century booms in South Korea and Taiwan are arguably more impressive than the now much more famous 30-year  boom in China, where per capita incomes just recently surpassed $5,000.

Now, however, the gold medalists appear to be parting ways: both have succeeded mainly as manufacturing exporters, and South Korea is pushing ahead. In 2006 the total value of the Seoul stock market surpassed Taiwan for the first time, and it is now considerably larger, at $1 trillion versus $700 billion. The main reason is that, to a surprising degree, Taiwan makes its money from small and globally unknown companies that manufacture parts for PCs that run on Windows and Intel chips-a niche so narrow that the Taipei stock market has been out of favor for years now.

South Korea's corporate giants have been much more visionary and ambitious, becoming global leaders in industries as diverse as shipbuilding, petrochemicals and construction, and creating the first major global brands to rise up from an emerging market: Hyundai, Samsung and LG. Normally, manufacturing stops growing as a share of the economy when a nation hits a per capita income of $10,000, but South Korea is 15 years past that barrier and manufacturing continues to expand as a share of GDP. This unique manufacturing juggernaut can't continue forever, but it can continue for the foreseeable future-5 to 10 years.

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Topics: Development • Economy

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soundoff (5 Responses)
  1. ROBPicket

    What can the United States learn from South Korea's diverse industrial success? Is this yet another example illustrating the need for the US to focus on domestic expansion and investment?

    April 25, 2012 at 11:06 am | Reply
  2. Jess

    South Korea and Singapore? Since it's limited to two, and with Taiwan not technically being a country and all...

    April 25, 2012 at 1:51 pm | Reply
    • Maurice

      Dear Jess, I am currently a Ph. D. student in business school of a Taiwanese university. I need to correct your opinion. Taiwan is officially known as Republic of China (ROC), once a founding member of United Nation, but Taiwan (ROC) withdrawn from UN after China (People’s Republic of China, PRC) entered UN. Taiwan encountering many barriers when she trying to keep her economic growth, since Taiwan got more political and diplomatic difficulties than S. Korea. Taiwan has a more powerful potential enemy than S. Korea; China is still a threat to Taiwan even Taiwan already invested a lot in there. I hope people around the world can support Taiwan more, since there is no other country can play this important role for the balance of Pacific Rim.

      April 28, 2012 at 10:31 am | Reply
  3. j. von hettlingen

    South Korea's economic growth has been phenomenal. As the 3rd largest economy in Asia and the 13th largest in the world, it enjoys prosperity and has all reasons to dread the economic burden of a reunitication with the North.
    Taiwan can very well sustain economically. Unfortunately it's diplomatically isolated with only two dozen countries in the Pacific, Latin America and Africa that have diplomatic tie with Taipeh.

    April 25, 2012 at 3:58 pm | Reply
  4. Dominic Llewellyn-Davies

    No suprises about South Korea, but will Taiwan continue to remain prosperous. Distinct from mainland China . .

    April 25, 2012 at 4:23 pm | Reply

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