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Finger Lakes Community College
How does the economy of South Korea compare to the United States?
Frankie Cottrill
Survey of Economics ECO 100
Angela Simmons
June 7, 2023
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Inflation is an increase in the average price level of goods and services in the economy
(Tucker 271). Before North and South Korea were completely separated in 1953, they had two
completely different government styles (South Korea – The World Factbook). The North had a
communist style of government while the South was more democratic (South Korea – The World
Factbook). After they officially split into two countries, Park Chung-Hee, the second president of
South Korea, helped South Korea experience rapid growth in their economy, with gross domestic
product (GDP) rising nearly 8% every year from 1962, a year before he became president, to
1989, ten years after he was assassinated (Korea Information – Economy). South Korea is
currently a strong export driven economy (South Korea – The World Factbook). The United
States has been around as a country longer than South Korea, meaning the American economy
has had more time to develop and stabilize itself. The Great Depression was one of the most
traumatic experiences in all American history (United States – World Factbook). During the
Great Depression around a quarter of the labor force became unemployed. Following World War
II, which helped get the United States out of the Great Depression, the nation emerged as one of
the most powerful nations in the world (United States – World Factbook). The economy has
since achieved steady growth, low unemployment and inflation, and rapid advances in
technology (United States – World Factbook). The United States and South Korea have very
similar economic styles, just on different scales due to the size of each country.
South Korea has a mixed economic system combining command economy and market
economy (South Korea: Introduction). This means that there is economic freedom but there are
also still government regulations businesses must follow (Korea Information – Economy).
Individuals and businesses can freely conduct economic activities and they are able to earn profit
(Korea Information – Economy). Despite this, the constitution does not guarantee an unlimited
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pursuit of capitalistic free economy (Korea Information – Economy). If the business is found to
cause more harm than good, then they will not be able to continue doing business (Korea
Information – Economy). This is in place as a way to protect the economy against issues that a
completely free economy may encounter (Korea Information – Economy). Some government
restrictions and regulations include restricted foreign investment, mandatory fifty-two-hour work
week, income taxes, etc. (Korea Information – Economy). America is also a mixed economy,
composed of all three market types: traditional economy, command economy, and market
economy (Tucker 498). The United States most closely fits into the market economy description
(Tucker 498). However, there are certain groups such as the Amish who operate using a
traditional type of economy (Tucker 498). The government also takes part in regulating the
economy, such as taxes (Tucker 498). Similar to South Korea, American businesses have the
right to sell whatever product they want, but the government will intervene if the business is not
complying to the laws set for selling products (Tucker 498). Both countries have very similar
mixed economic systems.
While real GDP in South Korea is drastically lower than real GDP in America, it has
remained far steadier than the United States. In 2019, the real GDP was $2.213 trillion, declining
to $2.198 trillion in 2020 and rising to $2.289 in 2021 (South Korea – The World Factbook). In
2019 in America, real GDP was $20.513 trillion, far above South Korea (United States – The
World Factbook). However, in 2020 it decreased to $19.946 trillion before jumping back up to
$21.132 in 2021 (United States – The World Factbook). These numbers are reflected in the
percentage of real GDP growth rate when South Korea goes up 2.24% in 2019, declines -0.71%
in 2020 and increases again in 2021 by 4.15% (South Korea – The World Factbook). In America
real GDP went up 2.29% in 2019, decreased -2.77% in 2020 and went back up 5.95% in 2021
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(United States – The World Factbook). America’s rapid decline in real GDP in 2020 was likely
due to the COVID-19 pandemic (United States – The World Factbook). Just like real GDP and
percentage of real GDP, America has higher numbers regarding GDP per capita, starting at
$62,500 in 2019, decreasing to $60,200 in 2020 and increasing to $63,700 in 2021 (United States
– The World Factbook). While America has larger numbers, South Korea consistently has a
lower drop between 2019 and 2020. In 2019 the GDP per capita in South Korea was $42,800 and
in 2020 it was $42,400, only decreasing $400 while the United States decreased $2,300 (South
Korea – The World Factbook). Like real GDP and percentage of real GDP, the increase in GDP
per capita in South Korea was less than the United States in 2021, only increasing to $44,200
(South Korea – The World Factbook). For the most part, GDP in South Korea has been rising
steadily with three significant downturns since the 1960’s (GDP – Korea, Rep). The United
States has had a nearly identical pattern, only declining twice since the 1960’s (GDP – United
States). GDP in both countries seemed to have been negatively affected in 2020, likely due to the
COVID-19 pandemic. However, South Korea’s GDP did not decrease nearly as much as the
United States.
Prices in South Korea are usually very low compared to the United States (South Korea
vs. U.S.). Food, rent and utilities, public transportation, and certain groceries are cheaper than
American costs (South Korea vs. U.S.). However, gas prices in South Korea are higher than they
are in America (South Korea vs. U.S.). The inflation rate in South Korea is fairly low compared
to the United States. In 2019 the South Korean rate of inflation was 0.38%, in 2020 it was 0.54%
and in 2021 it was 0.38% (South Korea – The World Factbook). In America, the rate of inflation
in 2019 was 1.81%, in 2020 it was 1.23% and in 2021 it was 4.7% (United States – The World
Factbook). The United States has higher rates of household and government consumption
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(United States – The World Factbook). South Korea has a much higher rate of investment in
fixed capital than America (South Korea – The World Factbook). America has only a slightly
higher investment in inventories at 0.1% while South Korea has 0%. Finally, South Korea also
has a higher percentage of exports of goods and services and a lower percentage of imports of
goods and services (South Korea – The World Factbook). South Korea’s revenues are $378.552
billion, and expenditures are $372.412 billion (South Korea – The World Factbook). America’s
revenues and expenditures are significantly higher at $6.429 trillion and $7.647 trillion
respectively (United States – The World Factbook). South Korea is experiencing a surplus of
1.4% of GDP (South Korea – The World Factbook). The United States is experiencing a deficit
of –3.4% of GDP (United States – The World Factbook). South Korea’s fiscal year is the
calendar year (South Korea – The World Factbook). And the United States fiscal year is from
October 1st to September 30th (United States – The World Factbook). South Korea generally has
lower prices as well as a budget surplus. However, the United States has higher revenues and
expenditures.
South Korea’s labor force is made up of 28.674 million people (South Korea – The World
Factbook). 4.8% of people work in agriculture, 24.6% of people work in some sort of industry,
and the other 70.6% of people work in services (South Korea – The World Factbook). In
America, the labor force consists of 194.797 million people (United States – The World
Factbook). The United States agriculture labor force is made up of 0.7% of people, industries are
20.3% of people and services are 37.3% (United States – The World Factbook). Unemployment
rates in South Korea are also relatively low compared to the United States. In 2019 the rate of
unemployment was 3.75%, in 2020 it was 3.93% and in 2021 it was 3.53% (South Korea – The
World Factbook). The country maintained a very low unemployment rate throughout COVID-19,
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which America struggled with. In 2019, the United States had an unemployment rate of 3.67%
but it spiked to 8.05% in 2020 (United States – The World Factbook). It lowered slightly in 2021
to 5.46, but it is still a high percentage compared to previous years (United States – The World
Factbook). Both countries have a similar poverty rate despite the difference in unemployment
rates. South Korea has a poverty rate of 14.4% (South Korea – The World Factbook). The United
States has a poverty rate of 15.1%, only slightly higher than South Korea (United States – The
World Factbook). Overall South Korea has a lower unemployment rate likely resulting from the
high work ethic throughout the whole country.
South Korea has an agricultural component where they grow rice, tangerines/mandarins,
cabbages, onions, and potatoes along with other vegetables, milk, pork, poultry, and eggs (South
Korea – The World Factbook). Like South Korea, the United States also has milk, potatoes, pork,
and poultry along with maize, soybeans, wheat, sugar cane, sugar beet, and cotton (United States
– The World Factbook). Industries in South Korea include electronics, telecommunications,
automobile production, chemicals, shipbuilding, and steel (South Korea – The World Factbook).
The United States has a much larger group of industries including technology, petroleum, steel,
motor vehicles, aerospace, telecommunications, chemicals, electronics, food processing,
consumer goods, lumber, and mining (United States – The World Factbook). Both South Korea
and the United States have quite similar agricultural and industrial exponents.
South Korea’s exports for all years have a lower value than America. In 2019 exports
were $660.507 billion, in 2020 they dropped to $607.505 billion, and in 2021 they jumped back
up to $771.202 billion (South Korea – The World Factbook). South Korea exports 24% to China,
15% to the United States, 9% to Vietnam, 6% to Hong Kong, and 5% to Japan (South Korea –
The World Factbook). South Korea exports integrated circuits, cars and vehicle parts, refined
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petroleum, office machinery, ships, and telephones (South Korea – The World Factbook).
Exports in the United States are much higher, in 2019 they were %2.546 trillion, in 2020 they
were $2.159 trillion and in 2021 they went back up to $2.557 trillion (United States -The World
Factbook). The United States exports 17% to Canada, 16% to Mexico, 7% to China, and 5% to
Japan (United States – The World Factbook). America exports refined petroleum, crude
petroleum, cars and vehicle parts, integrated circuits and aircraft (United States – The World
Factbook). Similar to exports, South Korea’s import values are also lower than the United States.
In 2019 the import value was $607.54 billion, in 2020 it was $541.57 billion, and in 2021 it rose
to $698.103 billion (South Korea – The World Factbook). South Korea imports products such as
crude oil, integrated circuits, natural gas, refined petroleum, photo lab equipment, cars, and iron
(South Korea – The World Factbook). South Korea gets 24% of its imports from China, 12%
from the United States, 9% from Japan, 4% from Vietnam, and 4% from Taiwan (South Korea –
The World Factbook). The United States imports in 2019 were worth $3.106 trillion, in 2020
they were worth $2.813 trillion, and in 2021 they were worth $3.402 trillion (United States – The
World Factbook). The United States imports products such as cars, crude petroleum, computers,
broadcasting equipment, and packaged medicines (United States – The World Factbook). In
South Korea, the currency they use is called the South Korean Won (South Korea – The World
Factbook). In 1997, South Korea was on the path of going bankrupt and ended up signing an
agreement with the International Monetary Fund which allowed financing for $58 billion USD
(Korean Crisis and Recovery). The Fund recommended that the Korean government put policies
in place to stabilize the economy, and they did (Korean Crisis and Recovery). In the United
States, the currency is the United States dollar, and the currency is backed by government set
insurance levels (Tucker). American currency is considered fiat money because it is money that
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is accepted by law, not particularly because of its intrinsic value (Tucker 397). Overall, both
countries are able to import and export goods that are extremely beneficial to both countries and
have trustworthy measures in place backing their currency.
South Korea and the United States both have quite similar economies. Even though their
numbers may look very different when they are being compared, for the size of each country
they are both on around the same level. They have both experienced mostly economic growth
since the 1960’s, with only a couple of recessions and other minor downturns. COVID-19
affected both countries, but they were able to recover rather quickly, even growing from what the
economy was before the pandemic. The United States is a very important country in the western
hemisphere, and South Korea is a very important country in the eastern hemisphere.
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Works Cited
South Korea, Central Intelligence Agency, www.cia.gov/the-world-factbook/countries/koreasouth/#introduction.
United States, Central Intelligence Agency, www.cia.gov/the-world-factbook/countries/unitedstates/#economy.
“GDP (Current US$) - Korea, Rep.” World Bank Open Data,
data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=KR.
“GDP (Current US$) - United States.” World Bank Open Data,
data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US.
“Korea Information - Economy.” Korean Cultural Center New York,
www.koreanculture.org/korea-information-economy.
“Korean Crisis and Recovery.” International Monetary Fund,
www.imf.org/external/pubs/nft/seminar/2002/korean/.
“South Korea: Introduction.” >> globalEDGE: Your Source for Global Business Knowledge,
globaledge.msu.edu/countries/southkorea#:~:text=South%20Korea%20has%20a%20mixed,Pacific%20Trade%20Agreement%
20(APTA).
“South Korea vs US: Cost of Living & Salary Comparison [2023].” Livingcost.Org, 11 Feb.
2023, livingcost.org/cost/south-korea/united-states.
Tucker, Irvin B. Survey of Economics. Cengage, 2023.