Magazine article Newsweek International

A Social 'Time Bomb'; Behind the Facade: Income Inequality Is a Growing Problem

Magazine article Newsweek International

A Social 'Time Bomb'; Behind the Facade: Income Inequality Is a Growing Problem

Article excerpt

Byline: B. J. Lee

During a lunch break last week, hundreds of Samsung Electronics employees poured out of their tall headquarters building in downtown Seoul. Most seemed upbeat, and why not: the company had just concluded another successful year, with more than $7 billion in profits and a record-high stock price. That means generous bonuses for the company's workers--and indeed, many of the tech giant's employees were headed to expensive Western and Chinese restaurants around the corner.

But just a block away, the scene was shockingly different. Dozens of homeless men in thin, shoddy clothes were squatting on stained bedsheets or cardboard in a dark subway underpass. Some were eating noodles from a cup, others drinking bottles of soju, a local liquor. Almost all were demanding change from scared pedestrians. "I am starving!" shouted a middle-aged man. "All I want is small change."

South Korea's success story is well documented. As the world's 11th largest economy, the nation boasts a number of world-class companies and a fairly prosperous group of upper-middle-class people who work for them. But the egalitarianism that used to be the hallmark of Asian societies is fast disappearing. Experts say the number of poor people in the country has been rising significantly while the middle class is shrinking. Meantime, rich South Koreans are wealthier than ever. President Roh Moo Hyun has acknowledged the problem. In his first cabinet meeting this year, he conceded that economic inequality is something he's "agonizing" about, adding: "Under the current system, it will take more than 10 years" to reverse the situation. Experts agree, describing the economy as "polarized." Park Won Suk, who leads a civic coalition that promotes more social equality, calls the issue a "time bomb" that "threatens to blow up the entire Korean society."

Income disparities are common everywhere in this age of globalization. But the speed and scope of the trend in South Korea has alarmed some economists. In 1995, the bottom 10 percent of the population earned 41 percent of the national income average. By 2003 that number had fallen to 34 percent. According to the government, the number of people living in poverty (defined as a four-person family earning less than $1,360 a month) has reached a record high--7 million people, or 15 percent of the population. On the other hand, the income of the top 10 percent of South Koreans rose from 199 percent of the national average in 1995 to 225 percent in 2003. According to the Korea Development Institute, the country's middle class shrank by about 5 percent between 1997 and 2004.

What's driving this shift? Many analysts say that neoliberal market reforms adopted in the late 1990s, in the wake of the country's 1997 financial crisis, have widened the gap between economic "haves" and "have-nots. …

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