[Market Economy Guide] Venezuela and Korea

Venezuela Is Poor Despite Having the World’s Largest Oil Reserves

Korea Thrives Without Natural Resources… Human Resources Are the Key

Venezuela in South America has the largest oil reserves in the world. Just how large are they? Its recoverable crude oil reserves, using current technology, amount to more than 300 billion barrels. That is close to 20% of the world’s confirmed reserves. Yet in Venezuela, oil is actually called “the devil’s excrement.” For us, living in a country where not a single drop of oil is produced, that sounds deeply enviable. So why do they call oil—which brings enormous wealth to their country—by such a harsh name? To understand that, we need to look at the “resource curse” that has trapped Venezuela.

A Country Cursed by Resources: Venezuela

The resource curse refers to the phenomenon in which the more abundant a country’s resources are, the slower its economic growth becomes. Brazil, Russia, Indonesia, and Nigeria—countries with low national income relative to their abundant natural resources—are good examples. The resource curse occurs not only in developing or underdeveloped countries but also in advanced economies. In the late 1950s, the Netherlands discovered natural gas fields in the North Sea and earned enormous revenues. But as a result, the value of its currency rose and its manufacturing sector collapsed. It took nearly 30 years to recover. This is the so-called “Dutch disease.”

Venezuela is a similar case. Because it makes money too easily through oil wealth, it has no particularly competitive industry other than selling petroleum. Businesses have little will to develop technology or innovate, and the people lack motivation to work. So while the state earns money, the people themselves remain unable to escape poverty.

A Country with No Resources at All: Korea

Korea is often described as a country lacking in resources. This comparison usually comes up when measured against nations rich in natural resources such as oil. But we achieved the “Miracle on the Han River” after colonial rule and the Korean War left us with virtually nothing. Some Middle Eastern countries have higher per capita income than Korea. Yet not one of them has developed the broad range of cutting-edge industries that Korea now possesses.

In just a little over half a century, we grew to the level of an advanced country without the help of natural resources such as oil. Even Europe, which managed colonies, and the United States and Canada, with their vast territories, did not accomplish this in the same way. So did we really have nothing at all?

No. Although we lacked visible resources or industrial facilities, we had diligent and hardworking human resources, along with intangible assets: an extraordinary drive to succeed and a passion for education unlike anything else in the world. Even in households so poor they barely had enough to eat, the prevailing sentiment was that their children must be educated well and succeed. People believed that even if their own generation struggled, the next generation could achieve upward mobility through education.

In many underdeveloped countries in Africa and South America, families often remain trapped in poverty for generations. They do not have the cultural asset of believing that education can make a different life possible. The wealthy oil-producing countries of the Middle East are in a similar situation. Because they are rich, education there is effectively free from elementary school through university and even graduate school. But academic achievement is poor. For people who can live comfortably without studying, there is little incentive to work hard academically or pursue self-improvement. Some people occasionally argue for the necessity of free education, but Korea succeeded through education not because schooling was free, but because it effectively used the desire for upward mobility through education as an incentive to cultivate talent.

The intangible desire to succeed and the strong passion for education produced the tangible asset of human resources. Korea’s enviably low illiteracy rate, high academic achievement, and high university enrollment rate are all products of this exceptional educational zeal. As a result, we achieved upward mobility not only at the individual level but also at the national level. Korea is the only country in the world to transform itself from an aid recipient into an aid donor, and it now stands proudly as a member of the Organisation for Economic Co-operation and Development (OECD).

People Are an Infinite Resource

Just a little over 40 years ago, we envied the countries of the Middle East. Now they envy us. We did not have the abundant natural resources they had; all we possessed were human resources. But precisely because of that, we were able to draw out the limitless potential of people to the fullest.

The prominent American economist Todd Buchholz once explained, “There is a striking contrast between Venezuela, which remains trapped in economic backwardness and authoritarian rule precisely because of its abundant oil, and Korea, which leapt to the level of Western Europe through investment in education and hard work.” Only people, with their limitless potential, can create ever more opportunities for enterprise.

◆ Please remember

There is a striking contrast between Venezuela, which remains trapped in economic backwardness and authoritarian rule precisely because of its abundant oil, and Korea, which leapt to the level of Western Europe through investment in education and hard work.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: [시장경제 길라잡이] 베네수엘라와 한국

Author: Sung-no Choi

Date: 2019-07-29

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=13&idx=20355