South Korea's economic planners have always been at the center of decision-making during pivotal transitions. Among them, Hyun Oh-seok, the former Deputy Prime Minister, is a prominent macroeconomic strategist who has experienced the entire process of transitioning from a developing to a developed economy. His career trajectory, which began at the Economic Planning Board and included roles at the World Bank and the Korea Development Institute (KDI), culminated in his position as Deputy Prime Minister and Minister of Strategy and Finance. His path is synonymous with the history of South Korean economic policy.
Today, the world has entered an era of 'complex crises' characterized by simultaneous geopolitical, technological, and financial conflicts. The growth formulas of the past are no longer valid. In this transitional period, what path should the South Korean economy take? Hyun emphasizes that 'competition is now about direction, not speed,' advocating for a shift towards becoming an 'inclusive innovation nation.' His analysis and solutions extend beyond mere policy proposals, outlining the future trajectory of the South Korean economy.
What motivated you to choose a career as an economic bureaucrat, and what was your role during that era?
= I began my public service in the 1960s and 1970s when South Korea was just entering the early stages of industrialization. At that time, economic bureaucrats were not merely executing administrative tasks; they were akin to 'economic engineers' designing national development strategies. Centered around the Economic Planning Board, we directly shaped the direction of the national economy through resource allocation, industrial policy, and export strategies. In that environment, I developed a belief that economic policy could change the fate of the nation, which motivated me to pursue a career in public service. Looking back, I can say that the bureaucratic organization at that time was a strategic group that complemented the market and provided direction.
What do you consider the key principle that enabled the 'Miracle on the Han River'?
= The most fundamental principle was 'state-led rapid growth.' At that time, South Korea lacked both capital and technology, making it difficult to expect growth if left to the market. Therefore, the government directly designed the market, focusing on speed rather than efficiency in managing the economy. I believe three elements were foundational to this approach: first, the government's proactive market intervention and design capability; second, a concentrated investment in education and human capital; and third, a shared spirit of communal sacrifice across society. The combination of these three factors enabled rapid growth in a short period.
Do you believe this growth model is still applicable today?
= Some elements remain valid, but it is difficult to apply them directly. In the past, 'catch-up growth' was possible, but now that we are on the threshold of advanced economies, we can no longer grow in the same way. We must now lead in technology and build a creative corporate ecosystem. At the same time, addressing the gaps and inequalities that have arisen during the growth process is crucial for 'inclusive growth.' This means that we must consider sustainability and social balance alongside simply increasing growth rates.
How do you assess the strengths and structural limitations of the current South Korean economy?
= South Korea's economy ranks among the best in terms of education levels and digital infrastructure, which is a clear competitive advantage. However, there are also significant structural limitations. The rigidity of the labor market, productivity gaps between large and small enterprises, and issues related to low birth rates and an aging population threaten sustained growth. Particularly concerning is the rapid decline in potential growth rates. These issues are not merely cyclical but structural, making them difficult to resolve without institutional reform.
You have described the current global economy as a 'complex crisis.' What does this mean specifically?
= Past crises were typically temporary shocks arising from specific events, such as financial crises or oil price fluctuations. However, the situation is different now. Geopolitical conflicts, technological hegemony competition, climate change, and financial instability are all occurring simultaneously and influencing one another. I refer to this as the 'entrenchment of uncertainty.' This means that crises are not just temporary but structurally persistent. In such an environment, simple economic responses are insufficient; we need strategies that enhance the resilience of the entire system.
How do geopolitical shocks, such as those from the Middle East, impact the South Korean economy?
= The first effect is through rising oil prices, which stimulate inflation. This inflation then leads to pressure for interest rate hikes, which dampens corporate investment and household consumption. At the same time, increased exchange rate volatility exacerbates financial market instability. South Korea's high dependence on energy imports and its export-oriented economy make it particularly sensitive to such shocks. Ultimately, the economy is affected on both the real and financial sides. In this situation, we need a system that manages macro risks comprehensively rather than relying on individual policies.
What is the concept of 'economic security' that you have recently emphasized, and why is it important?
= Economic security refers to a situation where economic power becomes a core element of national security. In the past, military power was central, but now strategic industries like semiconductors, batteries, and energy have become key to national competitiveness. Disruptions in supply chains can directly impact both the economy and security. Therefore, we need a control tower that integrates industrial policy, foreign policy, and security policy. This is not just a short-term response but a long-term strategic issue.
What direction should the South Korean economy take beyond the catch-up model?
= The key is transitioning to a 'platform-based economic structure.' In the past, concentrating investments in specific industries was effective, but now, inter-industry convergence and ecosystem-based growth are crucial. Particularly, small and medium-sized enterprises and startups need to become the center of innovation. The government should support data and AI infrastructure and improve the regulatory environment to activate the corporate ecosystem. Ultimately, innovation is created not by specific companies but by the entire ecosystem.
How do you assess the recent shifts in real estate and capital market flows?
= The movement of funds from real estate to the stock market is a positive structural change. This signals that the asset allocation structure is changing, not merely a speculative shift. It also indicates that the capital market has entered a mature phase. However, excessive leverage, particularly phenomena like 'debt investment,' could lead to financial instability, so we must remain vigilant. From a policy perspective, it is important to guide funds toward productive investments.
If you had to summarize the direction the South Korean economy should take over the next 20 years in one phrase, what would it be?
= I would say 'the economy of trust.' It is now about competition in direction, not speed. The old way of rapidly catching up is no longer effective. What matters is building social consensus and trust that enable sustainable innovation. Long-term growth is only possible when there is consistency in policy, stability in institutions, and trust between the market and the government. South Korea has already achieved significant accomplishments, but we are entering an era where 'how to sustain growth' is more important than 'how to grow.'
Hyun Oh-seok, former Deputy Prime Minister: Hyun is a leading macroeconomic expert and policy designer in South Korea. He began his public service career at the Economic Planning Board after attending Korea University and Seoul National University, later serving as the head of the World Bank and KDI. In 2013, he was appointed Deputy Prime Minister and Minister of Strategy and Finance, overseeing South Korea's overall economic policy. He is regarded as one of the few individuals who have experienced the transition of the South Korean economy from the development phase to the advanced economy stage. With experience in international organizations and practical policy, he has continually influenced structural reforms and long-term strategic planning for the South Korean economy.
* This article has been translated by AI.
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