Harry S. Dent | Wednesday, May 01, 2013 >>
April was an insane month of travelling.
Last week I was in Phoenix, AZ hosting Demographics School. Before that it was Delray Beach, FL. And before THAT I was in Seoul, South Korea, giving a speech at a financial conference for Chosun-Biz.
I literally have not had two personal days to rub together. I love it. Wouldn’t have it any other way.
Most major financial firms have resisted my more bearish forecasts in recent years, after loving the more bullish ones in the 1990s. But in the last year a number of firms have welcomed me to speak on the prospects for a down-economy ahead.
That’s how I ended up in South Korea at the beginning of last month (and at the Daishan conference there last November).
And the surprising this was the reception I got…
Seoul was not on my bucket list. But, what a great city!
The Old City is actually very modern, as South Korea morphed from an emerging country into a developed, rich and industrialized nation. It did this between the 1980s and the 2000s, 22 years after Japan made the same transition… and with such speed that it skipped many of the middle steps that now slow other emerging markets down.
South Korea has come so far, in such a short amount of time, that its exporters – think Samsung, LG, Hyundai and Kia – are now real threats to their western counterparts (like Apple and GM).
And it’s a beautiful place. The Old City is surrounded by mountains, and the New City is in the flatter area behind the mountains, with a major river running through it. The latter hosts the new financial center with modern buildings everywhere. It is this center – with first class services that cater to a world driven by information – that has set South Korea on a path to riches.
When I was there in November I stayed at the Banyan Tree hotel. It had an unbelievable view of the old city and mountains. There was a hot tub in the middle of my room that was larger than anything I had ever seen. My wife liked that! On the trip this April I stayed at the Westin. It was in the flatter financial and river district.
But I digress. There are two points you should glean from the success story that is South Korea (both of which are why they’ve welcomed me there so warmly of late). The first is that this kind of development, at this speed, does not happen in most emerging countries. Only Japan, Taiwan, Singapore and South Korea have transitioned – over the last 50 years – from emerging countries to wealthy, developed countries that compete in higher-end industrial and technology industries.
Other emerging countries just plod along. They become wealthy a bit at a time as they develop a growing middle class, but their focus remains on commodity and construction industries.
And that’s why they’ll never be as wealthy as we are in the U.S. or most developed countries… and why their new middle class is not nearly as wealthy as our middle class.
It’s also why you should tread very carefully when investing in these countries… particularly with the two great downturns we forecast before 2023 because it is those countries that depend on their commodities that will suffer the most.
My second point is that South Korea has made such incredible strides because it has embraced the modern world. It didn’t cling tenaciously to old ways of doing business… to the tried and tested. It broke free and as a result, today South Koreans are rich.
Look at this chart…
As you can see, South Korea has seen a massive increase in its standard of living, in U.S. dollars. It’s gone from $2,000 U.S. dollars per capita to nearly $25,000 in the last three decades. When you adjust for purchasing power, that is like $40,000 today. South Koreans are as rich as many Europeans, and nearly as rich as the Japanese and Americans today.
But North Korea has seen no such progress and has a GDP per capita well below Kenya at $500 today. That’s where it’s been for decades. People in North Korea are practically starving while the elite in the military and mafia are the largest consumers of high-end Hennessy cognac! And the “divine” leaders tell the people there, from the day they’re born, that they’re lucky to be living in this paradise.
But North and South Korea share the same heritage. They have similar genes, a similar topography, and the same language. Yet free market capitalism and democracy has allowed the South Koreans to have 46 times the standard of living! And North Koreans remain stuck in the past.
The thing is, it’s not going to stay this way for ever. We’re scholars of cycles (and history). One cycle that’s coming around again is the 250-year revolution cycle. As it runs its course it brings about major revolutions in the political and social realm, like the Protestant Revolution of the early 1500s and the American and French Revolutions of the late 1700s. It’s due to hit again in the next decade.
We’ve already seen the start of the downfall of dictatorial leaders, with the uprisings in Egypt and other African countries. This will only accelerate. Kim Jong Un and his fellow dictators face a trying future.
Look for a major crisis to occur in the next decade that could shake the foundations of our societies and politics, here and around the emerging world. We’ll see major innovations in our political, social and business organizations that could pay off for decades and centuries ahead.
This will require a radical shift in how we organize and conduct business in the future – just like the one South Korea underwent to rise to the top of the pack – which is why I’m developing a small business course for anyone interested in surviving ahead… and becoming the next shakeout winners of the future. I’ll keep you posted as this 12 CD course progresses. Stay tuned.
The world is getting ready to change, even more than it did after the Great Depression of the 1930s. We have studied history and such changes thoroughly. We will help guide you through this tumultuous decade ahead, with your investments, your businesses and your personal finances.
Ahead of the Curve with Adam O’Dell
As much as South Korea’s economy serves as a model for other emerging markets, its stock market looks to be in trouble. This is especially so when you compare it to Japan’s stock market.