In addition to the chaebol's dominance, Koreans should be worried about the state of their underlying economic institutions. Academics and think tanks rate South Korea's level of economic freedom, the robustness of its property rights, and its protection of equity investors below those of Japan, Taiwan, and many other wealthy countries. Although the day-to-day processes of doing business may be relatively easy in Korea, its economic environment offers few advantages to a small contender pitted against much bigger players.
Other traditional gripes about the East Asian powerhouses also apply to Korea. Its business culture has Confucian roots, so seniority and personal networks can mean more than merit and written contracts. Its education system emphasizes memorization, instills a pressure to conform, and mainly prepares students to work as cogs in big corporate or government machines. Its creative class is underdeveloped by international standards, and its culture is reticent about new ideas and new people, though immigration has ticked upward thanks to the policies of former President Roh Moo-hyun.
Of course, Korea has many economic assets as well. Its scientific research institutions rank among the best funded and most productive in the world, and its education system does produce high scores in science, math, and problem-solving. Its people's work ethic and their commitment to the national project are exceptional. In fact, the latter can be fervent enough to recall the republic's estranged neighbor to the north, which seems at times to differ in ideology but little else.
Yet the best thing Korea has going for it may be the opportunity to see and learn from its neighbors' mistakes. Japan had the chance to reinvent its economy and chose, explicitly or otherwise, not to follow through. China arguably has it tougher than Korea: Its political system may still be entrenched after its breakneck growth subsides, constraining the free flow of capital and ideas.
Korea, in contrast, is a democracy with several years left to prepare for the next stage of its economic development. If all goes well, the big question in East Asia will change from, "Can China avoid becoming Japan?" to "Can China follow Korea?"