Plan for a vanishing country

Korea is like a frog in a slowly boiling pot. The new government has formed a task force on demographic challenges.

Kim Chang-gyuThe author is the economic news editor at the JoongAng Ilbo.

Akiya — meaning “empty or abandoned houses” in Japanese — has come to symbolize the thinning and aging population in Japan. The country is saddled with a growing number of houses given up by the inheritor upon failing to sell the property after the homeowner passes away. In Tokyo, over 10 percent of the houses are empty, creating a serious social problem.

Local prefecture governments run the so-called “akiya banks” to post online the information on vacant homes and arranging trade. Anyone wishing to move in can live in the location for free or at dirt-cheap price. But transactions are limited to some areas with a flourishing economy despite such endeavors. According to the Ministry of Internal Affairs and Communications, as many as 164 villages have disappeared from the map because there had not been any resident since 2015.

Tesla CEO Elon Musk tweeted about the depopulation trend in Asia’s major economies of Japan and Korea. “Unless something changes to cause the birth rate to exceed the death rate, Japan will eventually cease to exist.” He later turned attention to Korea, Hong Kong and Italy, all heading down the same path as Japan.

“South Korea and Hong Kong are experiencing the fastest population collapses,” he wrote, sharing the World Bank 2020 data on countries with the lowest birth rate.

Korea is at the bottom among 200 countries with a birth rate of 0.84. Its population is thinning at the fastest pace. Hong Kong came next at 199th with 0.87 rate and Japan 186th with 1.34. If birth rates remain unchanged, Korea will lose 6 percent of its current population in three generations, Musk warned.

The Korean economy these days is like a lamp in the wind. The world is swept up in an inflation scare from uninterrupted rises in oil prices and supply bottlenecks. Central banks around the world are raising interest rates and tightening money supply to contain inflation. To a varying extent, recession or slowed economy will likely be a common trend next year. The Korean stock markets have been battered even by small ripples in the United States and other key markets. The won has been crashing, too. Exports have been slowing, and trade deficit is widening. Korea catches a severe cold when others cough. The country is that vulnerable to external shocks.

An economic slump will come at bad time for Korea. Population has decreased since 2020, a year when the number of deaths (310,000) exceeded the new births (270,000) for the first time. The economy loses growth potential if the population declines. The grim mix of global-wide inflation and economic slowdown will deal a critical blow to the country, which is heavily reliant on exports of processed goods from imports of raw materials.

According to estimates by Statistics Korea, total population of 51.84 million in 2020 is expected to fall to 51.2 million in 2030 and 50.19 million in 2040. By 2050, the count would sink to 47.36 million. In 30 years, Korea will lose 4.48 million, more than Busan’s population of 3.36 million.

When the population declines, businesses and jobs will disappear. Growth and income could come to a standstill. Due to reduced income, the young won’t get married or start families, feeding the vicious cycle of declining of population, growth and income. British scholar of population, Paul Willis, called the social impact from population reduction “age-quake” by likening it to a seismic shock.

The government and private sector have been less alarmed in addressing the issue. It may be because policy makers based in the capital do not feel the urgency from population decline. Since a future issue does not generate immediate results, it is pushed back in policy prioritization. Promises are made in the early stage, but forgotten as the administration’s term wears on.

Since starting a president committee on the low birth rate and aging society in 2005, the government spent over 220 trillion won ($171 billion) to tackle low birthrate. But the demographic problem has only worsened. At some point, the problem may become unfixable. Korea is like a frog in a slowly boiling pot. The new government has formed a task force on demographic challenges. It must not let resources go wasted this time. The clock is ticking for the country, which could vanish off the map.