South Korea
From $80 per capita (1961) to top-10 economy via state-directed chaebols; semiconductor dominance now hostage to annual U.S. export license renewals for Chinese production.
South Korea performed the fastest economic transformation in human history, rising from per-capita income below Sudan's in 1960 to joining the world's top ten economies within a single generation. This was not accident or geography—it was deliberate industrial policy executed with military precision.
The Korean peninsula's geography offers few natural advantages. The south lacks significant mineral resources, holds only marginal agricultural land compressed between mountains and sea, and sits in a dangerous neighborhood between China, Japan, and nuclear-armed North Korea. When the Korean War ended in 1953, South Korea was among the world's poorest nations, its industrial base destroyed, its population traumatized. American aid kept the country alive but couldn't make it thrive. Per-capita GDP in 1961 was approximately $80.
Everything changed when General Park Chung-hee seized power in 1961 and struck a bargain with Korean capitalists. The military government had arrested industrialists for corruption, then realized it needed them. The deal that emerged created the chaebol system: massive family-controlled conglomerates that received cheap credit from state-owned banks, protection from foreign competition, and monopoly privileges in domestic markets. In exchange, they delivered on government export targets. Failure meant prison; success meant expansion into the next designated industry.
The First Five-Year Plan (1962-1966) focused on light industry and agriculture, achieving 7.8% annual growth. The Second Plan (1967-1971) pivoted to heavy industries—steel, chemicals, shipbuilding—hitting 9.6% growth. Samsung, founded by Lee Byung-chull, evolved from a trading company into electronics. Chung Ju-young built Hyundai from a construction firm into automobiles and shipbuilding. The government picked winners, forced mergers, and directed credit with an iron hand. This was state capitalism of the most intensive variety.
The model nearly collapsed in 1997 when the Asian financial crisis exposed overleveraged chaebols and crony lending. The IMF bailout forced restructuring: Daewoo dissolved, banks consolidated, and corporate governance nominally improved. But the fundamental structure survived. The top four chaebols—Samsung, SK, Hyundai, and LG—now produce 40% of South Korea's nominal GDP. The top ten account for 80% of industrial output. Samsung alone represents roughly 20% of total exports.
Today that concentration creates both strength and vulnerability. Samsung and SK Hynix dominate global memory chip production, manufacturing crucial semiconductors for AI data centers worldwide. But 35-40% of Samsung's NAND flash comes from Xi'an, China; SK Hynix produces 40% of its DRAM in Wuxi. American export controls now require annual licenses for chipmaking equipment—permission that can be revoked. In December 2025, the U.S. approved Samsung and SK Hynix for continued China operations in 2026, but only for maintenance, not expansion. Legacy chips only.
By 2026, the semiconductor geopolitics will intensify. Annual license renewals introduce permanent uncertainty into long-term planning. Both companies face pressure to relocate production from China to Korea—a massive capital reallocation that would take years. The chaebol system that enabled Korea's rise now concentrates its risks: too much production, too much expertise, too much national income tied to annual decisions made in Washington about what equipment can cross which border.