In many developing countries, fiscal expansion and populism are often treated as synonymous. Korea, being known for its fiscal conservatism, experienced little welfare populism during its high-growth period. In fact, welfare spending accounted for only about 3 percent of GDP in the mid-1990s, just before the Asian Financial Crisis, compared with nearly 20 percent in many advanced economies.
Rather than relying on cash transfers—a common instrument of populist welfare policy—Korea developed institutional arrangements that addressed the actual needs of welfare recipients while limiting fiscal costs. Most notably, the country invested heavily in education, creating opportunities for upward social mobility. At the same time, the widespread practice of lifetime employment helped establish the idea that jobs themselves could function as a form of welfare.
In many developing countries, fiscal expansion and populism are often treated as synonymous. Korea, being known for its fiscal conservatism, experienced little welfare populism during its high-growth period. In fact, welfare spending accounted for only about 3 percent of GDP in the mid-1990s, just before the Asian Financial Crisis, compared with nearly 20 percent in many advanced economies.
Rather than relying on cash transfers—a common instrument of populist welfare policy—Korea developed institutional arrangements that addressed the actual needs of welfare recipients while limiting fiscal costs. Most notably, the country invested heavily in education, creating opportunities for upward social mobility. At the same time, the widespread practice of lifetime employment helped establish the idea that jobs themselves could function as a form of welfare.