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New Korean leader may be more Merkel than Thatcher

Park Geun-hye, the first woman to be elected president of South Korea, may turn out to resemble Angela Merkel more than Margaret Thatcher. Though conservative, her policies, which include social spending, curbs on conglomerates and engagement with North Korea, run left of those of the incumbent Lee Myung-bak. Korea can afford it: German pragmatism is needed, not Maggie’s radicalism.

Park, 60, is the daughter of Park Chung-hee, who ruled Korea from the time of a military coup in 1961 until his assassination in 1979. Park senior was an authoritarian but he also promoted export-led industrialisation, especially through big business conglomerates or chaebol like Samsung and Hyundai. That produced a remarkable economic flowering. He oversaw economic growth averaging 8.5 per cent a year.

The new Korean president-elect acted as her father’s first lady after her mother’s assassination in 1974, but her policies are very different. She favours higher social spending than her New Frontier party colleague, Lee, let alone her father. She is also relatively accommodating toward the North, although it is unlikely that she will reinstate the “sunshine” policy followed by the opposition presidents of 1998 to 2008. Park has criticised the power of the chaebol. That’s a popular stance, but if turned into policy it could have mixed effects: it could open up the economy, but at the same time it might weaken the country’s biggest exporters.

Park has compared herself to Britain’s Thatcher and Germany’s Merkel. Thatcher became prime minister in 1979 at a time of great economic difficulty, and reversed the policy tide of the preceding decades. Merkel, who was elected chancellor in 2005, has taken a more cautious, consensus-building approach to the Euro zone crisis that has unfolded on her watch.

Almost uniquely among rich countries, Korea’s budget is barely in deficit and should soon be in surplus, and its debt load is manageable at about a third of GDP. That means a Thatcherite U-turn isn’t needed.

All the same, Korean public spending has risen in recent years to 33 per cent of output, according to the Heritage Foundation, and economic growth is running at an uninspiring two per cent. That should discourage excessive stimulus and social handouts. Park’s politics aren’t yet set in stone, but seem closer to Merkel’s — the better fit for Korea’s circumstances.