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Issue Report

Collection of full-length papers and in-depth analysis of economic and management issues.

Korea's Social Conflict and Its Economic Cost

Korea's Social Conflict and Its Economic Cost


July 31, 2009

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Originally released on June 24, 2009


Since its democratization in 1987, South Korea has incurred large social costs due to recurring eruptions of social conflicts which were not managed smoothly through institutional means. Sound management of social conflict can provide the impetus for further national development while poor management can cause social division and impede progress. With levels of social conflict escalating worldwide amid the global financial crisis, even industrialized countries that are superior to Korea in terms of risk management are mired in severe social conflicts such as "bossnapping." To prevent social tension from inflicting severe consequences, it is imperative for societies to recognize the huge social costs that are entailed and create a consensus about effective methods of conflict management.

The level of conflict within a society is determined by structural conflict factors such as income disparity and racial diversity, and the effectiveness of conflict management systems. In other words, t he stronger the structural conflict factors are, the more likely a conflict may occur. Social conflicts, however, can be eased if the conflict management system, which consists of factors such as the level of maturity of democracy and the government's capacity in implementing policy, operates effectively. According to the social conflict index proposed in this paper, Korea ranked fourth worst among 27 OECD member countries in the severity of social conflict. Despite having a low level of structural conflict, Korea was evaluated as having a high level of social conflict primarily due to its relatively immature democracy and low government effectiveness. The evaluation was based on the latest available data as of 2007. A regression analysis of 27 OECD countries showed that Korea ranks higher in social confl ict than the OECD average, with 27% of its GDP per capita going to efforts in conflict resolution. Under this backdrop, Korea should learn the lessons of both failure and success in other countries. Switzerland, for example, succeeded in turning itself into one of top industrialized economies through effective management of religious and linguistic conflicts, while Italy and Turkey became prime examples of failure in conflict management.

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