How A Financial Crisis Created K-pop
Anyone who is on the internet has to know about K-pop. (Or indeed, anyone who reads The Daily Vox – editor) With synchronised dance moves, colorful hair, and high-quality music production, the K-pop industry and its artists have masses enthralled. However, the K-pop machine is far more than pretty aesthetics and angelic voices. The industry, which has been around since the 1990s, has pretty interesting ties to the Asian financial crisis. SHAAZIA EBRAHIM and FATIMA MOOSA explain.
Whatâ€™s the connection between the Korean Hallyu wave and the Asian financial crisis?
The first thing you need to know is that K-pop forms part of the Hallyu wave. The Hallyu or Korean wave is a Chinese term which describes the growing popularity of the Korean entertainment industry around the world.Â Hallyu – a steadily growing phenomenon since 1999 – includes music, culture, drama, and beauty. With the mission to become the worldâ€™s biggest pop culture exporter, the South Korean government actively works on expanding the industry.Â
But the most interesting thing about Hallyu is that itâ€™s pretty much an east Asian-style economic policy. The South Korean government began injecting funds into the industry after 1997 Asian financial crisis.
lol i lose my shit every time i remember that k-pop was created by the south korean government in the late 90s as an export in order to pay back a $57 billion IMF loan
â€” bao ngo (@srirachadrinker) March 5, 2019
Whatâ€™s the Asian financial crisis and what were the economic conditions in South Korea when K-pop hit the scene?
The year 1997 was not a good one for southeast and east Asian countries. Weâ€™re going to have to get into economics for this one.
When the Thai government decided against pegging its local currency against the US dollar (USD) in July 1997, it sent the Asian markets into a tailspin. Already the â€œtiger economiesâ€ of the Asian region, boasting some of the most impressive growth rates at the time, began revealing a series of asset bubbles. The region had high levels of foreign direct investment because of its giant export economies. This led to rising real estate values, bolder corporate spending, and also large public infrastructure projects which was largely funded by heavy borrowing from banks. Still with us?
This system of available investors and easy lending often meant reduced investment quality, and the cracks started to show in these economies. The Federal Reserve started hiking interest rates to combat inflation, which made Asian exports less attractive (for those with currencies pegged to the dollar) and led to less foreign investment.The Thai decision was the final straw.
Currency traders attacked the Thai baht’s peg to the USD, and the baht was eventually devalued. This had a knock-on effect of a series of currency devaluations in southeast and east Asia which led to stock market declines, reduced import revenues, and government upheaval. South Korea was no exception.
After extensive negotiations, the South Korean government accepted a $12 billion bailout from the International Monetary Fund (IMF) in 1997. Counting the money the government accepted from the World Bank and the Asian Development Bank, South Korea had a whopping $55 billion loan package to pay back.
The South Korean government used the money to restore its depleted foreign currency reserves, and re-establish its financial system. The financial system was in shambles as it had been lending to the countryâ€™s super corporations (chaebols), and huge industrial conglomerates.
Okay, so the South Korean government was up to its ears in debt. How did they pay back the money?
After taking the loan, South Koreaâ€™s government paid the money back in less than five years (and two years and 10 months before the deadline) on August 24, 2001. Part of paying back the loan and its conditions included government reform of the country’s financial sector, reforms of the family-owned industrial giants, known as chaebol, and economic liberalisation. But a call for citizens to help the government pay back the loan reaped unexpected results.
More than 3.5 million people voluntarily (!) donated their gold jewellery and other gold objects to the government to repay the debt. These were melted down to gold bars to the value of $2.2 billion and used to repay part of the debt.
After paying of the loan, South Korea supposedly had economic sovereignty from the IMF.Â But it wasnâ€™t enough to restore the economy.
Enter the governmentâ€™s ingenious plans for the countryâ€™s entertainment industry.
How did the government use the entertainment industry to restart their economy?
President Kim Dae Jung (in office from 1998-2003) chose the entertainment industry as a growth engine and set up the Korea Creative Contents Agency. His government also injected funding into the Korean Film Council to promote pop culture, while also pushing universities to churn out talent.
Various government ministries including the food, foreign affairs, sports and tourism ministries put money into the industry. Within the culture ministry, the popular culture industry division enjoys $500 million chunk of the budget, with the aim to build a $10 billion cultural industry export industry by 2019.
Korean government industries actively promote Korean pop culture around the world especially in countries which are unfamiliar with it. The Korean Tourism Organisation has turned drama film sets into tourist attractions for drama fans. Government has also set up K-pop academies for entertainment companies who want to train international talent. The sports and tourism ministry even established an â€œadvisory committeeâ€ in 2012 to find ways to sustain the Hallyu wave.
The Hallyu does not just refer to the spread of Korean popular culture. Studies have found the spread of pop culture led to an increased interest in Korean food, products, language, and a general lifestyle. This is deliberate since the wave was meant to preserve Korean culture from the demands of the IMF bailout which forced South Korea to liberalise imports from Japan after 1997. This raised colonial-era fears that Japanese products and culture would saturate South Korean society.
At the end of 2018, a Korean government report found that there are reportedly 89.12 million Hallyu fans around the world.
Just how successful is the K-pop industry economically, and how did it develop?
The K-pop industry was around from the early 1990s starting with Seo Taiji and the Boys. But it was the development of K-pop group H.O.T, TVXQ, and others that the industry really began making economic gains. The leader of this development was Lee Soo-Man. In 1989 Lee founded SM Planning which later evolved into SM Entertainment in 1995. He is credited as having led the Hallyu wave.
Lee Soo-Man was faced with the same problems of the financial crisis and the subsequent collapse of the Korean music market in 1997. SM Entertainment was one of only eight music companies that survived. He did this by going public with his company.
Kang Heon, the director of Korea Pop Music Research Institute said: â€œBy listing on Kosdaq in 2000, SM got 20 billion won [$17.6 million]. With this, Lee could have either played it safe and led a rich life or taken a chance and made investments. He did the latter and became the father of the Hallyu.â€
The Korea Creative Content Agency published a report in 2017 which showed that the export of K-pop has made the South Korean music industry into an estimated $5 billion industry. SM Entertainment is now worth over a $900 million. SM Entertainment is part of the Big 3 in the industry. The other two companies are JYP and YG. JYP has the largest company now from the Big 3.
JYP, YG and SM Entertainment and most other entertainment companies have diversified their business portfolio. They own travel companies, restaurants and fashion companies which are all connected to Hallyu.
In 2018, BigHit Entertainment overtook the Big 3. BigHitâ€™s net worth is measured at over $1 billion. According to reports, it is BigHit group BTS who now have the greatest impact on the markets.Â When BTS tops the charts in the United States and around the world, the stocks of the other companies rise as well.
The K-pop can be seen as one of the fastest global growing entertainment industries. It might never reach the levels of the US music scene in terms of reach, and monetary value. Its impact is growing though aided by the internet age and the different experience it presents to fans.
In South Africa, K-pop fans might not make up huge numbers but the influence is there. From festivals and culture nights held by the Korean embassy in South Africa to fan gatherings online and in real life there are moves to get more people involved. Fans in South Africa actively participate in the economy of the industry by buying albums and merchandise of their favourite artists. This is despite the often high prices they have to pay. Fans are also determined to see their favs perform in South Africa.
This, if nothing else, shows how successful the South Korean governmentâ€™s Hallyu plan is.
So how do you feel about learning that K-pop emerged from an economic crisis? Tweet us @thedailyvox or comment below.
Featured image via Flickr