After the 1997 Asian Financial Crisis nearly bankrupted South Korea, the government decided to rebuild the country through culture instead of manufacturing — and by 2022 a nation of 51 million was earning $12 billion a year in music, film, television, and cosmetics

The 1997 Asian Financial Crisis, which nearly destroyed the Korean economy, is the specific reason that essentially every listener of contemporary global pop music has heard of BTS, that essentially every Netflix subscriber worldwide has watched at least one Korean drama, that Parasite became the first non-English-language film in the recorded history of the Academy Awards to win Best Picture in 2020, and that Korean skincare products currently comprise one of the more substantial global cosmetics export categories. The specific mechanism by which one of the more catastrophic national economic crises of the late 20th century produced one of the more successful national cultural exports of the early 21st century is not accidental. It was, in essential respects, deliberate policy — a specific 25-year national strategy that the Kim Dae-jung administration initiated in 1998 and that every subsequent Korean administration (regardless of political affiliation) has continued to fund, expand, and refine across the subsequent quarter-century. The strategy’s substantive premise was that the specific configuration of manufactured-goods exports that had powered Korean economic growth from the 1960s through the 1990s — the chaebol-dominated production of ships, cars, electronics, and heavy industrial equipment — had, in the 1997 crisis, demonstrated its structural vulnerability to global capital flows in a way that required substantial diversification into industries less exposed to commodity price cycles and heavy-industry competition from lower-wage economies.

According to the Victoria and Albert Museum’s institutional history of the origins of the Korean Wave in the aftermath of the 1997 crisis, Kim Dae-jung’s Cabinet identified two specific sectors as candidates for post-crisis diversification: information technology and cultural industries. The IT strategy produced, across the subsequent two decades, the substantial Korean semiconductor, memory chip, and consumer electronics industries currently dominated by Samsung Electronics and SK Hynix. The cultural strategy, more novel and initially more controversial, involved the establishment of the Ministry of Culture and Tourism in 1998, the passage of the Cultural Industry Promotion Basic Law in 1999, the creation of what would eventually become the Korea Creative Content Agency (KOCCA) in 2001, and the explicit government commitment to “quadruple exports in cultural industries” across the subsequent decade. The specific policy instruments included dedicated cultural-industry budgets that grew from approximately 0.5 percent of the national budget in 2000 to approximately 1.4 percent by 2020, government-backed venture capital funds for cultural production companies, tax incentives for cultural exports, broadcast quotas requiring domestic content on Korean television and radio, screen quotas for Korean films in domestic cinemas, and substantial university-level expansion of culture-industry degree programmes across the Korean higher education system.

What the money actually bought

The cumulative results across the subsequent 25 years of coordinated cultural-industry policy have been, by every available measure of contemporary global cultural export data, substantially larger than the Kim Dae-jung administration’s 1998 planners had anticipated. As detailed in the McGill Business Review’s analysis of Hallyu’s economic impact on the South Korean economy, Korean cultural content exports rose from approximately $180 million in 1998 to approximately $5.27 billion in 2014, and to approximately $12 billion in 2022. The $12 billion cultural-content figure includes K-pop (approximately $1 billion in direct music exports, with substantially larger indirect contributions through concert tours, merchandising, and the economic activity generated by the roughly 200 million Korean pop music fans currently estimated worldwide), K-dramas and K-film (approximately $2 billion in direct broadcast rights and licensing exports, with substantially larger indirect contributions through Netflix and other streaming platform investments in Korean content), and Korean gaming and other digital content (which together account for the substantial majority of the residual). K-beauty cosmetics — typically categorised as personal-care rather than cultural-content exports in the official statistics — contributed approximately $8 billion additionally in 2022, subsequently rising to $10.3 billion by 2024 as Korea overtook Germany to become the world’s third-largest cosmetics exporter, and to approximately $11.4 billion by 2025.

The specific commercial breakthroughs that have most substantially defined the current era of Korean cultural exports are, in essence, three: the 2012 release of Psy’s “Gangnam Style” music video (which became the first video in the recorded history of YouTube to exceed one billion views and established Korean pop music as a genuinely global commercial category rather than a regional Asian phenomenon); the June 2013 debut and subsequent global rise of the seven-member Korean pop group BTS (whose economic contribution to the Korean economy was estimated by the Korean Ministry of Culture, Sports and Tourism at approximately $50 billion between their 2013 debut and 2022, exceeding the annual GDP contribution of several major Korean industrial conglomerates); and the October 2019 theatrical release of Bong Joon-ho’s Parasite (which became, in February 2020, the first non-English-language film in Academy Awards history to win Best Picture, opening substantially wider Western audiences to Korean cinema in ways that translated directly into Netflix’s subsequent 2021 acquisition of Squid Game and the broader $2 billion Netflix commitment to Korean content production across 2021-2025).

The strategy after the crisis

The substantive question that the Korean case raises for other developing economies attempting comparable cultural-export strategies is whether the specific configuration of policies that produced the Korean result is replicable elsewhere. Per Treasury Today’s analysis of how the Korean Wave has reshaped perceptions of the Korean economy, the answer offered by essentially every serious cultural-industries scholar who has examined the question is: partially, but with substantial caveats. Korea possessed several substantial structural advantages at the 1998 launch of its Hallyu strategy that many developing economies do not: a substantially high pre-existing rate of tertiary education (approximately 40 percent of the Korean working-age population held tertiary degrees by 2000, providing a substantial creative workforce), a substantial pre-existing entertainment industry (Korean television dramas had been successfully exported to Asian markets since the late 1990s, at the beginning of what subsequent scholars have called the Hallyu 1.0 wave), a substantial pre-existing chaebol financial infrastructure (which could be redirected to support cultural production companies at scale), and a specific policy commitment to long-term investment in an industry whose returns would take approximately 15-20 years to fully materialise.

The Kim Dae-jung administration’s 1998 decision to prioritise cultural exports was widely criticised by Korean industry analysts at the time as substantially unrealistic. Per Martin Roll’s business-strategy analysis of the Korean Wave’s rise as a cultural economy phenomenon, the specific results across the subsequent 25 years have been that Korea has established what is now the substantially most valuable single-country cultural export sector in the global cultural economy per capita, has produced measurable positive spillover effects on Korean tourism (17.5 million international visitors annually pre-COVID, of whom approximately 70 percent cited K-content as a substantial factor in their travel decision), has substantially improved international perceptions of Korean industrial products (Samsung phones sell more effectively into markets that have been substantially exposed to Korean cultural content), and has established Korea as the substantive global model for how a mid-sized country can, given substantial and sustained government support, transform its cultural production capacity into a substantial economic export sector on the scale of its traditional manufacturing industries. The 1997 financial crisis that nearly bankrupted Korea produced, essentially by accident of the specific policy response the Kim Dae-jung administration chose to make to it, the specific national cultural economy that has, across the subsequent quarter-century, become the substantially most successful national cultural export project in the recorded history of the developing world.