Norway in 1986, Korea in 2026

Yeh Young-june

The author is the head of the editorial board at the JoongAng Ilbo. 

Although the term may sound unfair to the Dutch, "Dutch disease" remains a standard concept in economics textbooks. It describes how the Netherlands, enriched by the discovery of natural gas in the North Sea in 1959, later suffered a prolonged decline in industrial competitiveness. Massive foreign currency inflows strengthened the guilder, undermining manufacturers of automobiles, ships and machinery. Expanding welfare programs, inflation and rapid wage growth compounded the problem, eventually leading to unemployment and negative economic growth. It took roughly two decades for the country to recover.

Not every windfall ends the same way.

About a decade after the Netherlands struck gas, Norway discovered vast offshore oil reserves in the North Sea. For one of Northern Europe's poorest countries, the sudden wealth fueled demands for higher wages and expanded welfare spending. Those pressures peaked during a nationwide labor strike in 1986.

Prime Minister Gro Harlem Brundtland, who led the Labor government, resisted calls to spend the oil revenues immediately. When critics asked why the government was holding onto the money, she replied that releasing it too quickly would drive up inflation, erode workers' purchasing power and leave Norway with the same disease that had afflicted the Netherlands.

Her government imposed a lockout affecting about 100,000 workers and passed legislation limiting wage increases. At the same time, it promised job security and a gradual expansion of welfare, forging a grand compromise among labor, business and government.

That consensus ultimately led to the creation of Norway's sovereign wealth fund. Rather than spending oil revenues at home, Norway invested them in overseas assets and limited the amount of investment income that could be transferred into the national budget. Today, the ceiling stands at 3 percent, preventing excessive liquidity from overheating the domestic economy. Norway has since become one of the world's wealthiest nations, with per capita GDP approaching $80,000.

Korea now finds itself experiencing its own historic windfall, driven by the semiconductor supercycle. Samsung Electronics reported first-quarter operating profit exceeding 57 trillion won ($37.5 billion), surpassing even the annual record once achieved by Japan's Toyota.

As a result, discussion has increasingly turned to "excess profits." The term may sound contradictory because businesses exist to maximize profits, but semiconductor companies are undeniably earning returns far beyond expectations. Those gains are the reward for decades of investment by first-generation entrepreneurs who entered the industry more than 40 years ago and by researchers and engineers whose innovation prepared Korea for today's boom.

The challenge begins after success.

Korean society hardly looks prepared for managing such extraordinary prosperity. Employees receiving enormous bonuses, investors who believe those payouts have reduced their own returns and ordinary citizens excluded from both groups increasingly find themselves competing over how the gains should be shared. The government has also entered the debate over redistribution, placing itself at the center of questions that Korea has never confronted on this scale.

One fact, however, remains certain: Every supercycle eventually ends, and usually sooner than expected.

More worrying are the early signs of a semiconductor version of Dutch disease. Exports have reached record highs, yet the won has remained weaker than expected, while inflation and interest rates have climbed. Capital generated by bonuses and stock market gains is flowing disproportionately into real estate. Even as the benchmark Kospi approaches 9,000 points, market gains have become highly concentrated, with far more declining stocks than rising ones. At the same time, industries outside semiconductors risk losing competitiveness as capital and talent gravitate toward a single sector.

This is not merely a theoretical concern. Taiwan, another major semiconductor powerhouse, offers a cautionary example. Although its economy grew 8.7 percent last year, private consumption rose only 1.3 percent. The uneven distribution of growth has been accompanied by widening inequality, rising housing prices and persistent inflation. The Economist described Taiwan as suffering from a form Dutch disease, dubbing the phenomenon the "Formosa flu."

No country can simply lock away a windfall forever. The question is where the money should go.

The answer is investment in the future.

Semiconductor companies must continue preparing for the next technological breakthrough. Falling behind in the race for the next game-changing innovation could quickly cost them their leadership in memory chips.

The government faces a similar challenge. Surging tax revenues should not automatically trigger another round of expansionary spending. Yet the priority should not be how today's semiconductor tax revenues are distributed, but how they can become seed capital for future generations.

If Korea squanders this golden opportunity, economics textbooks may someday coin a new term: "Korea disease." The prosperity created by K-semiconductors should not end by producing deeper polarization and a distinctly Korean version of the Dutch economic malaise.