[Insight & Opinion] Uncertainty in the Global Economy and the Korea-U.S. Alliance in the Era of Economic Security

The uncertainty of the global economy, which began with the worldwide spread of COVID-19, is gradually intensifying. There are growing concerns that stagflation?a simultaneous occurrence of economic recession and inflation triggered by the oil crisis in the 1970s?may reoccur. Former U.S. Federal Reserve (Fed) Chairman Ben Bernanke criticized the Fed's delayed response to inflation and warned that the U.S. economy might experience stagflation in the future. U.S. Treasury Secretary Janet Yellen also expressed concerns at last week's G7 finance ministers' meeting, stating, "The outlook for the global economy is very difficult and uncertain," and highlighted that "the rise in food and energy prices triggered by the Ukraine war is causing stagflation effects."

While no one can definitively say whether stagflation as severe as that experienced in the 1970s will occur in the future, it is undeniable that the uncertainty of the global economy is increasing. The direct reasons for the growing uncertainty in the global economy are the economic repercussions caused by COVID-19, which has not yet ended despite two years passing, and the Ukraine war. However, from a more long-term perspective, the uncertainty in the global economy stems from the strategic competition between the U.S. and China over hegemonic status in the world economy, which could lead to a profound reorganization of the international order. COVID-19 and the Ukraine war have acted as catalysts accelerating the strategic competition between the U.S. and China over the restructuring of the global economy.

As the uncertainty of the global economy grows, countries are prioritizing securing economic stability by eliminating risk factors under the banner of ‘economic security.’ The newly inaugurated Yoon Suk-yeol administration has also adopted economic security as a key national agenda. Last week’s Korea-U.S. summit was significant as the first step in the economic security diplomacy envisioned by the new government. The fact that the two leaders first met at the Samsung Electronics semiconductor plant in Pyeongtaek symbolically demonstrated that the Korea-U.S. alliance will be strengthened not only in the military domain but also in the economic sphere. In particular, the agreement between the two leaders to cooperate in maintaining the stability of not only global supply chains but also financial markets means that the Korea-U.S. alliance will serve as a pivotal political foundation for maintaining economic stability in the future.

This Korea-U.S. summit reaffirmed that the U.S. remains a reliable and trusted ally for South Korea even in an era of economic security dominated by economic uncertainty. Despite China’s rise, the U.S. remains the most central country in the global economy, so developing the Korea-U.S. alliance into a comprehensive strategic alliance will be a strong safeguard in preparing for the economic security era. To leap forward as a ‘global pivotal state,’ as pursued by the new government, it is expected that South Korea will play a leading role in multilateral diplomacy such as the Group of 20 (G20), based on the achievements of alliance diplomacy demonstrated at this summit. The stability of the Korean economy cannot be considered separately from the stability of the global economy. Therefore, the new government’s active role on the international stage to restore the liberal world economic order also aligns with South Korea’s national interests.

Jae-hwan Jeong, Professor, Department of International Relations, Ulsan University

This content was produced with the assistance of AI translation services.