Korea, of course, has a long and illustrious history. We Americans tend to think Korean history started with our military involvement during Harry Truman’s reign, but as a civilization Korea goes back millennia, and it has been a great and rich nation at times in its past.

The earliest known Korean state was Old Choson, in what is now northwestern Korea and southern Northeast China, which was conquered in 108 BC by the Han Chinese.

After a thousand years of alarms and retreats, stability and tumult, with Korea regarded by China as a buffer against Japan and by the Japanese as a gangplank to China, Korea came into its own in its Koryo Period, which lasted four centuries, from 918 to 1392 AD. The full flowering of Koryo culture took place in the middle of this period, marked by a stable government and influenced by Chinese political institutions and methods, a vigorous Buddhist faith, and a particularly distinctive ceramics industry that produced celadons—characteristic Korean stoneware with a gray-green, iron-pigmented glaze—which are still appreciated today.

During the 14^th century Korea came under the influence of Neo-Confucianism, whose emphasis on good conduct, wisdom, and appropriate social interaction became an important part of Korean culture. This gave rise to the Choson Dynasty, 1392 to 1910, which during the 17^th and 18^th centuries produced particularly able kings and administrators.

Thus while Europeans were struggling to rise from the Dark Ages and build castles the Koreans had established a civilization at a high level. Today they are mindful of their history, and they know their forebears accomplished great things. And of course Koreans are ever mindful of their occupying a small country sandwiched between two powerful giants, China and Japan. For two millennia this constant threat has spurred the Koreans to great efforts.

Geographically, what does Korea look like? South Korea is characterized by mountainous terrain in the north and east and broad plains in the south. It’s densely settled, with a majority of its population concentrated in the southern section, although about a quarter of the South Koreans live in Seoul, thirty miles south of the demilitarized zone.

As Paige and I have toured we’ve seen fabulous ancient temples, Buddha statues, dances, music performances, and other artistic presentations. It’s crowded, too, like so many Asian countries. South Korea’s the size of Mississippi, but seventy percent of it is covered with mountains. Imagine if two-thirds of Mississippi were covered with mountains and 46-million people lived there instead of 3 million. That’s South Korea.

Women constitute nearly 40 percent of the labor force, about a third of whom work on family farms. The rest work in services, health care, and textile and electronics manufacture, whose work force is 70-90 percent female.

After a week or so of spying so few girls, we cast about for why. The reasons were startling. We knew, of course, that China’s one-child policy had caused a shortage of Chinese girls, principally because in rural China some girl babies are left outside to die or are drowned, but Korea has no one-child policy. However, it has the sonogram. Most couples in Korea, like prosperous couples everywhere know that the state instead of grown children takes care of the elderly, so opt for two children, a boy and a girl. As boys are more desirable than girls, if the first-born is a boy, well and good. The problem arises when the first-born is a girl and the sonogram informs the couple that the second is to be a girl, too. This second may be aborted, and if the third fetus is also not a boy, she is in as much danger as was her aborted sister. If the first and second children are boys, the couples are satisfied and stop reproducing.

This demographic shortfall is true all over Asia, in Japan, Taiwan, and other countries, the first time these civilizations have faced this particular problem. In Korea in 1993 there were 115.6 boys born for each 100 girl babies. (The normal ratio is about 105 males to 100 females.) In 1995 only 47.9% of primary school children were female, which meant an extra 200,000 6-to-11-year-old boys. Local sources estimate that by 2010 there will be 128 men to every 100 women in the 27-to-30 year cohort.

This presents a serious demographic problem. Oddly enough, a similar situation occurred in Europe just before the year 1000, when for similar reasons girl babies were killed. As a result, back then it wasn’t the bride’s father who paid a dowry, but the husband who paid the bride’s father to obtain his new wife. Asia today has some 3-billion people, which makes this a huge trans-national problem. The Asian shortage of females will mean an imbalance worldwide—worse in some areas, perhaps, but important to all of us.

Anyone interested in politics, economics, and investing in Asia needs to take such a change seriously and think through the consequences. As an investor, I like not only to buy cheaply, but also to buy when a fundamental change is about to occur, giving my investment a double whammy. This demographic shift seems to me to be one of the largest cultural events that will hit Asian society—and an opportunity.

Some obvious effects? The legendary mistreatment of women in Asia---and Korean men have reputedly been the worst offenders---is about to change as the value of women skyrockets. Certainly, wives will be in demand. These brides will not only command dowries but also more money with which to establish their households. This should mean more sales of ovens and dishwashers, more interior-decorating and furniture stores, indeed more sales of everything a young woman might desire to set up her household. Just now Korea has no day-care centers; these new wives may well want help raising their children, and since they’ll have their pick of husbands, doubtless they’ll pick those whose prospects promise the best possible life, including abundant child care.

While we were in Seoul near the university area we came across the wedding-dress district, a surrealistic sight of 120 bridal shops, one right after another. I believe this entire district is doomed as female Korean graduates put off their weddings. If I could figure a way to do so, I would sell short these shops.

In the streets of Korea today Paige and I see few exercise clubs and spas, but I suspect more independent women will demand them. After all, these sought-after young women will be able to stay single longer, obtain better educations, and still snare the husband of their dreams. Normally, as in all Asian countries, the Korean daughter-in-law takes care of her husband’s aging parents. In the dawn of the new millenium I don’t think she’ll be so eager. There are few old-age homes here, but accordingly they strike me as a good investment. I would also expect the value of the companies producing frozen food and other easy-to-prepare meals to soar. Surely women’s education will also boom, with female politicians, lawyers, doctors, and accountants for the first time joining their male counterparts in good-sized numbers. Divorce will rise dramatically as unhappy wives will have plenty of alternative options.

This trend won’t be confined to Korea, of course, but will flow throughout all Asia, where it will be valuable and desirable to be a woman. Doubtless Asian governments will step in to "solve" the problem, possibly by making it illegal for local gals to marry foreigners. Remember, for centuries Korean society, north and south, has been dictatorial. There’s a good possibility that the government will eventually establish tax incentives for girl babies, either a tax break or a tax credit.

Paige and I have also been amazed by the country’s prosperity. As recently as 1965 South Korea was poorer than North Korea—as well as the poorer countries of Africa and Asia.

Today South Korea is one of the 20 richest countries in the world, an astonishing achievement over a mere three decades. Its GDP per capita is eight times India’s, 15 times North Korea’s, and already even with the lesser economies of the European Union. This success has been achieved through a system of close ties between government and business, including directed credit, import restrictions, and government sponsorship of specific industries, as well as workers who would take orders.

How have the Koreans accomplished this? Much the way the Japanese performed their post-war miracles, through centralized planning under a serious dictatorship supported and aided by the U.S. Government and its money. Japan’s Ministry of Trade and Industry directed investment from banks and other investment corporations into those conglomerates and industries it wanted to see developed; Korea has done the same. Both are controlled economies run by central planners, and both have run into many of the attendant problems the USSR and China have encountered.

Bearing down on its citizens, the Korean government promoted the import of raw materials and technology at the expense of consumer goods, and it encouraged savings and investment over consumption. This is all well and good, but can be dangerous to an economy if hubris and overconfidence develop.

At long last, the Asian financial crisis of 1997 and 1998 exposed the longstanding fissures in South Korea’s development model, including its high debt-to-equity ratios, massive foreign borrowing, and undisciplined financial sector. On the positive side, in contrast with Japan, which has the second oldest population in the world, Korea has the fourth youngest population in the world, and unburdened by the past, its youth will push for change, opening , and unification.

Reeling under the crisis, Korea had a scheduled election in 1998, and Kim—the first political outsider to be elected in Korea since it has had elections—was elected. He has urged the dismantling of the chaebols, the clubby conglomerates that dominate the Korean economy, the largest cogs in the old-boy, non-competitive economy. Prior to his term, the government, as MITI did in Japan, directed banks to lend to chaebols for nationalistic purposes. This led to inefficient, sprawling enterprises which depended on being propped up by the Korean government to survive, instead of depending on their competitiveness against foreign businesses.

Today, however, KIA, the Korean automotive manufacturer, once given boatloads of money by the banks, has been allowed to go bankrupt. Under the old regime the banks would simply have lent the company more money. As another example, Daewoo is selling off one of its trophies, the Seoul Hilton.

A number of these private-sector conglomerates are near bankruptcy. Because of the Asian crisis, Korean growth in 1998 was sharply cut, but now it has bounced back. However, true long-term growth will depend on how successfully South Korea implements economic reforms that bolster the financial sector, improve corporate management, and open the economy further to foreign participation.

Korea’s economy this year is up sharply from last year, far more so than Japan’s, which had no such luckily timed elections in which a savior could be elected. Korea was fortunate to have a national election in the midst of an economic crisis.

As for direct investments here, I am reluctant to invest just now as over the past year the stock market has already doubled. It seems to me that IMF loans and the printing of extra Korean currency have had a lot to do with Korea’s sudden prosperity, creating a boom that’s probably not stable. If you give me a quick infusion of $60 billion, I’ll show you a good time too. From 1995 to 1997 the Korean balance of trade has been awful, a gigantic imbalance. I don’t think reality has set in here yet. I’m not sure there are many real companies here that can compete with Western companies without their protected home base. Korea’s too closed a society and too controlled an economy, and as an investor I haven’t seen enough signs of real change. As things have improved, a sigh of relief is evident. Unfortunately, complacency and a feeling that change has gone far enough is setting in. So I will wait for an inevitable setback and a resumption of real change before joining the party.

What might be promising here as an investment? With so little tourism just now, a tourist organization will perform well over the long run. Till now Koreans have been as busy as bees in a hive, happy to sell honey, and telling the world not to mess with them. They won’t even allow a local loan on a foreign car. But I suspect all this will change as this society develops. Another good investment is land north of the river that divides Seoul. South Koreans believe that as Seoul is only 30 miles south of the DMZ, the northern part of the city is the most vulnerable to an attack by the North Koreans. Thus, when the two hermit kingdoms do unite, the land in the north of the city should rise in price to match the more costly land south of the river.

Unlike China, whose shops carry any Western goods that will sell, in Korea there are very few foreign goods. This may keep out competitive products, but it doesn’t lead to a strong local manufacturing base. Westerners we have met here tell us that China is a much easier place to live and work. As a way to keep tighter controls on foreign interests Korea has even required exit visas for resident businessmen who need to travel in and out.

We didn’t even see American soldiers, of whom there are some 40,000. They, too, have become insular in Korea. Indeed we caught some public-service advertisements on the U.S. military radio stations that urged American soldiers to leave the base and explore Korean society; apparently the soldiers stay cloistered on their bases.

Will North and South Korea ever unify? For decades North Korea has been a terrific whipping boy for South Korean politicians, a devil who could be blamed for everything from too many thunderstorms to the lack of a decent foreign toothpaste.

North Korea of course is a real mess. More than 90% of its command economy is socialized; its agricultural land is collectivized; and its state-owned industry produces 95% of its manufactured goods. Because of the small size and homogeneity of North Korean society and the strict rule of Kim Il-song in the past, and now his son, Kim Chong-il, state control of economic affairs is unusually tight even for a communist country. Economic growth during the period 1984 to 1988 averaged 2% to 3%, but output declined by an average of 4% to 5% between during 1989 and 1997 because of the country’s systemic problems and the large disruptions in economic and technological links with the former USSR and China. Its dictators insist on a high level of military spending from an economic pie that is steadily shrinking. Moreover, a serious drawdown in inventories and critical shortages in the energy sector have led to increasing interruptions in industrial production.

Even though abundant mineral resources and hydropower have formed the basis of industrial development since World War II, North Korea has fallen far behind South Korea in economic development and living standards. Manufacturing is still centered on heavy industry, including military industry, with light industry lagging far behind.

Despite the use of improved seed varieties, expansion of irrigation, and the heavy use of fertilizers, North Korea is not even self-sufficient in food production. Indeed, a shortage of arable lands, several years of poor harvests, systemic inefficiencies, a cumbersome distribution system, and extensive floods in 1995 and 1996 followed by a severe drought in 1997 have resulted in increasingly serious food shortages. Substantial grain shipments from Japan and South Korea offset a portion of the deficit.

However, I believe the two Koreas will be unified one day, principally because South Korea wants it for both social (brides) and business reasons (cheap labor). The huge numbers of kids soon to be voters also favor unification. Production in North Korea is cheaper than in South Korea, so the businessmen are pushing for it. Even now Hyundai has a plant up there. Today three tourist boats have limited trips to the North, and a tourist resort is being developed. We even tried to visit, but were told quite frankly—"Sorry, no Americans!"

So traffic between the two siblings is starting up once again, and despite the border spats between their two armed forces every now and then, it will continue. Once started, such developments are hard to stop.

The eventual merger of the two parts of the hermit kingdom will give a further boost to Korea and its continued change and prosperity.