The answer lies partly in the Asian Financial Crisis of 1997-1998, which left the country economically crippled, forcing the government to request a $57-billion loan from the IMF. The crisis exposed a huge fault line in the Korean economy: it was too dependent on the nation’s chaebols – megaconglomerates like Hyundai, Samsung, and LG, which hauled the economy up from sub-Saharan-African levels of poverty in the 50s and so became too big to fail.
The government of then-president Kim Dae-jung realised it had to diversify. According to Choi Bokeun, an official at Korea’s Ministry of Culture, Sport, and Tourism, Dae-jung marveled at how much revenue the United States brought in from films, and the UK from stage musicals. And he decided to use those two countries as benchmarks for creating a pop culture industry for Korea.
Was the president out of his mind? Building a pop culture export industry from scratch during a financial crisis seems like bringing a Frisbee instead of food to a desert island. But there was method to the madness. The creation of pop culture, Dae-jung argued, doesn’t require a massive infrastructure; all you really need is time and talent. Of course, that was easier said than done. In order to sell pop culture to the world, you first have to convince the world that your nation is cool.
Korea had no tradition of homegrown pop music bands. If the country wanted to achieve its pop culture export aspirations, it was going to have to use extreme methods. K-pop stars are groomed like Romanian gymnasts or Bolshoi ballerinas – picked out as children and groomed for years before they are permitted to perform in public, a process that results in 13-year music contracts. ...
It’s not just the record labels who are putting their noses to the grindstone. The Korean government runs and finances a fund of funds, managed by an entity called the Korean Venture Investment Corporation, with a staggering $1 billion earmarked solely to be invested into Korean pop culture. One government-funded lab is working on virtual reality and hyper-realistic hologram technology – not for the purpose of warfare or espionage but rather, to make a mind-blowing concert experience.
--Euny Hong, Newsweek, on manufacturing cool