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Squid Game, Debt and Inequality

Authors: Teo Chuan Hao, Jester & Truong Dam Linh Giang

Research Head: Sasthaa Gingee Babu (Uday)


Squid Game shows us how debt has the potential to bring out the worst in all of us and the reality of the wealth inequality between the affluent and the poor. The driving force behind this phenomenon is a soaring household debt[1], the highest in Asia (Son, 2021). This article will seek to explore how this crisis is exacerbating wealth inequality in Korea.

Causes of the debt crisis

As with any economic issue, it would be remiss not to examine the factors of the debt crisis to understand Korea’s current position. As seen from Figure 1.1, household debt has been climbing steadily from ₩916.16 trillion in 2011 to ₩1726.09 trillion in 2020. We will be looking at five important factors fuelling the debt crisis, namely: consumerism, youth gambling, real estate prices, the recession caused by the COVID-19 pandemic and hesitancy of banks to lend.

Figure 1: Total value of household debt in South Korea from 2011 to 2020

Source: Statista

Many Koreans are prone to becoming victims of a consumerist culture. In 1990, Korea had one of the highest gross national savings rates of 37% (Park et al., 2005). However, as its economy grew, so did its spending habits. This is attributed to Korea’s culture of following trends, and if they are unable to do so, they feel left behind (CNA Insider, 2020). There is mounting pressure for the youth to constantly purchase new goods to forge a common ground with their peers (Cho et al., 2011). Simultaneously, these youth lack a source of stable income, hence they rely on borrowing money to fund their consumerism.

Gambling addiction has been on an uptick amongst Korean youths in the past six years due to lack of awareness and social support for those affected (Jang et al., 2019). Some teens can be found gambling on illegal sports websites in hopes of winning a larger cash prize. Despite the large windfalls that can be gained from taking on such risks, those who find themselves on the losing end of their bets may end up with an even larger deficit in their wallets.

Contrastingly, there is a strong link between increasing real estate prices and increasing household debt (Kim et al., 2014). House ownership is a scarcity in the country, leading to younger Koreans taking on risky loans to finance their properties. For older Koreans with more income and wealth, they also tend to take on loans to invest in real estate. Returns on real estate investments have been high, encouraging households to borrow to invest in it (Zabai, 2017).

A more recent factor is the economic recession caused by the onslaught of the COVID-19 pandemic. Private consumption fell 4.4% in the first three quarters of 2020 as seen from Figure 2, and many small businesses found it difficult to stay afloat with the decreased windfall (Borowiec, 2021). Many had to turn to borrowing to finance their businesses, mortgages, and even previous loans.

Figure 2: Percentage change of private consumption and government spending from previous quarter

Source: Korea Economic Research Institute

Within Korea, there is a range of financial institutions that indebted consumers and gamblers households can rely upon. Organisations such as commercial banks tend to take on fewer risks because of 2 main reasons: the trauma from previous financial crises (Asian Financial Crisis, 2008 Financial Crisis) (Kaminsky et al., 2009; Stiglitz, 2010), and the culture of default cultivated by consumerism and gambling addictions. Conversely, there are organisations, such as insurance companies and registered money lenders, that take on more risks in expanding their credit. This comes with higher interest rates which reach up to 20% depending on the borrower’s credit score. Most borrowers with difficulties paying back pre-existing loans are only able to secure loans from such organisations (The Economist, 2014). A worrying new trend shows that unsecured household loans from non-bank financial institutions were 116.9 trillion in March 2021 (Jung-a, 2021). If they are unable to service their loans under these sky-high interest rates, a never-ending cycle of debt repayment would arise. This situation is indeed the driving force behind Korea’s household debt crisis.

Impact of the debt crisis on wealth inequality

In order to assess the impact of the debt crisis on wealth inequality, we will need to know how the channels in which wealth is accumulated are affected. There are a variety of ways to gain wealth, however, for brevity, we will only be discussing two such pathways: accumulation of income and leveraging of loans through possessed wealth (Shin, 2020).

Accumulation of income is the most basic method to increase one’s wealth. Those on the lower end of the income scale have a higher propensity to consume (Hobijn & Nussbacher, 2015) and hence a lower propensity to save. Being bogged down by debt will only serve to reduce the amount of surplus income they are able to save. This means that low-income earners that have to pay back debts will accumulate wealth at a slower rate. Conversely, high-income earners have a higher propensity to save. Though they might have to service more debt, their surplus income would be at a higher percentage than that of a low-income earner without debt. As seen from both ends of the spectrum, the indebted poor will end up with a smaller amount of surplus income to save while the indebted rich are still able to accumulate wealth with only a small dent in their surplus income. This leads to greater wealth inequality.

Possessed wealth refers to ownership of capital, houses, or other property. Owners of such wealth tend to be conferred with high credit ratings and higher collateral, allowing them to easily borrow from commercial banks. However, low-income earners are often subprime borrowers with low credit scores. Hence, they are less able to borrow from commercial banks, turning towards non-bank borrowers with higher interest rates instead. The indebted rich can then take advantage of these loans by investing the large capital sum into financial markets or real estate assets (Park, 2016) where they will be able to reap significant returns in a short period of time. The indebted poor have limited access to financial markets. Therefore, they have no choice but to service their loans with higher interest rates and no other avenues to amass wealth.

Additionally, those owning properties can take advantage of rising property prices (Soo, 2021), stocks and bonds to service their debt. This also gives them leverage to increase rental prices, accelerating their accumulation of wealth. Au contraire, tenants who are in debt will have to cope with even higher rent experience greater wealth inequality (Jun, 2021).

Evaluation of current solutions

While Asian powerhouses like China and Japan lowered their interest rates in hopes of recovery from the pandemic via increased domestic consumption, the Bank Of Korea has decided to go against the grain in order to curb the surge in lending (Song & White, 2021). This is a testament to the severity of the debt crisis in Korea. Though this may discourage potential borrowers from taking out a loan, this does little to ameliorate the situation of those already in debt. Those who have an interest-inelastic demand for money will continue to borrow at elevated interest rates, exacerbating the crisis. The National Happiness Fund implemented by the government has shouldered the burden for many borrowers in poverty by writing off their debts. However, it fails to tackle the debt incurred by middle and higher-income households, where the majority of the debt is accumulated. Peer-to-peer lending platforms have sprung up as an alternative for subprime borrowers but the growing delinquency rate undermines its feasibility in the long run.

The aforementioned policies can boost Korea’s household debt crisis in the short run, but we believe more policies should be introduced to tackle the root cause: the excessively high demand for loans. Implementing social welfare programs might reduce the urgency to take on loans with high interest rates. Conversely, public education on financial prudence and the ills of gambling targeted towards the youth will serve as a deterrent against the early onset of debt.


Korea’s debt crisis has been fuelled by 5 factors recently: consumerism, youth gambling, real estate spending, the COVID-19 recession, and the hesitancy of banks to lend. We introduced the 3 policies that Korea’s government has introduced, its potential benefits and dangers. Rather than just taking on short term policies, we believe there is a need to focus on eliminating the root cause of the crisis with a mix of short and long term policies concurrently. Though Squid Game may simply be an exaggerated work of fiction, it is unsettling to find so many parallels between the lives of the indebted poor in and outside of the series. If the debt crisis rages on, the gap between the haves and the have-nots will continue to widen. Who is to say the first Squid Game might not occur then?

[1] Includes any kind of loan an individual can take on (e.g. student loan, credit card debt and mortgage loans, e.t.c.).


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