A new SpongeBob episode debuts Monday night, an event so culturally monumental that the New York Times saw fit to devote an article to tracing every minute detail of the cartoon's production from storyboards in Burbank, Calif., to animation studios in South Korea. One passage jumped out:

In the 1980s animation began to migrate overseas because the labor was less expensive and because animated shows were not selling well in the United States. The labor is still somewhat cheaper, Nickelodeon executives said, but South Korea dominates in animation because the country has built an infrastructure for the practice while in the United States there is little formal training for animators.

Regular readers of How the World Works will appreciate that the role of state-directed industrial policy in East Asia in promoting economic growth is a core preoccupation of this blog. To connect such a topic, with all its manifold implications for the proper role of government in economic affairs, to the oeuvre of, as some French acquaintances of mine like to say, Bob l'éponge, is a Krabby Patty dream come true. I had to know more.

An animated TV commercial for Lucky Toothpaste made in 1956 is considered one of the wellsprings for the Korean animation, but it wasn't until 1994 that a a government report identified cartoons as "Korea's top cultural product export." That awareness inspired incentives aimed at further strengthening the sector. Some were as simple as changing the industry's status from "service" to "manufacturing," which resulted in a 20 percent tax break. The shock of the Asian financial crisis in 1997, which hit South Korea especially hard, led to additional efforts. The Seoul Metropolitan Government set up the Seoul Animation Center in the late '90s, intended to "provide comprehensive support to the Korean cartoon and animation industry and act as a major hub for animation in Korea." The federal government also established the Korean Culture and Contents Agency (KOCCA) around the same time as the chief state institution for promoting the business of culture. Among other things, KOCCA also holds a stake in a handful of venture capital funds that seek out animation co-production investing opportunities with domestic and foreign producers.

From a "fact-finding mission" commissioned by UK Trade & Investment:

Just one example of a KOCCA fund that can accessed by animation companies is the $43 million Sovik Fund, administered by the Sovik Venture Capital Co Ltd... The Sovik fund can fund a maximum of 50 percent of the cost of a production and Sovik is looking at around $5 million-6 million per project. Last year [2003] Sovik's investment included one co-production between Korea and France, and the company is looking at a potential co-production between Korea and Japan.

South Korea is the 12th largest economy in the world, a remarkable achievement that has inevitably led to its own industries coming under the same kind of globalization-inspired competitive pressures besieging the West. Chinese and Indian animation studios are now undercutting the historical Korean price advantage in cartoon production. But cheap labor isn't the only key to surviving in the global economy. So is finding your niche. Why are SpongeBob cartoons made in Korea, even at this late date in the evolution of Korean economy? At least in part, because the government made it a priority.