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Eureka: South Korean President Moon's economics Eureka: South Korean President Moon's economics
by Akli Hadid
2017-10-23 09:47:59
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President Moon wants to focus South Korea's economy around three pillars: income-led growth, fair competition and innovation-led growth. Let me give my opinion on that, free of charge, like casting two cents in a pond and wish the South's economy growth and prosperity.

moon1_400First on income-led growth. I'm old Joe and I own a Seven-Eleven or a Family Mart. Or call it a C&U if you want. Or I own an Isaac Toast stand or a Wa Bar. By the way, these are really the backbone of the Korean economy, and really where a lot of the economic planning should be going. More on that later. Let's say President Moon decides, based on income-led growth, the raise the minimum wage to 10,000 won. Now as old Joe just to break even, I can no longer pay those debt-burdened students to help me run shop. I'm going to have to rely on family, close friends, cousins, children, a wife, a girlfriend, someone to help me operate my shop and only pay them with my affection in return.

Income-led growth is good when you start making 5 dollars an hour and you end up as a 65 year-old making six figures after a series of smart decisions, a streak of good luck, and no one out there to sabotage you. But the problem when income is artificially raised is that it not only causes inflation because young people have too many dollars chasing too few products. It causes tuition fees to rise because universities know you can make 10 dollars an hour flipping burgers at fast-food joints. It causes consumer goods aimed at the youth to rise because clothing giants and smart phone manufacturers know that a lot of young people can make 10 to 15 dollars an hour doing menial jobs. But more importantly it causes more youth unemployment, because I would rather call my friends to help me when needed than employ students when I can't afford to pay them 10 dollars an hour.

Now President Moon, just like when your predecessor punished me by banning me from working at universities, when you raise the minimum wage and artificially raise the income, you're really punishing the owners of your local samgyetang restaurant and Isaac Toast or Family Mart by preventing them from getting help from students.

So the idea is to let employers decide what the salary will be. If the salary is insultingly low, no one will take the insult, or perhaps people will quit every month and be replaced by other desperate workers, which is not good for the image of the store. So employers know what salary is suitable for workers, and more importantly they are the ones who can come up with good (or lame and insulting) explanations for why the salary is so low or so high.

Regarding fair competition. Let's imagine I'm old Joe and I own a Seven Eleven. Let's imagine that each time another mini-mart opens in surrounding areas I send my team of friends with baseball bats to greet the owner of the new mini-mart, and that I send a team of scantly clad prostitutes to stand at his door. Of course clients arent't going to visit his store and the other owner will have to shut down. These are precisely some of the tactics used by big business in some areas, among other vicious tactics.

The idea is to explain that while such tactics may be beneficial in the short run, in the long run, absence of good competitors leads to stagnating innovation because there's no one to compete with. Fair competition is one where small and big business complement each other, not kill each other. If you have excessively jealous and hateful big business, they might win in the short run, but not in the long run.

Let me put it this way. Imaging the FIFA prevented any team from even entering the competition against Brazil. You can't even start playing with Brazil, let alone beat them. Brazil would win every world cup for sure, but no one would bother watching the world cup. That's Brazil going home with a trophy and medal, but losing all the sponsorship rights and advertising rights and everything else that goes with winning the World Cup. Now with fair competition you can have a Brazil that wins 5 World Cups, you can also have a Brazil losing 7-1. Fair competition means a competition with good referees, that is a good justice system. Now when establishing fair competition, you want to draft laws by using the OODA loop: Observe first, observe first, observe first. Orient decisions second. This means try to draft solutions. Orient decisions second. Orient decisions second. Decide what decision is good. Decide third. Decide third. Decide third. Take action fourth. Take action fourth. Take action fourth. I'm deliberately being insolent because a lot of times in South Korea you observe first, and take action in the next minute.

Finally, regarding innovation-led growth. This reminds me of the South Korean mindset where a lot of times people think about invading global markets before thinking about sweeping their own porch. The idea for any economy is to start at the local level, then perhaps at the regional level, then perhaps at the level of a couple of regions, then at the level of three regions, then three regions and a big city, etc; Then the whole nation, then the world. Samsung used to be a grocery shop, Facebook started off as a worthless toy for Harvard students and every major company started off as a small district shop. Then they opened two shops, then three shops, then four shops, then five shops, then the sixth, if possible each time they opened a shop they made sure that the other ones had decent profits.

There's a great movie scene where during McCarthyism an allegedly pinko radio newscaster lights a cigarette and says “good night and good luck.”


     
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Emanuel Paparella2017-10-23 12:44:00
Here too there is a humanistic side to the positivistic analysis: one area where the US is still on top in the field of education is "knowledge based economy" or the application of information to economic benefits. However, looking at the shipwreck that US education is fast becoming vis a vis other nations (adjunct professors now comprise 75% of college faculty and the US is now 17th on the international evaluation scale among the first 20 nations in the world and we have an ignoramus sitting pretty in the WH) it appears that genuine traditional liberal arts education has not benefited greatly from the nexus and that in fact it may have been prostituted. I wonder if the South Koreans who are right up there on top of the pyramid of economic growth, have taught about that conundrum or are they just following blindly the example of their giant mentor which is about to involve them in a war with the North in the name of savage capitalism. Did Kierkegaard have it on target? To be sick and have dehumanized oneself and not to know it is the sickness unto death.


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