"Do you go green with envy if your cousin buys land Do you think that we live in a world of contradictions Do you blame your own failure on others and society Do you think your success has been achieved on your own Do you think the rich make you worse off Do you think urbanization stunts the growth of rural areas Do you think economic democratization would transform the nation into an advanced one All the answers to these questions are "NO". Now, is the time for us to look for the right ideology rather than nice ideologies. Agreeable-sounding euphemisms such as socialism, social democracy, and modified democracy need to bow out, and we need to have profound debate to make a society where the better-off are more favorably treated."
In an interview with the Korea IT Times, President Jwa - who had his book titled "Economics for S. Korea's Success" published just last week- pointed out that we should of created a world where the success of conglomerates leads to making SMEs fare better. Dr. Jwa, who is also an adjunct professor of economics at Seoul National University (SNU), has set forth new view on capitalism in his books such as "differentiation beyond evolution" and "the new wealth of nations" so as to consistently argue for the global economic development that covers economic growth, industrial development, and regional development.
The following is an excerpt from President Jwa's interview with Korea IT Times.
Q) On the cover of the recently released book "Economics for S. Korea's Success" appears the phrase "Better-off neighbors do benefit me." Could you elaborate on what it means
A) Recently, Gregory Clark, an economic historian at the University of California, Davis, has taken an interesting approach to why the Industrial Revolution took place in England, not in China. Dr. Clark said, "During the pre-Industrial Revolution period after the 12 century, England saw the rich had more surviving children than the poor. The progeny of the middle and upper classes pervaded all levels of society. That meant there must have been constant downward social mobility. As a result, the behaviors that made for wealth and production-oriented values could have spread with them, consequently giving rise to the Industrial Revolution in England. On the other hand, the growth of China's low classes had prevented the Industrial Revolution from occurring in China by putting China under the malthusian trap."
"Historically, Germany, France, America, and Japan emerged as advanced nations by free riding on England, while South Korea followed in Japan's footsteps and China did in Korea's footsteps. The phrase "Better-off neighbors do benefit me" came from this notion. Take, for example, a person's life. A person is born and raised by his parents for free, and then he grows up getting free lessons on success know-how from teachers, friends and society. From the beginning to the end, we are all free riders who piggyback on others' achievements to get better off. Let's take an example of companies. Samsung- which took its cue from Sony a decade ago- has come out on top in the hardware sector in the world. Samsung's success was made possible by free-riding on its then better-off neighbor Sony. Now, a lot of companies strive to free-ride on Samsung. In other words, if individuals and companies want to raise their chances of winning, they should be hemmed in by a throng of better-off neighbors."
Q) In the past 20 to 30 years, the government has pushed ahead with its policy for balanced regional development. Though, it seems fair to say that the level of balanced regional development is far from satisfactory. How can we achieve balanced regional development
A) Lets cut to the chase. Concentrated development is the key to balanced regional development. In other words, the shortcut to balanced regional development is to accept the fact that there exists unbalanced development and to spur the development of front-running regions.
Efforts to put all the regions on a par with one another never come to fruition. Policies for balanced regional development can entail redistribution of resources and moral hazard of less developed regions by inevitably getting in the way of better-off regions' development. As a result, the outcome would be downward equalization. Strategic cities in prosperous regions should be encouraged to move forward in a way that could create synergy with their surrounding regions. As these cities grow further, we just let trickle-down economics and spill-over effects come into play to achieve shared growth.
Without plenty of better-off regions around us, there will be no way forward for our region. Therefore, the government needs to do away with its policy for balanced regional development and its local self-government system without decentralization of power. The government should set up a local administrative system in which municipalities are given more self-governing power and take the responsibility for their own future under the principles of autonomy and accountability. Of course, in the process, some local self-governing entities could wind up going bankrupt because of their lack of self-governing capability. We should leave that possibility open.
Q) What kind of government policy can help in boosting the number of better-off neighbors
A) From an industrial point of view, better-off neighbors means better-off companies. The more companies flourish, the faster industries grow and the more new markets are created. Eventually, the whole economy advances. Therefore, the government should draw up policies that favor more competitive companies to motivate other companies into achieving shared growth.
However, unfortunately the Korean government has made various kinds of regulations and restrictions that are hostile to large companies since the 1990s. As a result, SMEs have become unsure of growing into big companies, and big companies are reluctant to be categorized as conglomerates. On top of that, in the face of a variety of conglomerate-unfriendly regulations and barriers, conglomerates (or better-off neighbors) relocating to other big business-friendly nations to find new investment opportunities has grown in large numbers.
If the nation gets rid of these regulations and barriers and favors high-achieving companies, thriving conglomerates will proactively forge business partnerships with Korea's competitive SMEs, thereby helping them grow into big companies or conglomerates.
Later, as SMEs evolve into conglomerates in this way, they will eventually have to compete with the very conglomerates that helped them in the past, which will make markets more dynamic. Therefore, the government should put aside political reasons and ideologies, and press on with policies that are hospitable toward conglomerates and make uncompetitive companies run their course. Policies to provide unconditional, indiscriminate support could end up getting a lot of flak for wasting tax money and failing to single out those who deserve special treatment the most.
Q) The G20 Summit is slated to be held in November 2010 in Korea. Still, some G7 members - who were deemed as economic superpowers, have yet to fully dig out of long-running economic recessions. Do you have any message for these nations
A) Since the 1970's, G7 nations- such as America, Canada, Japan and France who had posted high growth rates before the 1960's - have taken social democratic approaches like the US National Home Ownership, Japan's balanced regional development and lifetime employment, and Germany's standardized education system, thereby sending the global economy into a state of stagnation. South Korea also plunge its economy into dire straits by implementing balanced regional development, educational equalization, uniform SME support policies, and regulations on large corporations and the Seoul Metropolitan area. So then, what made these social democratic proponents so unsuccessful The problem lies with the ideologies on "Better-off neighbors do hinder us.", which originated from ideologies that is based on Karl Mark theory of "capitalism is full of contradictions."
These nations took social democratic approaches that promoted balanced development by taking down better-off neighbors and pursuing equality through redistribution of resources. In other words, these approaches discriminated against better-off neighbors and booming regions. Therefore, assertions to achieve national advancement through the balanced development of the economy, society, and regions are not feasible. Sweet-sounding ideologies such as socialism, social democracy, and modified capitalism have failed to guarantee the sustainability of advanced nations. So, I hope the upcoming G20 Summit would serve as a venue where ear-pleasing ideologies are put on the backburner and discussions on the right ideology to favor better-off neighbors take place.
