Korean Economy?

[Seeker]

The Korean economy is wierd.

First, it's very protectionist (at least pre-IMF, try buying Japanese electronics)

Second, it's merchantile.
The government and corps together, the unions are (sometimes) encouraged to work in 'harmony', and more importantly the banks also work with the jaebol. Korea Inc is in NATIONAL united competition in a way alien to Canada.

Third,It has low taxes, and very little social safety net (don't get old and ill and be poor in Korea, unless you have a big generous family or you can convince some fundies how christian you've become)

Fourth, it's wages are 'too high' (according to manufacturers)

Fifth, in manufacturing almost anything that can be manufactured is made here. They only import luxury items.

And yet I'd have to say that compared to Canada there is no employment problem, and Korea doesn't have the same poverty/ghetto problems of North America. Sure, there are poorer and richer neighbourhoods, but if you're healthy you'd have to work NOT to have a job.

Does Canada have anything to learn from Korea in economic matters? Or is this an illusion like 'Japanese management', the supposed superiority of japanese ways in the 80s that turned out to be about bad loans?

[DanS]

It's a total illusion. Mostly. Well maybe not much of an illusion, but it can't last.

The fact that they only import luxury items (if they do) is a sign of weakness rather than strength. Other parts of the world are good at making stuff cheaply and well. It is harmful for Korean consumers to ignore these products and it encourages continued wealth destruction by subsidizing inefficient industry in-country.

You can do what Korea is doing for a while and be pretty successful at it. However, at the end of the day, you're much better off opening up your economy to the benefits of external competition.

One of the things that you didn't mention is that Korea is an industrial economy. This probably won't last, and the changes will be pretty painful. I think you'll have a lot of industrial ghost towns in 20 years time.

As for the taxes stuff, that will probably change. That's what's happened everybody else that has entered the first world, as Korea has just recently done.

[Seeker]

Most Koreans are very nationalistic, even in the absence of trade restrictions.

Try finding a non-Korean car.

Or a non-Korean appliance.

Or furniture.

Food. Imports are of course available but not popular and much more expensive (olive oil, spaghetti noodles, ground beef and other beef products, figs. Compare to Canada where there is abundace of 'foreign foods').

Or even clothes (most leather is knockoffs with fake bad Italian labels).

Electronics. In this area, the Koreans do import many things from Japan, but only 'grudgingly' as soon as they can they make it local.

Of course they import massive quantities of raw materials.

I haven't really been noticing the wealth destruction you've mentioned. I know that Canada has NAFTA and 7.4 % unemployment. I know that it is JESUS H CHRIST hard to find a decent job, and that almost nothing is manufactured in Canada.

I know that young Koreans turn down jobs and out of hundreds of people I know here, they're ALL working, and when they quit they have a new job or business in weeks or days (korean banks extend credit to locals much easier).

I know that many people from my parents generation grew up in a world where anybody willing to work hard could find a good job fairly easily. Some of that generation is still stuck in the mindset of that world, they don't realize how expensive, and regulated, and qualificationized, the world has become.

All anecdotal BS but this is my last few days and I'm summing up my thoughts about Korea.

EDIT: Industrialized: I thought I mentioned that Koreans manufacture....well, just about everything?

[DanS]

I haven't really been noticing the wealth destruction you've mentioned.

You will not have. It all works on subsidies--things you cannot see.

and that almost nothing is manufactured in Canada

This is not true. A great deal is manufactured in Canada, and much of it goes south. However, a lack of manufacturing is not necessarily a sign of weakness for Canada, as services are often much higher value endeavors than manufacturing. Let's be blunt, an advanced economy doesn't need to manufacture so much. Only 15% of the American economy is tied up in manufacturing. 42% of Korea's economy is tied up in manufacturing. (BTW, 27% of Canada's is tied up in manufacturing.)

I know that young Koreans turn down jobs and out of hundreds of people I know here, they're ALL working, and when they quit they have a new job or business in weeks or days

This is generally indicative of a fluid labor market. This is good and perhaps it's something from which Canada can learn (I don't know). But you don't need to look so far as Korea for this, since your neighbors to the South have been doing pretty good at unemployment, even at a trough of business activity.

Most Koreans are very nationalistic, even in the absence of trade restrictions.

This is bad. Ever driven a Kia?

[Seeker]

Ssanyong, Kia, Daewoo, Samsung, Bongo...there are many many Korean auto manufacturers and Hyundai.

USA 6.4% to CAN 7.4%?

Whoop dee doo, 1% less unemployment at the cost of no health care or education?

What I'm thinking is allowing our Big 5 Banks to merge.

Then they can lend more easily and they can lend for 'industrial strategic' reasons instead of just profitablity.

I still believe that free trade is ultimately best, but how we sacrifice our interests when you have the current US dispute over televisions?

China got the Wal-Mart TV contract again, and so US manufacturers want a 84% duty. Free what? Their workers work for much much less money, it's not 'dumping'.

I think that in a world of "Free" trade Korean merchantilism makes sense.

[Dinner]

Originally posted by Seeker
Most Koreans are very nationalistic, even in the absence of trade restrictions.

Try finding a non-Korean car.

I've been to Korea twice and I spent a month there during both visits. That doesn't make me an expert on the place but it does let a person get a good feel for the country. The place isn't just nationalist it's super nationalistic.

Until the mid-1990's it was illegel to purchase a Japanese car in South Korea because of the historic grudge the two countries have against each other; the few foreign cars which made it into the country were subject to a 100% tarrif and were held for various "safety" checks by the government for as long as a year. Of course there was never a safety issue and the whole system was just designed to make it hard for foreign owned companies to do business. Form what I understand the Asian economic crisis in the late 1990's weakened the anti-foreign laws (because the IMF forced them to trade more fairly) but the basic system is still in place.

I only saw two types of people with foreign cars: 1) Very, very rich businessmen (or their wives) who could afford to pay a 100% tarrif on top of the price for their M-B 500SL, and 2) U.S. servicemen who got to bipass the Korean import laws due to the status of forces agreement between the U.S. and Korea. Other then that everyone was driving locally made cars.

[DanS]

Whoop dee doo, 1% less unemployment at the cost of no health care or education?

First, the US had a more severe downturn than did Canada. Secondly, health care and education aren't really related to unemployment.

there are many many Korean auto manufacturers and Hyundai

Yes, but the cars that I have seen suck much worse than even American cars. The Korean consumer is being shafted (or shafting himself) by buying shoddy goods.

Then they can lend more easily and they can lend for 'industrial strategic' reasons instead of just profitablity.

Oh God. It's just throwing taxpayer (or shareholder) money down the rathole for an advanced and complex economy like Canada has.

I think that in a world of "Free" trade Korean merchantilism makes sense.

See above about the rathole.

[Japher]

Most current manufacturing optimization procedures have come from Japan or Korea, so I am not surprised to see Korea with a booming mercantile economy.

The problem with an economy based purly on manufacturing is that imports will eventually outweigh exports. At that time the economy will colapse as it is now dependent on foreign trade, something which is controlled by those other countries.

Also, not yielding any social benefits obviously makes it easy for the country to profit. I wish the US would do it, but then that isn't to humanitarian, is it?

I agree that the Korean's national pride helps in this, as well as their social structures. Yet, I have never seen anything succeed for long based souly out of spite. I think the Korean's may become the next Japan, but unless the realize their short comings and diversify, they will also have a short stay in a good economy.

[DanS]

The problem with an economy based purly on manufacturing is that imports will eventually outweigh exports. At that time the economy will colapse as it is now dependent on foreign trade, something which is controlled by those other countries.

[Seeker]

'Rathole' investments have created and are creating dozens of special economic zones and incentive regions across Korea.

-the special tech zone
-language zone
-sliced raw fish zone (serious)

How could any one private company with only it's own interests create these kind of long-term infrastructure/incentive areas?
And by working WITH the government, the targeted businesses get tax breaks and other special considerations.

'hit harder'

Why? The war, or tax cut?

[DanS]

Why? The war, or tax cut?

No, none of these things.

[Seeker]

I have to second the 'huh' here...

What exactly are the Koreans going to become so dependent on as an import?*

PlayStations? Luxury Italian fashions?

And where did this inverse relationship idea come from?

Oh, they do have some social safety net...most service companies have a 50% health insurance plan (employer/employee split) and they have public works for old people (all the people who would normally get social security pensions are out sweeping the streets and planting trees).

EDIT: so much as to cause a 'collapse'.

EDIT: then WHAT?

[Dinner]

If the last economic crisis wasn't enough to get the Koreans to wake up and smell the coffee then I don't see them doing it until they absolutely, positively have no other option. That means the reconing will be that much worse for their economy when the time comes.

How will the reconing come? They're already seeing it as cheaper made goods from China, India, and Vietnam are cutting into markets Korean companies used to own. Have you noticed how all the Korean companies are trying to move their goods up market? Take Samsung, they used to a huge share of the low end of the TV market but now the Chinese have totally taken this market away from them. If Samsung wants to keep existing as a TV manufacturer it has to move up to bigger and more complicated goods (which is what they've been doing) or they'll see their business shrink year after year after year as the Chinese take more and more market share.

Korean made clothing used to be every where but now it's much less common because all of the multinationals have set up shop in even lower wage countries and then priced Korean (and American for that matter) made clothes out of the market.

They're going to have to diversify their economy into services or they're going to see it crash in the next 30 years.

[Japher]

DanS: What's the problem with that statement? A unilateral approach to economy (as it appears Korea has taken) has no ability to stabilize or even, really, to fluctuate... Look at Argentina.

[DanS]

What's the problem with that statement?

The problem is that it doesn't make any sense.

A manufacturing economy can correct imbalances as easily as any other.