Today’s [March 16, 2006] New York Times reports as news a story which, if true, would be an event in defiance of economic law and thus a literal miracle, comparable to the raising of the dead or a virgin birth. This alleged miracle is contained in the headline “In Korea, Bureaucrats Lead the Technology Charge.”
The opening paragraph of the article gushes, “With Korea’s aggressive electronics conglomerates leading the world’s markets into the next frontiers of high technology, an unlikely commander is heading the charge: the government.” This supposedly is the same government and the same bureaucrats who, in the article’s words, led “a push into biotechnology that produced a national scandal over faked stem cell research.” (The scandal first became public last December.)
Reading further into the article, however, one learns some very significant information. Namely, the head of the country’s Ministry of Information and Communication—the ministry described as the leading governmental actor in information technology in South Korea, “with a budget of nearly $1 billion to promote new technologies”—is one Chin Dae Je. Apparently with no awareness of its significance, the article mentions that before becoming minister of information three years ago, Mr. Chin was an executive of Samsung Electronics. The same paragraph in the article also reveals that he “consulted with his former Samsung colleagues, along with other big Korean companies, to pick technologies that would help the nation `leap into the leadership position in the I.T. field.’”
Based on this information, here’s my hypothesis, which I think is far more plausible than financially disinterested Korean bureaucrats glued to following government regulations, somehow suddenly, causelessly, becoming responsible for the country’s economic success: The parties leading the technology charge, and at the same time using the Korean government as a vehicle serving their financial self-interests, are Samsung Electronics and other Korean firms. Their executives tell the bureaucrats what to do. All that’s happened is that they’ve managed to obtain government financing for some of their research. (Of course, sometimes, acting through the government, they may also tell some competitors what to do, which makes it looks like initiative is coming from the government.)
On other occasions, they’ve no doubt managed to obtain other forms of government subsidization, such as, perhaps, some road construction or river and harbor improvements. Looked at in this light, there’s actually nothing more surprising going on in Korea today than went on in our own country in much of the 19th Century, when businessmen used the government under Republican administrations to enact protective tariffs on their behalf. (This, of course, still goes on today in our country, in far more varied forms than tariffs and on a much larger scale than in the 19th Century.)
The same principle of businessmen using the government for their own ends undoubtedly applies to Japan and the alleged role of its Ministry of International Trade and Industry in the success of the Japanese economy. And it applies to every other case of alleged government responsibility for the economic success of a country.
Such behavior on the part of businessmen is morally wrong and economically debilitating. It is morally wrong because it entails initiating physical force against others, for example, in the collection of taxes to pay for the subsidies. It is economically debilitating in all of its forms: Government sponsorship of research easily becomes government control of research and the destruction of research. Protective tariffs distort production and hold down real incomes, living standards, and the ability to save and invest. Roads and river and harbor improvements would be more efficiently built and operated by private firms than by the government.
But such behavior on the part of businessmen is at least intelligible and proceeds from the operation of financial self-interest, albeit misguided financial self-interest. With a proper limitation on the powers of government, it is capable of being rechanneled into morally proper and economically sound forms. It stands on a much higher rung in hell than the dull, dead hatred of self-interest, success, and wealth that so often proceeds from within government itself and always proceeds from ideologues seeking to use government to impose their wealth and life-hating philosophies.
Corrupt businessmen are infinitely cleaner and better than corrupt ideologues. They’re still willing to take money to do what a customer wants. The corrupt ideologue in contrast is unwilling to take money to stop doing what his victim does not want. If I had to choose, I’d take the corrupt businessman any day.
It’s sign of the corruption of our culture that today, businessmen feel the need to hide behind the mantle of corrupt ideology and pretend that what springs from their fundamentally life-giving self-interest comes instead from the government, the agency that can give only destruction and death.
This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book and provided that mention of the author’s web site www.capitalism.net is included. (Email notification is requested.) All other rights reserved.
{ 5 comments }
The “elite” media flub every opportunity to shed light on economic events. Whether it’s energy prices, technology, or “industrial guidance,” they inflame prejudices and misconceptions. Such articles aren’t just ignorant, they’re destructive.
“The corrupt ideologue in contrast is unwilling to take money to stop doing what his victim does not want”
This sentence caught my attention. Because when I read it I realized that there are only 600 members of parliamant controlling the fates of germany. Now why should they not take money to stop what they are doing? If Mises was right we should think they attribute a certain value to their ideology. So let’s say every one of them would be content with 100.000 Euro that would make 600 x 100.000 Euro total for one favor. Now I expect about 1.000 Euro of refund for too much paid taxes (in germany you have to pay monthly taxes on your income and at the end of the year get a refund if you meet certain criteria). So I would only have to find 60.000 people like me who would be willing to pay that 1.000 Euro for the government to pass a law that limits the states power to raise taxes and prohibits further inflation or increasing of depts and the state would soon fall over its ever increasing demand of money.
Now 60.000 people doesn’t seem that much. I like this idea. I think, I’ll try.
Felix Benner,
In what prison will you reside once convicted of bribery?
Just joking- a little.
The success of South Korean manufacturing is due to fairly low taxes, a fairly low level of regulations and fairly good protection for property rights.
If South Korean taxes and regulations became worse than those of the United States (and other major nations) and general protection for private property againt threats(which include confiscations and violations of contracts as well as taxes and regulations) then manufacturing industry would decline in South Korea. No matter how clever the government administrators were or how much money they had.
The New York Times is demented – even leftist economists no longer believe in “industrial policy” or in the ability of government to “pick winners”.
One of the most upsetting things about South Korea is the effect the education system and the media have had on the young.
They are indeed very good at maths (and other subjects) – but there is also a “cult of the North” among them.
They believe that one of the worst regimes in the world (North Korea) is a good place, they are also antiAmerican – believing in all sorts of nasty behaviour by Americans during the Korean war (without the context that the grandparents have of what the Communists did).
Traditionally Korean culture respects the old – but the modern youth respect only what is written in their books and is on the T.V. or film screen.
It is very depressing.
I am sure the young would mostly believe the New York Times (demented as it is) if they read it.
Paul:
At least part of the problem (in attitude) you describe may be the result of the unfortunate historic circumstance of the nation’s split in two after WWII.
Prior to WWII, Korea’s cultural center, as well as the hub of industry, was in the region from Seoul northward (Seoul might even be viewed as the southermost extremity of the northern–industrialized–portion of the peninsula). Prior to the outbreak of what was to be the Korean War, there was a steady emigration southward (most especially to Seoul) of people from that more prosperous northern area, especially of those, such as small-business types, who realized that collectivism would not hold much in the way of a future for them. Further south (than Seoul) was almost entirely rural and agricultural.
North Korea (at the time of division) was preponderant in almost any measure of economic activity and prosperity you might tally–which just goes to show how devastating collectivism has been. As an example, I’ll tell you something from my own time there (Army–1961-2). The information is actually something I read in the “Stars and Stripes” of the day.
After WWII, there were, on our hands, both in Korea, Japan, and elsewhere, tens of thousands of “enemy POWs” of Korean nationality to be repatriated. By the terms of the peace treaty and of our agreements with the Russians, repatriation of these former soldiers was to be to either zone–at their own choice. And this was still going on even at that time (from Japan) over 15 years after cessation of hostilities. What “Stars and Stripes” discussed was the overwhelming choice–90% or so–of these men (and often families)–who chose North Korea. This was due to two separate but somewhat related influences. Firstly, the political leadership associated with South Korea (regardless of their geographic origin) had been among the most active of the anti-Japanese freedom activists even before WWII and, consequently, were reluctant and slow to re-establish normal relationships. North Korea was quicker to normalize, to establish diplomatic relationship, and thus secure audience in Japan for its various trade and propaganda efforts. Secondly, as mentioned, the North was more heavily industrialized, had more and better roads, schools, hydroelectric power and diffusion of electrification, etc., etc. There were virtually no jobs of any sort to be had in South Korea: nobody’d want to go there except someone whose family owned property or had some other important connection–there was nothing “going on” there at the time.
As a measure of the economic backwardness of the South Korea of that day, consider that its TOTAL annual trade with the US at the time was only a couple hundred thousand dollars or so (and most of that was the export, by an Army sergeant, of hand-crafted table mats made by elderly folks during wintertime!).
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