Thursday, November 27, 2014

The Trouble with Non-Economists talking about Economics, Part 2

The other day, a Facebook acquaintance linked a post on his Facebook page, which showed up on my news feed. It was a link to a website called Korea Exposé. The title of the article was “Disposable Workers of Hyper-Capitalist Korea.”

It is no secret that (fairly or unfairly) Korea is known as being relatively unsympathetic to workers' rights (see here). So I agreed with the author before even reading his article that Korean workers could be treated better than they are treated. But is Korea hyper-capitalist? It is certainly news to me.

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So I gave it a read. Not too surprisingly, the author, Se-Woong Koo, started off his post by providing a list of workers being abused by their supervisors, employers, and customers. It's always a good idea to start a blog post with an emotional punch to the readers' guts. It makes sure that the readers stay interested and keep reading. Perhaps I should start doing that more often, too.

The author then says that during a discussion among his friends, many of whom are academics specializing in Korea, as they tried to figure out the root cause of all this violence against workers,

...the disagreement came down to whether we should primarily fault capitalism or Korea’s culture and recent history of colonialism, militarisation, and entrenched biases against manual labour.

Who in Korea has not had this exact same conversation multiple times? I (and I am sure that countless others) have engaged in, as well as watched, this same conversation so many times that it has become a cliché. If learned academics who specialize in Korea are having the same conversation as the rest of us laity, then I do believe that the debate over whether or not higher education is necessary to produce well-educated citizens is over.

But it gets better (or worse, I suppose) when the author says

It is true that capitalism in an unregulated form fundamentally dehumanises individual workers as nothing more than providers of labour, for which wage is seen as sufficient compensation.

That's quite the powerful statement – dehumanize. When I saw that, I was reminded of an old joke I once heard. A man meets up with an old friend whom he has not seen in decades. As the friends are exchanging pleasantries, the friend asks the man how is wife is. The man answers, “My wife? Compared to what?”

Well, let's for a moment put aside the fact that capitalism does not actually dehumanize people because capitalism is much more than simply about mass production, but about mass production to satisfy the needs of the masses (in order to make a profit). Also, let's, for the sake of argument, assume that Korea is indeed a hyper-capitalist society.

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Are Korean workers worse off today than they were, let's say, forty years ago? How about thirty or twenty or ten years ago? Or how about a hundred years ago? I am going to go out on a limb and say that anyone who is going to say that Korean workers were better off in the past than they are today is going to have a very difficult time trying to come up with an objective, backed-up-by-data answer.

To his credit, the author does add a definition for hyper-capitalism. He says:

It means that South Korea, as a rapidly developed economic powerhouse, has embraced and refined capitalism to the point unseen in other countries, a fact noted with no small amount of pride.

You will note that this is yet another assertion that the author makes without giving any sort of evidence. Especially considering the fact that the Korean economy bears some resemblance to the Japanese economy, it is quite unlikely that Korea's hyper-capitalism has been “unseen in other countries.”

Then there was this nugget:

But the term also implies that something is off with the South Korean version of capitalism, which has thoroughly succeeded in inculcating conviction in money as the singular measure of good both public and private, unencumbered by state regulation or respect for basic rights. Being the ‘purest’ form of capitalism, it also represents the worst form of the ideology imaginable.

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Whether or not money is considered to be “the singular measure of good both public and private” is debatable. Although money is certainly very important (my favorite moral defense of money came from Ayn Rand's AtlasShrugged when one of her heroes, Francisco D'Anconia gives a speech that became popularly known as “the root of money” speech), there seems to be no evidence to suggest that money is “the singular measure of good both public and private.”

But that's a philosophical discussion, which could go on forever without ever changing any of the debaters' minds. The real debate that we have is with the author's assertion that Korea's version of capitalism is “unencumbered by state regulation or respect for basic rights.”

Right now, as of this writing, Korea has 14,975 government regulations on the books. Two laws that I can think of that the Korean government recently passed are the Retail Structure Improvement Act, which prevents telecommunication companies (under the threat of criminal prosecution) from subsidizing their customers any amount more than ₩345,000 and the Book Discount Law, which prevents retail bookstores from selling books at a discount any higher than 15%.

Although it has not been made into law just yet, the International Direct Purchase Law is a proposed law, which will regulate how much, how, and what individual consumers will be able to purchase from international websites such as Amazon or eBay.

So, where is the “unencumbered by state regulation” and the “'purest' form of capitalism?”

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As for the author's comment about Korea's hyper-capitalism being “unencumbered by respect for basic rights,” though it's true that there have been many instances of Korean workers being abused, it's quite telling that he neglects to mention that Korean labor unions are some of the most militant in the world (see here, here, here, here, and here). Perhaps it could be argued that many business leaders have no respect for basic workers' rights. But that is entirely different from saying that workers have no rights.

And finally, the author says

the Park Geun-hye administration’s current motto is “Creative Economy”, a thinly veiled euphemism for deregulation.

For proof of President Park's love affair with deregulation, he provides a link to the Korea Herald, where President Park championed deregulation as the best way to revitalize South Korea's economy and create jobs.

Admittedly, there are fewer government regulations now than there were at the beginning of the year. There are currently 14,975 regulations while there were 15,282 regulations in January.

However, we also have to look at the net effects of President Park's policies related to the economy, all of which are intertwined. Aside from the three laws that I already mentioned, the Korean government and prosecutors have also been using Kakao Talk logs to monitor people, which has done more to damage the company than its competitors ever could, and expanding the welfare state. The government is also currently discussing providing free homes for newlywed couples as well as other welfare programs.

On the one hand, President Park's “creative economy” is trying to make it easier for businesses to lay off workers, while on the other, it is also slowly but surely removing the disincentives of staying unemployed via welfare programs.

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Considering the potential net effects of the “creative economy,” it might be far too early, and also too much of a stretch to claim that it is a euphemism for deregulation.

At the end of the blog post, it says that the author, Se-Woong Koo, earned his Ph.D. from Stanford University. It does not say what he got his Ph.D in. However, something tells me that it was not in economics.

Thursday, November 20, 2014

Free Homes for Newlywed Couples. Seriously?

Despite the fact that lawmakers in Korea's National Assembly are still struggling to find funding for existing welfare programs a la free school meals and child-care programs, it seems that the New Politics Alliance for Democracy (NPAD) Party, the moribund main opposition party, has proposed yet another welfare program.

(One, does this mean that we can finally all agree that “free” is not really free? Two, I hope NPAD's advisers are unpaid interns. Even the most amateur gambler will tell you never to double down on a losing hand unless you are really good at bluffing, which the NPAD is not good at doing.)

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Specifically, NPAD lawmaker Representative Hong Jong-hak stated that his party intends to push to provide up to 30,000 free homes for newlywed couples, as well as push to lower the National Housing Fund's interest rates.

Representative Hong said that the NPAD Party will push to allocate ₩243.2 billion (US$221.7 million) for the project in next year's budget.

Again, the National Assembly is still struggling to fund existing welfare programs.

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In an article in the JoongAng Ilbo, the Ministry of Land, Infrastructure, and Transportation released a report to Saenuri lawmakers that stated that “assuming that the National Housing Fund's 2015 interest rates are held constant, constructing 30,000 homes over a period of four years will cost up to ₩3.6 trillion (US$3.2 billion). Furthermore, constructing 100,000 homes over a period of four years will cost up to ₩12.1 trillion (US$10.7 billion)”

Sense seemed to prevail when members of the ruling Saenuri Party opposed the NPAD Party's plans. They said that the plan was “unfeasible.”

However, lest anyone begins to think that the Saenuri Party is somehow the bastion of rational thought, I think this would be a good time to remind everyone that it is the same party that is still throwing its full weight behind Abenomics' even-uglier stepsister, Choinomics.

You decide which is which
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At this point, I could go into an in-depth discussion about economic theories and present different kinds of arguments to state why this latest proposal is a harebrained idea.

I could talk in-depth about the Laffer Curve, which postulates that after a certain point of taxation, tax revenues actually fall rather than rise.

I could also talk, again, about Frédéric Bastiat's Broken Window Fallacy, which explains how opportunity costs affect economic activity in unforeseeable ways.

I could also talk about how economists/partisan economists/politicians can never predict economic conditions of the future (as even the OECD admits) because central bankers and political leaders who like to think of themselves as enlightened leaders tend to only see positive signs in the economy than spot potential problems because, like everyone else in the world, they like to think that they are doing a good job (see confirmation bias). This is why no one should ever trust a politician when a politician says “Trust me.”

Finally, I could talk about the pitfalls of populism. I could talk about how populism is, by its very nature, more focused on “redistribution” rather than thinking of ways to create new wealth. I could talk about how the problem with populists is that for all their flowery rhetoric, most of them have little to no idea about how to realize their lofty goals without having to “break a few eggs.” I could talk about how populism may be an attractive means to achieving short-term political victories, but that in the long-term, when its leadership finally has to own up to its own inadequacies, it will also have to contend with an enraged public that was promised Nirvana but delivered anything but.

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I could talk about all that. But I won't. Going into an in-depth conversation about those topics requires sober thought, seriousness, and rational thought. However, politicians clearly have no such capability.

If this “homes for newlywed couples” is the best idea that NPAD lawmakers can come up with, I don't think that Saenuri lawmakers could possibly ask for a more loyal opposition as the Saenuri Party will be guaranteed to win one election after another, not because the Saenuri Party is wise or prudent, but only because it is a little less stupid than the NPAD Party.

Gods help us all.

Thursday, November 6, 2014

Book Review: "A Capitalist in North Korea"

When I saw the book for the first time about three weeks ago, the book called out to me. The title of the book was “A Capitalist in North Korea – My Seven Years in the Hermit Kingdom.”

As though the title wasn't enough to pique my curiosity, the cover of the book showed a picture of what looks like a typical North Korean propaganda poster – communist revolutionaries looking proudly toward their bright future. However, instead of being represented by a picture of Kim Il-sung or his son or his grandson, the bright future is represented by the Sign of the Dollar.

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I had never heard of either the book or the author, Felix Abt, a Swiss national who was appointed by ABB as its director for North Korea, before. As soon as I saw the book, I knew that I had to read it.

I expected to read about bureaucratic red tape, the effects of sanctions, the “culture shock” of introducing capitalism to a citizenry that has known nothing but the Kim Dynasty's juche, and the slow but sure growth of capitalism in North Korea. I expected to get enlightenment. What I got was disappointment.

The book is only 317 pages long. It should not take more than a couple of days to finish reading such a book. It took me three weeks; and what a painful three weeks it was as I had to figuratively flog myself to finally finish it.

In the first opening pages of the book, he mentions the 2010 sinking of the ROKS Cheonan. Despite the mountains of evidence that points to North Korea's involvement in the sinking of the corvette (here, here, here, here, and here), Abt openly doubts North Korea's involvement because “a prominent Korean seismologist and and an Israeli geologist suggested, based on an analysis of seismic and acoustic waves, that the ship probably hit a South Korean mine.”

A bitter taste in my mouth began to form before I even began the first chapter. However, he then immediately says that “all of it plays into a bigger picture of geopolitical bullying.”

The last time I checked, it was the North Koreans who were firing artillery, rockets, missiles, kidnapping foreign citizens, and threatening war against its neighbors.

The book is not without its merits. There were the bits of information that I had hoped for and expected. However, out of the book's 317 pages, relevant information could not have been printed on more than twenty to thirty pages.  The rest of it was utter rubbish.

Abt seems to find it funny as he acknowledges that others have called him North Korea's useful idiot.” But what he does not seem to know is that he also seems to have gone fully native after he had lived in North Korea for so long. By that, I mean that Abt seems to have fully adopted the North Korean method of being as erratically contradictory as often as possible.

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For example, Abt insists that North Koreans are not at all brainwashed. In fact, he compares North Korean propaganda to advertisements that people see in other countries. Specifically, he says “the world businesses engage in another form of propaganda: advertising. The only difference is that it advances a cause of consumerism rather than politics.” To hammer home the point, he also rhetorically asks if Americans “get brainwashed by cravings for McDonald's and Starbucks seeing their logos smothered all over the country.”

Never mind that McDonald's and Starbucks are merely corporations that do not have the ability to arrest or gun down those who do not like their products. But as far as Abt is concerned, they are both morally equivalent.

But I was willing to let it go. Perhaps we did have it all wrong about the North Koreans being brainwashed. After all, he lived in North Korea for seven years. Wouldn't he know better? However, even before I could acclimate myself to believing what he said, he contradicts himself by saying that the patriotic songs that North Koreans sing are not about their love for their country, but rather their love for their leaders. In fact, North Korea's supposedly most popular melody is a catchy tune about how North Koreans cannot exist without “General” Kim Jong-il who has “extraordinary talents and virtues.”

But it's just a song with a catchy tune. Who cares about that? It's true. One song does not brainwash an entire country. But then Abt later says that North Koreans “would jump into torrential floods at the risk of their lives to save portraits of Kim Il-sung.”

He then mentions that “around 40 percent of elementary school classes are on the childhood of Kim Il-sung and Kim Jong-il” and that North Koreans are “taught from an early age to be proud of being Koreans rather than coming from a “less fortunate” race such as the Japanese.” And during art festivals for schoolchildren, kindergartners make drawings titled “Let's cut the throat of US imperialism!”

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According to Abt, North Koreans are so the-opposite-of-brainwashed that a senior party cadre asked rhetorically why North Koreans should have statistics about suicide. After all, “Our people are among the happiest on earth,” the senior party cadre supposedly claimed.

It is a sentiment that Abt seems to share as he adds, “Astoundingly, I never came across people (North Koreans) who would have criticized or even challenged the system, nor did I meet expatriates who had heard about such cases.”

Because your average North Korean, who has learned his whole life to be careful of what he says in front of even those that he loves and trusts, would then outwardly speak ill of the regime to a foreigner?

I suppose Abt thinks that people ought to have their minds so broken that they would become unwitting assassins a la “The Manchurian Candidate” for Abt to consider someone to have become brainwashed.

Another glaring contradiction in his book was about the way Christians are treated in the country. He says:

“A true Christian believer in today's North Korea would be branded as a traitor of the worst kind. During the century before the DPRK was founded, white American Protestants from the Bible belt promoted Christianity as the religion of a superior foreign race, making it today antithetical to the revolution.”

However, a few pages later, he says:

“Despite stereotypes that North Korea overwhelmingly represses the Christian religion, the government usually doesn't see the Lord as a serious threat to its earthly system. I once asked a senior security official if they did not feel threatened by Moon's Unification Church, active in North Korea in the hospitality and car manufacturing industries. He answered quite candidly: “Well, you know, it's a cat-and-mouse game.” It's a never-ending contest that the North Koreans will make sure the other side can never win.”

So which is it? Are North Korean Christians branded as traitors or does the North Korean regime not see Christianity as a threat? As I said, just like the regime itself, Abt appears to have embraced its dual-personality disorder.

At least Jim Carrey tried to be funny
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The part where Abt appears to have accepted North Korean propaganda as his own is when he complains on numerous occasions about the havoc that international sanctions have had on North Korea's economy. He mentions that if it just weren't for the sanctions, the North Koreans would have access to state-of-the-art technology that they so richly deserve.

However, he never once mentions why North Korea is the most heavily sanctioned nation in the world. He mentions North Korea's nuclear tests in passing, but never once stops to ponder that the North Korean leadership has no one to blame for the sanctions that have been placed on it but itself.

Throughout the whole book, Abt does not utter a single word about North Korea being the country that instigated the Korean War or the fact that North Korea secretly bought nuclear technology from Pakistan or that it has launched missiles over its neighbors or kidnapped foreign citizens or conducted terrorist attacks against South Korea in the past (here and here).

The only thing that he said that seemed to make any sense was how ineffective the sanctions were. He claimed that, too often, sanctions do not hurt criminals or government officials, but rather ordinary citizens.

So what does he say when sanctions are finally fine-tuned so that it will only specifically hurt the North Korean leadership? He says:

In July 2012, the UN Security Council released a report on sanctions, according to the AP news agency, which wrote: “No violations involving nuclear, chemical, or biological weapons or ballistic missiles were mentioned in the 74-page report to the Security Council committee monitoring sanctions, published Friday.” On the other hand, the document highlighted North Korea's responsibility for illegally imported luxury goods including tobacco, bottles of sake, secondhand pianos, and several secondhand Mercedes Benz cars. It is stunning that these would be considered serious crimes which the Security Council had to urgently address.”

So now that the Security Council has gotten it right, he thinks it's a waste of time.  How very convenient.

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However, the most outrageous thing that he claims in the book is about the human rights violations in that country, which the world is finally paying some attention to.

Abt admits that anywhere between 120,000 to 200,000 people are being held in prison camps, but then brushes it all aside by saying that that figure “represents less than 1 per cent of the total population.”

He further acts as a North Korea-apologist by comparing that figure to American incarceration rates, because America is “home to the highest documented percentage of prison inmates in the world.” Like as though the conditions of imprisoned Americans could be compared to the North Korean practice of imprisoning three generations of an entire family in gulags for the “political crimes” of one person!

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But then probably to defend himself, he claims:

“While I clearly disavow any human rights abuses in North Korea and anywhere else in the world, I'm a businessman who has never visited any gulag or prison. I am not a human rights expert.”

Seeing how he admits that he is not a human rights expert, one would think that he would remain silent about this topic from here on out. However, he does not.

To be specific, Abt has some choice words about North Korean defectors who speak ill of North Korean human rights violations. He claims that “as 70 percent of them (North Korean defectors) remain jobless in South Korea, they can make a living by selling dubious information.”

There are approximately 27,000 North Korean defectors currently living in South Korea. And there are thousands more who live elsewhere around the world. You would think that if there was, indeed, a conspiracy among North Korean defectors to sell a grand lie, it would be a matter of time before that lie was punctured. But such logic seems to escape Abt.

Abt also adds that “the intelligence services, academics, book authors, journalists, and human rights and political activists who interview these defectors almost ceaselessly after their arrival in South Korea have an impact on their narrative, too. Those who know the North Korean refugee resettlement process in South Korea are aware of how easily individual accounts evolve over time from mild accounts of hunger or seeking economic opportunities to romantic tales of escape against all odds.”

To add the cherry to his insult against North Korean defectors and their testimony, he adds that “while it is a serious issue, North Korea's foes are equally guilty of using rights rhetoric as a political tool to further isolate and corner the regime.”

Like as though the regime did not isolate and corner itself for decades with its juche and songun policies.

In a different but related issue, Abt also says that throughout his seven years in North Korea, he had never seen a single starving person. To be specific, he claims, “In the mid-2000s, I did not come across starving people, though I did see scores of thin Koreans who looked malnourished.”

I suppose that it's possible that Abt had never seen this young woman or others like her (see here, here, and here). But do they not exist because he had never seen them? In his mind, it seems to be so.

And what does Abt have to say about those videos of North Koreans who are foraging for food? They're not starving! He claims that foraging for food is a traditional pastime. To be specific, he says:

“What many outside North Korea generally ignore is that the much-quoted “foraging for food” is an age-old North and South Korean tradition, a result of the absence of arable land in the North to grow crops. For centuries, Koreans from all over the peninsula have consumed wild mushrooms and edibles – long before the foundation of the DPRK – and they still love to eat them.”

Of course. That must be why so many South Koreans also go out to forage for food everyday. Oh right. They don't.

But just so that Abt makes it clear that there is hunger in North Korea and that the North Korean government is doing its best to “take care of its people,” Abt says “Amazingly, Kim Jong-il was, unlike other Asian leaders, highly enthusiastic about potatoes and soybeans and gave them a role in agricultural development.”

Abt never mentions that it is likely that other Asian leaders were not enthusiastic about potatoes or soybeans for their own countries' agricultural development because they did not have to be.

There are far too many other contradictions that he writes, as well as far too many statements that cannot be taken as anything other than the defense of the North Korean dictatorship. In fact, I dog-eared all the pages that I felt contained such statements. If I mentioned every single instance of this, however, I would have to scan and upload the entire book!

Despite Abt's insistence that he is apolitical, this book is essentially a political book more than anything else; and it is excruciatingly awful. In Abt's narrative, North Korea is not evil in the slightest bit. In fact, there are plenty of other evil regimes in the world, which, therefore, naturally, exonerates North Korea of all its sins. And if it has sinned, Abt never saw any of it! He's just a businessman, for heaven's sake! Nobody is either good or bad. Never mind reality!

Truly “A Capitalist in North Korea” can be called enlightening only by devaluing the term.

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Throughout this entire book, it is amazing how Abt manages to sustain an oozy, cynical tone, which is the book's most striking feature. Its sheer stupidity is disgusting and without reprieve. Its sense of morality is non-existent. From almost any page of the book, I could hear a hollow, ghostly voice droning on repeatedly “There is no good or evil – it just is.”

Well, I saw evil in the pages of this book. And I saw that evil was impotent, irrational, stupid, vain, and blind.

If anyone chooses to fork over their hard-earned money for this book, I will certainly not try to dissuade them. After all, who knows how to best spend their own money than the individuals themselves? However, if there is anyone who still wishes to purchase this book, might I suggest a cheaper and more practical brand of toilet paper? Charmin, perhaps?

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