Samsung (and other Chaebols) has to Embrace the Future

Fairly or unfairly, South Korea, whose official name is the Republic of Korea, is often pejoratively called the Republic of Samsung. However, seeing how Samsung Group generates up to 20% of South Korea’s GDP, that name may not be entirely inaccurate.

As such, when Elliott Management, a US-based hedge fund management group, made its first serious attempt at shaking up Samsung Group last year, things were expected to get ugly. After all, South Korea’s economic fate is inextricably tied with Samsung’s fate. Essentially, Elliott Management opposed the US$8 billion merger of two of Samsung Group’s companies - Samsung C&T Corp and Cheil - because it believed that Cheil’s offer was too low and that there was not much evidence for Samsung Group’s “aggressive” claims that the merger would be profitable in a few short years.

For its part, Samsung stated that it needed the merger to streamline its corporate structure and to eliminate redundancies in order to cut unnecessary costs. Also, Samsung needed the merger to take place because it would have given Lee Jay-yong, the still current heir to Samsung’s chairmanship, more control over the company.

Things got uglier than anticipated. So much so that the language used in some Korean media outlets took on severely anti-Semitic tones. The decision whether to accept or reject the merger deal was pitted as one between a besieged group of noble Koreans (sound familiar?) fending off foreign vultures, specifically Jewish ones, whose sole purpose is to devour weak companies for all the money that they are worth and to leave them (and the countries that depend on those companies) to rot.

Samsung Group narrowly won that vote by 3%. For its part, Elliott Management demanded that Samsung C&T buyout its stake in the company. It was never publicly revealed how much Elliott Management was compensated.

It was assumed that that was that but more than a year later, Elliott Management seems to be ready to face off against Samsung a second time.

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After a series of explosions, recalls, continued explosions, and worldwide derision, Samsung Electronics finally decided to discontinue the Galaxy Note 7. The timing couldn’t have been worse. There are already signs that the international smartphone market is sputtering and increased competition from Chinese smartphone manufacturers are threatening the dominance once enjoyed by Samsung and Apple. The cost of recalling the troubled phones alone is estimated to exceed US$5 billion; not to mention the incalculable cost of tarnishing one’s reputation. Furthermore, considering how Samsung is still embroiled in a series of billion-dollar-lawsuits with Apple, the Galaxy Note 7 debacle couldn’t have come at a worse time.

Enter (or re-enter) Elliott Management.

Sensing an opportunity to strike while the iron is still hot, Elliott Management once again voiced its desire to see a shakeup in Samsung’s governance structure. Having learned from its previous bout with Samsung, Elliott Management appears to have put aside its brash demeanor and penned a relatively gentle proposal letter which would most likely be welcomed by both Korean and foreign shareholders and stakeholders for their own reasons.

Elliott Management’s biggest four proposals are:

• Split Samsung Electronics from Samsung’s wider corporate holdings.
• List the newly-split Samsung Electronics on public stock markets such as the Nasdaq Stock Exchange.
• Commit Samsung Electronics to a US$27 billion stock buyback program and, in line with international corporate standards, return 75% of its annual free cash flow to investors.
• Improve transparency in Samsung Electronics’ corporate governance by adding three independent directors to its board.

The third proposal is likely to be met with approval by both Korean and foreign shareholders (and likely tacit approval by the Korean government for the stimulative effects it would have on the overall Korean economy) considering the fact that Samsung Electronics’ cash reserves is estimated to be around US$70 billion, a sum that Elliott Management and many others classify as being “significantly overcapitalized.”

For its own reasons, however, aside from splitting Samsung Electronics from Samsung’s wider corporate holdings, Samsung will most likely not at all consider Elliott Management’s other three proposals.

Perhaps as a result of Elliott Management’s toned down proposal, the Korean media’s defense of Samsung has not taken on the ugly anti-Semitic tone that some took up last year. However, that is not to say that the Korean media has abandoned its nativist strategy to defend Samsung; and the unintended (or perhaps intended) side effect of such a defense strategy may be to prevent Korean investors from seriously considering the possible benefits of Elliott Management’s proposals.

Case in point, a few days ago, Hankyung (aka The Korea Economic Daily), one of the most respected business/economics news outlets in Korea, penned an editorial about Elliott Management’s proposal. After stating what the four main proposals were, the editorial went on to excoriate “foreign corporate raiders” that seek to maximize short-term returns for shareholders (namely themselves) at the expense of sustainable growth for the businesses they descend upon. The editorial then goes on to say that the Korean government needs to help Korean corporations to defend themselves from “the wolves” and one of the best ways of doing so would be to allow Korean corporations to issue Differential Voting Right (DVR) shares.

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Typically, DVR shares are traded in the same way as ordinary equity shares except these provide fewer voting rights to the holder. Investors who purchase these types of DVR shares tend to be passive investors who are not much interested in the decision making process but are merely interested in financial gains i.e. the exact opposite of “activist shareholders.” Consequently these types of DVR shares are usually traded at a discount and may offer higher dividends to shareholders who choose to purchase them in exchange for accepting highly weakened voting rights.

DVR shares with higher voting rights can also be simultaneously issued by a company’s promoters to themselves or their own family members. This is done to increase their control in the company’s decision making process, which would of course be in excess of their financial holding of the company. Therefore, the sale of DVR shares to “outsiders” would not weaken the promoters’ voting rights and would also make hostile takeovers difficult to achieve, if not outright impossible.

Currently, Korea’s Commerce Law prohibits the issuance of DVR shares.

The problem with such editorials is that they keep Korean investors and shareholders in the dark about the benefits that are being proposed by these “foreign vultures.” To explain, they don’t explain why Elliott Management wants to see Samsung Electronics split from the parent company or the events that led to such a proposal to be made. It also doesn’t bother to do anything more than simply mention in passing that one of Elliott Management’s proposals is to have Samsung Electronics publicly listed on the Nasdaq Stock Exchange, which would subsequently help to significantly raise Samsung Electronics’ market value - not unlike what happened for Alibaba.

It goes without saying that being publicly listed and traded in international stock markets would certainly pose a challenge for the existing management teams and the systems that they have in place. After all, publicly traded businesses face extra scrutiny from investors, regulators, and the media from all over the world. That is to be expected once they begin to play on a much larger stage. Once publicly listed, Samsung Electronics would no longer be able to rely on a fawning local media or local regulators who may (or may not) have conflicts of interests with Samsung Electronics. In other words, international exchange markets, whether those in New York or Hong Kong would further be able to help to steer Samsung Electronics’ governance and corporate structure into a more internationally respectable one.

Especially important for international investors is that such a public listing would significantly streamline the investment and share-buying process. Currently, due to Samsung’s refusal to be publicly listed and traded, international investors need to jump through a series of hoops just to be able to buy a basket of Korean companies’ shares - only some of which is actually Samsung’s shares. In fact, Samsung has dedicated an entire page on its website - full of bullet points, tables, charts, and legal disclaimers - to help international investors purchase Samsung’s stocks.

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Of course, the problem is that the chaebols’ main priority is not having their stock indexes properly evaluated, but rather to maintain the control they have over their own business empires. The reasons are simple. The first and most obvious reason is that they have been able to retain control over their own businesses and they have no desire to lose that. The second (and related) reason is that not being publicly traded in international exchange markets has meant that chaebols have been able to exploit cross-shareholding for many years.

So what is cross-shareholding? Cross-shareholding is a practice that has often been used by chaebol chairmen and their family members with the sole purpose of securing their control over their business empires with just a handful of shares.

For example, when Company A makes an equity investment in Company B, which in turn buys a stake in Company C, which in turn secures a stake in Company A, a cross-ownership loop is created. This is what allows chaebol owners to have control over their business empires with just a handful of shares. It is also the very thing that has allowed chaebol families to facilitate father-to-son transfers of corporate control - something that would be anathema in Western markets.

An added benefit of cross-shareholding for Samsung’s owners and family members is that even if one of their subsidiaries loses money, Samsung Group can use the profits that have been generated by another subsidiary to cover the costs. Using this method, Samsung Group can undervalue their stocks, which is one of the key reasons for Korean corporations being so notorious for their relatively low dividend yields.

Yes, laws have been passed and the Korean government has put political pressure on the chaebols to ban new cross-shareholding investments (though not existing ones) but some practices take a long time to die out. As far as Samsung or the other chaebols are concerned, they have little incentive to take Elliott Management’s proposals seriously. They’re at the top of the world. Why would they give that up?

Decisions of this nature will always carry costs and benefits. The costs to the chaebols are obvious. They and their families would lose the iron grip they have over their businesses, jeopardize hereditary successions, and they would be at the mercy of extremely strict and demanding foreign investors and regulators. In short, they would their Shangri-La.

However, nothing lasts forever. Not even the joys of paradise. Economic uncertainty in Europe, modest job growth in the United States, and China’s economic slowdown and looming banking crisis have all significantly weakened external demand. Korean businesses have long complained that militant unions have long dissuaded foreign investors from investing in Korea and though that is true, that claim masks the role that low dividend yields have played in doing the same thing. Domestic consumption remains sluggish and further attempts to stimulate the economy via quantitative easing could inadvertently exacerbate household debts. Korea’s low rates of immigration combined with an aging population who will also have to someday face a real estate bust threaten economic contraction.

All indicators, from the short-term to long-term, are pointing to economic gloom and doom. And Korea is quickly running out of options and time to cushion the blow. The massive cash reserves that Samsung and other chaebols are holding on to may help them to weather economic recessions and survive where Hanjin failed to do so. However, a siege mentality is bound to fail over an extended period of time.

Samsung and other chaebol companies have a choice to make - adopt Elliott Management’s proposals (or at least some of them) while they are still gentle proposals and thus launch Korean corporations into the 21st century and compete with the rest of the world on an even footing and help to expand markets, both domestically and internationally, or someday be made to adopt them a la IMF diktats circa 1997~1998 when they were anything but gentle.

Choose wisely
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What Going Cashless Could Mean

A few months ago, news broke that the Korean government plans to eliminate coins from its money supply by 2020. However, eliminating coins is not the end goal in and of itself. The ultimate goal is to eventually also phase out paper money. However, there is no set date for that yet.

At first glance, this makes sense. More and more people are using debit cards, credit cards, various smartphone apps such as Samsung Pay and Kakao Pay, as well as virtual cryptocurrencies such as Bitcoin (though Bitcoin does not seem to have become mainstream in Korea just yet) to make financial transactions. Considering the overall social trend that we are seeing in Korea unfold before our very eyes, it is understandable when the Korean government says that eliminating coins from the overall money supply would be able to help it reduce minting costs, which is about ₩60 billion (US$52.1 million) per year.

Although it is likely that the Korean government still has a positive seigniorage rate -- the profit made by a government by issuing currency, especially the difference between the face value of coins and their production costs -- in the long term, eliminating coins would be more profitable because of inflationary pressures that devalue money.

So going cashless certainly has benefits. An added bonus that comes with the elimination of cash is that it would severely inconvenience those engaged in criminal activity. As more and more people use cards, physical or virtual, to make and/or receive payments, it would become much harder for activities like tax evasion, gambling, money laundering, terrorism financing, human trafficking, and the drugs trade to go unnoticed by the government. And in Korea's case, it would help the government to better monitor the clandestine flow of money into North Korea, which is no small matter!

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However, there is another reason, a rather big reason, that the government prefers a cashless society; and it is one that is seldom talked about by those outside of groups that focus on cryptocurrencies or economics in general. The reason is that a cashless society would make it much easier for the central bank, in Korea's case that being the Bank of Korea, in tandem with the government, to potentially impose negative interest rates.


What are Negative Interest Rates?

Central banks all over the world are tasked with maintaining a certain level of stability in each country's financial system. Among the tools that central banks possess, nothing is as powerful as their ability to increase or decrease the discount rate, which is the interest rate charged to commercial banks and other depository institutions for loans received from the central bank.

So, for example, if a central bank decreases the discount rate, which is what is typically being done around the world these days, it would make it cheaper for commercial banks to borrow money from the central bank. In turn, the commercial banks would be able to pass on those savings to their customers -- you and me -- in the form of lower interest rates charged on things like auto loans or mortgage loans.

This would compel individuals to borrow and spend more money. That way, a stagnant economy would get the boost that it needs and it might be able to stave off or perhaps even recover from a recession.

Similarly, if an economy is overheating -- witnessing dangerously high inflation rates -- the central bank will increase the discount rate, which would then have a domino effect of making it more costly for people to borrow money, which would then help to cool the economy.

At least that's the theory anyway. But what happens if the theory doesn't match reality?

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What happens if an economy doesn't experience growth despite the fact that interest rates are kept close to zero? For example, interest rates in Japan have been kept at nearly zero for more than 20 years, but it has not helped Japan to escape from its deflationary trap. When we consider the fact that much of Korea's economy was modeled after Japan's economy (see here and here for more wonkish comparison) and also take into account that, like Japan, Korea has an aging population, the possibility of falling into a decades-long deflationary trap is not an unfounded fear.

As a result, more and more governments are now flirting with an idea that was once panned as being ridiculous -- negative interest rates. Basically, it's taking the idea of imposing lower interest rates to stimulate economic growth and injecting it with steroids.

The idea is that the central bank will go all in and impose a discount rate below zero percent for commercial banks. The idea is that if a central bank imposes a discount rate of, say, -0.5%, commercial banks would be less willing to park their money in the central bank where they would be charged money for doing so. So, instead, commercial banks may prefer to lend money to each other. The theory is that when more and more money circulates among commercial banks, then banks would more willingly lend money to their customers, which would in turn help to stimulate economic growth.


Does this mean that the Average Joe/Jane will have to pay to keep money in a bank?

That is a popular argument that many have made in regards to the negative interest rate. However, I think it is unlikely that commercial banks would actually do that. People who make that argument often neglect to look deeper into the very different relationship between central banks and commercial banks and the relationship between commercial banks and their customers.

Whereas the relationship between KB Kookmin Bank and me is one that can be characterized as a business/customer relationship, the same cannot be said of the relationship between Kookmin (or insert other banks here) and the the Bank of Korea. That is because central banks act much like regulators over their respective financial industries. In other words, consent is practically non-existent in the relationship between central and commercial banks. For good or for ill, central banks make the rules and regulations and in order to stay in business, commercial banks have to obey those rules.

It goes without saying that banks hold a lot of leverage over their customers, but no matter how powerful commercial and investment banks may be, there is one power they do not possess over their customers. They have no control over their customers' choices. For example, if Bank A charges their depositors an annual fee to keep their money in their bank, those depositors will more than likely look for other banks to save their money in where they won't have to pay such a fee. And Banks B and C and D and others will only be too happy to oblige.

That is why it is unlikely that commercial banks will somehow end up cannibalizing their customer base. Especially during periods of economic slowdown, market expansion might be a more practical strategy for long-term survival than profit maximization.

However, it does not change the fact that commercial banks would still be losing money because of the negative interest rates. So, they may partially push those costs to their customers by other means such as higher overdraft fees or eliminating free account transfers. So there is a chance that regular bank depositors might end up having to pay additional hidden fees, but being directly charged for saving money in a bank account sounds like a tinfoil hat conspiracy theory.

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What does this have to do with a cashless society?

The theory behind negative interest rates is almost sound. Incentives are important and when there is no incentive to save -- in fact, if there is every incentive to spend -- people will spend more money, which would help to stimulate economic growth. However, there is a problem with the theory. It depends entirely on the assumption that human beings think and act like Homo Economicus. The problem is that Homo Economicus does not exist.

Homo Economicus is all about maximizing one's economic utility and is aware of all publicly known information and responds accordingly. So for example, if the government taxes kale at 100% but taxes candy bars at only 10%, and assuming that they are the only two things that anyone can buy and depending on the utils that Homo Economicus derives from kale and candy bars, respectively, there is a very good chance that Homo Economicus would buy only candy bars. None of that describes a typical human being.

Human beings do not possess all publicly known information. Everyone suffers from asymmetric information from one degree to another, we are all biased, and we all tend to act emotionally. And one of the most powerful emotions that dictates how people think and act is fear.

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Theoretically, a negative interest rate will drive individuals to make the necessary cost-benefit analysis and decide that spending one's money would be more profitable than saving money at zero percent interest. However, the theory discounts humans' fear of the future. Though we do not possess all publicly known information, we are a species that is aware of our own frailty and mortality. Barring any unforeseen circumstances that could potentially snuff out our lives at any given moment, we will all some day grow old. Our bodies will become weak, our minds will become feeble, and we will all die. That is ultimately why we save our money and not spend every penny that comes our way (if you do spend your money like this, STOP IT!).

Negative interest rates could potentially wreak havoc on people's retirement plans. If the interest rate is above zero, we can save our money with the full knowledge that the balance that we end up with at the time of our retirement will be greater than the principal that we started out with (assuming that our savings are not canceled out by inflation). Unlike interest rates that can be changed at will, however, assuming there is no sudden medical breakthrough that will cure everything, the aging process does not change. So even if the interest rate is at zero percent, it will not change the fact that we still have to plan for retirement. But zero percent compounded for X years is still zero. That means that in order to reach our targeted savings goal for our retirement, we need to save more money than we would have to had the interest rate been above zero.

This is one of the possible reasons that might explain the ineffectiveness of keeping interest rates low.

So especially in aging societies like Korea and Japan, it is possible that imposing negative interest rates could lead to drastic unintended consequences (not to mention the fact that lower profit margins that negative interest rates would impose on banks in general could drive a lot of smaller banks out of business, thus inadvertently exacerbating the "too big to fail" phenomenon).

So imagine what you would do if you were planning for retirement but the bank is basically telling you that it will do nothing more than simply hold your money. What would you do? The more risk averse among us would still likely keep our money in our bank accounts despite the zero percent interest. After all, the money in the banks are insured by the government. But for those who are more prone to taking risks for whatever reason, it is likely that they will pull their money out of the bank and invest it in something that will give them a greater long-term yield. That is why so many people who can afford to do so buy property (though everyone should always keep an eye out for economic bubbles).

But if enough people pulled their money out of their banks to look for greener pastures, couldn't that lead to a bank run and wouldn't that be catastrophic? Yes, it would certainly be catastrophic. But what if there were no cash to withdraw from the banks to begin with? When there is no physical money that you can hold in your hands or literally stuff under your mattress, when the only money that you can use is all digital e-money and, unlike cryptocurrencies like Bitcoin, it can all be tracked by the central bank, then you literally cannot flee from the banks. Or at least it would be really hard to do so.

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That is because it would become much easier for the government to "direct" people from deciding against "hoarding" their money upon the imposition of a negative interest rate after cash has been eliminated. To explain, in order to have better returns, individuals may desire to take their money out of their bank accounts and invest it in private asset markets such as property or what have you. However, unlike banks, other private asset markets are not guaranteed by the state, and thus not safe for investors. At least not as safe as banks. That way, there will be incentive for people who prefer safety and risk-free investments to keep their money invested in state-guaranteed banknotes, even if all of those banknotes are purely digital.

In other words, a cashless society transfers absolute control of the money supply to the central bank. Combine that with negative interest rates and the central banks have the perfect mix of ingredients necessary to incentivize spending, disincentivize savings, AND prevent bank runs that could offset the stimulative goals of the negative interest rate. Theoretically, assuming everything goes according to plan, the macroeconomic outlook will become less dire and might be a winning strategy to overcome negative economic growth. But what will that do to individuals' savings? How will this effect retirement plans?



So why not go cashless from the get go?

Like the case in Germany, though many people prefer to use other methods of payment, cash still has a special place in everyone's hearts for various reasons (see here, here, here, here, and here).

So, a sudden abandonment of cash would be met with great resistance. It would make a lot more sense to gradually acclimate the public to going cashless.

The government has stated that people will be issued special cards for them to store their e-change. For example, if someone buys ₩9,500 worth of goods and handed over a ₩10,000 note to the cashier, instead of receiving a ₩500 coin as is done right now, the cashier would digitally wire that ₩500 worth of change to the card that the customer carries. This is perfect in many ways. That is because eventually, all the change that gets digitally wired to individuals' cards will begin to accumulate over time and once that happens, that accumulated money in people's cards will be used for transactions side by side with paper money (for as long as paper money is still circulated).

This means that the continued use of e-money could be further incentivized. Doing so would just be a matter of imagination. For example, the government could provide a favorable rate environment for e-money, or by an enticing exchange rate for swapping out of paper money for e-money via credit or point systems or special offers in partnership with Korean conglomerates.

Combine that with a a steady campaign to stigmatize the use of paper money -- as has already been done throughout Europe -- and the Korean government would be able to gradually shift toward a cashless society while facing minimal resistance. It's actually quite brilliant.


What it would mean to live in a cashless society

As I mentioned earlier, a cashless society could wreak havoc on people's retirement plans. And this is no small matter especially when we take into account how much debt the average Korean household has. 

There are other possible outcomes that could arise from going cashless. For one thing, a cashless society would certainly reduce privacy for the average person as our money could easily be tracked, thus making it incredibly difficult to hide our money from the Tax Man. However, it is not just the government that people will have to worry about. Once e-money is "printed" by the government and administered to the general public by private financial institutes, it could become much easier for our spending habits and history to be tracked by others such as insurance companies and marketers.

As usual, the rich will still be able to benefit. They can buy anonymity via shell companies or charities. However, for average people, anonymity would be a thing of the past. However, those who would be hit most are those who currently do not have bank accounts because of poor credit scores. Once cash becomes a thing of the past and they are still barred from banks because of their poor credit scores, their lives could become much more difficult. It would not be a stretch to conclude that this could potentially exacerbate the wealth gap.

If you're rich
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Further, it could also make life miserable for those who are deemed immoral by societal standards. Take the porn industry for example. In 2014, it was reported that Chase Bank had shut down a number of bank accounts that were discovered to have been used by porn actors. Porn is already illegal in Korea and those who are apprehended are usually prosecuted to the fullest extent of the law. Pornographers may be difficult to defend, particularly if they might also peddle revenge porn. However, other possible victims of the morality police are sex workers who already face a lot of discrimination in their lives as they might get locked out of banks, too.

Also depending on how well the relevant laws are enforced, it could also make it impossible for businesses to pay people anything lower than the minimum wage. Many people might think that this is a good thing. However, it could potentially make life much harder for marginal workers as it is possible that people might not even bother to hire them at all.

However, all of those problems pale in comparison to the much bigger issue -- what if going cashless and imposing negative interest rates on top of that still do not help to spur economic growth? What happens then? That is what people should be pondering.

Random Thoughts about Captain America: Civil War, a Movie Review about it, Objectivism, Ayn Rand, and Hell Joseon

WARNING: The following may appear to be the ramblings of a madman regarding various topics such as Captain America: Civil War, libertarianism, Objectivism, Ayn Rand, and Hell Joseon. And it's going to be a long read. In other words, it's going to be one of those K-blogger nerd rages. Also, this is not a movie review. Rather, it is a review of a movie review. So, if you are a productive member of society and you have better things to do with your time, I suggest you go on your merry way and continue living a rewarding life. However, if you can't take your eyes off train wrecks and you have an unhealthy obsession with watching people putting up half-baked ideas on the Internet, then, please, go on. You have come to the right place.

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The Movie

I went to the midnight showing of Captain America: Civil War (CACW) on opening day. In light of the fact that the last movie that I had seen prior to CACW was Batman v Superman: Dawn of Justice (see my review of that movie here), a movie that I found thoroughly disappointing in almost every way, I found CACW quite enjoyable.

(Minor spoilers ahead)

In the movie, as a result of the destruction that the Avengers tend to leave in their wake, the United Nations has declared that it would have direct oversight of the superheroes.

Iron Man aka Tony Stark (Robert Downey Jr.), who is stricken with guilt over those who have lost their lives, directly or indirectly, because of his actions, is in favor of the decision. In light of the popularization and use of the term "blowback," which is a result of a series of tragedies all on its own, and the manner in which so many people have become desensitized to the phrase "collateral damage," I think that it is a good thing that at least a fictional character from a fantastical fictional world seems to be taking civilian deaths seriously.

On the other hand, we have Captain America aka Steve Rogers (Chris Evans) who thinks that agreeing to acquiesce to the authority of the United Nations would mean that they would lose their freedom to do the right thing when they deem necessary and would force them to become pawns in a global chess game and is, therefore, against the decision.

This ideological divide pits various superheroes against each other to the point that they find it necessary to physically fight one another. And I don't care what anyone else says, that airport fight scene was awesome.

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The Random Review

The politics in the movie is not exactly subtle. The political rhetoric that was jammed into the movie was so hammy that Kevin Feige may as well have been bashing people on the head with Mjölnir. But that was fine. I doubt anyone went to watch the movie to learn about the basic principles of Lockean Natural Rights. I enjoyed the movie for what it was and that was that (for anyone who wishes to read an excellent review of CACW, check out Kevin Kim's review here).

Yesterday, however, by chance, I came upon a review (of sorts) of the movie on OhMyStar, which is the entertainment division of OhMyNews, a Korean online newspaper. I would have skipped it had it not been for the fact that I noticed that the opening paragraph started with Ayn Rand's name. 

For anyone who still doesn't know, I am a student of Objectivism (I know, booooo!), and therefore deeply interested in all topics related to Ayn Rand. I discovered Ayn Rand and her philosophy of Objectivism when I was in college and have read all of her major works. In fact, some time ago, I had the great pleasure of purchasing rare copies of The Fountainhead and Atlas Shrugged that had been translated to Korean (I was pleasantly surprised to see that the translation was quite faithful to Rand's original work). However, the fact remains that the vast majority of Koreans have never heard of Ayn Rand. So, I tend to get excited when I see any mention of Rand and/or Objectivism in the Korean media.

I know, I know!
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While reading the review, however, I could not help but feel dejected as the writer seemed to have had only a surface understanding of Rand's philosophy.

The writer gave a very brief introduction about her childhood and explained how she eventually became "the godmother of the Conservative Right." Then the writer stated that her philosophy could be summarized as "absolute freedom for the elites" because Rand thought that society is able to progress only through the achievements of the elites and that elites produce their best work only when they have the most freedom. That is why, the writer explained, Rand opposed regulations and taxes.

On the other hand, the writer continued, her ideological opponents believe in the power of governmental regulations and reject the Invisible Hand of the Free Market while calling for welfare programs to help the poor.

The writer then placed Captain America into Rand's camp and Iron Man into the opposing camp, which he referred to as the libertarian camp and the communal camp respectively.

These superheroes, by fault of birth or accident or some other reason, are the elites, the writer claimed. And these elites are often forgiven for the destruction they cause because it is often perceived that their violence is carried out in the service of a greater good. But now, these elites have decided to square off against one another. And Captain America, who has decided that he can neither retire nor be part of "the system" decides to stand his guard -- even though that means opposing every government in the world, much like the way Rand and her disciples like Alan Greenspan insisted on doing things their own way.

The writer then ended his review by stating that the question that people have to ponder is what the difference is between Rand and Captain America.

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Team Captain America?

I felt almost depressed after reading the whole thing because of how much Rand had been misunderstood by this writer and how much more misunderstanding is likely to be caused among even more people who have never had any first hand information about Objectivism.

For one thing, it is absolutely amazing to me that anyone could think that Rand advocated "absolute freedom for the elites!" Although it's certainly true that Rand thought that the masses owe a deep sense of gratitude to producers, none of her heroes could ever be seen as "elites." Howard Roark, Rand's protagonist in The Fountainhead, was a penniless architect throughout most of the novel and his mentor, Henry Cameron, died broke. Many of the villains in Atlas Shrugged such as James Taggart and Wesley Mouch were wealthy CEOs and high-ranking government officials who often colluded with one another.

If anything, Rand had nothing but disdain for the collectivist notion of "elites."

As for Captain America himself, his words in the panel that I shared above could just as easily have been said by Howard Roark or John Galt. After all, one of John Galt's more succinct quotes from his 60-plus-pages-long speech in Atlas Shrugged was "There are two sides to every issue: one side is right and the other is wrong, but the middle is always evil."

So on the surface, it might seem that Ayn Rand would have been on Team Captain America. But to be honest, that's not entirely clear. The heroes that she created, Roark and Galt, were an architect and an engineer respectively. As heroically as Rand may have portrayed those occupations, in real life, they are just a couple of regular Joes with white collar jobs -- just some guys who want to do what they think is right and make an honest buck preferably while being left alone.

Captain America, on the other hand, is an enhanced supersoldier who uses a physics-defying shield to pummel Nazis and aliens into pulp. And to be frank, Captain America's popularity notwithstanding, his superpowers aren't that impressive. At least not when you compare him to some of his other teammates like Thor and The Hulk -- a literal god and a monster that smashes puny gods. In fact, they get compared to thermonuclear weapons in CACW.

This is an important distinction because Ayn Rand was quite specific regarding the use of physical force, which she defined as the threat of physical destruction. According to Objectivist ethics, no one is allowed to initiate the use of physical force against others. The only time that Rand thought that people could legitimately use physical force is only in retaliation and only against those who initiate its use. In other words, Rand championed self-defense, but not murder. Nothing controversial, right? So far, all of that sounds quite libertarian.

"OMFG! AYN RAND! HOW DARE YOU MENTION THAT SOCIAL SECURITY-COLLECTING WITCH WITHOUT SIMULTANEOUSLY GNASHING YOUR TEETH AND STOMPING YOUR FEET?! WHY DO YOU HATE THE POOR, YOU CAPITALIST PIG?"
- Practically almost everyone who thinks Ayn Rand is evil but that Che Guevara guy seems cool
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Objectivism =/= Libertarianism

And this is one of those points where Objectivists and libertarians part ways. Admittedly, libertarianism, like any other political philosophy is not a monolithic idea. Hell, Bill Maher used to call himself a libertarian before Ron Paul showed up and turned it into a political movement, which later morphed into the Trump-supporting Tea Party that people know today. Yes, the whole thing has turned into one giant clusterfuck.

Anyway, when libertarians take their philosophy to its logical conclusion, quite a number of them begin to champion a form of anarchy. To be specific, it's called anarcho-capitalism. And many of these anarcho-capitalists, who have been influenced by the likes of Murray Rothbard and Lysander Spooner, are inherently hostile toward anything that resembles a State. They see the existence of the State itself as immoral because they view it as a coercive entity, which by definition violates the Non-Aggression Principle (NAP), a cornerstone of libertarian tenets.

By using the word "libertarian" in his review, that writer from OhMyNews gave meaning to Rand's philosophy that she never intended. For many who have only second-hand knowledge about Ayn Rand, it comes as a surprise when they learn that Rand despised libertarians. She called them second-handers and accused them of stealing some of her ideas and perverting them because libertarians did not accept some of the underlying ethics and metaphysics that went into her philosophy. Further, she never had anything nice to say about anarchy in any of its forms.

Contrary to what many of Rand's detractors at Salon or Slate or Alternet have to say about her (most of whom I think have not actually read anything that she wrote), Rand thought that the government was absolutely necessary for a free society to exist. And in her ideal world, she thought that the government's function was strictly limited to protecting people's rights. And in order to protect people's rights, she thought that the legal use of all physical force had to be under the control of only the government.

In her book The Virtue of Selfishness, a collection of her non-fiction essays, Rand said:

The use of physical force -- even its retaliatory use -- cannot be left at the discretion of individual citizens. Peaceful coexistence is impossible if a man has to live under the constant threat of force to be unleashed against him by any of his neighbors at any moment. Whether his neighbors’ intentions are good or bad, whether their judgment is rational or irrational, whether they are motivated by a sense of justice or by ignorance or by prejudice or by malice -- the use of force against one man cannot be left to the arbitrary decision of another.

Visualize, for example, what would happen if a man missed his wallet, concluded that he had been robbed, broke into every house in the neighborhood to search it, and shot the first man who gave him a dirty look, taking the look to be a proof of guilt.

The retaliatory use of force requires objective rules of evidence to establish that a crime has been committed and to prove who committed it, as well as objective rules to define punishments and enforcement procedures. Men who attempt to prosecute crimes, without such rules, are a lynch mob. If a society left the retaliatory use of force in the hands of individual citizens, it would degenerate into mob rule, lynch law and an endless series of bloody private feuds or vendettas.

If physical force is to be barred from social relationships, men need an institution charged with the task of protecting their rights under an objective code of rules.

This is the task of a government -- of a proper government -- its basic task, its only moral justification and the reason why men do need a government.

A government is the means of placing the retaliatory use of physical force under objective control -- i.e., under objectively defined laws.

Going back to the MCU, we have to remember that in Captain America: The Winter Soldier, it was revealed that SHIELD, which was a covert agency under the control of the United States government that the Avengers belonged to, had been infiltrated by Hydra terrorists on all levels and had to be disbanded. A big deal was made about how Black Widow aka Natasha Romanoff (Scarlett Johansson) decided to hack into SHIELD's database to leak classified information in order to expose Hydra to the public. From that point forward, as far as the law was concerned, the Avengers were individual citizens (With perhaps the exception of Thor. I think it's safe to say that Thor is an illegal alien, but who's going to tell him, right?) who were taking action against a perceived enemy on their own free will without being held responsible to any higher authority -- i.e., vigilantes.

Ayn Rand would not have been all right with that. On some level, she might have sympathized with Captain America, but at the end of the day, she probably would have said that he needed to stand down.

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Team Iron Man?

So does this mean that Rand would have been on Team Iron Man instead, advocating the United Nations' absorption of the Avengers? The short answer is "Hell no!"

In 1971, the United Nations General Assembly passed Resolution 2758, which recognized the People's Republic of China (PRC) as "the only legitimate representative of China to the United Nations" and expelled "the representatives of Chiang Kai-shek from the place which they unlawfully occupy at the United Nations."

In short, Taiwan was out and Red China was in for no other reason than the fact that the communist government seized control and used terror (see Cultural Revolution and Great Leap Forward) to stay in power. Rand used the word "monstrosity" to describe the United Nations that day. On her calmer days, she said that the United Nations was responsible for allowing the Western world to be swallowed in cynicism, bitterness, hopelessness, fear, and nameless guilt.

So, no, Rand would not have been on Team Iron Man either. She would have despised Iron Man's capitulation, and she would have called it that. And the irony is that Iron Man is the closest thing that Marvel has produced to an Objectivist character! Think about it. Iron Man is a wealthy entrepreneur and brilliant industrialist, and above all, an intelligent and rational man who is driven strictly by his own ego and who will only work on his own terms. And he has none of that obsession with guilt over his dead parents or unhealthy sense of obligation that Batman suffers from. Iron Man is an Objectivist through and through!

And for anyone who has ever seriously read either of Rand's novels, it would be as clear as day that even Iron Man's enemies are Randian villains. Don't believe me? Let's do a quick roundup.

• Islamic militants from Iron Man -- Mystics. Enough said.
• Obadiah Stane (Jeff Bridges) from Iron Man -- Moocher who tried to steal Stark Industries from Tony Stark by subterfuge and then by murder.
• Senator Stern (the late Garry Shandling) from Iron Man 2 and Captain America: The Winter Soldier -- Looter who tried to force Tony Stark to turn over the Iron Man technology to the United States government because reasons.
• Justin Hammer (Sam Rockwell) from Iron Man 2 -- Second Hander who lacks Tony Stark's ingenuity and tries to sell his own inferior war machines to the United States government via crony capitalism rather than by producing a better product that can compete with Stark's merchandise.
• The Mandarin aka Aldrich Killian (Guy Pearce) from Iron Man 3 -- Nihilist who chooses to ignore good and evil or anything that resembles morality and just destroy everything.

Deal with it!
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So instead of being on one team or another, in my educated guess, Rand would have chosen neither. Instead, she might have suggested a third solution -- establish another governmental agency like SHIELD but this time, make it transparent and force it to be answerable directly to the White House and to Congress.

Or perhaps she might not have had an opinion because she didn't like any of the MCU movies because of the movies' growing focus on moral grayness, something which she found deplorable especially in works of fiction because she thought that the best works of fiction dealt not with things as they are, but with things as they might be and ought to be. Or maybe she might not have been that big a fan simply for no other reason than the fact that it's no Charlie's Angels, a show which she was actually quite fond of.

Either way, it's nowhere near as clear cut and simple as the way this OhMyNews reviewer made it out to be.

What does any of this have to do with Hell Joseon?

WARNING: Please note that I'm done talking about the movie or the movie review now and the remainder of this post will deal with Objectivism itself and how I wish for it to apply to Korea.

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As far as I know, the movie itself has nothing to do with Hell Joseon. What I do find sad is the dearth of knowledge about Objectivism in Korea, where I think a healthy dose of Objectvism can do wonders for Koreans.

When people speak of Hell Joseon, they are typically referring to the highly competitive education system and the lack of guaranteed high-paying jobs while the children of chaebol owners seem to do their utmost to become modern-day versions of little Neros.

However, I am convinced that it is more than just that. I am convinced that Hell Joseon is the verbalized admission that we are currently living in an age of moral crisis. During such times, conservatives are quick to say that people need to rediscover their traditions, their roots. Like Rand, I disagree. Too often people understand that something in their lives is wrong, but rarely do people question their morals. Instead of returning to past morals, I think Koreans need to discover new ones.

Conservatives are wrong? You don't say!
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When people hear the word selfishness, people immediately associate the word with people who will do anything, including harming others and committing immoral and illegal acts simply for their own benefits. It is for this very reason that Stephen Colbert rhetorically asked if the world really needed more selfish people. In Korean, the word is called 이기주의, which is closer to sociopathy or extreme narcissism than to the Objectivist notion of selfishness. Extreme altruism at the cost to one's own life or sociopathic narcissism at the cost to someone else's life -- those seem to be the only two choices people seem to think are possible when in reality, life need not be a zero-sum game.

One often hears that Koreans are a materialist group of people -- people who are obsessed with physical beauty, status (how else can people explain the business card culture?), college background, etc. And it's all mostly to get financially ahead. But why? Why is getting financially ahead the main goal? Money is certainly important in Objectivism, but it draws a clear line between deserved wealth and undeserved wealth.

Sacrifice is a word that one hears regularly. Every able-bodied man must sacrifice by serving in the military to serve the country. Senior citizens sacrifice their own livelihoods to support their unproductive adult children. The fact that Koreans once donated their gold and family heirlooms to the government when the economy crashed and burned in 1997~1998 is spoken of in reverent tones. But why? Why is that the good?

Objectivism does not deny compassion. Concern for the welfare of those one loves is a rational part of one's selfish interests. No one loves simply for love's sake. People love for the joy, the good, the happiness that the object of one's love brings to them. Love is selfish. But Objectivism rejects the adoption of false compassion. It states that people should not sacrifice (which specifically means to give up something one values in exchange for something one values less) for the happiness of strangers if it comes at the cost of one's own happiness. Objectivism states that one's highest moral purpose is the achievement of one's own happiness.

Korea is often referred to as a highly competitive society. But what does it mean to be competitive? Rand stated that "competition is a by-product of productive work, not its goal. A creative man is motivated by the desire to achieve, not by the desire to beat others."

Why do so many Korean children languish in hagwons after school for hours upon hours? Is it done so that the children can get better education so that they can become better versions of themselves? Or is it to beat other students for grades or bragging rights?

Objectivism also advocates laissez-faire capitalism to help to bring about real competition in the economy, which Koreans sorely need. There may be laissez-faire capitalism within the fried chicken restaurant industry, which has resulted in a cutthroat competition where many often find themselves losing everything. But what about competition in the overall economy? It becomes harder to find when we see chaebols being coddled and subsidized, when chaebol leaders are seldom held responsible for their wrongdoings and failures, when foreign companies are blocked or harassed.

Instead of seeking a new sense of life, a new morality, young Koreans have instead opted to embrace Hell Joseon, which is nihilism wearing a Korean mask -- a philosophy that rejects everything and condemns oneself to live in misery instead of doing what one can to achieve one's own happiness.

Koreans badly need Objectivism.

There is a glimmer of hope. Recently, Yaron Brook, the executive director of the Ayn Rand Institute traveled to Japan and China to introduce new audiences to Objectivism and he mentioned that there is a tentative plan to visit Korea next year. He's certainly not a cultural icon like the way Ayn Rand was (and I doubt there will be another revolutionary figure like her ever again) and so it will be slow going, but it seems that maybe, just maybe, more and more people in Asia are ready and will be able to free themselves from their old morals and shackles. I think it is long past due.

I don't know if it is something that I will ever see happen in my lifetime. But one can certainly hope.

"If you saw Atlas, the giant who holds the world on his shoulders, if you saw that he stood, blood running down his chest, his knees buckling, his arms trembling but still trying to hold the world aloft with the last of his strength, and the greater his effort the heavier the world bore down upon his shoulders -- what would you tell him to do?"
"I don't know. What could he do? What would you tell him?"
"To shrug."

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