Thursday, March 16, 2006

Debunking a Reported Defiance of Economic Law in South Korea

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 is included. (Email notification is requested.) All other rights reserved.

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