idiots' collective

Korea: _____!

noreply@blogger.com (Aaron McKenzie) — Tue, 09 Feb 2010 12:13:00 +0000

Dokdo Is Ours has some bang-up ideas for the latest iteration of Korea's everchanging tourism promotion slogans. One sample:

Protecting Consumers from Lower Prices

noreply@blogger.com (Aaron McKenzie) — Tue, 09 Feb 2010 11:44:00 +0000

Here's a letter that I sent to the JoongAng Daily newspaper today:

In a recent "News in Focus" feature, you reported that a pair of Korean agencies charged with consumer protection are looking with suspicion upon the falling prices at local discount chains such as a E-Mart and HomePlus. Supposedly, any price fluctuations are confusing to consumers who, the thinking goes, are too simple-minded to know a good deal from a bad one ("How Low Can the Mega Mart Prices Go," 9 February, 2010).

Yet, contrary to the claims of the Korea Consumer Agency (KCA), the role of mega marts is not to "stabilize prices," but rather to meet the demands of their customers. To the degree that the store succeeds in doing this, it earns greater profits. Given the reported surge in sales since the recent price-slashing began, it's fair to say that these stores are providing exactly what customers want: lower prices.

Could it be that individual consumers are better positioned than the KCA or the Fair Trade Commission to know what is in each person's best interest? These agencies would do well to look at the sales figures and have a bit more trust in the public's judgement.

Sincerely,
Aaron McKenzie

Update: The JoongAng published this letter on 11 February, 2010.

Uniquely Privileged Institutions

noreply@blogger.com (Aaron McKenzie) — Mon, 08 Feb 2010 06:21:00 +0000

“We have now reached a state where [unions] have become uniquely privileged institutions to which the general rules of law do not apply”
-Friedrich Hayek ¹

The degree to which people are willing to suspend their notions of right and wrong - and of the legal and the illegal - when labor unions are involved never ceases to fascinate me. All you arsonists and vandals take note: a union membership card is the best ticket to leniency a person could ask for in South Korea, so get yours today. Hell, it worked for the 55 members of the Ssangyong Motors labor union who have recently been given, at most, suspended sentences after being convicted for their parts in last year's violent occupation of the Pyongtaek-based company's factory (see photo above). From today's JoongAng Ilbo:

The 77-day seizure of the automaker’s factory in Pyeongtaek, Gyeonggi cost Korea’s fourth largest automaker 316 billion won ($269 million) lost in production. Occupiers also injured riot police sent to control the situation. Protesters used slingshots, Molotov cocktails and burning tires to repel officers.

While intelligent people may disagree on the extent to which a government should be involved in the lives of its citizens and in the economy as a whole, there is at least one core function of the state that prompts almost universal agreement: protection against violence (be it foreign or domestic), a protection that extends beyond a person's physical being to cover their private property. Despite what some may believe, private property rights do not exist merely as a creature comfort for the wealthiest classes, but rather as a fundamental protection against the power of the government and other citizens to seize the the belongings of other individuals. Such protections against arbitrary seizure are not, however, desirable only for their individual results. Private property rights are at the heart of the social processes that create a free society and a high standard of living.

The most ardent supporters of labor unions, however, see property rights merely as obstacles to achieving their particular goals for society. Yet, it's not clear why a company's property should be treated any differently than, say, a family's home where the protection of that property is concerned. A just system of laws does discriminate based on assets or income, such that Ssangyong's factory deserves the same protections under the law as my rat-trap hovel, and vice-versa.

The idea behind the sympathy toward unions seems to be that bending the rules on property rights will somehow help the less fortunate. This, however, has never proven true. It's illogical to think that anything which decreases output (or stops production altogether) and destroys resources could ever be a road to wealth - for anyone, rich or poor. Furthermore, most private sector companies that have a unionized labor force are also publicly-traded entities, meaning that other citizens - many, if not most, of whom are far from rich - own shares in that company, often via pension plans, and are thus hurt when a labor union sets about trashing an entire facility. Finally, the $269 million in lost production cited in the JoongAng article accounts only for the losses at Ssangyong. What were the effects on Ssangyong's suppliers and their workers? How exactly do they benefit from such work stoppages?

As in the case of Ssangyong, labor unions are remarkably self-assured in their belief that they know better than the company's management how the firm should be run. And maybe they do. Maybe the workers are underpaid. Maybe the union leadership does know best where a factory should be located. Maybe the union has a particularly keen insight as to which cars consumers want to buy. It's possible.

And so, a suggestion for these large unions:

Take those large sums of money you've raised from union dues and start a company of your own. Given your vast managerial knowledge, I have no doubt it will be a first-rate success. You can pay your workers a higher salary and, since you're offering such "socially just" benefits, you'll no doubt be able to lure the best workers away from those other, less-humane car companies, thus enabling you to build a top-flight product. You can get out from under the Fat Cats, build a better car, and, if you're lucky, some sanctimonious hipster musician might even write a romantic folk song about you. Go ahead, make it happen. If nothing else, such a venture will keep you busy for a while and give you less time to destroy other people's property.

___________
¹ Friedrich Hayek, The Constitution of Liberty (1960)

Nuclear Energy Defends Dokdo

noreply@blogger.com (Aaron McKenzie) — Fri, 05 Feb 2010 09:27:00 +0000

It seems there's now a third claimant in the Dokdo/Takeshima squabble: the Pacific Ocean. Some folks in Korea might see this as a threat to their entire national identity, but the folks over at the Korea Hydro and Nuclear Power Company (KHNP) figure that if Poseidon throws you the proverbial lemon, you might as well use it as an excuse to peddle nuclear power:

(click to enlarge)

Newsweek Cover Boy: Lee Myung-bak

noreply@blogger.com (Aaron McKenzie) — Fri, 05 Feb 2010 07:08:00 +0000

My latest issue of Newsweek has South Korean President Lee Myung-bak staring back at me from the cover. The Bulldozer, as Lee is known in these parts, is the subject of an adoring piece on the Korean economy, its ongoing recovery admidst the current turmoil, and Lee's goal of turning South Korea into a "respected global soft power." The piece is certainly correct in its portrayal of South Korean aspirations, but I am suspicious that it may have been written by the government's public relations people, so full of blandishments is it.

The story begins by noting that in the third quarter of 2009 South Korea became the first member of the OECD to post positive economic growth and is expected to have the highest growth of any member of that organization in 2010. Of course, South Korea has painfully ample experience in dealing with financial panic:

"...unlike most other rich nations, South Korea had recent experience with a major financial meltdown. Many of its current leaders are veterans of the Asian crisis that crippled the country's economy in 1998, and they knew how to manage a free fall. Lee's team immediately moved to save threatened banks and companies by setting up $200 billion in various funds to guarantee payment of their debts and for other forms of emergency aid. They struck currency-swap deals with major economies such as the U.S. to secure dwindling reserves of foreign currency and front-loaded public spending so that 65 percent of the country's $250 billion budget was spent during the first half of 2009, ensuring that the money got into the economy rapidly—but without adding new debts. A government focus on protecting jobs kept consumer sentiment relatively high, and the Bank of Korea cut interest rates by 3.25 percentage points to 2 percent, a historic low."

To what degree each of those individual measures contributed to stabilizing the Korean economy will likely remain a subject of some dispute in the years to come, and I won't be surprised if some of them prove to have had either no significant effect on the recovery or even a negative impact. At all events, there will no doubt eventually be a regression model to confirm whatever it was you wanted to believe from the outset.

Furthermore, while I'd rather have knowledgeable people than not have them, I'm skeptical of the notion that an expert on past economic/financial crises will necessarily be the Moses figure to lead a nation out of its current predicament. Ben Bernanke, after all, was well-known for his work on the Great Depression before becoming chairmen of the United States Federal Reserve. Yet, if the only thing necessary to get through such a pickle were to put an expert in charge at the top, the US economy would be crackerjack marvelous right now.

The claim that South Korea has weathered the current crises so well due to the people in charge, while plausible, is ultimately little more than an untestable counterfactual. We can't go back and rerun this crisis and see what would have happened had someone else been in charge, just as we'll never know if the 1987 stock market crash in the US would have played out any differently had Ronald Reagan and Allen Greenspan not been in their positions at the time.

As I said, I'm happy to have the experienced folks in their respective offices right now - god knows you wouldn't want me pulling the levers over at the Ministry of Finance - but I'm inclined to believe that the systemic reforms undertaken in the wake of the 1997-98 debacle (which, to be fair, the article briefly mentions) have had as much or more of an impact. At least, I sure hope so. Implementing proper incentives for, and restraints on, government officials seems like a far more prudent way to prepare for future crises than simply hoping that we'll have the "right people" in place when the time comes.

* * *

And as a brief aside, the writer of this article needs to take another look at Lee's resume:

At Hyundai [Lee] led a company known for fearless forays into foreign markets, whether it was building huge bridges in Malaysia or selling cars with stunning success in the crowded U.S. market.

Prior to becoming the mayor of Seoul, Lee was indeed the CEO and chairman of Hyundai Engineering and Construction, but to my knowledge he never ran - or officially worked at - Hyundai Motors.

A Peculiar Brand of Change

noreply@blogger.com (Aaron McKenzie) — Wed, 03 Feb 2010 23:43:00 +0000

As you know, I've long been skeptical about Barack Obama and his supposed "change" agenda (see here), which makes it odd that I missed this one. The following two quotes come from Obama's 2008 campaign website. Apparently, a main prerequisite for being elected to political office is a complete obliviousness to irony.

The website's header quote:

"I'm asking you to believe. Not just in my ability to bring about real change in Washington...I'm asking you to believe in yours."

And in the main article:

"...we need to stand up to the special interests, bring Republicans and Democrats together, and pass the Farm Bill immediately.

Talk about audacity.

As Jacob Sullum at Reason Magazine wrote in 2008, said Farm Bill "includes tax breaks for racehorse owners, 'marketing aid' for fruit and vegetable growers, research funding for organic farmers, enhanced price supports for domestic sugar producers, increased subsidies for dairy farmers, a $170 million earmark for the salmon industry, and billions of dollars in automatic payments and 'permanent disaster assistance' for corn, wheat, cotton, rice, and soybean growers. Take that, special interests!"

(Via Megan McCardle)

All My Friends are Gonna Be Strangers

noreply@blogger.com (Aaron McKenzie) — Wed, 03 Feb 2010 07:47:00 +0000

If you're in the market for a "stranger than fiction" documentary, look no further than Friends of Kim (2006), a travelogue chronicling a trip through North Korea with the Korean Friendship Association. The KFA is headed by a Spanish fellow named Alejandro Cao de Benos - a member of the Catalan aristocracy and the only the Westerner in the North Korean government - who is disturbingly devoted to the idea that North Korea is the world's last remaining paradise for workers. Fortunately, the video seems to be available in its entirety on Youtube. I've posted the first part above and you can watch the other sections here.

In a recent interview (posted in English at One Free Korea), Cao explains how he came to have the hots for the DPRK:

I was 15 years old. I was looking for a system that represented my ideals of egalitarian society. It was the time of the disappearance of the Soviet Union, everybody turned his eyes towards social democracy and no longer wanted to call himself “communist”. Principles were on sale. I studied the patterns of Vietnam, China and Cuba. But North Korea was taboo even for the most radical left. It was in Madrid that I got in touch for the first time with three North Korean families who represented the country in the World Tourism Organization. I obtained material about North Korea and began to cultivate my interest.

I wrecked my parents' car when I was fifteen. Actually, I wrecked my parents cars. I backed the Honda into the Toyota and the Jeep. At the same time. Oh, and in that same year I also provoked an investigation by the FBI when I tried to extort $10,000 out of my uncle by posing as the Oregon Zoo and threatening to send a hippopotamus to his house in Idaho. Point is, I did some asinine things when I was fifteen, but good lord, at least I never fell in love with North Korea.

The most fascinating part of the video is watching as the travelers' attitudes toward North Korea change as the trip progresses. At the outset, many of them are certain that capitalism has failed and that by coming to North Korea they will finally be able to see socialism that works. Gradually, they come to realize that not only has the North Korean government enslaved and impoverished its people, but it's also damn near impossible to get a decent drink or have an ounce of fun in the country.

And since we're on the topic of North Korea, Ask a Korean! posted a collection of North Korean jokes last month. One commenter points out that they may simply be recycled versions of old Soviet jokes, but I suspect they apply with some of the same bitter force to North Korea. A sample:

An Englishman, a Frenchman and a North Korean are standing in an art gallery, looking at a painting of Adam and Eve holding an apple.

The Englishman says, "They are English, because the man shares delicious food with a woman."

The Frenchman disagrees: "No, they're French, because they are walking in the nude."

Finally, the North Korean speaks up, "They are North Korean. They have no clothes and little food, but they think they are in heaven."

Tell that one to Mr. Cao next time you see him.

If You Build It...

noreply@blogger.com (Aaron McKenzie) — Mon, 01 Feb 2010 06:21:00 +0000

PJ O'Rourke once quipped that the reason politicians have such a love affair with trains is that they get to decide where the tracks go. For much the same reason, politicians adore planned cities.

Since the 2002 presidential campaign, South Korea has toyed with the idea of moving its capital city out of Seoul and down to South Chungcheong province, near Daejon. This was an idea chiefly pushed by Roh Moo-hyun, the now-deceased victor of the 2002 election, on the premise that Seoul had become too crowded and too much the center of wealth and power in the country. Of course, such a proposal didn't hurt Roh's political fortunes in the Chungcheong provinces, either. And so, in July, 2007, ground was broken for the Sejong Special Autonomous City, named for Korea's most famous king. Even now, though, more than two years since the project began, the national government still cannot figure out what to do with the city. In fact, as the Joong Ang Ilbo reported last week, the administration of President Lee Myung-bak has just released the latest iteration of the government's plan for the city.

I had the opportunity to visit the construction site of Sejong City in early November as part of a KDI event. There is, as yet, little in the way of construction, though the land has been cleared and a visitor's center stands ready to show the obligatory "Korea: Harmony and Dynamism for the 21st Century!" video - complete with stentorian narration - to anyone willing to sit through it. The purpose of this video is to convince skeptical citizens that this project is a good idea and to entice investment from companies and universities. Unfortunately, the city's slogan, "A Multifunctional Administrative City," evokes nothing so much as images of standing in line to get a driver's license or register your dog - not exactly the high-tech, uber-modern theme the planners have been pushing. And thus far, the reaction to this marketing slogan has been pretty much what you'd expect: a few memorandums of understanding from universities, noncommittal curiosity from some companies, and sniffs of outright derision from many who doubt the government's ability to build a viable city where none existed in the 3,000 year history of Korea.

Coincidentally, my visit to Sejong City came only a few weeks before the news of Dubai World's debt problems broke. The middle eastern emirate came to prominence over the last decade or so by seeking to build an economy less dependent on its ever-shrinking oil revenues. The city was overtaken by a construction boom that included such questionable projects as the Palm Islands and the Burj Dubai. Although managed by ostensibly private companies, these projects and most others in Dubai were blessed and orchestrated by the government, and in particular the prime minister, Sheikh Mohammed bin Rashid Al Maktoum. Having watched Field of Dreams one too many times, Sheikh Mo, as he's known, evidently believed that a flashy city in the desert would prove irresistible to one and all. Of course, a crisis hit world financial markets and people proved less willing than expected to pony up millions of dollars just to live on an island shaped like a palm tree.

Friedrich Hayek once wrote (in The Fatal Conceit) that "the curious task of economics is to demonstrate to men how little they really know about what they imagine they can design." Cities are complex organisms that evolve naturally for a whole host of reasons, many of which are imperceptible to the humans who inhabit them. A city rests as much, or more, on a foundation of invisible social and cultural interactions as it does on the roads, sewers, or buildings that we see. They are for the most part, as Adam Ferguson put it, the result of human action but not of human design. Of course it's possible for the governments of Dubai or Korea to pour almost unlimited resources into the construction of roads, buildings, and other infrastructure to create a city, but just because something can be done does not mean that it should be done. After all, to what other use could those same resources have been put?

Dubai World's troubles are exhibit 1A of this reality. Let's hope Sejong City does not become exhibit 1B.

Beware the Rising Tide of Good Intentions

noreply@blogger.com (Aaron McKenzie) — Thu, 28 Jan 2010 06:24:00 +0000

As The New York Times reported this week, the Norwegian government is getting a valuable lesson in the dangers of categorizing people rather than treating them as individuals. Back in 2002, the country's trade and industry minister got the bright idea that the world would be a nicer place if 40 percent of all company board members in Norway - even in private firms - were female. Just another politician and his fantasies, right? Not quite: the Norwegian Parliament took a shine to the idea and in 2003 passed a law that went into effect in 2006 for state-run firms and in 2008 for private companies. And sure enough, women now account for more than 40% of directors at the affected companies.

Problem solved. Next issue.

Not exactly:

"...as the dust has settled, researchers are grappling with some frustrating facts: Bringing large numbers of women into Norway’s boardrooms has done little — yet — to improve either the professional caliber of the boards or to enhance corporate performance. In fact, early evidence from a little-noticed study by the University of Michigan suggests that the immediate effect has been negative on both counts. And the sixfold increase in women as directors has not yet brought any real rise in the number of women as chief executives."

Could it be that the composition of corporate boards prior to this law's enactment cannot be explained on purely chauvinistic grounds? It's not that discrimination doesn't exist in the world, but researchers have had one hell of a time proving that it alone accounts in any significant way for the disparity between male and female achievement in the workplace of Western economies. One reason for this lies in the fact that - and you'll want to sit down for this news - men and women, as groups and individually, are different. They are often raised differently by their parents, they choose different careers, and due to the inevitable burdens of biology and childbirth, the average female spends significantly less time in the workplace than does a man of similar age and educational background. All of which means that making broad male-female comparisons will tend to land us right back at that old apples-and-oranges dilemma.

Most smart personnel managers know this: when they seek to fill a position, they're not comparing men and women, they're comparing individuals with different education and skill sets. Conversely, simple-minded personnel managers who choose to hire based on genitalia pay an inevitable price for their prejudice. Ironically, as the Times piece points out, the Norwegian quota was sold to businesses with the following tagline: “Profit is made by employing the best people, regardless of gender.” To judge by the early evidence (and, as always, we have to take care not to confuse correlation with causation), it seems that this is precisely what companies were doing before the quota went into effect. Now, however, they're being forced to consider gender, even at the expense of merit.

Interestingly, as Thomas Sowell has noted, in the United States "when you compare college-educated, never-married individuals with no children who worked full-time and were from 40 to 64 years old - that is, beyond the child-bearing years - men averaged $40,000 a year in income, while women averaged $47,000." Now that we've compared apples with apples, are we to conclude that men are suffering from discrimination?

The most basic method of getting more women into the office is to encourage a more competitive marketplace, as this will exact a higher toll upon those who discriminate based on gender (as well as race, religion, etc.) and give employers less latitude for indulging their prejudices without risking their own bottom line. Perhaps the Norwegian Parliament will stumble upon this idea eventually.

Related:

"Woman Disdained"

"Guys in the Sky"

Fortune Magazine on Hyundai Motors

noreply@blogger.com (Aaron McKenzie) — Wed, 20 Jan 2010 04:19:00 +0000

Fortune is currently running a fawning story on Hyundai Motors (with the above video) and its emergence as a threat to the existing power structure of the global automotive industry. The article is worth a read, especially for those of us who still remember those first rickety Excels to be sold in the United States in the 1980s. Indeed, it's been fascinating to watch the evolution of Hyundai (and its sister company, Kia) from a maker of low-quality, low-budget cars, to reliable but boring vehicles, and now into a company that produces cars and SUVs which win plaudits not only for their styling but also their performance and reliability.

Hyundai certainly seems to be making its move at the right time. As The Economist reported last month, Toyota no longer appears invincible; the Big Three of Detroit haven't exactly inspired confidence of late; and the financial crisis has made the lower prices of Hyundai's cars all the more attractive to consumers. I'm not sure it's cool to own a Hyundai just yet (though the Genesis Coup e could change that), but at least you'll no longer be the object of ridicule for driving one.

As it happens, I had the opportunity to visit Hyundai Motors' main Ulsan assembly plant - the world's largest integrated auto factory - in October of last year (a KDI junket that also included a stop at the Hyundai Heavy Industry shipyards). Full disclosure: I have fetish for factories and assembly lines anyway, but the precision and complexity of such places ought to make anyone proud to be a human. After all, I have yet to meet a band of chimpanzees that could churn out a car every twelve seconds (or, for that matter, build a supertanker in 8-10 months).

It bears noting, however, that Hyundai's current success may not entirely compensate for the cost required to attain it. Since at least the early 1960s, the automotive market in Korea has been heavily protected from foreign competition (and in some cases, domestic competition, too, as when the Korean government, in an effort to help Hyundai, ordered Kia to stop producing passenger cars) and at times outright subsidized, which of course led to the growth of domestic manufacturers. Many now argue that such protections of infant industries underpin the current success of not only Hyundai in automobiles but also of Samsung and LG in electronics. What this ignores is the cost of such policies: to what other uses might these resources - which were spent either by the government or citizens to produce and buy overpriced, low-quality cars in a protected market - have been put? A handful of Korean firms that received protection are now globally competitive, but does their success adequately compensate for the many firms that received special favors but which failed anyway?

At the root of these questions is what the 19th century French philosopher Frédéric Bastiat called "the seen and the unseen." That is, it's easy to point to Hyundai's present day feats and deem the policies which promoted the company a success, but because the resources that were used to favor Hyundai could not be directed elsewhere (in a manner involving less government coercion), we are unable to see what would have happened had Hyundai not received preferential treatment. Moreover, the favortism shown toward Hyundai likely came at the expense of smaller firms in Korea's light manufacturing sectors - the main source of Korea's comparative advantage in the 1960s and 1970s - and it's unwise to suddenly dismiss such costs now that Hyundai is making a profit.

I wish Hyundai all the best and hope they give Honda and Toyota more than just a scare, but let's not pretend that their success has been a cheap ride for Korea.

Answer Me This

noreply@blogger.com (Aaron McKenzie) — Wed, 23 Dec 2009 01:31:00 +0000

If lowering or eliminating tariffs aids the economy now, why have them at all in the first place?

From today's Joong Ang Ilbo:

The Ministry of Strategy and Finance said yesterday it will lower tariffs on 46 imported items including oil, gas, sugar and corn next year to back an economic recovery trend.

According to the ministry, the policies will help keep the public utility costs from rising sharply and expensive imports from triggering inflation.

Equal Every Which Way

noreply@blogger.com (Aaron McKenzie) — Mon, 21 Dec 2009 04:52:00 +0000

"The best things and best people rise out of their separateness; I'm against a homogenized society because I want the cream to rise."
-Robert Frost

In his 1961 story "Harrison Bergeron," Kurt Vonnegut tells of a society in which everyone is finally equal. "They weren't only equal before God and the law. They were equal every which way. Nobody was smarter than anybody else. Nobody was better looking than anybody else. Nobody was stronger or quicker than anybody else. " And so, graceful ballerinas, to take one example, had to wear hideous masks and sandbags so that, on seeing them, other people wouldn't "feel like something the cat drug in." The maintenance of such perfect equality fell to the Handicapper General.

Vonnegut, of course, wrote fiction, but the best fiction always has one foot in reality, which is why I won't be shocked if the South Korean government establishes its own Office of the Handicapper General one of these days. The latest insinuations of such a move come from - where else? - the Education Ministry, which yesterday announced that students who have received private education services (at, for example, a language or test-prep institute) will be disadvantaged in the admissions process for local foreign language high schools. This move is ostensibly being made to curb the so-called "private education fever" in which, as I wrote last year, parents seek to compensate for the poor quality of public schools by enrolling them in private institutes. The presumption, of course, is that wealthy families are more likely to spend the money on these lessons, thus giving them an unfair advantage in said admissions process. Yet, rather than addressing the problems of its own schools, the Education Ministry has opted to punish Korean citizens for the faults of the state-run school system.

As of 2011, then, foreign language high schools will introduce admissions procedures that emphasize "self-study." Aside from the practical difficulties of enforcing such a policy (it will, notes the Joong Ang article, require interrogations of the students), there's no inherent reason why learning via self-study is superior to learning in an institute. If you were facing surgery and had the choice of doctors, would you choose the best doctor available - one who was probably trained in an institution, maybe even a private one - or would you insist on having a self-taught surgeon perform your procedure? The same question can be similarly applied to nearly every profession, from auto mechanics to architects to tailors. Why should school admissions be any different? The point isn't that a self-taught person cannot succeed, but rather that if the Education Ministry seeks to follow its current policy to the logical extreme it should close down all schools and universities, public and private alike. After all, we wouldn't want students learning anything from someone else.

In addition to targeting those dastardly private institutes, this policy, just as other proposals in the past, has as its underlying goal the equalization of educational opportunity across Korea. While this may be a noble goal, a country such as Korea, which lacks natural resources and thus relies on the brains of its citizens for economic prosperity, will not profit by punishing people who seek, and can afford, better educational opportunities than those offered by the government. Reducing the opportunities available to one segment of the population merely lowers the overall level of human capital in a society. And sandwiched as it is between two powerhouse Asian economies, Korea simply cannot afford to be handicapping its citizens.

And so, Education Ministry take note: it's time to let the cream rise.

Update: Chris Backe offers a similarly sour evaluation of this situation.

The KIKO Rodeo Continues

noreply@blogger.com (Aaron McKenzie) — Sun, 20 Dec 2009 04:02:00 +0000

Brace yourself for some temerity, because I'm about to scratch my head in puzzlement and call into question the statements of a Nobel laureate in economics. The Joong-Ang Ilbo reported on Friday that Robert Engle, co-winner of the 1993 Nobel, was in Seoul last week to testify on behalf of Dorco, a Korean manufacturing firm that got burned in last year's KIKO debacle. In his testimony, Engle claimed that - and you'll want to brace yourself for this stunner - the banks selling these currency contracts were seeking to maximize their profits. Commence peeling yourself off the floor.

But let's step back for a moment and get a refresher on the nature of KIKO ("Knock-In, Knock-Out") contracts and why they suddenly became a problem late last year (via The Korea Times):

KIKO options allow businesses to sell dollars at a fixed won/dollar rate if the exchange rate stays within the range fixed in the contract. If it soars above the upper limit, however, exporters can sustain huge losses, as they have to pay more for dollars on the currency market to sell them at the fixed rate to the banks. With the won plunging against the dollar in recent months, many local businesses suffered massive losses and are now on the brink of bankruptcy.

The Seoul Central District Court then stepped in last December and ruled that the KIKO contracts between SC First Bank and two Korean exporters were invalid, saying that the bank did not adequately inform the companies of the risk involved in the contracts, a ruling which opened the door for further lawsuits. Yet, as I wrote in January, ignorance should not be a valid defense for the companies that purchased these contracts.

And despite Mr. Engle's testimony, I stand by that opinion to this day. One of the greatest moral traits of free markets is that they rely on voluntary cooperation, which means that if a deal doesn't suit you, you can walk away from it. This, however, requires discretion on both sides, that is, the proper consideration of risk and opportunity. If you feel you don't have enough information about a product or service to make an informed decision, then walk away. You are allowed to do so.

To be fair, the Joong Ang article does not quote Engle as saying that firms should be protected from the consequences of their mistakes. Rather, according to the article, he asserts that "the knock-in knock-out contract, also known as KIKO, was designed so that banks would benefit far more than the small businesses that bought the risk-hedge derivative products." No doubt many will jump up, waving their arms in indignation at the notion that both sides did not reap precisely the same profit, but there is no particular reason why this should be so.

Sean Hayes, writer of the Korea Law Blog and a consultant to the law firm representing 50 of the KIKO plaintiffs, however, sees it differently:

In some cases...clients were asked to sign English-language contracts, despite being unable to speak English. He recalls sitting down with one plaintiff: "He pointed at a word and asked what it meant. The word was 'buyer'. He didn't even know what 'buyer' meant."

In other cases, no contract was sent - the only documentation the client received was the trade confirmation. Some companies apparently felt that getting loans in the future was conditional on buying the kiko. Others were rushed into the decision on the basis of a quick, five-minute sales pitch. Most of the companies were too small to have a derivatives governance structure - typically, the authority to go ahead with the trade rested with one person, who was the business owner or the person looking after the company's finances, he says.

All of which merely seeks to excuse ignorance and rationalize a bad decision. But it's a bad decision that's already been made and the courts seem willing to protect the companies from the consequences, so all we can do here is try to draw a few lessons for the future. Here they are: First, if you don't speak English, then don't sign a contract written in English. Second, if you don't have a staff capable of handling these sorts of financial matters, be aware of your own limitations and think twice about signing something you don't understand, no matter how pretty and promising it might appear at first glance. And finally, banks are not obligated to loan their money to your company.^* If they want to make your future loan availability conditional on present KIKO purchases, they can probably do so. If they want you to do naked cartwheels down the middle of Main Street in exchange for future loans, they can probably do that, too. It's their money, you're asking to use it, and, as such, you'll have to meet their conditions. You don't like the conditions? Go elsewhere, or use your own money.

In order for markets - indeed, for society - to function, courts must enforce the terms of contracts as written, not the terms as an embittered party wishes they had been written. Unfortunately, the initial district court ruling last year set a terrible precedent and opened the door for other companies seeking to wiggle out from under the fallout of their own blunders. Accusing banks of reaping "excessive" profits may succeed in distracting attention from this reality, but it doesn't change it.

__________

Notes

* Actually, they might be obligated. Korean commercial banks are required to provide more than a specified proportion of their loans to small and medium-sized enterprises (SMEs).

The Enduring Loon Endures

noreply@blogger.com (Aaron McKenzie) — Sat, 24 Oct 2009 22:01:00 +0000

I've written here before of Huh Kyung-Young, far and away the most, um, interesiting politician in South Korea. As a recap, though, here is the opening sentence from a Joong-Ang Daily feature on him from early 2008: "Huh Kyung-young, who claims he has an IQ of 430, supernatural powers and is perfectly sane, ran in the presidential election last month, his third unsuccessful bid to get into the Blue House."

Always pushing those outer limits of that sanity, however, Huh has now embarked upon a career as a rap singer and dancer. If there wasn't video, I wouldn't have believed it either, so thank the good lord for Naver Video (skip to about 1:00 for singing and dancing). Don't worry that it's in Korean; the language of oddities such as this is universal.

The Untold Riches of a Pooter

noreply@blogger.com (Aaron McKenzie) — Mon, 28 Sep 2009 12:14:00 +0000

Been a long time, eh?

Between coursework, research and running the day-to-day affairs of Djibouti, I've had no spare time to fulfill my daily, monthly or, hell, even annual quotas at this once-esteemed institution. And what's more, I have recently stumbled into a new business endeavor that has in recent weeks taken up almost twenty minutes of my time.

Being the only American at KDI, I have by default become the exclusive importer of an item known as "The Pooter" (see video above), created by a fellow from California named Jack Vale. Think of it as the next generation of the Whoopee Cushion, the best friend a ten year-old boy ever had...until now. The Pooter - and please pardon the pun and cliche - blows the Whoopee Cushion away.

As readers of this site will know (if any readers remain), I have a fascination with trifles - that is, the seemingly worthless crap on which people choose to spend their time and hard-earned money. As I wrote last year about Bumper Nuts, you can tell a lot about a society by its toys and knick-knacks. So say what you will about financial crises and the purported s hrinking of the American middle class,¹ but any country that can afford to produce and consume Pooters and Bumper Nuts is wealthy beyond the dreams of past generations. Even Kubla Khan, in his stately pleasure dome, didn't have such things - and it wasn't because he didn't see the humor in them. Everyone, in my experience, thinks flatulence and scrotums are funny.

We take for granted that nearly everyone in the United States, at all income levels, is wealthy enough to outsource their laundry to a machine and food production to ConAgra, and now we as a society have become so rich that we don't even have to break our own wind anymore.

Notes______________

¹ And anyway, writes George Will: "Economist Stephen Rose, defining the middle class as households with annual incomes between $30,000 and $100,000, says a smaller percentage of Americans are in that category than in 1979 -- because the percentage of Americans earning more than $100,000 has doubled, from 12 to 24, while the percentage earning less than $30,000 is unchanged. 'So,' Rose says, "the entire 'decline' of the middle class came from people moving up the income ladder.'"

Return, With PJ

noreply@blogger.com (Aaron McKenzie) — Fri, 22 May 2009 13:27:00 +0000

I know, I know: this post spells the end of the longest hiatus in the otherwise storied history of this particular outpost. And I promise I'll be better at this posting thing from here on out. Wait, no, I don't promise any such thing, but I will try.

For now, though, PJ O'Rourke - one of my personal heroes - seems to be as a good a way to return to posting as any. Here he is recently at the Australian National Press Club:

The Defense of the Indefensible

noreply@blogger.com (Aaron McKenzie) — Wed, 25 Feb 2009 10:47:00 +0000

Bloggingheads posted a fascinating conversation (see video above) over the weekend between Mark Leon Goldberg of UN Dispatch and Kevin Jon Heller of Opinio Juris. Heller, an American law professor at the University of Melbourne in Australia, is currently involved as an advisor to the defense of Radovan Karadžić, the accused Bosnian Serb war criminal, in Karadžić's trial at the International Criminal Tribunal in The Hague. For those of you not old enough to remember the 1990s, Karadžić is allegedly the man behind the massacre at Srebrenica in 2005, in which 7,500 men and boys from the area were killed.

Not surprisingly, Heller has come in for some criticism for his decision to be involved in any way whatsoever with the defense of a man like Karadžić (who, like Slobodan Milošević, is representing himself). Heller, however, answers his critics by saying that part of what defines liberal, democratic cultures is the belief that even an accused monster deserves a fair trial. As brutal and despised as Saddam Hussein was, his trial and subsequent execution at the hands of a jeering lynch mob did not sit well with people around the world who value a judicial system based on law rather than revenge. Having said this, though, Heller, citing his Jewish heritage as a conflict of interest, goes on to say that he would not have represented Adolph Hitler had the Führer not offed himself in the waning days of World War II.

And how, you're no doubt wondering, does any of this relate to Korea?

Let's say North Korean leader Kim Jong-il somehow finds himself in a jail cell at the International Criminal Court in The Hague later this year. And imagine that you're a criminal defense attorney. Would you represent him?

Life, Liberty & the Pursuit of Trifles

noreply@blogger.com (Aaron McKenzie) — Sun, 22 Feb 2009 10:51:00 +0000

Perhaps the greatest evidence of the economic prosperity enjoyed in Korea is the ability of the country's citizens to pursue the most puzzling and seemingly pointless pursuits. As evidence, I offer the case of Kim Sun-Ok, a South Korean housewife who recently broke the world record for marathon singing by belting out tunes for more than 76 hours straight at a local karaoke bar. Via the AFP:

She started singing at 11.14am local time on Thursday and sang a total of 1,283 tunes before she gave up at 3.21pm on Saturday following her family's appeal for her to quit for the sake of her health, it said.

Under Guinness World Record regulations, she was given 30-second breaks between songs and five-minute breaks every hour. She was also barred from singing any song she had already sung less than four hours earlier.

I emphasize that Ms. Kim is a homemaker in a country where women traditionally performed the great bulk of housework - cooking, cleaning, child-rearing, and everything in between and on the edges. In the past, if a woman worked before marriage, she would typically quit that job after the nuptuals and stay at home to raise the kids and keep the homefront in order, a full-time job and then some that had her working long hours.

Slowly, though, as the world and then Korea became more prosperous, the formerly backbreaking routine of a housewife (doing laundry by hand, for instance) gave way to an "outsourced" life: the laundry to a machine, for example, or the food prep to restaurants and department stores. Add to this a declining birthrate that has also returned a fair chunk of time to your average ajumma's day and what Korean cities are left with is roving packs of bored, middle-aged women, always on the prowl for some way to fill their time.

All of which has given Korea's housewives the time and energy to head down to the noraebang and act the diva for 76 hours without stopping. Show me the Korean housewife of 30 years ago who had the time for such shenanigans.

Networked Minutiae

noreply@blogger.com (Aaron McKenzie) — Thu, 19 Feb 2009 23:58:00 +0000

I was born in 1979, which puts me in the final generation to remember what life was like before the internet and cell phones and the other assorted technology that has made our lives so much easier and more interesting. Hell, our family even owned a black-and-white television. As a result, I often feel that I appreciate the wonders of our modern world more than, say, folks who were born after about 1985 and who thus never had to learn how to use a library card catalogue or miss a phone call because the only phone they had was mounted on the wall in their kitchen.

The flipside of having a toe-tip in ancient times, however, is that I am simply unable to see the attraction in many of the latest applications of all this new technology. As this site attests, I appreciate the impact - both potential and realized - of blogs, and photo sites like Flickr are truly a marvel. But I have yet to see a good explanation for the popularity of Twitter, and while in theory I see the attraction of Facebook, I find that I can't read the status updates of more than two friends without wanting to yell, "who the hell cares how many songs you just loaded onto your iPod or what color of socks you're wearing?"

If these social networking sites allow us to be more connected than ever before, they also remind me of why, in the past, I resisted being more connected than I already was: online, just as much as offline, the minutiae of other people's lives is boring and I take offense when they imply, via their Facebook status updates, that I might be interested. My life may not be a thrillride but it's not so bad that I have to care about what you're drinking right now.

These sites do, however, show just how slick a lot of people are at marketing, particularly at marketing themselves. With a site like Facebook, a person can portray himself exactly as he wishes to be seen: no dandruff, no dirty dishes in the sink, no smut under the mattress, no penis stuck in the bathtub drain again. One thing’s for sure, though: Facebook doesn’t make a loser any less pathetic, as evidenced by all the invitations I initially got from the same people to join “Siamese Zombie” groups.

What’s most amazing to me is that a concept as simple as Facebook could be so goddamned successful, or that they could actually charge money for some of things on offer, such as JPG images of a jalapeno pepper for $1 that you can then give to your friend (this - not surprisingly - seems to have disappeared). I’m forever surprised at what people will pay for, and even more at the fact that I couldn’t have thought of charging them for it before someone else did.

Back to Basics

noreply@blogger.com (Aaron McKenzie) — Thu, 19 Feb 2009 10:54:00 +0000

Today's issue of the IHT has a fascinating article by Su-hyun Lee on the adjustment of North Korean defectors to life in South Korea. After years of peddling their "North Korea as Communist Shangri-la" myth, the regime conceded some time ago that, yes, South Koreans have the better standard of living of the two countries, a level of prosperity they have attained by selling their souls to imperialistic occupiers from the United States. A lot of defectors, then, arrive in South Korea expecting that their lives will be a featherbed of delights, only to be sorely disappointed:

After she defected here from North Korea in 2006, Ahn Mi Ock was shocked to learn that most South Koreans lived in small apartments and had to struggle to buy one.

Ahn, 44, had fully expected that once in the South she would enjoy the same luxurious lifestyle portrayed in the television dramas she had watched on smuggled DVDs. It had not occurred to her that the fashionably dressed characters sipping Champagne in the gardens of stylishly furnished houses were not, well, average South Koreans.

For my part, I've long been fascinated by the exposure of North Korean defectors to the outside world and to a semblance of reality. Due to the regime's near-monopoly on information in North Korea, many citizens have never heard of, much less used, basic ideas and technologies that we take for granted every day. When they arrive in South Korea, defectors generally spend three months in a government-run "reeducation" center - ideological detox, if you will - in an attempt to gain a basic understanding of how a market functions and how to conduct one's daily life in such a system. Three months, though, is scarcely time enough to learn the things that the rest of us have absorbed for our entire lives. To that end, other programs have been established:

To alleviate their confusion, a Newspaper in Education program to encourage young people to read was introduced a year ago at Setnet High School, an alternative school for North Korean defectors. There, they can ask an instructor to explain concepts they encounter in newspaper pages.

"What is business and sales?" asked Park Jeong Hyang, 18, during a Setnet class.

"Amateur? Is that something to do with sports?" asked Mah Gwang Hyuck, 23.

"Can you explain what marketing is again?" asked Kim Su Ryun, 18.

Where to begin?

Guys in the Sky

noreply@blogger.com (Aaron McKenzie) — Tue, 10 Feb 2009 10:55:00 +0000

Foreigners, with good reason, are usually surprised and perplexed to learn that Korea has a Ministry of Gender Equality. Not that the relations between the sexes in Korea couldn't stand to improve, but I, for one, am skeptical that simply creating another layer of government bureaucracy will have any appreciable impact on the matter. Of course, as the Korean economy is liberalized and becomes more globally competitive, the opportunities for women will expand accordingly - as they have over the past thirty or forty years. Officials over at the Ministry of Gender Equality, however, will no doubt be quick to take credit for these gains in the status of women, but what we'll really have is a problem of simultaneity: opportunity increased and Korea has a ministry that ostensibly promotes such advances, but correlation does not indicate causation.

My reason for bringing this up?

The JoongAng Daily yesterday ran a lengthy feature piece on the relative scarcity of male flight attendants on Korean airlines. Despite having won numerous industry awards for excellence, Asiana and Korean Air continue to come under fire for discriminating against men:

Korean Air has 463 male flight attendants, which is about 11 percent of its total flight attendant contingent.

The ratio is 34 percent for Air France, according to [The National Human Rights Commission], and 6 percent for Asiana Airlines, according to Asiana management.

To which I can only ask: so what? These airlines continue to win plaudits for their customer service so we can assume that they're doing something right. Perhaps the management at these companies knows something that the human rights watchdog and the Ministry of Gender Equality don't, namely that customers, for one reason or another, prefer female flight attendants and are willing to patronize carriers that provide them. That may - or may not - be sexist on the part of the passengers, but meeting that preference is wholly rational on the part of the airlines. Quite frequently, companies are merely reflecting their customers' preferences when they adopt employment policies unrelated to technical productivity.

The JoongAng article does, however, point out that male flight attendants can at times be preferable to their female counterparts:

...there are times when a male presence is called for. Kim, who still flies about 10 hours a month, says there are still a few old-school (if not chauvinistic) passengers who demand male flight attendants, saying that they will talk only talk to another man.

Kim also mentioned an incident when a sick passenger defecated in his pants and Kim helped him get cleaned up.

“If I were a woman, I think the man would’ve been extremely humiliated,” Kim said.

(Yes, I'm sure that having a man there to clean him up meant that the incontinent old bugger could see the full humor in his situation.)

Finally, it bears noting that this particular instance of gender discrimination takes place in a highly-regulated and protected airline industry (although it is becoming less so), where for many years entry by foreign firms has been subject to all manner of local barriers. Coincidence? Maybe.

Godly Pecs

noreply@blogger.com (Aaron McKenzie) — Mon, 09 Feb 2009 22:50:00 +0000

It does beg a question or two (from Prem River):

I was out on a Sunday at about midday, when I saw a man doing this...most disciplined of push-ups. He seemed to pause forever at the bottom and at the top. But he was not at the park or some inconspicuous spot. He was doing it on the steps of a nice-looking church.

That it was Sunday was interesting and I got to wondering about it. Was he walking past, and suddenly remembered that he had not done his daily allowance of exercise, and chance had it that Church happened to be there? Had he arrived late for church and missed the service, and decided to pay homage to his deity in another way?

Or, finally, has the Church doctrine been rejigged and re-tweaked for modern times?

In the movies when the actor goes to confession, and says "I did this" and "I did that" and "I'm sorry father," the priest usually orders him not to do it again, and to say ten Hail Marys. But these days perhaps he is told not to do it again, to go outside, get down and "do 50 good ones."

SERI's "New Familism"

noreply@blogger.com (Aaron McKenzie) — Fri, 06 Feb 2009 11:02:00 +0000

This week, in the Samsung Economic Research Institute's "Weekly Insight" paper, research fellow Jeon Young-Jae offered a five-page summary of Korea's ten major economic trends for 2009. These trends are mostly the usual suspects - deflation, a credit crunch, proposed government spending, and the like - but amidst all the negatavism, Jeon is also predicting that you and your mother-in-law will finally stop bickering and learn to get along:

Under such [dire economic] circumstances, a new “familism” may come forth as people seek to ease financial and emotional difficulties stemming from a sagging economy through family solidarity. Amid an anticipated painful period of restructuring, many workers who had been preoccupied only with work will rediscover the value of family. Business activities will tend to decrease whereas non-business activities among family members and relatives will generally improve.

How a person who works for a (supposedly) reputable think tank can offer such nattering sociological nonsense is beyond me. Isn't it equally likely that as a result of the economic turbulence more people will discover the value of a bottle of soju and a day at the horse track?

Your Prize, Mr. Hill? Iraq.

noreply@blogger.com (Aaron McKenzie) — Tue, 03 Feb 2009 11:03:00 +0000

If this is the reward, I'd hate to see the punishment.

In a show of gratitude for his years of loyal service in dealing with the North Koreans, the Obama administration appears ready to send Christopher Hill on an all expenses paid trip to...Iraq. According to CNN, Hill will replace Ambassador Ryan Crocker when Crocker retires next month.

Hill, of course, has had a long career in the foreign service:

Hill was widely credited with helping persuade North Korea to agree to abandon its nuclear program in favor of better ties with the West.

During the Clinton administration, Hill was the U.S. ambassador to Macedonia and special envoy to Kosovo. He was also part of the U.S. team that negotiated the Bosnia peace settlement.

He also served as U.S. ambassador to Poland and South Korea during the Bush administration before taking over the North Korea assignment as assistant secretary and lead negotiator to the six-party talks aimed at getting the country to end its nuclear program.

And just how, you may wonder, is the process of de-nuking the North coming along? Well, funny you should ask, because just today UPI reported our trusty friends north of the 38th having this to say: "North Korea Vows to Retain Nuclear Weapons."

Finally, an interesting tidbit of trivia which might interest Mr. Hill: if you look up "impossible" in the dictionary, it gives as examples "bringing peace to the Middle East or dealing with the North Koreans."

The Most Hated Family in America

noreply@blogger.com (Aaron McKenzie) — Tue, 03 Feb 2009 05:53:00 +0000

I've moved around a fair bit in my life and, as a result, have had the inevitable misfortune of living next to some of God's stranger creations, including - as chronicled on this site - the Munsters and the Dragon Lady. During my university years, I lived in a second floor apartment above an aspiring jam band that regularly tried to set records for longest drum solo. Fed up with the noise, I finally moved, only to land in another upstairs unit, this one above a man with severe mental illness who once or twice a week would punch out his windows.

Never, though, have I lived next to anyone as odd as this:

The video is a BBC documentary, hosted by Louis Theroux, entitled "The Most Hated Family in America." The hated titular brood is the Phelps clan of Topeka, Kansas, who, along with their patriarch Pastor Fred Phelps make up almost the entire membership of the Westboro Baptist Church. To call this family "homophobic" would be unkind to homophobes, but then, I'm not really sure what the next step up the ladder of hate is called. Suffice it to say, I've never seen anyone as obsessed with fags and fornication, to use the parlance of the Westboro parishioners, as these folks.

I do find it, um, queer, however, that the state of Kansas hasn't raised more of a fuss about the kids being raised in such a hateful atmosphere, especially when the parents take them to their protests, which as one incident in the BBC documentary shows, often puts them in harm's way. If the state of New Jersey can take a kid named Adolph Hitler Campbell away from his parents,¹ what's it take to get a child extracted from the Westboro nuthouse?

______________
¹ To be fair, New Jersey officials claim that young Adolph's name was but one reason for their concern.