idiots' collective

Elsewhere...

noreply@blogger.com (Aaron McKenzie) — Mon, 06 Feb 2012 11:06:00 +0000

Hear those crickets? Yes, I know, things have been mighty quiet around these parts in recent weeks. I was buried in work, most of which was merely spillover from last year and which was thus not bringing in any more money despite consuming my time. This week has seen my return to the webosphere, and to writing about matters which actually hold my interest, but most of my latest writing (with the exception of this account of my return to the dark ages) has been a better fit for other outlets. A few links, then, are in order.

Over at the Center for Free Enterprise site, I've written a trio of pieces that will, as chef Paula Deen puts it, knock your socks clean off and into the dryer:

In this post, I explain why you ought to celebrate the fact that Facebook creates so much value even as it creates so few jobs.

Once you've finished reading that post, check out my argument against Korea's system of mandatory military service.

And just a few minutes ago I posted this piece on Korea's lackluster venture capital and SME sectors. The Korean government, you see, crowds out private investment for small firms, protects uncompetitive companies, and then wonders why it has neither a vibrant venture capital market nor a healthy SME sector.

Finally, I've already linked to my recent op-ed for Korea Business Central, but in case you missed it, you can read it at the link.

Wherein Aaron Gets His Comeuppance

noreply@blogger.com (Aaron McKenzie) — Fri, 03 Feb 2012 03:44:00 +0000

Back when I was a kid, my Grandparents lived in an old Idaho farmhouse which, for one reason or another, lacked a flush toilet. Oh, the home had a commode, but I recall that flushing it involved dumping a bucket of water into the tank. Why we were still doing this in the early 1980s I don't recall, but it certainly beat the other option: a proper outhouse out behind the brooder house.

I bring this up this because, several weeks ago, I mentioned to the missus that we'd probably do well to leave the water taps dribbling on the coldest days if we had any interest in preventing our pipes from freezing. Before last winter, I'd never had this experience but after the hassle of getting them flowing again on that occasion, I didn't care to do it all again.

Well, fast forward to yesterday morning, which found Seoul flash-frozen by -17° centigrade temperatures. I was in a hurry to get out of the house, as was my wife, who was starting a new job and who thus had matters aplenty on her own mind. Fast forward to 8 PM last night when I came strolling into the house, ready for a hot shower and a shave after a day at work only to find that the water taps were dead and dry.

In one of his more well-known remarks, Woody Allen once quipped that "not only is there no god, but try finding a plumber on Sunday." I'll go you one further, Woody: try getting a plumber to your house on a day when all your fellow nitwits also didn't remember to guard against frozen pipes. And so, after trying to thaw the pipes ourselves, to no avail, it appears that we're to live without running water until at least tomorrow.

I have no doubt that my grandparents would be dealing with this lack of indoor plumbing with considerably more grace and stoicism than I can muster. Growing up in this modern world, where the toilet stands ever-ready to whisk away your deposits, I daresay I've become an impatient, mollycoddled pantywaist who can't stand a few hours of diluted hardship.

Bottom line: remember to leave those taps flowing ever so slightly, lest you end up letting the yellow mellow and trucking buckets of water to flush the brown down.

A Midweek Buffet of Goodness

noreply@blogger.com (Aaron McKenzie) — Wed, 01 Feb 2012 05:20:00 +0000

Over at Korea Business Central, I am the author of the latest "Korea Economic Slice," a regular feature in which guest writers are invited to comment on current issues in the Korean economy. My intro:

If the election of Park Won-soon as Seoul’s mayor last October is any indication, the upcoming April parliamentary elections will turn on matters of social welfare and inequality. More importantly, however, these elections will be a sign of the degree to which Koreans are willing to accept the vagaries of a market economy which, while leading to unequal outcomes of wealth accumulation, is a precondition for a sustainable welfare state. Discussion of such matters could scarcely come at a more pivotal time for Korea, facing as it does an aging and declining population, a slowing economic growth rate, and reinvigorated concerns about reunification with North Korea. Unfortunately, Korea’s political class shows little sign that it understands the gravity of the moment, competing not in a battle of ideas over how to revive the economy but rather to see who can most flamboyantly give away other people’s money.

As the old joke says: if you want to save the polar bears, start eating them. For the past few decades, some Texas ranchers have taken that advice to heart with regard to endangered African critters, raising them on their huge spreads and allowing big game hunters to bag a trophy. Animal rights activists, meanwhile, appear to be more concerned with simply not hunting the animals rather than actually preserving their numbers. This segment from 60 Minutes (also above) is a great lesson in incentives, private property rights and how easy it is to be self-righteously wrong. (h/t Carpe Diem)

My friend Steven Denney informs me that PEAR (Papers, Essays, and Reviews), the Yonsei Journal of International Studies is seeking submissions for its Spring/Summer 2012 issue. The website is here if you've got something you think might interest Steve.

Finally, you'll be doing yourself a favor to read this piece by the always-insightful Mark Pennington on "'The Left' and Public Choice Theory." (h/t Cafe Hayek)

Trading Ideas

noreply@blogger.com (Aaron McKenzie) — Mon, 23 Jan 2012 23:44:00 +0000

Over this long, Lunar New Year weekend, I had the great good fortune to have lunch with Steven Denney. Steve's an ambitious young graduate student over at Yonsei University, the sort of fellow who makes the rest of us look bad with all of his get-up-and-go. As one would expect, he blogs at not one but two sites (here and here) and I seem to recall him mentioning that he had another site - focusing on North Korea - in the offing.

While Steve and I share many interests, our worldviews are a study in contrasts. As an illustration, Steve sent me two recent articles by former U.S. Secretary of Commerce Clyde Prestowitz, both of which - to my mind, at least - are filled with needless hand-wringing about the supposed decline of U.S. manufacturing and the eventual implosion of all that makes America worth a damn. As tough as it is for me to get through a Prestowitz article (for a Secretary of Commerce, he sure seems to have slept through a surprising number of economics courses), I figured I'd offer a few comments here rather than simply starting an email thread with Steve.

In the first article, from December 2011, Prestowitz argues that trade deficits are important and, further, that the United States must take steps to reduce its current account deficit:

The opportunity lies in the size of the $500 billion U.S. trade deficit. Just halving it would create 2.5 million jobs without the need for tax reductions, further deficit spending, or further quantitative easing. Indeed, taxes could even be raised without fear of job loss. President Obama should see this as a Godsend. He can have his cake and eat it as well by increasing jobs and reducing the federal budget deficit.

Prestowitz never explains how he arrives at the "2.5 million jobs" number, nor can I imagine how anyone would prove such a figure, so complex an organism is the global economy. More likely, government efforts to reduce the trade deficit would create some jobs, even as such actions destroyed others, all while punishing consumers and making the U.S. economy less competitive in the long run.

More importantly, though, a current account deficit equals a capital account surplus - that is, more investment is flowing into the United States than is flowing out. To bemoan the trade deficit, therefore, is to also lament the willingness of foreigners to invest in America. Of course, a sizable chunk of this "investment" is in the form of U.S. government debt (as well as corporate debt, real estate, facilities, etc.), which troubles budget deficit hawks like myself, but if you're a person who believes that the U.S. government should be engaged in greater deficit-financed stimulatory spending right now then you should also celebrate the U.S. trade deficit.

For more on trade deficits and (supposed) Chinese currency manipulation, I highly recommend this Econtalk podcast.

The second, and more recent, article finds Prestowitz lobbying for a defined U.S. national economic strategy as a way to counter the mercantilist tendencies of countries like China. Not surprisingly, I ain't climbing aboard Prestowitz's Industrial Policy Express, even if he could prove that China's export-promotion orientation helps the Chinese more than it hurts them. Rather than rehash my views on this matter, however, I'll merely direct readers to this 2010 piece in which I laid out my skepticism of politically-designed industrial policy. Briefly:

...to paraphrase PJ O'Rourke, a successful industrial policy requires that bureaucrats and politicians know more about everything than we do, and requires them to make smarter decisions than we can. And it demands that a state official make those wise and knowledgeable decisions without regard for his political or financial self-interest.

As it happens, the current issue of The Atlantic has a superb article by Adam Davidson which touches on these very issues. It is, in short, the best piece I've read on U.S. manufacturing and employment in recent memory. Indeed, it's one of the magazine pieces I've read on any subject in a long while. It's specific, nuanced, and I can't recommend it highly enough. Rather than offering my comments on it here, however, I'll simply get out of your way and let you get to reading it.

American History Revisited

noreply@blogger.com (Aaron McKenzie) — Sun, 01 Jan 2012 13:31:00 +0000

Via two different sources come two curious new insights on American history:

The first is that Abraham Lincoln apparently walked around for several years never knowing that a watchmaker had inscribed his pocket watch with a secret message on its innards. From How to be a Retronaut comes the story and the image:

The second is this American artist Mort Kunstler's update of Emanuel Leutze's famous "Washington Crossing the Delware" painting . The Washington Examiner has the story here (via Marginal Revolution):

Kim Jong-il is Dead. Dead? Dead. Uh-oh.

noreply@blogger.com (Aaron McKenzie) — Mon, 19 Dec 2011 05:22:00 +0000

According to North Korea's ever-reliable Central News Agency, Kim Jong-il - he of the pompadour hairdo, numerous holes-in-one on the links, and despot extraordinaire - has died. Reports of Kim's demise have proven premature in the past, but given that the North's main news organ is confirming the death, I suppose we can take it as given.

Death has seldom come to a more deserving person. In addition to putting North Korea's economy firmly into the crapper, Kim and his father (Kim Il-Sung, founder of the nation) oversaw a network of concentration camps, kidnapped Japanese and South Korean citizens, and regularly engaged in state-sponsored terrorism (bombing civilian airliners, shelling South Korean towns, etc.). Outside of North Korea, few people responded with anything short of "hallelujah" to Kim's death.

But.

The trouble in North Korea may have only just begun. Kim Jong-il's son, Jong-eun, is the heir apparent, but he's young and untested. Moreover, as I wrote last year, a dynastic power transfer in North Korea increases the risk that the ruling coalition breaks down, inciting internal - and perhaps international - strife.

And, in the event that Kim's death has made you optimistic about Korean reunification happening sooner rather than later, I will refer you to this piece from last year. Be careful what you wish for.

Over Yonder...

noreply@blogger.com (Aaron McKenzie) — Tue, 06 Dec 2011 05:01:00 +0000

Over at CFE Korea, I've got a handful of new posts to occupy your time:

In this post, I add a few thoughts to the Korea Herald's debate topic of the week ("Should There Be a New Tax for the Rich?"). And as it happens, I had just last Saturday written this post about the so-called "Buffett Tax."
Local protests against the KORUS FTA are dwindling, but they haven't completely run out of steam. My latest comments on the protests are here.

Finally, I found this Bloggingheads.TV conversation on the Italian debt crisis (between Robert Wright and Franco Pavoncello) to be informative and entertaining.

The Castle & the Abuse of Eminent Domain

noreply@blogger.com (Aaron McKenzie) — Sun, 04 Dec 2011 03:51:00 +0000

Go find your dictionary and look up the phrase "pleasant surprise." If your dictionary is worth its space on the shelf, the definition will read: "A fifteen year-old, low-budget Australian film which turns out to be the most insightful, hilarious commentary on eminent domain abuse in recent cinematic history." Next to the entry will be a screenshot from The Castle.

Released in 1997, The Castle is the story of the Kerrigans, a family of rustic boobs (to use the most charitable description) who live right next door to the Melbourne Airport in a house which, as son Dale proudly boasts, is worth almost as much as the day they bought it. The family, while short on class and sophistication, nevertheless exudes a close-knit warmth and a pride in their humble home. Indeed, they exemplify the old adage that a man's home is his castle, hence the film's title.

Everything in the Kerrigan household is going along swimmingly until a real estate assessor shows up one day to do a valuation on their property. Soon thereafter, father Darryl receives a notice that his land has been "compulsorily acquired" to make way for extensions to the neighboring airport. What follows is one man's battle to keep his home in the face of a legal system which frustrates common sense at every turn. His initial confrontation with a government employee is but a taste of things to come:

Bureaucrat: "There is an ironclad agreement between federal, state, and local governments and the airport commission [which states that you must vacate the property]."

Darryl: "Yeah, well where's the agreement with Darryl Kerrigan, 3 High View Crescent, Coolaroo?"

And then there's this scene, wherein Darryl is astonished to discover that it's up to him to prove why he should be allowed to keep his home:

Libertarians (and other free market types) who start talking about the rule of law and the importance of private property rights are often derided as being tools of the wealthy, interested only in maintaining ill-gotten privileges - which only shows how little these critics have considered such matters. These institutions are not mere conveniences of the plutocratic class. Rather, the protection of private property - as part of a consistent rule of law - is a chiefly a protection of "the common man" against attempts by the state, often captured by privileged special interests, to seize by force what it cannot get via persuasion. Thus, in The Castle, it is Airlink, a sorta-private, kinda-public Big Corporation (read: private money combined with state force), that is out to take the Kerrigan's land.

The Castle has taken on new relevance in the last decade as American cities have used - and abused - eminent domain to force people out of their homes not in order to build roads or schools, but rather in the interest of increasing local tax revenues. Indeed, in 2005, the United States Supreme Court put its own stamp of approval on such thuggery when it ruled in Kelo v. City of New London that a Connecticut town government had every right to forcibly take someone's home and hand it over to the pharmaceutical company Pfizer. In addition, the NBA's New Jersey Nets will soon relocate to Brooklyn, where their new arena was built using much the same methods. Yet, as this video from Reason.TV shows, none of this is new:

Throughout The Castle, Darryl Kerrigan repeatedly argues that "you can't just steal my home," to which judges and lawyers reply in confusion that he's being compensated. So why the all the fuss? Of course, if I walk into the Apple Store and offer them $50 for a new iPad, the store employees will understandably refuse to sell. If I force them to take the money and then walk out with the iPad, I'll be arrested for theft. No judge would accept, as my defense, the argument that Apple had been compensated for the iPad. For an exchange to be voluntary, both sides must agree to the terms, otherwise we're dealing with a form of theft (i.e. the difference between $50 and the actual retail price of the iPad). The same is true of eminent domain when land-owners object to moving at the prices offered by the government. That this may inconvenience certain parties (the government, private construction companies, etc.) does not change the fact that, at root, this is theft pure and simple.

As further credit to the writers of The Castle, the film manages to be a biting commentary on the importance of private property rights without ever forgetting that its first order of business is to be a comedy rather than a preachy docudrama. Whether you've never seen it before, or whether you were enraged by decisions like Kelo (or maybe you just want a solid comedy for next Saturday night), track this film down and give it a look. You won't be disappointed.

New Posting Climes

noreply@blogger.com (Aaron McKenzie) — Sat, 03 Dec 2011 10:42:00 +0000

As I mentioned a few weeks back, I recently began working with the Center for Free Enterprise here in Seoul. Part of that collaboration has involved working with Hana Lee - CFE's Queen of All Things Technological - to get a CFE blog up and running.

And here it is: CFE Korea, the English-language blog of the Center for Free Enterprise, while still young and prone to stumbles, is open for reading. I encourage you to add it to your bookmarks, subscribe to the RSS feed or to our email updates, and to leave your comments. In addition to me and Hana, CFE's Director of International Relations, Casey Lartigue, will also be contributing to this newest outpost of classical liberalism. And as it happens, I just this evening did up a post over there, so you'd best amble on over and give it a read.

I'll still be posting 'round these parts, so don't delete me from your bookmarks just yet. My plan is to use CFE Korea as a platform for my thoughts on Korean politics and economics, while maintaining Idiots' Collective as my personal site, with a smattering of non-Korea related policy matters tossed in. Or maybe I'll just use this site to post pics of Korean bikini models.

Groups are Not Individuals

noreply@blogger.com (Aaron McKenzie) — Tue, 29 Nov 2011 11:32:00 +0000

I seldom disagree with Thomas Sowell, and even when I do my first inclination is to think that it's me who must be mistaken, so much do I admire the man. That said, I'm troubled by his latest piece on the issue of immigration.

Take, for instance, these lines from his column:

"There is no inherent right to come live in the United States, in disregard of whether the American people want you here."

and

"The American people have a right to decide for themselves whether they want unlimited imports of cultures from other countries."

Regardless of whether he's right or wrong on the merits of a policy of open immigration, Sowell here commits the error of confusing groups with individuals, that is, of assuming that the former has the decision-making capacities of the latter. "The American people" can no more decide to "want" a particular immigrant or import in the United States than "the American people" can decide what jeans to wear, what music to listen to, or where to take a summer vacation. Only individuals can do these things, and I assume that Sowell, as an economics professor, would point out as much to any student who erred on this point.

As Don Boudreaux has written: "while many governments today are democratic and, hence, in some degree representative of, and responsive to, the wishes of voters, it remains important to keep in mind that all trade and all political actions ultimately are the result of choices made by individuals"

Individuals trade with, associate with, and enter into contracts with other individuals. Immigrants - illegal or otherwise - are individuals who would not come to the United States if they didn't think that some other individual would be willing to give them a job. They don't expect "The American people" to employ them any more than I expect "The Korean people" to employ me, a legal immigrant. Thus, if "the American people have a right to decide for themselves whether they want unlimited imports of cultures from other countries," I should have the right to decide for myself whether to peacefully enter into a contract with Señor Mexicano without anyone else meddling in the matter.

As above, this is not to debate a specific immigration policy, but rather to point out that The American People and The Immigrant People may not be terribly useful terms.

Meanwhile, Over at the Korea Herald...

noreply@blogger.com (Aaron McKenzie) — Mon, 28 Nov 2011 21:15:00 +0000

In today's edition of the Korea Herald, I make up half of the paper's "Voice" section and defend the general direction of the Korea-USA FTA. My opening paragraphs:

Out of a curious sense that Korean companies deserve special government privileges at the expense of Korean consumers ― specifically, immunity from competition ― hardline members of the opposition Democratic Party did their best to torpedo the free trade agreement between Korea and the United States.

These DP legislators, additionally believing that no man is ever too old to indulge his childish instincts, finally resorted to physical violence after failing to nitpick the deal to death. Fortunately, the benefits to both countries from this agreement will ultimately overshadow such shameless antics.

Nam Hee-sob, of the Korean Alliance Against the KORUS FTA, anchors the other side of the debate.

While I generally supported the passage of the KORUS FTA, I was not as giddy about it as some of my friends for the simple reason that the agreement amounts to managed, not free, trade. Korea Herald reader Brian Arundel, commenting here, sums up my sentiments:

The only thing that bothers me is that the FTA is 1,000 pages long. It should be one sentence long ― “we, the two countries, agree to do nothing to limit trade between our two countries.” This would be a real free trade agreement, but that’s not possible with the vested interests in both countries.

Agree With Me Or Else...

noreply@blogger.com (Aaron McKenzie) — Mon, 28 Nov 2011 03:45:00 +0000

In the wake of this incident, in which anti-FTA protestor thugs attacked a local police chief, I can only reiterate what I wrote last week:

Those who oppose free trade – if they have even a shred of respect for the dignity of individuals and the competence of adults to make their own decisions – should focus their energies on persuading others to voluntarily reject participation in the global economy. Using one’s fists or the political process to foist such an idea on others is merely a sign that the idea was rotten from the start.

If you have to resort to punching and kicking people to make your point, you've already lost the battle of ideas.

Why Not Subsidize Everyone, Then?

noreply@blogger.com (Aaron McKenzie) — Sat, 26 Nov 2011 02:09:00 +0000

A quick, Saturday-morning letter to the Joong Ang Daily:

To the Editor:

You report that, since 2007, the Korean government has allocated more than 22 trillion won “to help farmers whose businesses might suffer due to the influx of cheaper produce from the U.S. under the recently approved free trade agreement between the two nations.” (“Farmers Already Getting FTA Budget,” 26 November, 2011)

For decades Korean farmers have benefited from artificial, government-created barriers to competition which forced consumers to pay higher prices for lower quality products. How can farmers now claim to be entitled to compensation simply because they have lost an unearned privilege?

Moreover, there is nothing unique about the effects of international trade on a particular sector of the economy, as market activity of all sorts benefits some while squeezing others. This is true whether the source of dynamism is ever-shifting consumer preferences, technological advance or, yes, international trade. Must we also subsidize certain farmers if consumers began to eat, say, more potatoes and less rice?

Aaron McKenzie
Research Fellow
Center for Free Enterprise, Seoul

My Korean Deli: A Book Review of Sorts

noreply@blogger.com (Aaron McKenzie) — Wed, 23 Nov 2011 11:36:00 +0000

The story, no doubt, will soon be optioned for a sitcom: A Waspy New England literary editor opens a convenience store deli with his Korean mother-in-law in a rough Brooklyn neighborhood. Hilarity ensues. Cue laugh-track. Add in a few other characters – a gun-toting ex-con employee, a lawyer wife, George Plimpton – and you have the plot of My Korean Deli, a memoir by Ben Ryder Howe, aka The WASP.

Howe and his wife, Gab, met at the University of Chicago, he the self-professed “Marxist-Rousseauian” and she the typically driven daughter of South Korean immigrants. After university, he wound up working for Plimpton at the famed Paris Review literary journal and she went into corporate law in New York City. This being New York, however, housing was a problem, money was a problem, and so they moved in with Gab’s parents in Staten Island. They eventually decided that, to repay Gab’s parents for their self-sacrifice, they would use their life savings and a few bank loans to buy a deli for Gab’s mother, Kay, to operate.

Anyone who has lived in Korea – or had a Korean mother-in-law – will recognize Kay. She comes from the generation that endured the Korean War as children and whose skin tends to be leather-tough as a result. As an immigrant to the United States, she did all manner of menial jobs to provide for her family and the prospect of running a deli doesn’t faze her in the least.

Howe is another matter entirely. His New England upbringing, his Socialist leanings, and a career at the donor-funded Paris Review did little to prepare him for the world of commerce. Folks with such pedigrees tend to believe that wealth can simply be regulated into existence.

“The Puritans,” writes Howe of his ancestors, intellectual as well as biological, “were the sort of people who believed that society was at its best when smothered within a government bear hug.”

There is, however, no faster way to demonstrate to a socialist intellectual the complexities of a market society, and the stifling nitpickiness of government, than to put him in charge of running a business. Suddenly, profits are no longer a form of theft, a job is not mere exploitation, and charity is something done voluntarily rather than at the point of a gun. And that bear-hugging state, previously this person’s preferred means of communal uplift, suddenly becomes an annoyance extraordinaire. The following quote, while lengthy, says it all:

Around this time there’s a change in New York City’s official rules for street vendors, the people who sell things like hot dogs and roast nuts on the sidewalk (who presumably do it not because of a passion for the great outdoors but because they can’t afford actual stores). Since we’re not a street vendor, the change doesn’t affect us, but it’s worth mentioning because of what it says about the mentality of small business owners.

The change is an increase in the city’s fines for violations such as not wearing paper hats, standing a few inches (literally) too far from or too close to the curb, and leaving carts unattended while making bathroom visits. Overnight, the fines go up from two hundred and fifty dollars to one thousand, and since most vendors receive an average of seven violations a year—often three or four at once—many are facing ruin. (The kind of sudden and capricious ruin that the cart vendors, many having fled despotically run Third World countries, know all too well.) No public hearings or debates in the city council have been held on this calamitous change for twelve thousand or so of the city’s most economically challenged families. And the only way to fight the tickets is for the vendors to go to an obscure court called the Environmental Control Board, fill out forms and wait for hours while losing more money—this for people who epitomize the embattled yet scrappy New Yorker everyone claims to love. Some street vendors earn as little as thirty-five dollars a day.

Dread is the nature of small business. You’re gnawed by fear that something is going to come out of nowhere and flatten you before you’ve even had a chance to shout, whether it’s a blackout or a government inspector. The urge to seize control of your own destiny, even if it means doing your own precious business harm, can be difficult to resist.

As much as anything, My Korean Deli is a portrait of a city being slowly overtaken by the climbing ivy of regulations, red-tape and The Bureau of Petty Harassment. After reading this book, I'm amazed that New York City has any profitable businesses remaining.

If he was ill-prepared for commercial life, Howe’s background in the literary world served him well in recounting his foray into the market. This fellow, quite simply, can write. In My Korean Deli Howe is fluid, precise, and self-deprecatingly funny. He knows he’s out of his element, that he’s the biggest liability in the whole store, and the book is a chronicle of his efforts to become at least a net neutral presence, if never quite an asset. And as an American living in Korea, I couldn't help but appreciate his descriptions of Korean-American society, filled as they were with both admiration and confusion.

All of which is a long way of saying, buy this book. Read it. Enjoy. If nothing else, you'll come away happy that one more man has learned just how difficult it is to run a damn business in this world.

Politics: the Concentration of Animosities

noreply@blogger.com (Aaron McKenzie) — Tue, 22 Nov 2011 23:09:00 +0000

My latest letter to the Joong Ang Daily:

To the Editor:

At a recent lecture in Osan, the Buddhist monk and liberal activist Venerable Pomnyun suggested that the solution to Korea’s acrimonious political climate lies in a new political party. (“New Political Force Needed: Monk,” 22 November, 2011)

What the nation will gain by adding yet another faction to the political fray is not clear. After all, one doesn’t break up a dogfight by tossing one more pit bull into the ring. Far from needing more political parties and politicians, then, Korea desperately needs less politics.

Because politics, unlike most aspects of our lives, is a zero-sum affair where the minority must live with the decisions of the majority, virtually any decision made in this arena will incite the ire of one group who fears being trampled by a slightly larger group.

Consider the debate over the KORUS FTA: if the issue of trade were removed from the political arena, individuals would be free to decide whether to trade internationally or to keep their commerce within the local community. When put to a political vote, however, we see brawls in the National Assembly and endless partisan bickering as politicians attempt to decide what is right for everyone.

The Venerable Pomnyun may fancy himself a transcendent political figure, able to soothe souls and unify the masses. Unfortunately, even when a revered Buddhist monk is involved, the use of political channels, though occasionally inevitable, always tends to strain the delicate threads that hold society together

Aaron McKenzie
Research Fellow
Center for Free Enterprise, Seoul

Update: The Joong Ang published an abbreviated version of the letter on 25 November, 2011.

FTC: Stop Abusing Consumers! That's Our Job.

noreply@blogger.com (Aaron McKenzie) — Sun, 20 Nov 2011 05:58:00 +0000

My latest letter to the Joong Ang Daily:

To the Editor:

Once again proving itself oblivious to irony, the Fair Trade Commission recently fined Zespri, a New Zealand kiwi company, 427 million won for unfair trade practices. This penalty comes even as Korean government policy increases the price of this fruit above market levels. (“Zespri Penalized for Unfair Monopoly in Kiwi Sales,” 18 November, 2011).

Among the FTC’s charges: In an attempt to exclude other kiwi brands from store shelves, Zespri allegedly entered into exclusive retail agreements with local supermarkets. To this allegation, one is tempted to say, “so what?” Supermarkets exist to make a profit and can do so only to the extent that they satisfy consumer demand. Thus, if these stores enter into misbegotten agreements with Zespri, their customers will quickly let them know and this information will be reflected in the bottom line. Why should we expect the FTC, which does not bear the consequences of its decision on this matter, to know better than the supermarket about which fruits to sell?

Charging that Zespri’s activities “unfairly restrain competition in the market,” the FTC claims to be concerned that such collusion will result in higher prices and lower quality for consumers. Yet, as your article notes, New Zealand kiwi are presently slapped with a 45% import tariff when they arrive on Korean shores, while Chilean Kiwi face a 12.4% tax – artificial price hikes which are passed on to consumers. Is the FTC also planning to fine the Korean government for this anti-competitive policy?

Aaron McKenzie
Research Fellow
Center for Free Enterprise, Seoul

And now that we're on the subject, I have a question, which I ask in good faith (rather than simply rhetorically): Why does the FTC punish E-Mart for maintaining an exclusive supply relationship with Zespri even as, say, McDonald's is allowed to serve only Coca-Cola products? From my anecdotal observations, this sort of contract seems to be quite common.

Update: An abbreviated version of this letter was published here.

Coercion: The Last Refuge of Bad Ideas

noreply@blogger.com (Aaron McKenzie) — Fri, 18 Nov 2011 21:13:00 +0000

Late last week, at a rally in Seoul against the pending trade agreement between the United States and South Korea, four anti-FTA protestors gave the world a disturbingly candid summary of their movement’s mindset when they attacked a police officer, beating him after he slipped on autumn leaves and fell to the ground. Of course, many who oppose the KORUS FTA will argue that these thugs and their violent tactics do not represent the opposition, and that beating people up is no way to get one's point across. What they are really saying, however, is this: “while we are not personally willing to use violence to achieve our political goals, we are perfectly willing to let someone else – that is, the government – do it for us.”

According to the KORUS FTA tariff tables, the import tax on garlic (to choose just one of the many items there listed) brought into Korea is presently 360%, a policy which enriches local garlic farmers but which harms consumers. Now suppose that you decide that you want to buy some garlic from the United States but cannot afford to pay this exorbitant tariff. You thus embark on a career as a garlic smuggler, somehow slipping clove upon clove into Korea until the customs authorities finally catch you and demand payment of all back taxes.

If you refuse to pay, the officials will not simply shrug their shoulders and let you return to your illicit activities. No, they will put you in prison and, should you attempt an escape, they are prepared to shoot you. And all of this happens simply because you had the temerity to buy garlic from someone on the wrong side of a political border.

That free trade makes us better off than we would be if we insisted on doing everything for ourselves long ago ceased to be a topic for debate (the nature of trade agreements, being managed rather than "free," complicates matters somewhat). You will be more prosperous if you cooperate with people outside your home, outside your neighborhood, and yes, outside of your native country.

Yet, while free trade certainly “delivers the goods” in a way that national self-sufficiency cannot, such materialistic defenses miss the essential moral case for free trade. After all, by what moral code can one justify the imprisonment of a person who, as above, merely wishes to buy garlic from one vendor instead of another, from one side of the proverbial street instead of the other? This, however, is precisely what opponents of free trade are advocating when they promote restrictions on peaceful exchange between consenting adults in different countries.

As economists like David Ricardo, Adam Smith, and countless others have shown, political boundaries have no economic significance. A voluntary exchange between two individuals, wherever on the planet they happen to be standing, makes both sides better off by definition. Similarly, these political borders have no moral significance. Peaceful interaction between individuals on different sides of an invisible line is no less ethical than if those two people happened to be in the same nation, province, city, or neighborhood.

Those who oppose free trade – if they have even a shred of respect for the dignity of individuals and the competence of adults to make their own decisions – should focus their energies on persuading others to voluntarily reject participation in the global economy. Using one’s fists or the political process to foist such an idea on others is merely a sign that the idea was rotten from the start.

Imports: The Gains from Trade

noreply@blogger.com (Aaron McKenzie) — Thu, 17 Nov 2011 05:04:00 +0000

From the Korea Herald comes this story:

South Korean imports from the European Union grew at a far faster pace than its exports to the economic bloc over the three months since their bilateral free trade deal took effect in July, data showed Sunday.

I'm sure some folks will read this and dive immediately into to the hand-wringing, worrying that Korea's trade relationship with the EU will soon amount to an unsustainable trade deficit. As Don Boudreaux never fails to point out, though, economies are not polities and collectives are not individuals. "Korea" and the "European Union" do not trade goods or services. Rather, individuals in Korea and individuals in the European Union make exchanges, which are then tallied up according to the arbitrary political borders which those goods crossed. That Koreans imported more from Europe than they sent to The Continent, however, does not mean that Koreans, as individuals, are poorer as a result.

More importantly, at least as concerns the KH article, is the bizarre, mercantilist preference for exports which pervades society. Whenever a politician touts a trade agreement, he speaks of the greater opportunity for exporters, of the potential to expand "the nation's" business overseas (what does that even mean?). But consider: why do we export goods? That is, why do we haul our ass out of bed and go to work at ungodly hours? In short, why do we export our labor everyday? Of course: we do so in order to afford groceries, a car, a house, and all the creature comforts that make life more enjoyable.

Exports are only beneficial, then, to the extent that they enable us to import, and the less we have to export in order to get the same amount of imports, the better. If you can buy (import) that DVD box set of the Rambo movies by working for one hour (i.e. exporting one hour of labor), why work for two just to get the same product?

PJ O'Rourke once quipped that "imports are Christmas morning; exports are January's MasterCard bill." True, true. Which is why I couldn't help but crack a faint smile when I read the Herald's story.

Reading Chang Ha-Joon (Ch. 8)

noreply@blogger.com (Aaron McKenzie) — Wed, 16 Nov 2011 07:55:00 +0000

Drip, drip, drip…

Little by little, Thing by Thing, I’m slowing managing to release my thoughts on each chapter of Chang Ha-Joon’s 23 Things They Don’t Tell You About Capitalism. For a variety of reasons – other commitments, my own sanity, etc. – tearing into Chang’s writings is not my top priority these days, but with any luck, I’ll complete this pet project just in time for his next book. Anyway, on to “Thing 8: Capital Has a Nationality…”

If his writings are any indication, Chang Ha-Joon is a quarrelsome fellow by nature, ornery and always ready to pick a fight even when it’s not clear what he gains by doing so. Chang’s thesis in the eighth chapter of his book seems to be that firms tend to hire more people from their native country, and to keep more of the high-end corporate functions (strategy, R&D, etc.) at home, and therefore….

Therefore what? Chang writes that “home biases do not exist simply because of emotional attachments or historical reasons. Their existence has good economic bases.”

Well, yeah.

Doing business with folks who have a common cultural and linguistic background is a helluva lot easier than trying to cooperate with a bunch of foreigners with whom you can’t communicate and who eat strange-smelling foods. Believe me, I’ve been there.

I confess that I’ve read “Thing 8” three times and still cannot determine how the information contained therein qualifies as a secret, hidden part of capitalism (as the book’s title would suggest).

Even in his blandest moments, however, Chang still manages to make me nervous, as when he writes:

So, if a foreign company operating in the same industry is buying up your national company with a serious long-term commitment, selling it to that company may be better than selling it to your own national private equity fund. However, other things being equal, the chance is that your national company is going to act in a way that is more favourable to your national economy.

Thus, despite the globalization rhetoric, the nationality of a firm is still a key to deciding where its high-grade activities, such as R&D and strategizing, are going to be located. Nationality is not the only determinant of firm behaviour, so we need to take into account other factors, such as whether the investor has a track record in the industry concerned and how strong its long-term commitment to the acquired company really is. [emphasis mine]

How exactly a private firm like General Electric is my company, or why its our concern if GE wants to sell this or that subsidiary to someone else – even to a foreigner (except, one might argue, where national defense is concerned) – is not clear. On the list of “23 Things Chang Ha-Joon Doesn’t Tell You About Himself,” then, is this: he believes he has an ownership stake in your company even if he has never bought a share, lent you money, or otherwise been involved with your firm. And if he doesn’t approve of your sales decisions, he apparently believes that he (or, at least, he and any other Right-Minded Smartfolk who agree with him) has the right to override that decision.

Pessimism: Fashionable but Unnecessary

noreply@blogger.com (Aaron McKenzie) — Mon, 14 Nov 2011 12:05:00 +0000

My latest letter to The Korea Times:

In an article entitled “Two Faces of Food Insecurity, (13 November, 2011),” Kim Da-ye writes that “the combination of climate-change-related disasters, more people to feed and shrinking farmland sounds like a doomsday scenario.” Yet, while the recent floods in Thailand and the birth of the world’s 7 billionth person made for dramatic news stories, there is little reason to believe that they are signs of a looming apocalypse.

Since at least the time of Norman Borlaug, the so-called “Father of the Green Revolution,” famine has ceased to be a product of weather and has come instead to be the fault of autocrats like Kim Jong-il and Robert Mugabe, who have each taken once-fertile breadbaskets and turned them into wastelands of hunger. By contrast, starvation has long since ceased to be a problem in South Korea, which when bad weather strikes, can simply import food from abroad. Food security, then, comes not from self-sufficiency but from openness to world markets.

And despite the world’s growing population (and occasional price spikes), real commodity prices have actually fallen about 1% per year for over a century. The world is not, in short, running out of minerals, fuel, or food. If anything, humans appear to be growing ever more efficient at producing their victuals. Consider that, taken as a whole, in 2005 twice as much grain was produced from the same acreage as in 1968. As logical economics would predict, humans become more efficient at using a resource as that resource becomes scarcer.

So let’s try to be optimistic for a moment: for the past 200 years, even as populations have increased and as natural disasters have come and gone, human standards of living have increased at unprecedented rates around the world. Why surrender to pessimism now?

Aaron McKenzie
Research Fellow
Center for Free Enterprise, Seoul

Update: This letter was published on 15 November, 2011.

Only $200 for 14,400 bits/second!

noreply@blogger.com (Aaron McKenzie) — Wed, 09 Nov 2011 11:55:00 +0000

Walter Mossberg, technology writer for the Wall Street Journal, dug back into his archives for this week's column and unearthed his reviews of several tech products from years gone by. The whole piece is a charming bit of nostalgia, and well worth your time, but here are a few samples:

The pocket-size phone: In January of 1992, I declared Motorola's MicroTac Lite to be the first mobile phone you could carry easily in a pocket. It was the first to weigh under half a pound and was "only" an inch thick—about triple the thickness of a slim smartphone today. It cost between $1,500 and $2,500.

Faster modems: Though it would be hardly recognized today, the external dial-up modem was a crucial device in connecting computers around the world. In June 1993, I recommended a popular $200 model, the Sportster, from a company called U.S. Robotics, that had gotten to the amazing speed of 14,400 bits per second. Comparing it with a broadband connection now is like comparing a bicycle to a locomotive.

Color digital camera: In 1994, the Apple QuickTake 100 could store up to 32 shots for a mere $700.

Reading Mossberg's piece, my mind flashed back to this recent Econtalk episode in which Russ Roberts and Bruce Meyer discuss the difficulties of measuring inflation and inequality. Consider, for instance: my 64 GB iPod touch, which I bought in 2010, holds more than 10,000 songs, keeps my calendar and alarms, sends SMS messages anywhere in the world, and also allows me to talk on Skype - all for about $400. Ten years ago, even the wealthiest plutocrat on the planet couldn't get his hands on such a gadget, yet here I am, living far outside the top 1%, walking around with said marvel. Just consider for a moment what implications this has for inflation and inequality statistics.

Mind Your Own Business

noreply@blogger.com (Aaron McKenzie) — Tue, 08 Nov 2011 12:23:00 +0000

Here's a letter I sent to the Joong-Ang Daily today:

To the Editor:

Late last week, Representative Sohn Hak-kyu, chairman of the Democratic Party, suggested putting the Korea-United States free trade agreement on the ballot as a referendum. (“To Kill FTA, DP Proposes Putting it On the Ballot,” 5 November, 2011)

Given the political left's recent successes in the school lunch referendum and the Seoul mayoral election, Sohn may have good reason to believe that a public vote on the KORUS FTA would result in the agreement's demise. As an additional benefit, Sohn and his DP colleagues can now tout themselves as champions of democracy, allowing citizens a direct say in their nation's economic policy.

Putting aside the economic merits of the KORUS FTA, however, this use of the democratic process would be an assault on a core tenet of human liberty. Free trade, by definition, requires neither government agreements nor approval at the ballot box by those who are not party to any given exchange. If Jim and Mary wish to make a peaceful trade between themselves, why should Bill and his buddies have the power to either approve or veto this exchange? Similarly, if I wish to buy an American car, why should Sohn Hak-kyu have any say in the matter?

The freedom of association – to choose one’s friends, spouse, workplace, and business partners – is a fundamental feature of a free society, a feature of human dignity which does not require the approval of voters. Sohn and his DP colleagues would thus do well to mind their own business and leave consenting adults free to order their affairs as they see fit, regardless of where on the planet they happen to be standing.

Aaron McKenzie
Research Fellow
Center for Free Enterprise, Seoul

Postscript: This is as good a place as any to announce that, as the sign-off to my letter indicates, I recently accepted a position with the Center for Free Enterprise here in Seoul. Thanks to President Kim Chung-ho and Director of International Relations Casey Lartigue for the opportunity. Here's hoping for much success in needling, pestering and bedeviling the Forces of Petty Harassment!

Intentions are Not Results: Korea's Minimum Wage Swells the Unemployment Rolls

noreply@blogger.com (Aaron McKenzie) — Thu, 03 Nov 2011 00:24:00 +0000

Among the many disparate demands made by the Occupy Wall Street movement is a call for an increase in the minimum wage to as high as $20/hour (U.S. federal minimum wage is presently $7.25). Hearing this appeal, a thinking person might reasonably ask, "why not $25/ hour, or $50? Hell, why not $100?"

Why? Because, as apartment security guards (gyeongbi ajosshi) in South Korea are about to learn firsthand, minimum wage laws only help workers if employers are unable to adjust the number of workers they hire. This, however, is rarely the case: companies can generally hire fewer workers (and shift to technological substitutes) as the cost of labor increases. Indeed, Korea's gyeongbi ajosshis, through no fault of their own, are about to find themselves priced out of a job by the good intentions of legislators. But as Thomas Sowell has said, "intentions are not results:"

In a 2007 revision to the country’s minimum wage spearheaded by the Lee Myung-bak administration, lawmakers ensured that all paid workers would receive 100 percent of the minimum wage, 4,580 won per hour, and end exemptions that had allowed employers to pay less for certain occupations.

The revision did, however, allow an exemption for security guards out of concern that apartments would lay them off en masse when faced with higher paychecks. Instead, the Ministry of Employment and Labor allowed a five-year grace period, during which security guards, who would see their pay rise to 70 percent of the minimum wage, would make the full wage by 2012.

Not surprisingly, apartment complexes are opting to replace security guards with CCTV cameras and secure doors. Thus, as a result of the new increased minimum wage, upwards of 80,000 security guards may be soon find themselves without a paycheck.

Korea's minimum wage law is just the latest example of how well-intentioned legislation too often ends up hurting those whom it was supposed to help, in this case the poor and low-skilled workers at the bottom of the wage scale. It doesn't require an advanced mathematics degree to see that if the minimum wage is $10/hour, anyone whose hourly productivity is, say, $8/hour will be unemployable, as the employer would be losing money for every hour of that person's work. By contrast, if no minimum wage law existed, that employee would be employed and would likely earn about $8/hour, commensurate with her productivity.

Instead of signs calling for a $20/hour minimum wage, then, OWS protesters should carry signs reading "Increase the Unemployment Rate!"

Will on a Friday

noreply@blogger.com (Aaron McKenzie) — Fri, 28 Oct 2011 06:51:00 +0000

Yet again, the end of a month has crept up on me and dropped a load of paperwork in my lap, leaving me little time to torment your inbox and RSS feeds. This being Friday afternoon in Seoul, however, I'd like to send you into the wekend with this recent gem from George Will, who, in addition to being one the best writers working today, is also generally correct about most things. For instance:

Passing through a U.S. airport is an immersion in a merciless river of words. They are intended to be helpful, but clearly they flow from an assumption that increasingly animates our government in its transactions with us. The assumption is that we are all infants or imbeciles in need of constant, kindly supervision and nudging, lest we allow ourselves to be flung off a moving walkway and over the edge of the world.

In Denver, underground trains take passengers to and from the ticketing area and departure concourses. As a train arrives, an announcement slightly louder than the noise of the arriving train says: “A train is arriving.” Do tell.

At Kansas City’s airport, a recurring announcement tells travelers: “Designated smoking areas are located outside, away from doors.” That means the designated smoking areas are pretty much the entire Midwest and everything contiguous to it — all of Creation that is “away from” this airport’s doors.

Read the rest here.

Support the Drug War for Ethical Reasons? Then Oppose It.

noreply@blogger.com (Aaron McKenzie) — Tue, 25 Oct 2011 04:15:00 +0000

"The more you support the drug war for ethical reasons, the more you should oppose it."

So argues Giancarlo Ibarguen in the video above, which notes that approximately 90% of the Colombian cocaine destined for the United States now passes through Guatemala, the old Caribbean routes now being heavily policed by the DEA. The value of this cocaine, before it even hits the streets of Los Angeles, Chicago and New York, is roughly $40 billion per year, approximately equal to Guatemala's entire GDP.

Not surprisingly, the drug cartels who control this trade are heavily armed and have no compunction about using these weapons to defend their territory. Moreover, the police and the justice system have been heavily infiltrated by this drug money, such that the average citizen is caught between crime and corruption, making Guatemala a dangerous place to live.

Most of these problems stem from the United States War on Drugs, implemented by President Richard Nixon in the early 1970s. Underlying this program seems to have been a belief that drugs like marijuana, cocaine, and heroin posed a threat both to the health of individual citizens and to the broader communities in which they were being consumed.

Yet, forty years on, it's doubtful that anything has ravaged American communities so much as the War on Drugs itself. A great portion of the crime in inner cities is associated with the illicit drug trade, either as dealers and gangs fight to protect turf, as users engage in theft to pay for drugs that, due to their black market status, are priced above open market value, and as innocent individuals are caught in the crossfire (both proverbial and literal). Thus, a policy that was supposedly designed to save lives and communities has had precisely the opposite effect. And this is only the effect of the drug war in the United States. The catastrophe is repeated in virtually every Central American, and several South American, countries, all of which makes Ibarguen's opening quote worth repeating: "The more you support the drug war for ethical reasons, the more you should oppose it."