Somebody is either smarter than I expected, or reading this blog. Yesterday the government announced measures to fight inflation. Among them are reducing some tariffs on food products.
While I find it a good step, I find it curious at the same time the exact products and their new tariffs are not given. As I noted in my last piece on the topic, Korea maintains some rather prohibitive tariffs. One could cut a 500% tariff in half, claim boldly before the public that you cut the tariff in half, and still have a prohibitive tariff. And for those of you have not read my original post (or any Korean tariff schedules), 500% is almost a bargain compared to others.
What gets me to post today is not the news per-se. What gets me is the possible ass-hat from the Samsung Economics Research Institute the Joongang Ilbo quoted:
Experts were unimpressed. “These tax and tariff cuts are short-term measures. Inflation is an urgent problem and it is understandable but they are not fundamental solutions,” said Kwon Soon-woo, a senior researcher at the Samsung Economic Research Institute.
If Kwon is talking about these specific tariff cuts (that I have not seen), he could be making the same point I was previously. He may have even been being charitable by musing about a short-term effect. If not, I seriously beg to differ with Kwon.
A tariff cut will have some effect on the price short-term. However the big effect is long-term. If you cut tariffs enough you will have more people entering the Korean market, some with a definite competitive advantage. The advantage would drive competition, and thus lower prices even further. In the end you have both lower prices, and firms that use resources more efficiently.
All that gets me back to my original thought about the matter about the new president. The protectionist mindset is ingrained into Korean economics. Here you have one of the largest, and possibly most free-market, economic think tanks discarding the thought that lower tariffs could benefit the Korean economy, short and long-term. Up against a mindset like this, and the fact Lee MB is a prime product of the same system, I have serious doubts about his ability to impact, let alone change, the Korean economy.
17 Comments
maybe they’re just smarter than you, period.
I used to be totally free market, reading Milton Friedman and all. I still believe in the power of the market. But when I came here and saw all the manufacturing industry vs. Canada; I thought protectionism has benefited Korea.
Manufacturing moves offshore, and all that’s left are McJobs, banking and lawyers. The vast majority are left behind.
The benefit is gained from the open markets of others. If they resorted to the same mercantilism found here that industrial base you admire would be considerably smaller.
McJobs go to those without the skills wanted by the market. If those pursuing liberal arts degrees were to instead look at engineering, science, and math perhaps you’d see a thriving industrial base such as that found in Germany. Though wages get the attention it’s really the cost of production that matters - engineers are more likely to figure out more efficient ways of building things than an Art History major. If the cost of production is lower than that of India or China then the jobs stay home.
No need to worry though, there’ll soon be enough nursing home jobs for those who tire of flipping burgers.
engineering and science? Dont you teach english for a living.
I think I can officially sum up people on this blog.
Nerd gets rejected by American society.
Goes to Korea.
Gets rejected in Korea.
Comes to Marmot’s hole to vent.
Well, Smackem, that’s why we welcome insightful, sophisticated, socially well-adjusted commenters such as yourself.
I’ll always welcome your resentment.
Smackem does make point, abeit perversely.
One of later critisms of Thomas Mun (considered the father of Mercantilsim as a theory) was gold when it gets down to it is pretty useless. It has always amazed me how this is forgoten on both sides. Korea, Japan, etc. worry endlessly of keeping a positive trade balance, and the US worries about a trade deficit. Neither of them is sustainable. In the end you have to trade a good for a good (or a service).
(Actually in the modern age Mercantilsm is even worse. In Mun’s day you got a nice shinny metal that can be used for something. Nowadays, all the merchanlists get is fiat currency.)
Korea has to trade for something, and the laws of nature are no match for the laws of man. So Korea has gotten around its merchantalist barriers by importing services as a “workers”. And these workers are some of the same that economic realities that made Korean rich and made these workers less employable in their home countries.
It’s always amazing to me to see trade actualy balancing despite all the hair pulling of the “expert” chicken littles.
My major beef here is Korea (or any country for that matter) can either use the enevitable to their benefit or detrement. Either they can lower tariffs to create some great companies, or keep them and create many less-than-great companies. And the latter will only waste scarce resources.
It will be amusing to see whether, once your hangover wears off tomorrow, you’re able to understand what you wrote at 9:29 tonight. If it comes back to you, feel free to try a re-post.
Sorry Linkd, other than a misspelling or two, I stand by it sober. Its called “Trade”, not “Get Money”, for a reason.
Sigh…you stand by “it”. Lord knows why, but I reread #7 three times, and I can’t ungarble it enough to figure out what “it” is.
My favorite “Dram-manism” was awhile back when he wrote a long post on his blog calling for Westin Hotels to sue some Korean bar that called itself “웨스턴” mistaking what the bar had meant as a Koreanization of the word “western” as “Westin”.
That was pretty funny.
For me, the hideous, error-ridden prose of Dram_man all but cancels out any interest or respect I might have for his ideas and arguments. Friends shouldn’t let friends write that badly for a public audience.
Nope.
Some OT from today’s FT, of interest only to number-gazers. I personally had never seen any downside to mark-to-market. I think I still don’t, but this snippet is one of those things that makes you go “Hm.”
I was going to write something long (its rather hilarious they hoist the RTC as a petard of virtue given their argument). However I will just get down the major flaw I find in their argument, and thus makes it unconvicing to me.
What I find is the flaw here is the use of the term “clearning price”. The clearing price is where all the demand is matched with all the supply, and as you may expect since demand and supply changes at a whim you never reach it, its a long-run abstraction used for lack of anything better in economics. For example IBM shares closed the day at around $115, if that was the “clearing price” there would be no change in it for eternity. One could argue that the NYSE is as close to an efficent market as we have, and thus the $115 is a “clearing price” for IBM at the 4:30pm close of trading on March 6, 2008. If thats your model (and accept the FT’s implict assumption that the debt market is efficent), then whatever the price is now is the clearing price.
So to better appreceate that arguement, I would need to know what the hell the FT means by a “clearing price”
Jeezus, reading your blather is like having cold cement poured into my nostrils and waiting for it to harden.
What I found interesting was only this: we know that nobody will lend anyone any money right now. We know that’s because the banks’ finances are fragile. And they’re fragile because they’re holding US mortgage-backed CDOs that they bought for such-and-such a price, thinking they were AAA-rated investments with secure returns, just like a Treasury bond. And it turned out that they aren’t that secure at all. That’s the known knowns.
And we know that we don’t know what the value of all those CDOs are anymore. There is only one way to determine the value of something: sell it. The CDOs are not worth now what the banks bought them for last summer. But what are they worth? We don’t know. Nobody is buying, nobody is selling. No transaction, no price. The known unknown.
If the US gov’t stepped in and took even a small portion of that debt, then it could force a price, by selling for whatever it could get. But Ah! Wait. Then there would be a market. A price would be known. And all the CDOs held by all the banks could then be ‘marked to market’, and we would know not just the value of the CDOs, but the value of the banks that bought them.
And what would happen then? Unknown unknown.
Sorry for the unnecessarily harsh opening line, Dram_man. Must have been something in the water last night.