OK can anybody explain how this stunt will help “revive the ailing economy”?
The heads of the National Council of Saemaul Movement in Korea distribute piggy banks during a nationwide campaign launched yesterday to revive the ailing economy at Sejongno, central Seoul. In the campaign, the council aims to distribute piggy banks to 1 million Koreans.
There are more than a couple problems with this:
1. How is delayed consumption supposed to grow the economy considering most economic growth is through consumption and the related multipliers?
2. If you wan to take the pure Keynesian view of savings equaling Investment spending (via lending), how is a company going to borrow and spend that money when it sits in a plastic pig?
3. How does it help to save when times are lean? Basic intuition says you should save when times are good, whereby the times when things go bad are not so bad. Why wasn’t the National Council of Saemaul Movement distributed piggy banks a year ago?
{ 11 comments… read them below or add one }
During the Korean IMF crisis the media told us to be frugal and put our money in the bank. They spoke negatively about the rich spending too much money during hard times. The stupidity was nauseating.
well, some people should do exactly this. Put their money in a plastic jug.
these economic theories are assuming there is a reasonably smart person behind the actions.
if all the US homeowners who defaulted kept their monies in a plastic jug, instead of buying 2 houses they couldn’t afford,
we arrive at the conclusion that there is no global recession.
goodness. if only the world were as simple as the way you analyze it, Dram_man.
And some ladies go to fancy clinics in Apgujeong and literally put their money into plastic jugs.
Cheap shot at the US consumer by the way.
you also forget that piggy banks were supposed to be filled up at home, and given to the bank, when it was full.
the key word here is given to the bank, when it was full.
beats me why not give to the bank in the first place.
my guess is to avoid giving the bank baek-won at a time, and wasting their time.
you probably missed out on the all-too-important South Korean gradeschool education.
don’t send your children to waegookin hakgyos. They probably don’t hit their students or teach them Korean Things 101.
Am I the only reader of this blog who pines for the good old days when it was only the marmot himself that blogged?
The NE Asian development model is as follows:
The countries (Japan, Korea, Taiwan) have nothing in terms of raw materials or industrial capital (factories, machinery, power grids, chemicals manufacturers, etc). It’s post WWII, and they’re poor. They also lack the domestic ability to make the good things in life for themselves. Hence, national wealth can only be increased through trade; specifically, maintaining a positive balance of trade.
They create a social contract: a strong man will take control of government. A few favored industrialists (chaebol) will have access to ALL of the nation’s wealth, so that they can build up capital-intensive industries to manufacture export goods. And the people will work hard, for two reasons. One, they’ve been indoctrinated with a large dose of nationalism, and two, their standard of living will continuously increase. The social contract involves tolerating limited political freedom and a tightly controlled economy, but in return, the chaebol agree to overemploy people and accept poor efficiency/productivity on a per-worker basis.
This process began with sewing machines and continued on to supertankers. But although the people were willing, the government dedicated and the chaebol ready, they needed factories, oil, chemicals, machines, computers, and credit. Capital. And they had precious little of it. Some came from overseas, but these countries were never willing to allow foreign ownership, and that limits investment. So whatever capital was available at home HAD to be directed toward the exporters, the chaebol.
We get now to Dram_man’s conundrum: In the current global financial crisis, it is apparent to everyone who can read a headline that consumers are being begged to consume, that the way to salvation and economic revival is consumption at the level of the common man. (Let’s just take this at face value, since it’s another discussion). But for those few glorious decades of NE Asian economic Tiger-growth, domestic consumption was drilled out of people as a selfish act that, in almost a zero-sum fashion, deprived the nation of the ability to grow and improve. There were infrequent occasions where campaigns were put on to place a washing machine in every home, but by and large, the way the people could help the nation to progress economically was by putting their money in the bank, so that society’s elites could go about the task of putting that money to work for the betterment of all.
And that sad little photo linked in the original post is just a completely thoughtless, unconsidered bit of innocent loyalty to a bygone development regime that has long since past its age of usefulness.
PS – of course, you can be generous enough to give them credit for the gigantic mental leap of periodically transferring the coins from the piggy banks INTO actual bank accounts.
The exchange rate sucks. Things seem ripe for the Japanese to come in and buy up Korea. They may even be able to get Dokdo at a huge discount.
Japan’s appreciating currency is going to kill alot of exports and send the economy into a deep recession. Its already in a recession as I type this.
Seems like the US & Europe will most likely start influencing Japanese domestic policies after this global crisis especially given the rate of foreign ownership in Japan’s economy.
#7: One irrelevant nitpick detail, Taiwan was not really that poor at all; they were generally a port city and so wasteful war related infrastructure wasn’t built while fighting was minimal and before Chiang and Co jumped ship, they took as much of the mainland shinies they could transport.
correction: city -> region. probably not right either, but it’s marginally better
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