How To Restore Productive Capacity and Spur Innovation in Korea

Many of the regular readers around the globe visiting my blog know the current state of the global economy and where it is going. With biflation, global forces gaming the system and incompetent governments in the picture, many may feel that there isn’t much we can do until there is a significant reset. And yet, many of us also feel that we ought to continue to educate people as much as possible and keep a society we belong to from falling further, not just for the sake of ourselves, but for the sake of future generations. After all, life is a gift from God.

One of the main themes of this blog is that productive capacity and innovation are the wealth of a nation. I have stressed why they are the backbone of a nation’s well-being both in economic and social sense. I have discussed how Korea has built its productive capacity and innovation competence in the course of industrialization and why they are facing enormous challenge. As pointed out, Korea’s manufacturing base has dwindled since the 1997 financial crisis due to several reasons. In the midst of global economic slowdown with bubbles unwinding, what are the urgent things Korea needs to do to restore its productive capacity and spur innovation?

-Don’t pick winners and losers in manufacturing sectors and emerging industries; let market forces decide. This practice has done more harm than good in the long-term. For example, it has stifled real competition, failing to allow new entrant with new ideas to enter the market and compete.

-Create social culture where job creation, not personal wealth is revered

-Provide the necessary skill sets to future entrepreneurs. This may include upgrading Korea’s engineering schools and revamp much of the current educational system of Korea

-Create an entrepreneurial ecosystem.

-Stop losing manufacturing jobs overseas; prevent offshoring jobs and industries.

-Stop providing subsidies, tax breaks, and regulations unfairly favorable to chaebols and set up regulation that create a level playing field to compete instead; Ban chaebols’ unfair practices

-Develop the tax structure and other incentives to attract foreign manufacturing operation.

-Prioritize spending in productive assets and oversee the national R&D funding; stop paying for non-productive stuff

-Prevent the further financialization of the Korean economy

-Move toward a more self-sustaining economy