The soil for the divided States of America has been fertilized by "mismanagement of globalization (Stiglitz 2017 in an interview with KBS."
Korea should stop following footsteps of the USA blindly in making policies on economy and setting up economic institutions.
Korea has created institutions that encourated individuals and firms to participate actively in the process of late-industrialization. As a result, it has succeeded in establishing prowess in manufacturing steels, petrochemicals, car, and electronics.
The key institution was the quasi-internal organization (Lee and Naya 1988, Lee 1992) - a regime of selective credit allocation to support the partnership between government and business groups for industrialization.
Manufacturing outgrew labor-intensive to capital-intensive industries. Meanwhile, politics has evolved from an authoritarian to democratic system. However, the stronghold of the government remained as the dominant economic policy paradigm.
Unbalances have emerged.
Note that the workers who have grown old in capital-intensive industries can be replaced by young and unskilled workers as well as robots unless they act collectively against managements.
Old workers with skills for handcrafts cannot be easily replaced.
A transition away from goverment-led growth strategy entails liberalization of controls. Financial deregulation under a centralized control often means that individuals are free to pursue self-interests at the cost of public interests.
How can a country let banks pursue self-interests to serve public cause? Germany provides an economic model that harmonizes individual self interests with public interests.
The keys to the model include (1) decentralized governance of government and two out of three pillars of banking system, (2) long-termism, and (3) regionalism.
A clue to forging ahead of advanced economy is to motivate and empower people to make innovations.
Banking industry shall be inhabited by an optimal mix of centralized institutions and decentralized institutions.
Korea should stop following footsteps of the USA blindly in making policies on economy and setting up economic institutions.
Korea has created institutions that encourated individuals and firms to participate actively in the process of late-industrialization. As a result, it has succeeded in establishing prowess in manufacturing steels, petrochemicals, car, and electronics.
The key institution was the quasi-internal organization (Lee and Naya 1988, Lee 1992) - a regime of selective credit allocation to support the partnership between government and business groups for industrialization.
Manufacturing outgrew labor-intensive to capital-intensive industries. Meanwhile, politics has evolved from an authoritarian to democratic system. However, the stronghold of the government remained as the dominant economic policy paradigm.
Unbalances have emerged.
Note that the workers who have grown old in capital-intensive industries can be replaced by young and unskilled workers as well as robots unless they act collectively against managements.
Old workers with skills for handcrafts cannot be easily replaced.
A transition away from goverment-led growth strategy entails liberalization of controls. Financial deregulation under a centralized control often means that individuals are free to pursue self-interests at the cost of public interests.
How can a country let banks pursue self-interests to serve public cause? Germany provides an economic model that harmonizes individual self interests with public interests.
The keys to the model include (1) decentralized governance of government and two out of three pillars of banking system, (2) long-termism, and (3) regionalism.
A clue to forging ahead of advanced economy is to motivate and empower people to make innovations.
Banking industry shall be inhabited by an optimal mix of centralized institutions and decentralized institutions.
