OECD graphs

Financing SMEs
Government at a glance
Use of performance budgeting practices at the central level of government 2016 Korea 0.61 Germany 0.35
Coverage of collective bargaining agreement (Proportion of all wage earners with right to bargaining. Number of employees covered by collective agreements*100) Australia 59.10% in 2016 Korea 11.80% in 2015 Germany 56.00% USA 11.50% 26.3% in UK in 2016.
Exports by business size

Structural features of Germany and Korea

Self-employment rate is low because income tax rate is lower for personal income than for corporate income in Korea.

What proves a development economist's theory to be valid?

The excellence of the Korean economy in development and growth.

How to avoid mismanagement of globalization?

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.

Role of state gov - Division of labor between central and local governments- Germany and Korea

일자리가 최고의 노후복지를 가능하게 한다. 국민연금에 해당하는 social security and 퇴직연금에 해당하는 pensions 는 고용사회부가 맡는다 belong to the mandates of the Labor and Social Affairs Ministry.

중소기업 지원과 혁신지원에 관한 실질적인 정책을 수립하고 집행하는 정부기관은 한국에서처럼 중앙부처가 아니라 주정부이다. 중앙부서는 중소기업지원기금을 조성해서 지방정부나 은행을 통해서 간접적으로 지원하는 역할에 그친다. 현장실정에 대한 지식을 갖지 못하는 상부조직의 겸손한 역할분담이다.

주정부는 학습조직a learning organization이다.
주정부는 경제정책을 수행함에 있어 수족역할이 아니라 두뇌역할을 수행한다. 주정부 경제장관은 대학교수(Dr Prof) 출신이다.

"Competition is the engine of a market-oriented economy.
Competition forces the market participants to technical and cost-optimizing innovation."

"Every region has specific strengths, potentials and opportunities that need to be developed, released and above all exploited."

이젠 국가간 경쟁보다 지역간 입지경쟁이 더 치열하다. "the regions are in a position to position themselves externally - for example in international location competition." 주정부장관이 climate change대응방안협의를 위해 미국의 california주를 방문한다.

주정부 경제정책의 주된 책무는 다음을 포괄한다. 한국에서는 중앙정부가 수행하는 기능들이다.
Wirtschafts- und Wettbewerbsrecht
Regionale Strukturpolitik
NRW auf Messen
Unternehmensverantwortung
Marken-/Produktpiraterie
Innovation & Märkte
Digitalisierung
Mittelstand & Gründung
Standort NRW
Energie
Klimaschutz

예: State government of NRW in Germany

Leitmarkt-Strategie und Cluster in NRW: 선도시장에서 입지 구축을 위해서는 중소기업(학습조직)들의 학습능력을 드높여야 한다. 이를 위해서는 지역클러스터의 발전이 중요하다.
"The cooperation of all players from the economy, science, culture and politics along value chains is an essential component of the successful development of the lead markets of the future." All players come to each other to enhance productivity of the others.

Provincial governments in Korea have become a branch unit for execution of the policies made by the central government because most of the fiscal resources are bestowed upon the central government.

헌법 전문 다시 쓰기 - 퍼온 글

http://owal.tistory.com/379#comment13185972http://owal.tistory.com/379#comment13185972

김진호 헌법 전문 다시쓰기

The National Pension Act of Korea is unconstitutional!

The next generation does not know about the potential robbery that the contemporaries make to them through the National Pension System. The Act violates the promise declared in the preamble of the constitution. 

Let's see first the preamble of the Constitution of the Republic of Korea. It states that we, the people of Korea, will "secure security, liberty, and happiness for ourselves and our posterity forever."

* 헌법 전문:  "우리들과 우리들의 자손의 안전과 자유와 행복을 영원히 확보할 것을 다짐한다." (English) "To elevate the quality of life for all citizens and contribute to lasting world peace and the common prosperity of mankind and thereby to ensure security, liberty, and happiness for ourselves and our posterity forever."

In order to ensure security and happiness of both the contemporaries and their posterity, the pension system needs to be actuarially fair - that is, the present value of lifetime contributions should be equal to the present value of lifetime benefits (Queisser and Whitehouse 2006). However, the National Pension System (NPS) by design undermines the economic safety of the next generations. 

"The inter-generational inequity comes mainly from the actuarially insensible structure (design) of the system (Phang and Shin 2002)."

The National Pension Act has incorporated the principle of income redistribution into the system at the cost of the actuarial fairness. The Act is silent about the interests of descendants. It states the purpose is to stabilize living conditions and improve the welfare of people by paying pension benefits in the event of old age, disability and death.* The people in the act involves only today's workers, eligible persons to vote, and not tomorrow's workers. The scheme transfers income not only from the contemporary rich to the contemporary poor but also from tomorrow's workers to today's workers. Consequently, the pension scheme is unsustainable.  

* 국민연금법 제 1조: "이 법은 국민의 노령, 장애 또는 사망에 대하여 연금 급여를 실시함으로써 국민의 생활 안정과 복지 증진에 이바지하는 것을 목적으로 한다."

To serve as an ongoing program, the parameters of the plan needs to be adjusted so that the system can become actuarially fair. 

Korea can learn from Germany. In Germany, the contribution rate, fixed as a percentage of wage and salary income, is adjusted regularly to avoid imbalances in order to keep the balance (Vitols 2003).

The NPS is compulsory and pre-funded. Yet, it is actuarially unbalanced, thus unsustainable by design. The expected lifetime pension benefits that a contemporary contributor with average life expectancy is greater than his or her lifetime contributions. The present value of expected deficits is increasing over time by design. 

Notably, "all pension systems transfer output of today's workers to today's retirees (cf. Willmore 2004)." Yet, the NPS is unconstitutional because of the following reasons. 

First, the income redistribution by NPS is financed without explicit consent by the next generations. On the one hand, it enhances equity by pursuing incomes redistribution in favor of the low-wage earners. On the other hand, it hurts equity because no contemporaries contribute to the income redistribution. Instead, tomorrow's workers finance the income transferred to the contemporary rich as well as the contemporary poor.

Second, the NPS is unsustainable. 

Not all pay-as-you-go pension systems are unsustainable. For example, for a actuarially balanced system, the present value of expected deficits is zero.

However, the present value of expected deficits will ever be increasing in the future for the NPF. The third fiscal forecasts of the NPS in 2013 shows that its expenditure will start to be larger than the income of NPS from 2044 and onwards. The pension fund will increase to 2,561 trillion won  (49.4% of GDP) in 2043 and then decrease to negative 214 trillion won in 2060 (Ministry of Health and Welfare 2013). According to this forecast, it is predicted that capital markets in Korea will melt down long before the National Pension Funds are depleted, i.e., the year 2060. Speculators will short sell Korean papers and stocks as soon as they notice the reach of its maximum reserve level which will occur in around 2043. According to the updated results of the 5th National Pension Fund financial estimate published at 2023.3.31, the National Pension Fund is projected to increase until 2040, reaching 1,755 trillion won. However, it is expected to turn into a deficit in 2041, leading to depletion by 2055 . 

In a fifteen year period, we are likely to see the financial melt-down happening. It will be like an explosion of an atomic bomb. The current generation needs to agree to make the National Pension System sustainable.

There are two ways to ensure the sustainability of a compulsory pension scheme. One is to adjust parameters such that PV of lifetime contributions is equal to PV of lifetime benefits. 

The other is to privatize the compulsory scheme. Chile did so in 1980 when the pay-as-you-go plan was about to default. The government persuaded pension contributors to switch from the PAYG plan to a new individual account system. It is mandatory for firms to deposit 10% of wage and salary income to individual accounts. The government established a  specialized institution regulating and supervising the pension-fund asset management companies. The government also provides a means-tested guarantee of minimum pensions for all pensioners. It is criticized because of the meager benefits it provides. The rate of return was on average 8 % for the 35 years since its inception. Reform of the pension system is debated because, after commission, the rate of return falls to 3 % (Financial Times September 12, 2016; Bravo report 2015).

What should Koreans do if indeed neither is available?