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[OUTLOOK]Smokestacks, Exports and Inequality

If inequalities in income are inevitable in the world, we should attempt to export them.

May 18,2001
A certain college student has a lunch at the school cafeteria 20 times a month. It costs him 24,000 won ($18) a month. He keeps his mobile phone in his left hand at all times. He has to pay around 50,000 won per month for his mobile phone fee. I was told that his monthly allowance is around 200,000 won. I was not happy with the expenditure structure of his monthly allowance; I was especially troubled by his lunch. So I told him to spend more on lunch and pay less for his mobile phone. He just smiled at me awkwardly. It costs 1,800 won per meal for faculty staff at the cafeteria, and the fare looked a lot more nutritious.

I am not going to mutter about the prospects of our economy, comparing agriculture with the communications industry. It is not right to compare the two, even though not a small number of households spend more on communications than food. However, we can ask this kind of question. With regard to the industries that we have to have, what kind of relationship has to be established between smokestack industries and the information technology industry? If we go one step further, the question can be about the relationship between offline industries and online industries.

I belong to a generation which has felt hunger pangs, so we all put hunger and thirst first; we can not make our stomachs feel full by eating a telephone. Of course we know how to disdain a complacent pig. We also know how to import meat by selling telephones.

However, the calculations of economics are not animal-like. Regardless of the fact that rice is much more important for a human being's survival, if the value added from the production of rice - in other words, income from producing rice - is less than that from communications services, the economy will prefer telephones to rice. The problem is how much value added will be produced by information technology. That is not certain yet, and there are complaints that our economic preferences are producing income inequality, not rising incomes overall.

But the answers may be unexpectedly close to us. One answer could be to turn to our eyes to where production of value-added is certain. In other words, we can change the information technology industry into something like a smokestack industry.

For example, instead of competing for subscribers for mobile phone service we can focus on research and development and expanding our infrastructure so that we can create jobs and raise income equal to that of conventional smokestack industries. We are producing only 55 percent of the parts and materials in a mobile phone, today's so-called a cash cow. Why aren't we doing more?

One other answer is diverting income inequality to other countries. Yes, we can not say things like this publicly, but if income inequality is unavoidable, is it not better to have it abroad rather than here? Only a limited share of the total income of the world can be traded. The battle to get more than others out of the limited amount of income can be called "the war of exports." Thanks to developing our information and communication industry earlier than others, we have competitive edges in this area. Of course, the domestic market will be bustling again with the next generation of mobile communications. However, the demand will be met again sooner or later, just as the demand for the current generation of mobile communications has already been met. If things go that way, we have to knock on the door of the world market. That is why I am arguing for the specialization of information technology in our exports. We are not in a position to worry about the gap between the rich and the poor of the world. This is the best option for our economy, which is still struggling near the periphery of the world economy.

Companies and the government surely understand that common sense. The problem is the pitfalls hidden in such common sense. For example there is a trend in our society that people hold up "new industries," including information technology, and give the cold shoulder to conventional smokestack industries. I too know that our economy will greatly benefit from taking orders by foreign countries for the new communication services. However, we should not forget that the textile industry, our first smokestack industry, became the first among our industries, earning $13.7 billion of the $16.6 billion in our trade surplus last year. Nurturing new industries should not lead to the demise of smokestack industries. I really hope that my worry over that possibility is groundless.

There is a house in Oeam-ri Asan, South Chungchong province, which has a smokestack under its floor. According to the owner's explanation, the smokestack was made in the Koryo dynasty days, and is much more efficient in warming rooms than a chimney on the roof. Pure white smoke hovered over ponds and courtyard and eventually rose to the sky. That was really something to see.

That's it. Let's take advantage of smokestacks while selling information technology. This is the first outspoken advice I give to the Korean economy.


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The writer is a columnist of the JoongAng Ilbo.


by Joseph W. Chung




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