[INSIGHT]Awakening the Sleeping Beauty

"Lord, it is time. The summer was immense." So begins Rainer Maria Rilke's poem, Autumn Day. But it plunges into bitter dismay toward the end. "He who has no house now, will no longer build."

To our dismay, the world's capitalist economy appears to be entering an unprecedented long winter.

The engine behind a capitalist economy is investment. Investment has expanded the economy by creating new means of production and supplying new products. Economic growth is the backbone of a capitalist economy and growth has been determined by the quality and size of investment. In particular, the economy grows fast when the amount of investment is large in comparison with the gross product or the total amount of existing wealth.

The so-called New Economy being molded through globalization and the spread of information technology has significantly improved the productivity of technology and capital. As a consequence, demand for labor and investment is rapidly declining. Decreasing investment is also curtailing consumption. The Japanese economy since 1991 has been the first victim of declining demand.

Japan was followed by the newly industrialized countries of East Asia, including South Korea, since 1997. Next came the United States and Europe beginning in 2000. In 2001, Taiwan and Singapore, countries that overcame the crisis in 1997, as well as Argentina, were battered by an economic downturn. The only exception is China, which continues to grow robustly.

The New Economy is moving the focus of economic activities from manufacturing to service industries and from capital investment to technology and efficient management. Capital investment across the world economy has been excessive － so much so that weapons and military supplies could be produced abundantly even during a large-scale war without new investment.

But in another sense, capital investment has not been so excessive; the economy today does not need extra investment except to replace existing infrastructure as it wears out.

The dynamism of the capitalistic method of production centered on investment and growth is disappearing. One of the most serious consequences of this trend is that it is becoming more difficult to get out of poverty and become rich through savings and investment. As it was the case with landlords and peasants during the middle ages, the rich will become richer and the poor poorer.

The free market economy without capitalistic dynamics will fall into a long coma like the sleeping beauty. In that story, when the princess falls asleep, everything else in the castle stops operating as well. The castle is the world and the princess is the advanced industrial economies. The Korean economy, which does not have a house to live in, will be sleeping out on the street during the winter.

Korean politics is structured in such a way that even if a deregulation takes place, a new regulation will immediately fill the gap. The tax burden on the Korean people is increasing. This is all because of a corrupt bureaucracy inherited from the Joseon dynasty, those who take political advantage of the peninsula's division and welfaristic populism.

As a result, Korea has become one of the most difficult countries in the world to do business in, to nurture global professionals and to merely be consumers. For the past 15 years, these decisive reasons why Korea could not become an advanced industrial country have become apparent.

The Korean people already know that whoever takes control of the Blue House, because of these inherent problems, Korea will set sail without a map and without flexibility and in the end will drift and drown.

Is there a strategy for the Korean economy to overcome the vices of Korean politics and to overcome the "autumn" of capitalism? Can it be the sole "awakened beauty" in the world?

Such a strategy should aim at maintaining large demand and worldwide competitiveness and at maintaining a positive current and capital account balance. Whether it be Pyeongtaek to Gunsan or Suncheon to Goseong, a large chunk of land should be set aside to establish a large, coastal, free market autonomous region, just like the one-country, two-system method China is using in Hong Kong.

The level of economic freedom there should be on a par with that of Hong Kong during the British colonial period rather than Hong Kong now. The economy of the autonomous region should be freer than any other economy in the world.

Phoenicia, Venice and Hong Kong were and still are free market areas that are independent from their contemporary domestic and international political and economic situations.

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The writer is the editor of the monthly Emerge New Millennium magazine.

by Kang Wee-seuk