Creativity and destruction

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Creativity and destruction

A government must be as simple, clear and detailed as possible in setting its policy goals. Otherwise, it can create confusion in execution of its policies and undermine the predictability of them. In this respect, the concept of “creative economy,” which the Park Geun-hye administration has accentuated as one of its top priorities on the national agenda, needs to be defined with more clarity.

The term “creative economy,” which has been employed by countries like the U.K. and international organizations since the dawn of the 21st century, refers to creative industries powered by new ideas, creative minds and intelligence rather than capital and labor as in traditional economies. It combines and incorporates art, culture and innovation in an economy to pave the way for new types of industries.

But what the government aspires to is not only incubating and energizing creative industries but also transforming the economic structure of the country itself to make it more efficient and vigorous. If so, the concrete goal of the government is clear: It must focus its policy direction on creating an economic framework or corporate environment to breed the paradoxical proposition of “creative destruction” - the term coined by economist Joseph Schumpeter - which is a process of revolutionizing an economic structure from within by destroying the old to allow the birth of the new.

Needless to say, the job should not be limited to the fledgling Ministry of Science, ICT and Future Planning. It really should involve the entire government to ensure consistency in the direction of the policy.

Schumpeter, one of the most influential economists of the 20th century, shaped modern thinking on economic evolution by describing a process of creative destruction as an essential aspect of capitalism. According to his theory, the free market and capitalism evolve through entrepreneurs creating new industries, adopting new ways, innovating new products and markets promoting new businesses and jobs while replacing preexisting ones.

Of course, Schumpeter saw the process of “creative destruction” from a long-term perspective, an evolutionary process over decades. But I believe the concept can also be usefully employed as a short-term policy tool, which could be a primary goal for the government’s creative economy agenda.

To facilitate the process of creative destruction, the government should provide a fertile ground that motivates and inspires creativity and entrepreneurship in every one of us so it could generate destruction of the old and tired and creation of the new and bold. Its first job should be deregulation and liberalization on the pan-government level. I would suggest that the government consider institutionalizing meetings for deregulation and reforms for a creative economy - chaired by the president.

Along with deregulation and system reforms, the government should step up policy efforts to maximize creative enterprise and inventive corporate activities. Most urgently, individuals and small enterprises must be able to easily jump into new ventures and start up businesses based on new ideas. The government and society cannot guarantee success by small venture enterprises. But their failures should at least be respected as necessary growing pains for future success. Failure isn’t a shame in a creative economy. The only shame is not being creative.

Government authorities also must protect intellectual property rights of creative innovators and start-up ventures from predatory practices of mainstream economic players and powerful businesses.

In the longer run, the government must pursue reform in education as a part of fostering creative and adventurous minds down the road.

To achieve the goal of a creative economy, the government must first abandon its old ways of devising and running policies. In addition to its regular hiring of civil servants, the government must seek out specialists and professional experts as well as introduce an effective system to build connections with specialists in industry, the public sector and academia. Such a new mind-set should be extended to all government offices.

There is another important task the government must not neglect in the process of building a creative economy. As Schumpeter pointed out, creative destruction and capitalist evolution inevitably generate pain from the arrival of new industries and the extinction of old ones. Therefore, the government must pay special attention to the losses and the social cost they entail.

New methods of manufacturing and providing services and new markets and industries create new jobs and growth but at the same time they will inevitably lead to layoffs, family breakups, insolvencies, bankruptcies and imbalance in wealth and opportunities. The government has to come up with systems and measures to minimize the social burden.

More specifically, the government must work toward the goal of enhancing social security and the welfare system, and over the long haul it must embark on education reform while beefing up training and lifetime education for workers. The government should not forget that efforts to promote inclusive growth and social unity are a must to create a creative economy.

Translation by the Korea JoongAng Daily staff.

*The author, former deputy prime minister and finance minister, is adviser to the JoongAng Ilbo.

by Sakong Il
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