Building a start-up nation
A campaign stretching for 19 months is not usual in a Korean administration. Each government has had an economic slogan and projects to serve its purpose. It was Innovative Cluster for President Roh Moo-hyun and Green Economy under President Lee Myung-bak. Under the pretext of enhancing resources security, President Lee sent government officials, state enterprises and companies to shop for coal mines and oil fields abroad. The so-called resources diplomacy turned out to be a scandalous flop, causing colossal financial losses for the country and sending businessmen, bureaucrats and politicians to prison.
However, the transition towards Creative Economy - the economic catchphrase of President Park Geun-hye - is led by the president herself. Park was steadfast and devoted to the project. The last in a chain of innovation incubating and promotion centers across the nation sponsored by 17 business groups opened last week and the president invited heads of conglomerates to thank them for their support of the government initiative.
She was showing her hallmark of resoluteness. She had not wavered when Yoo Seong-min, floor leader of the ruling Saenuri Party, challenged her power. She pushed ahead with her plan to dismiss Yoo despite the risk of exacerbating criticism against her narrow-mindedness and domineering ways. It was exactly her quintessential obstinacy that saved the Grand National Party, now the Saenuri Party, from the verge of breakdown. Moving out of the headquarters building into a tent could have been a political show, but nevertheless was necessary to display humbleness and atonement from the conservative party ahead of the election. Only someone with a strong will and drive can push ahead with a plan that cannot be comprehensible and generally approved.
Few had paid any attention to the slogan “Creative Economy” when the president and her government first touted the idea, so vague and grandiose. The concept came across as too bleary and abstract in the beginning. It has now built up some kind of form and shape. The creative economy will be a new infrastructure based on the country’s strength in ICT to open new gates for Korean businesses and industries to advance further and faster into global markets. The gates will be open both ways so that any businesses of trials and errors will be able to regain strength on home turf to start anew.
Innovation cannot be possible without trial and error. A total of 17 base camps to incubate crusaders has been established across the nation. They are miniature versions of Silicon Valley with chaebol companies serving as a control tower at each to supply mentoring, consulting, technology, marketing and funding assistance to train and dispatch the army under their helm. It is a humble start, but nevertheless cannot be underestimated.
Korea had created and built heavy industries powerhouses in barren land without any resources in the 1970s.
President Park Chung Hee’s vision of creating and modernizing heavy industries in the 1970s had been a huge, even impossible dream. But he proclaimed six strategic industries and placed large companies in charge of each field: shipbuilding, steelmaking, automaking, semiconductors, petrochemicals and nonferrous metals. Industrial complexes were established under the government initiative. Advanced economies thought it a pitiful endeavor.
The industrialization process had been a series of trial and error and challenges. The country endured two major oil crises by sweating at construction sites in the Middle East. Chief executives staked everything to make sure the plants ran smoothly and helped win further orders. Rags-to-riches stories from entrepreneurs like Chung Ju-yung, founder of Hyundai Group, were possible. Large companies that had been responsible for the six strategic industries have grown into conglomerates. The cooperative and related industrial network added onto the pillars made the foundation of the Korean economic growth model. It was the collaborative work of the state, entrepreneurs and workers.
The funding mostly came from overseas through government guarantees. The astronomical lending from the World Bank and the International Bank for Reconstruction and Development went into the industrial sites. The government set the loan targets and provided the payment guarantees. The public went along through taxes and austerity. The government reined in the currency to peg it at 700 won against the U.S. dollar for 10 years to make imports for facility equipment and resources cheap.
The inevitable side effects took a toll on other parts of the economy. Light industry was devastated and people had to suffer from skyrocketing consumer prices. Heavy industries prospered at their expense and large companies became rich. President Park finally demanded that it was payback time. Rounding up chaebol heads at a conference on a creative economy, she asked for whole-hearted cooperation from conglomerates to share their riches earned from state devotion and public sacrifice to help the younger generation and rebuild the nation through innovation and creativity.
Skeptics would say all the hype will go away once a new administration steps in. A president’s initiatives usually die with the end of his or her term. It was so with Innovation Cluster and Green Growth projects. The economy and people had to go through the same ritual every five years. Some of the innovation centers have picked up life while others remain idle.
The Federation of Korean Industries, the interest group for conglomerates, has pledged 136 trillion won ($116.8 billion) for the next three years to promote a creative economy and find a new growth engine. The government, corporate and private sectors all must pitch in to keep the campaign of building a start-up nation alive. We must stop all the political wrangling and concentrate on creating a society where young people have hopes and retired people can go on working. The president’s resoluteness on this goal is something we all can learn from.
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, July 28, page 31
*The author is a sociology professor at Seoul National University.
by Song Ho-keun