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Wednesday, December 6, 2006
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Economic Liberalization Changes Human Behavior
Lee Jay-min
Professor of Economics
YonseiUniversity, ROK
Many adult Koreans must know what the “Korean time” meant in the past. It was a term coined by Western residents here to signify the fact that Koreans used to fail to be on time for appointments and feel that there was nothing wrong with being one or two hours late. The Korean people these days keep time like people in other advanced countries. Then, how did this term’s life end? Probably, export activities contributed to the fate of the term. Here is a related episode.
When Korea ’s export-promotion drive was in full swing in 1960s, a foreign buyer who visited a Korean shoe manufacturer told the president of the company that he would purchase shoes in large quantity if the sample he requested met the quality standards of his company. He said he needed the sample in one month by mail, as he had to return to his office next day. The president worked all night long to make the sample and presented it to the foreign buyer before he left Gimpo International Airport . The buyer, who was flabbergasted but impressed by his efficiency, became the company’s best client. As demonstrated in this case, all of sudden, “Korean time” became minus 30 days from plus one or two hours. As such practices started to spread nationwide, the original “Korean time” might have vanished at the same time.
What does this really signify? It has been possible thanks to the opening up or liberalization of the domestic market. The availability of imports at lower prices and the ability to earn foreign exchange through export are some of the benefits accrued by liberalization. The larger benefits, however, are changes in human behavior. Such larger benefits get even larger when the market of a country is open to advanced countries, where the advanced people are living. Changing the behavior of people through interactions with advanced people is the core of economic development.
The Korean economy has been able to achieve miraculous growth since 1960s, and more recently the Chinese, Indian and Vietnamese economies have been able to achieve speedy economic growth. These can be attributed to the changes in human behavior through liberalization.
A free trade agreement (FTA) between Korea and the United States will have such benefits, as well. Korea is not the Korea in 1960s any more. And it is also true that Korea is in different circumstances from that of Vietnam and China . However, as Korea is not a highly advanced country yet; it cannot be denied that further liberalization through FTAs will benefit the Korean economy.
The problem is, however, that such benefits are fragmentary. What contributes to the changes in the pattern of human behavior is not limited to trade and investment. What we “officially” learn from advanced countries is more important. Since the 1960s, the changes of behavioral patterns of the Korean people were due more to knowledge they directly acquired in advanced countries than to economic liberalization. Korea was the only developing country after the World War II that succeeded in reversing the trend of the brain drain, which became the essential foundation of the miracle of the Korean economy.
That was then. How is the Korean economy now? The Korean economy has long seen warning signals in many areas. According to an OECD survey, Korea ranked first among world’s major countries in the ratio of the R&D personnel who do not return to their own country after completion of their study in the United States .
Even without such statistics, a careful observation will reveal that the highest quality manpower has not come back to Korea for a long period of time. Then, is it possible for an FTA with the United States to solve this problem? Of course not. Economic integration with the United States without proper safeguards can even intensify brain drain. Problems associated with brain drain should be resolved through domestic reforms in such areas as education, science and technology, and housing.
In terms of such reforms, the incumbent government cannot be given high marks. In this respect, signing an FTA between South Korea and the United States does not seem to be an attractive means of getting benefits. But benefits realized through liberalization cannot be over-emphasized in countries like Korea . A Korea-U.S. FTA will have some benefits in this respect. However, the Korean economy is in a difficult situation in which it can no longer wait just for liberalization benefits. Proper government measures in many areas are essential now.
[The Korea Economic Daily, Sept. 15, 2006]
