Our country is not at the level of fifth-place students; we are still at the level of tenth or fifteenth-place students, so it's premature at this time. In thirty years, we could be in a position to implement these policies to prevent such situations from arising. We need to have these discussions. Until the 1980s, about twenty different schools of thought coexisted, competing, learning, and mixing with each other. However, since the 1980s, a specific school has monopolized the field, and now economics has become as monotonous as British cuisine was before the 1990s. Therefore, we can say that economics has regressed compared to the culinary world I have experienced. The nearly monopolistic school of economics today is the neoclassical school. One of the earliest schools of thought in economics is the classical school, and even if you don't know many others, I'm sure you've heard of Adam Smith.

In The Wealth of Nations, which is a book written by Adam Smith, the concept of the invisible hand is introduced, leading to the emergence of the classical school of economics. What Adam Smith emphasized was that the reason I can have dinner is because bakers, brewers, and butchers are supplying good food at low prices in order to make money. He explained that while humans act out of self-interest, competition in the market can lead to positive outcomes for society as a whole. He argued that the government should not intervene for the economy to function well, which is known as laissez-faire. 

The theory of classical economics posits that there is an economic class structure in the world. At that time, workers had a low standard of living, and there were many people willing to work but not enough jobs available.

They only work if they are given just enough money to avoid starving to death. However, because of this situation, when these people receive money, they just eat, sleep, and have children to raise, leaving them with no capacity to save. Therefore, the only classes that can save are the capitalists and the landowners. The landowners inherit their land and are part of the aristocracy, so they tend to spend their earnings on luxury consumption, such as hunting and balls, and end up spending all their money. The classical economists argue that a system favorable to capitalists must be created for the economy to develop because capitalists use their money to improve productivity; they buy machines and invest in factories to increase productivity. In contrast, the landowning class tends to waste their money. The neoclassical perspective, on the other hand, is a more individualistic form of classical economics.

So, there are no such classes; everyone is just an individual. If these individuals make rational choices based on their self-interest, the economy does well. However, this presents an important limitation of neoclassical economics. What this means is that this branch of economics accepts the distribution of income, wealth, and power as given, and then considers how to improve society on that basis. The most important ethical principle is that if any social change harms even one person, it cannot be considered an improvement. For example, there is a small country in Africa called Equatorial Guinea, which has a population of only about one million. It ranks among the 30 poorest countries in the world, but suddenly oil was discovered there. With the discovery of oil, the national income surged, and for a time, the national income was almost on par with that of South Korea.

The problem is that when you mention that oil, the president's family and their friends have it all. They go to Switzerland, own a villa, and drive Ferraris, while the citizens' standard of living is almost the same as before. In such a country, to fix this issue, something needs to be done about the president's family. If they say they can't give anything up when the situation changes, then nothing will happen. That's a problem too. So, while the theory of the new distribution has many excellent points, in this respect, it is a very systemic theory. It talks about how to make changes without altering the basic property relations, ownership relations, and distribution of power. This is a theory that sounds very appealing to those who have teams and money. As a result, in today's world...

If you don't understand the theories of neoclassical economics, you can't discuss how to govern society. So, this is something you need to learn. You need to understand what the advantages and disadvantages are, what the limitations are, and what they do well and poorly. Entrepreneurs play an important role in this. When we think of a successful company, we immediately think of entrepreneurs with exceptional visions, like Bill Gates and Steve Jobs. However, there is a problem with this perspective. While these entrepreneurs are indeed very important, if we overly emphasize individual abilities, we fail to see how companies actually develop and succeed. Consequently, the wealth that individuals enjoy can sometimes exceed the contributions they make to society, leading to the mindset that, Well, they must be taking what they deserve because they did well.

It makes me think, so let me explain. When capitalism first started, it was possible for a genius individual to completely revolutionize an industry with just five machines and a workforce of fifty or a hundred people, using simple technology. There were people in the past, like Cartwright and Arkwright from England, who introduced innovative technologies that completely changed the game. However, by the end of the 19th century, such entrepreneurs had disappeared. Nowadays, it goes without saying that by the end of the 19th century, the machinery and chemical industries became incredibly complex. One person could no longer understand everything, and even if they did, the workforce had grown to five thousand or twenty thousand employees. If those employees didn't possess the right skills and work hard, the company wouldn't succeed. Moreover, technology could no longer be solely attributed to a single genius.

Staying locked up in a room thinking, Oh, I guess I can do this, is not enough. It requires hiring hundreds of researchers to conduct experiments and develop technology. Since the late 19th century, not only entrepreneurs but also workers, engineers, scientists, and professional managers within companies have played a crucial role. Businesses are not run by individuals alone. Furthermore, if we look at it more broadly, the government also plays a very important role in the success of companies. In the case of South Korea, Hyundai Motor Company initially started by assembling imported cars in a small factory, but suddenly decided to develop its own model. The most significant reason for this was the South Korean government's announcement of the automobile localization plan in 1973. They stated that any company that did not develop an independent model within the next three years would have its licenses revoked. This resulted in companies actually going out of business.

However, now Hyundai has started to develop its own models, and at that time, it was a different company, Kia. So, Kia created a model called Brisa back then. After releasing that model, the government provided tremendous support. They trained engineers with national funds, and some were even sent abroad for studies as government scholarship students. Those individuals came in, developed technology, and turned the company into a globally competitive enterprise. The entire nation sacrificed together for this. Until 1988, the import of automobiles into South Korea was completely banned. This meant that the people could not freely purchase foreign cars, which helped support Korean automobile companies by guaranteeing the market. Ultimately, as the professor mentioned, successful companies do not achieve success alone. Indeed, everyone in our country contributed, while American companies operated independently.

Isn't it a success that happened on its own? Just look at Silicon Valley; it's all about startups and venture capital, right? However, the Silicon Valley in the United States is a group that wouldn't even exist without government support. The foundation of the modern IT technologies being developed in Silicon Valley is the U.S. government. Initially, the U.S. Navy funded the development of semiconductors. The U.S. Department of Defense invested money that led to the creation of computers, the internet, GPS, and touch screens. 

So, how do you feel about the current state of the South Korean economy? I've noticed that college students are facing extremely high prices at restaurants. How much are we talking about? Around 12,000 won for a bowl of soup. The cost of ingredients has gone up, and many places can't afford to renovate. Especially, energy prices have risen significantly.

Due to this, there is no industry that is not affected by rising energy costs. Everything is increasing, and food prices have also risen significantly, leading to a very difficult situation. However, this is not something that only South Korea is experiencing; it is a global phenomenon. What happened is that during the COVID-19 pandemic, the international supply chain was severely disrupted, making it difficult to maintain a smooth supply, which contributed to rising prices. Additionally, Russia's invasion of Ukraine caused a drop in the supply of gas and other commodities, further pushing prices up. As prices continue to rise, many governments have no choice but to start increasing interest rates. In other words, when prices go up, the idea is to raise interest rates to tighten the economy, which in turn is expected to lower prices. However, this has led to further complications.

In the financial sector, difficulties are arising. People have taken out mortgage loans at an interest rate of 2%, but suddenly this has jumped to 6% or even 7%. The repayment burden has become immense. As a result, those people are cutting back on their spending; for instance, instead of going to the bakery twice a week, they now go once every two weeks. Consequently, the baker's income decreases. This means the baker buys less flour and eggs, which in turn reduces farmers' incomes. We are now witnessing a global phenomenon where prices are rising while the economy is declining. What is even more concerning is that the current economic situation has not properly resolved the international financial crisis that occurred in 2008. This is how I see it. The financial crisis originating from the U.S. has struck our market today. What I mean is, for example...

In 1929, when the Great Depression occurred in the United States, President Roosevelt changed various economic policies. A significant part of this involved economic system reform. Many manufacturing contracts were made, but after the 2008 financial crisis, there has been almost no reform in manufacturing. As a result, the economy has not been able to recover. So, what did they do? They set interest rates to nearly zero. Lowering interest rates, which we have taken for granted after seeing improvements for over a decade, is actually a huge deal. It’s like saying that a baseball team would pay the same salary to a player who hits .300 as to one who hits .100, as long as they bring in revenue. This means that businesses can borrow money. If interest rates are, for example, 5% or 10%, companies that cannot generate returns above 5% or 10% cannot borrow money. Therefore, they lowered the interest rate to zero.

Moreover, money was pumped into quantitative expansion, but it didn't go to the real economy or to consumers and wage earners. Instead, it was just given to financial institutions. Now, with interest rates at 0%, any investment in decent assets seemed fine. However, when inflation suddenly hit, the interest rates were raised to 5-6%, causing assets that were previously stable to become non-performing. This situation highlights how artificially sustained the economy has been. As interest rates rise, cracks in the system are starting to appear. It is a very difficult situation, but in my view, the Korean economy is facing not only these short-term crises but also a long-term identity crisis, which is a much bigger issue. I believe this identity crisis is a significant concern for the Korean economy.

We are facing a problem, but we are currently in a long-term identity crisis, which is an even bigger issue. This is how I see it: the identity crisis. What does this mean? Our country has experienced tremendous economic development over the past 50 to 60 years, which has completely changed the social structure. As a result, society has transformed entirely; the extended family system has disintegrated due to industrialization and urbanization. With economic growth, as the nation's income increases, economic growth naturally begins to slow down. This has led to stagnation in economic growth, and on top of that, the welfare system is flawed, resulting in the lowest birth rate in the world. Furthermore, the proportion of non-regular and contract workers in the labor market is alarmingly high. Our country ranks first in suicide rates, first in elderly poverty rates, first in the gender income gap, and has the lowest birth rate in the world. Our welfare state is the second smallest in the OECD, only larger than one other country.

The smallest country is only Mexico. However, Mexico is a poor country with a national income that is less than a third of ours. In the past, the United States tried to include Mexico in NAFTA, the North American Free Trade Agreement, but they managed to get it included. So, it’s not a country at the same level of development as ours; in fact, it's at the bottom. This has created a very difficult situation. Look, our country is investing in stocks, cryptocurrencies, and even futures in the U.S. stock market. There are many people in the UK doing the same, but there is no other country like ours where the entire young generation is all-in on these investments. Among the new users of the top four cryptocurrencies, over six out of ten are in their 20s and 30s. But why is that the case? If young people in our country were to receive a life exam paper, it would be...

Going back to the past in a time machine and being born with a silver spoon, right? Investing, or something like that, and trying to succeed with a one in a million chance is extremely difficult. In this situation, it’s hard not to invest in cryptocurrencies. There are also people who criticize young people for engaging in such speculative investments, but I absolutely do not want to criticize them. I was born in 1963, and even in my time, just about ten years later, there were many people who succeeded despite being born into poor families. For example, Chairman Chung Ju-yung was born into a very poor farming family, and there are many judges, scientists, doctors, and bankers who came from similar backgrounds. But now, that doesn’t seem to be the case. Why do we have terms like silver spoon and dirt spoon? Young people have come to realize that their future is almost entirely determined by who their parents are.

In such situations, the choices we are presented with are truly heartbreaking. However, what I want to emphasize is that the young people who receive such exam papers should protest to the older generations. They should ask, Why can’t our country provide us with better exam papers? They need to demand that the exam papers be changed. Changing the exam papers means reforming our country's systems to create a social safety net through welfare policies. It should ensure that even those born into difficult circumstances can rise to the top if they have talent and work hard. We need to guarantee these basic conditions for a genuinely fair competitive society. Until the early 1990s, our country had a very limited welfare state. The ratio of welfare spending to GDP was only about 3%. However, even then, it was somewhat...

The reason we were able to endure was primarily because the economy was growing rapidly, which created a lot of jobs. As a result, there weren't many unemployed people, so the number of those who needed assistance was relatively small. Additionally, birth rates were high at that time, meaning that society was less aged, and the burden of supporting the elderly was lighter. Most importantly, there was a system of extended families, which acted as a welfare state. For example, if I had to take a few months off work due to an industrial injury, my siblings would cover the children's tuition fees, and if the elderly needed help, not only my children but also my nieces and nephews would come to take care of them, along with neighbors offering support. However, that era has now ended. While changing the welfare system is a good thing, the reality is that it's not something an individual can handle alone. So, for now, what can individuals do?

What can we do? Ultimately, individuals need to raise their voices. We need to continue to advocate for changes, discussing with those around us, and this collective effort leads to results. It's important to express opinions. If not, we might resort to extreme measures, like the decline in birth rates in our country. Women's labor is not properly recognized, there is gender discrimination in the workplace, and a supportive environment for childcare is not provided. So, what can we do? We might end up calling for a birth strike. If we want to avoid that, we need to talk about how to bring about change. We need to reduce working hours to have time to raise children, and we need to provide childcare support. Ultimately, if all citizens do not raise their voices, these changes will not happen.

[일타강사 하이라이트] 세계적인 석학 경제학자 장하준 교수가 알려주는 쉽고 재미있는 명쾌한 경제학 설명! , MBC 230517 방송

즐거움과 감동을 선사할 MBC 교양 공식 채널


From the critical documentaries that raise questions, to the heartwarming documentaries that touch viewer's heart, MBC is renowned for its high quality documentary programs. 

Enjoy variety of documentaries ranging from nature, environment, culture and countless more here at MBC Docu channel!

[일타강사 하이라이트] 세계적인 석학 경제학자 장하준 교수가 알려주는 쉽고 재미있는 명쾌한 경제학 설명! , MBC 230517 방송

Scripts