Comeuppance in the Korean Legal Market

In early 2008, I got myself worked into a lather on the subject the legal profession in Korea - and, more specifically, the difficulties one faces in trying to enter it. At the behest of the local lawyers' lobby, for example, the Korean government maintains tight quotas on the annual number of new lawyers entering the profession and also strictly controls which universities may operate law schools. This is, of course, a slick system for existing lawyers who, due to less competition, can earn higher wages and worry less about creativity in their services.

Well, as ol' Paul of Tarsus would say, "whatsoever those lawyers soweth, that shall they reap." As this story in the Dong-A Ilbo newspaper illustrates, those who face no competition tend to lose their competitiveness:

Major domestic companies have given Korean law firms 79 out of 100 points for competitiveness, and 83 percent of the companies say they could turn to foreign law firms should Korea’s legal market be opened.

[snip]

On whether they would turn to foreign law firms after the market’s opening, 71.4 percent or 35 of the legal departments of the 50 companies said they would do so for “certain sectors.” Just five companies (16.3 percent) said no.

Many Korean lawyers argue that the current barriers to entry into their profession are necessary to ensure high quality in the legal profession. This, however, is a bit like saying that no new watch companies should be permitted to enter the market unless they can meet the "Rolex standard." Nevermind that under such a system, very few people could afford to wear a watch, just as in Korea, few people can afford the services of a lawyer.

Moreover, to judge by the Dong-A Ilbo's story, the restrictions have done little or nothing to promote a high quality legal sector in South Korea. Quite the opposite, in fact: the protections afforded existing members of the Korean Bar have protected them from competitive pressures and lessened the need for innovation or improvement. Now, as these lawyers face the possibility of foreign competition, the consequences of such a cushy past are staring them in the face.

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An Open Letter to the Chairman of the Korea Fair Trade Commission

Perhaps the goverment should investigate itself.

Ho Yul Chung
Chairman
Korea Fair Trade Commission


Dear Mr. Chung,

The Joong Ang Daily newspaper reported today that the Korea Fair Trade Commission (KFTC) will open an inquiry into the prices of thirty commonly-used consumer items which are generally more expensive in South Korea than in other countries. While I, too, am curious about why each of these items is more pricey in South Korea, I am particularly keen to hear of your findings regarding the price of beer in the local market.

As Andray Abrahamian reported in 10 Magazine late last year, South Korea maintains a 30% tariff on imported beer, canned or otherwise (compared with 1% in the United States, and no tariff in China, Australia and the EU). Such trade barriers, of course, raise the price not only of imported beer but also of locally-produced beer, as the tariff provides cover for domestic breweries to charge higher prices. In addition, such import duties reduce the competitive pressures on local breweries to improve their product.

In the same story, Abrahamian details a few of the numerous restrictions on microbreweries, such as the difficulties faced in obtaining a license for a small-scale brewery. Moreover, microbreweries are not legally able to bottle their beer for off-site sales, such as in a supermarket. As with import tariffs, these restrictions nourish the market dominance currently enjoyed by the big breweries, namely Hite and OB, by crippling would-be competitors.

In light of the KFTC’s vow to enforce competition laws and protect consumers, I applaud your decision to look into the high prices that characterize the South Korean market. I trust you will find the current, government-mandated restrictions on the beer market to be of great interest in your investigation.


Sincerely,
Aaron McKenzie
Seoul

* * *

Tylenol, baby carriages, and the iPhone also made the KFTC's list of suspiciously high-priced items. In the case of Tylenol, the fact that the product is only available in licensed pharmacies (and not, as in the United States, on any supermarket shelf) might be related to its high price. Imported baby carriages, meanwhile, are subject to an 8% tariff (as are contact lenses and chocolate, which also made the list). Eliminate that import duty and consumers would instantly get an 8% discount on their purchase.

The high price of the iPhone (and iPods generally) in South Korea is a phenomenon for which I have yet to hear a full explanation. In March, 2009, Apple increased the price of iPods in Korea by up to 38% to cover the depreciation of the Korean currency. At present, however, a new 64 GB iPod Touch is going for $345 on Amazon in the US, whereas the same gadget will set you back $485 on South Korea's Gmarket. Exchange rates don't explain such a great difference. Something else is going on, but I'll be damned if I know what it is at the moment.


All tariff figures are from here.

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Al Gore Seeking Happy Endings in P-Town?

These Taiwanese animators really have a way of breaking down the news in ways we can all understand. Being from Portland, Oregon, the recent rumors that Al Gore got a bit too frisky with a local masseuse back in 2006 caught my eye. Now, in case you needed help visualizing the situation, NMA brings you the cartoon version of the story:

H/T: Huffington Post

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Two Questions

After living in South Korea for more than eight years, I've come to accept many of the local peculiarties, even if I don't understand why they happen. Why, for example, do office buildings always keep one side of their double doors locked? I never did get a satisfactory explanation to that question, and so I long ago just shrugged and gave up asking.

This week, however, two new questions have arisen. Perhaps someone with more knowledge of South Korea and internal combustion engines can enlighten me.

1) Why are so many South Korean universities built on hillsides?

Visiting a university in South Korea always amounts to a day of hiking. Seoul National University is the worst in this regard: its ugly, 1970s buildings sprawl across the slopes of Gwanak Mountain in Southern Seoul. SNU, however, is not alone. The locations of Yonsei, Ewha, Hanyang and most other schools ensure that in the summer you'll always be a sweaty mess when you arrive at your on-campus destination, and in the winter you'll spend most of your time on your ass as you try to negotiate the icy hills.

Possible reasons, inasmuch as my limited imagination has come up with any, include: real estate prices, government regulations, or some feng shui-related idea of which I'm not aware.


2) Why have Seoul bus drivers taken to turning off their engines at stoplights, even when they'll only be stopped for 3-4 minutes?

Off. On. Off. On. I've always been under the impression that constantly switching the engine on and off puts a lot of unnecessary wear and tear on the engine. Might the eventual money needed for repairs offset any gains in fuel saved (if such is the case)? Speaking of which, don't internal combustion engines require a fair amount of fuel to get started (that is, more than might be used by idling for a few minutes)? And what about emissions? Would they be higher by idling than by constantly cranking the engine up? I'm willing to admit that the bus company management knows more about their buses than I do, but in addition to the constant engine-starting being irritating for passengers (that AC doesn't work too well when the engine is off), turning the engines off and on at every stop doesn't strike me as the best way to treat a good bus engine.

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Musical Tuesdays: Doc Watson's "Shady Grove"

When I was about nineteen years old and working on one of my first journalism gigs for a small paper in Washington, DC, I happened to score press passes to the American Music Festival at the Kennedy Center. Headlining the festival were acts such as Chuck Berry, the Blind Boys of Alabama, Medeski, Martin & Wood, and other legends.

The musician who grabbed my attention, however, was an old blind guitarist from the mountains of North Carolina playing on a secondary stage at some odd hour of the afternoon. His name was Doc Watson, and that was the first I'd ever heard of him. Little did I know that Doc Watson is an American legend, one of the finest guitarists of the 20th century. Once you've heard that guitar and that voice, you don't forget the sound, much less mistake it for anyone else. Hard to believe - and a damn shame - that I managed to get through the first eighteen years of my life without knowing about him.

In the video above, Watson performs "Shady Grove" with David Holt on banjo. Bill Monroe made the song famous, but it has its American roots in the 18th century and likely dates back even further to an old English ballad, "Matty Groves." The song is about a man's love for a woman named, appropriately but oddly enough, "Shady Grove." For my money, this song has one of the most beautiful melodies on offer, and it seems to be one of those numbers that every bluegrass act takes at a stab at recording at some point. Yet, while many artists have recorded the song - including JJ Cale, Jerry Garcia, and the Chieftans - no one has done it better than Doc Watson.

If you're in the market for some more Doc Watson music, I recommend Doc Watson in Nashville: Good Deal!, Down South (with his son, Merle, a supremely talented musician who tragically died in a tractor accident), and Doc Watson at Gerdes Folk City.

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Running on Empty

Here's a letter I sent to the Joong Ang Daily this afternoon:

Small and medium-sized enterprises (SMEs) are often the wellspring of what Joseph Schumpeter called “creative destruction,” the free market’s untidy way of delivering progress and creating wealth. Unfortunately, in an attempt to help small, local service station operators, the Small and Medium Business Administration (SMBA) recently decided to force two E-Mart gas stations to shorten their hours, a move that will serve only to further weaken South Korea's struggling SME sector, all while making consumers a bit poorer. (“E-Mart should scale back gas station hours: SMBA,” 25 June, 2010)

In the late 1990s, the South Korean government launched a series of generous support programs for local SMEs. Not surprisingly, SME performance initially accelerated with the help of these programs, but in recent years the South Korean government has found itself sheltering a large number of uncompetitive businesses from the winds of competition. The SMBA’s recent decision is the latest perpetuation of this problem. As your article notes, the mom-and-pop operators are miffed that the E-Mart fuel stations offer “competitive prices and superior product selection.” Pray tell, how will the South Korean economy – to say nothing of small businesses in the long term - benefit if the government protects businesses which offer higher prices and inferior products?

In addition, consumers will take a direct hit to their pocketbooks as a result of this ruling. At present, no one forces them to frequent the E-Mart service stations. Rather, they are enticed by the prices and convenient hours offered by E-Mart. The SMBA, however, will soon force these consumers to patronize other stations, where they will pay more for lower quality products and services. Moreover, the extra money wasted on fuel is money that cannot be spent elsewhere - at other small businesses, for instance.

Ultimately, while the SMBA’s decision might benefit a few clamorous gas station owners, it can do so only by stunting progress and limiting choice for everyone else.


Aaron McKenzie
Seoul

Update: The Joong Ang published this letter on 1 July, 2010.

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Jose Saramago: The Good Communist?

The Portuguese writer and Nobel laureate Jose Saramago, author of novels such as Blindness, died a little over a week ago at the age of 87. For all the literary accolades he accumulated, however, Fernanda Eberstadt of The New York Times rightly points out that "Mr. Saramago was known almost as much for his unfaltering Communism as for his fiction." Writing in the Boston Globe, Jeff Jacoby argues that "had [Saramago] been an unrepentant Nazi for the last four decades, he would never have won international acclaim or received the 1998 Nobel Prize for Literature...But Saramago wasn't a Nazi, he was a Communist," which, in light of sheer havoc wreaked upon the world, is worse.

As Jacoby notes, Saramago's political leanings were largely treated as little more than a "roguish idiosyncrasy," the curious eccentricity of an otherwise good man. And yet, Jacoby contends that "the idea that good people can be devoted Communists is grotesque."

There was a time, perhaps, when dedication to Communism could be absolved as misplaced idealism or naiveté, but that day is long past. After Auschwitz and Babi Yar, only a moral cripple could be a committed Nazi. By the same token, there are no good and decent Communists -- not after the Gulag Archipelago and the Cambodian Killing Fields and Mao's "Great Leap Forward." Not after the testimonies of Alexander Solzhenitsyn and Armando Valladares and Dith Pran.

In the decades since 1917, Communism has led to more slaughter and suffering than any other cause in human history. Communist regimes on four continents sent an estimated 100 million men, women and children to their deaths -- not out of misplaced zeal in pursuit of a fundamentally beautiful theory, but out of utopian fanaticism and an unquenchable lust for power.

As the risk of suffering fools too lightly, I daresay Jacoby might be reaching too far in this instance. This is not to argue that Communism is not a terrible, destructive philosophy, but rather to say that fools are, by definition, easily fooled. And Communism is so insidious precisely because, as Michael Breen writes, "through its spurious claims to justice and equality, it appeals to nice people." The best that can be said of those who espouse Communism, then, is they are dangerously ignorant of history - despicably goodhearted fools who focus on stated intentions rather than on results and who are easily manipulated by those who are power-hungry and, yes, evil.

Jacoby is, however, right on target when he writes:

Communism is not, as its champions like to claim, an appealing doctrine that has been perverted by monstrous regimes. It is a monstrous doctrine that hides behind appealing rhetoric. It is mass crime embodied in government. Nothing devised by human beings has caused more misery or proven more brutal.

Having never met Jose Saramago, I can't speak to the moral nature of his character, but he clearly gets more credit for intelligence than he deserved.

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Joong Ang Daily: Kim Jong-il Being Duped by Subordinates

I'm always suspicious when news stories quote sources who claim to have a unique insight into North Korean politics. The country is a black hole of intelligence, especially when it comes to the machinations within the inner circles of power, which is why stories such as this - intriguing though they may be - have to be taken with due skepticism. If true, however, I have to wonder how Kim Jong-il, who reportedly stays abreast of international news, will respond when he clicks on the Joong-Ang Daily's website (or idiots' collective) and finds that his son and closest advisors have been doing an end-run around him for the past few years. Heads could roll all the way to Yodok for such shenanigans.

All that said, the article is still worth reading, if for nothing more than wonkish gossip. Besides, anecdotes such as this, even if apocryphal, just perfectly capture the absurdity at the core of centrally-planned economies:

To avoid reprimand, [Kim Jong-il's] subordinates are reporting that the economy is in better shape than it really is, the sources said.

For example, Kim visited a flour processing factory in Pyongyang in late January, but the factory was suffering from a shortage of wheat. To make operations look normal, Kim’s subordinates urgently secured some wheat to operate the production line during the visit. Kim stayed longer than expected, and the wheat ran out. Embarrassed, the subordinates put the completed flour through the production line a second time.

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PJ O'Rourke: "Don't Vote: It Just Encourages the Bastards "

For all the apparent calamities of 2010, the year won't ultimately be a complete bust. I say this because one of my personal heroes, PJ O'Rourke, is set to release yet another book this year. Don't Vote: It Just Encourages the Bastards should be on store shelves, appropriately enough, in time for November's midterm elections in the United States. In the video above, O'Rourke previews the book and talks, as well, about "committee brain," the Tea Party Movement, and the ongoing oil spill in the Gulf of Mexico.

While I obviously haven't yet read the book, I suspect it will cover some of the same ground as this recent EconTalk podcast with Don Boudreaux and Russ Roberts, in which they discuss the field of public choice. Boudreaux, who rightly sees politics - and politicians - without even a hint of romance, points out that Washington's majestic architecture and grand avenues tend to obscure the nefarious behavior that fuels the city. Specifically, what politicians essentially do is take resources from other people and bring them back to their home district for their benefit and the benefit of their friends. Not exactly conduct deserving reverence.

Says Boudreaux: "The fact that the people who commit that behavior are elected to office, have titles--that what they do is not legislated as criminal activity--does not mean it is good for society."

Fortunately, fellows like PJ O'Rourke are out there, ready to lampoon the whole spectacle.

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Hell's Angels. Puppies. Bulldozers.

Sometimes I wonder if news editors don't just pull out a sheet of Mad Libs and make up the day's top stories. How else to explain a story that begins thus?:

A German student created a major traffic jam in Bavaria after making a rude gesture at a group of Hell's Angels motorcycle gang members, hurling a puppy at them and then escaping on a stolen bulldozer.

You can read the full story here, but I guarantee you won't be any more enlightened at the end of the story than you were after that first paragraph.

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CFR: U.S. Policy Toward the Korean Peninsula

The Council on Foreign Relations recently released its Independent Task Force report on U.S. Policy Toward the Korean Peninsula. Unfortunately, the report was completed before the Cheonan incident - not that North Korean belligerence is a new thing - but the timing of its release makes for interesting reading.

In the video above, a few members of the task force share their thoughts on the current state of affairs on the Korean peninsula.

Update: Tom Coyner, writing in the Joong Ang Daily, is unimpressed with this latest output from the CFR.

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Matt Ridley: "The Rational Optimist: How Prosperity Evolves"

Here's a video very much worth watching, particularly if you're what William Safire would have called a "nattering nabob of negativism."

From Blip.tv: Matt Ridley, bestselling author of The Red Queen, Nature via Nurture, and other books, tells the story of human cultural and economic evolution in his latest work, The Rational Optimist: How Prosperity Evolves. Combining the best of economics and biology, he explains both the "how" and "why" of the amazing (and recent) explosion in worldwide human well-being. Against the pessimism of many of today's intellectuals and commentators, Ridley presents a compelling case for why progress will continue, but only if cultural evolution is allowed to develop in the direction of more contact, trade, and openness between people. (H/T: Cafe Hayek)

For more from Ridley on his latest book, have a look at this video from the Cato Institute, which includes an introduction by Brink Lindsey and commentary from Robin Hanson. If you don't like watching videos, have a look at Ridley's latest piece, "Ideas Having Sex," over at Reason Magazine.

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Wheatley on South Korea's Pluckiness

Alan Wheatley, writing in today's IHT, has the latest paean to South Korea's rapid development and its seemingly speedy recovery from the current economic crisis. For those of you who follow the Korean economy, most of the column will read like the standard boilerplate: Korea was very poor, now it is rich; Korean companies sure are impressive; the Korean government aims to be a hub in everything; larger neighbors, China and Japan, still loom as challenges and threats. And, as often happens when foreign columnists parachute into a country to write a quick column, the standard errors - gleaned from a cursory reading of the prevailing narrative - show up, too:

It rankles with policy makers that financial markets do not give full credit for these achievements, applying a “Korea discount” in part because of nervousness about the unpredictable behavior of North Korea, with which Seoul is still technically at war.

To be sure, a belligerent North Korea does not advance the reputation of South Korea's economy, but perhaps just as significant is the hit the ROK takes from the frequent corporate governance scandals - and the perceived failure of the judicial system to hold anyone accountable for them - as well as for the family ownership structures of the chaebol. Such matters are at least as integral as North Korea to the daily workings of the South Korean economy.

In addition, Wheatley does his part to advance the view that all things wonderful in South Korea owe their existence to uniquely successful government direction:

Above all, perhaps, South Korea has reaped the benefits of the sort of long-term, government-driven economic planning on display in Busan.

“Concerted and conscious efforts on the part of the public and private sector, working together, to discover and upgrade a comparative advantage: I believe that was key to Korea’s development experience,” said Wonhyuk Lim, director of policy research at the Korea Development Institute in Seoul.

I've been meaning to write more about Korea's development experience, and specifically the degree to which it offers a template for other developing nations. While the popular story holds that the South Korean government - especially in the 1960s and 1970s under Park Chung-hee - simply waved its magic wand and summoned economic growth, there is compelling evidence (also from KDI) to suggest that while the economy was certainly government-led, the growth was not. That is, the more the ROK government tried to orchestrate certain outcomes, the more the economy struggled (see: the HCI Drive of the 1970s).

Read Wheatley's piece for yourself and leave your thoughts below.

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My Princely Life

Man, you know I've enjoyed things that kings and queens will never have
In fact, things kings and queens can't never get
And they don't even know about it

- Howlin' Wolf

Seoul's Joong Ang Daily newspaper has a knack for understatement. A few days back, for instance, the paper ran an article under the headline "Some Salary Workers Now Eat Like Kings of Old." Which is true, of course: the variety and quality of food available to your average worker today surpasses what even the most powerful monarchs could easily obtain in the not-so-distant past, and at much cheaper prices. The article fails to point out, however, that the modern middle (and usually lower) classes of developed nations live better than the royalty of past generations not only when it comes to food, but in myriad other ways as well.

For example, my modest apartment has excellent plumbing, reliable electricity and windows that keep out the drafts. I seldom have to turn on my natural gas heat even in the winter, though the air conditioner does help a man make it through Seoul's sultry summers. That's about five points for me, zero for Queen Victoria - and she had to fret and stew about an empire.

I also have three computers and an iPod Touch, all of which are connected to the internet and which give me instant access to just about any piece of information I could want (except, perhaps, Charlize Theron's phone number). The computers and iPod will also, at my command, play just about any piece of music I want to hear, from a Chopin sonata to Ray Stevens' "Mississippi Squirrel Revival." Never once have I had to pony up the money to hire a wandering band of minstrels to provide my evening's entertainment. As far as I know, Louis XVI never had anything better than a Commodore Vic-20 computer, and he was always looking for new minstrels. That's another few points for me.

And just by walking into my local pharmacy, I have access to better healthcare than, say, Queen Anne, who, with her gouty foot, kicked the bucket at the ripe old age of 49. Again, points for me.

So while I may not have the power or prestige of history's monarchs, I do have a whole host of comforts and luxuries that, as Howlin' Wolf put it, they can't never get. Even better, I don't have their levels of stress. For the headaches I do have, however, there's always Tylenol. No doubt Edward VIII could have used some acetaminophen when the prime mininsters were running him out of office for proposing marriage to a commoner.

Thinking about all these stately pleasures reminded me of Don Boudreaux's essay, "Equality and Capitalism," published in The Freeman back in 2002. In it, Boudreaux imagines what our own commoner ancestors would think of the lives of today's wealthiest people:

Do a mental experiment. Imagine resurrecting an ancestor from the year 1700 and showing him a typical day in the life of Bill Gates. The opulence would obviously astonish your ancestor, but a good guess is that the features of Gates’s life that would make the deepest impression are that he and his family never worry about starving to death; that they bathe daily; that they have several changes of clean clothes; that they have clean and healthy teeth; that diseases such as smallpox, polio, diphtheria, tuberculosis, tetanus, and pertussis present no substantial risks; that Melinda Gates’s chances of dying during childbirth are about one-sixtieth what they would have been in 1700; that each child born to the Gateses is about 40 times more likely than a pre-industrial child to survive infancy; that the Gateses have a household refrigerator and freezer (not to mention microwave oven, dishwasher, and radios and televisions); that the Gateses’s work week is only five days and that the family takes several weeks of vacation each year; that each of the Gates children will receive more than a decade of formal schooling; that the Gateses routinely travel through the air to distant lands in a matter of hours; that they effortlessly converse with people miles or oceans away; that they frequently enjoy the world’s greatest actors’ and actresses’ stunning performances; that the Gateses can, whenever and wherever they please, listen to a Beethoven piano sonata, a Puccini opera, or a Frank Sinatra ballad.

In short, what would likely most impress a visitor from the past about Bill Gates’s life are precisely those modern advantages that are not unique to Bill Gates - advantages now enjoyed by nearly all Americans.

So much for the "good ol' days."

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Markets in Everything: Chinese DPRK Fans-for-Hire

I believe this is what the fellows over at Marginal Revolution would call an example of "Markets in Everything:"

Because so few North Koreans have the money or the permission to leave the country for the World Cup, the nation’s sports committee has recruited about 1,000 Chinese fans as surrogate cheerleaders, including actors and musicians, according to Xinhua, China’s state-run news agency.

Read the full article here.

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