A Bumpy Ride for South Korea's First Formula One Race

Over the past two-plus decades, South Korea has earned a reputation for putting on a solid international sports shindig. The 1988 Seoul Olympics, the 2002 FIFA World Cup (co-hosted with Japan), the 2002 Asian Games - despite some initial fretting, these events were widely considered to to have been successful showcases of South Korea. So when the country was awarded a Formula One race back in 2006, few doubted that Korean organizers would once again do themselves proud. Unfortunately, in these discussions, few ever bothered to mention the associated price tag.

This past weekend marked the first ever running of the Korean Grand Prix, held down in the puckerbrush of Yeongam, South Jeolla Province, near the coastal city of Mokpo. Despite four years of planning and construction, the event nearly didn't happen. South Korea was beset by unusually heavy rains over this past summer, which delayed construction (although rumors of poor planning were afoot long before the weather became a factor), thus forcing Formula One to break its own rules on track approval. Formula One circuits are supposed to have their final inspection and approval 60 days prior to the race, yet the Yeongam track was approved less than two weeks before the drivers burned rubber. Not content to simply delay track construction, the weather gods outdid themselves and dropped buckets of rain on the race itself.

While organizers cannot be blamed for the lousy weather of late, they certainly should have anticipated other problems that elicited gripes from the media and spectators. From the Joong Ang Daily:

For the Korean Grand Prix, the weather wasn’t the only factor that delayed and disappointed, as many accommodations had serious problems.

Scores of reporters, team members and spectators were assigned to sleep in so-called love motels - which are usually used by people for quick sexual encounters - since these places usually charge by the hour.

BBC Sports’ Jake Humphrey posted a photo on his Twitter account that showed the love motel he was assigned to sleep in, which embarrassed some Koreans.

Also, an Italian reporter who was also assigned to sleep at a love motel was shocked to find a bundle of used condoms under his bed. Another reporter said that his room had been used by others during the day. A French reporter even said he would never come back to the Mokpo area again.

In addition, the local roads leading to and from the track were not designed for such an influx in traffic, leading to traffic snarls that had many people, well, snarling. Several of my friends who attended the event also complained of a shortage of toilet facilities, and thus of long waits to relieve themselves.

Some of these problems can likely be attributed to inexperience on the part of the organizers, and I'm sure that next year's event (Korea has a contract for at least six more races) will run more smoothly. More toilets can be constructed, volunteers can be better-trained and thus more helpful, and construction crews won't be rushing to finish the track at the last minute.

That said, several of the problems cited by attendees won't be so easily fixed. For instance, few investors will be lining up to build new hotels for a three-day event that happens only once a year. Similarly, why should the South Jeolla government pour more resources into expanding road infrastructure near a track that, 362 days a year, sits empty?

In writing this, I am reminded of a 2006 paper by Darren McHugh, in which he conducts a cost-benefit analysis of the Olympic Games on the host city. Despite the clamor to host such events, McHugh finds that the net economic impact on the host region is substantially negative. I can't help but wonder if a Formula One event isn't in the same category. I suspect it is.

One hint that Formula One might not be a profitable venture: as private industry backs away from sponsorships, local governments are stepping in to fill the gap. From The New York Times:

Where private industry withdrew, the new races have one common backer: local governments.

South Korea passed historic legislation last year in the “F1 Act,” which supported the construction and management of the new circuit — the first time that the government had voted on an act to help a motor-sport project.

I have to ask: if private investors aren't clamoring for the opportunity to invest in Formula One events - that is, they see no hope of reaping a profit - why should local governments dump taxpayer money into what is little more than a high-profile money pit?

Given the less than stellar production values of the first Korean Grand Prix, I worry that the South Jeolla government will do what governments usually do when one of their programs doesn't work well: blame the problems on insufficient funding. The result will likely be more public funds - to subsidize, for example, hotel and road construction - down the drain. Such subsidies might well make next year's event run more smoothly, but at what cost?

Read More

The New Employee Perk in Korea: Metamucil and Depends

A local friend of mine - a 45 year-old fellow who works for a large Korean bank - learned that he will be taking not-so-voluntary voluntary retirement at the end of this month. He'll receive a severance package which includes, among other things, 36 months of advance salary. Of course, he won't even be 50 years old when that comes to an end, so how he finances the rest of his life, to say nothing of how he fills his time for the next 30-40 years, remains to be seen. Not that he sees any injustice in his situation: he's worked at the bank for a bit more than 20 years and understands that employment is a two-way agreement that either party can end at any time. Still, he suddenly has a lot of free time on his hands.

In related news, The Economist recently ran this short article about how multinational firms in Korea are taking advantage of the way Korean firms discriminate against and/or underuse female workers:

South Korea is the ideal environment for gender arbitrage. The workplace may be sexist, but the education system is extremely meritocratic. Lots of brainy female graduates enter the job market each year. In time their careers are eclipsed by those of men of no greater ability. This makes them poachable. Goldman Sachs, an American investment bank, has more women than men in its office in Seoul.

[snip]

South Korean women have an average of only 1.15 children, one of the lowest rates anywhere. That has troubling implications for the country, but should help women in the workplace. Firms will have to use all the talent they can find. If they don’t, their rivals will.

As those last sentences illustrate, and as I've written here before, Korea's looming population implosion (see graph above) is likely to accomplish what government policies on gender equality have sought to do for years: bring women into the workplace and give them more power once there. Companies operating in Korea will, within the next 10-20 years, be scrambling for every employee they can get.

The same will likely be true of "older" workers - i.e. those decrepit, senile 50 year-olds who are now gently eased out to pasture. Say goodbye to forced early retirements: someday soon, Korean companies will be offering their older employees lifetime supplies of Metamucil and Depends, if only to keep them on the job for a few more years.

Read More

Mi Casa es Mi Casa

Busy as I've been of late with other projects, I've had scant time to devote to this little corner of the interwebs. I thus have a backlog of items to catalogue here, so let's get to it.

About a week ago, this LA Times article, detailing one man's crusade to save Seoul's hanok houses (foreground above), caught my eye. David Kilburn, a Brit by birth and owner of one such home, has taken it upon himself to stop what he considers to be the illegal demolition of traditional homes that, by law, may be protected.

(A disclaimer: I won't pretend to understand the tangle of codes, policies, and backroom deals that make up the legal backbone of Seoul's real estate market, because I don't. A few comments on general principles, however, are in order.)

I applaud Mr. Kilburn if he - with his own time, money and property - chooses to preserve and live in a hanok. His life, his resources, his land, his choice. End of story. However, if his next-door neighbor wishes to raze her hanok in favor of a more modern home, then Mr. Kilburn has no business pestering her about her choice. That the Seoul government has created a "preservation zone" for such homes should not change matters: neither Kilburn nor any city official should have the authority to tell a person what sort of home they can build on their own property, provided that home poses no physical danger to anyone else. Nor should the government be subsidizing the construction of new buildings, hanok or otherwise.

For its part, the Seoul government's Hanok Culture Division (yes, such a department exists) insists that it has no authority:

"We're trying to preserve the hanoks," said Han Hyo-dong, director of the city's Hanok Culture Division. "But we have no legal power. We cannot stop [the destruction]. We're trying to pass laws to enforce our protection efforts."

In other words, if you don't share the noble aesthetic preferences of Mr. Kilburn and the Hanok Culture Division, they'll use the power of the state to force you into compliance with their notions of beauty.

And, according to the LA Times piece, you'll be grateful that Kilburn dragged you into compliance - indeed, in the long run you'll come to see that hanoks were "designed to protect inhabitants from the sterile high-rise apartments that [loom] in the near distance."

It's a shame, though, that "sterile" gets such a bad rap. To me, sterile means that the windows keep out the winter draught. Sterile means that the plumbing works without turdy incident. Sterile means that the building is constructed with fire-resistant materials. Sterile means no dirty diapers to change (sorry, wrong kind of sterility). Perhaps these are a few of the reasons why millions of Koreans have abandoned hanoks in favor of those big, sterile apartments, ghastly though they may be to Mr. Kilburn.

Yes, hanoks are nice to look at, particularly if you're a tourist or a daytripper passing through the neighborhood. Of course, it's also fun, when in Vietnam, to see a man in a conical hat plowing his field behind a water buffalo. Shall we pass a law that forbids this farmer to buy a tractor and wear a Yankees cap, just so we tourists can gawk at something "traditional," something that fits with our idea of beauty? Perhaps we should: it's awfully hard to park a John Deere in the courtyard of a hanok.

Read More

It's Election Season - Cue China Bashing

If you're lucky, you're unaware of the fact that this is midterm election season in the United States. That's right: it's already been two years since that halcyon day back in 2008 when Americans transcended fear and set aside their petty bickering in order to elect Barack Obama, the human answer to every question. Since that time, however, Americans have gone back to doing what they do best: bitch at each other.

Oh, and the fear is back, too.

As The New York Times reports, China has emerged as the villian of the day in this election cycle, with politicians galore accusing each other of shipping "American jobs" off to the Middle Kingdom. The message? Be afraid, be very afraid:

With many Americans seized by anxiety about the country’s economic decline, candidates from both political parties have suddenly found a new villain to run against: China.

From the marquee battle between Senator Barbara Boxer and Carly Fiorina in California to the House contests in rural New York, Democrats and Republicans are blaming one another for allowing the export of jobs to its economic rival. result, Americans have suffered.

In the last few weeks, at least 29 candidates, either directly or through their supporters, have unveiled advertisements tapping into Americans’ anxiety over China’s economic might. The list includes 19 Democrats and 10 Republicans.

(To see the quintessence of such an advert, have a look at this little number by Zack Space of Ohio. You'd think he was accusing his opponent, Bob Gibbs, of being a rabid cat-rapist.)

Oddly enough, no candidate has stepped forth and released the campaign commercial I want to see. Given the prevailing panic over job losses and America's slip into irrelevance, I find it hard to believe that no office-seeker has thought to run such an advertisement:

Ominious Voice-over: My opponent uses a car when he could instead employ at least four footmen to carry him in a palanquin. My opponent uses a washing machine when he could employ three maids to scrub his knickers. My opponent uses a camera instead of employing an artist to paint his portrait.

My opponent outsources jobs to Technology. My opponent kills jobs. Will you trust him?

Putting aside for a moment the question of how many jobs have in fact been "lost" to China, why should we be any more concerned about employment shifts due to trade than we are to those resulting from advances in technology? Sure, I feel bad for the person who loses her job because a Chinese person can do it for less money, but no worse than I'd feel for a person who lost his job because, say, people no longer travel by horse and buggy.

Anything which allows humans to produce more efficiently - be it trade, organizational efficiency, or technology - has essentially the same effect: it reduces jobs in one area, but frees up that labor to shift to other areas. The result is an incremental (and often a phenomenal) increase in prosperity. Put simply, the rise of China will no more impoverish America than did the emergence of the automobile.

***

(Thanks to Kevin for his editorial help)

Read More

North Korea's "Dear Prince"

I'm not much of a pugilist, but I have no doubt that if you put me in a boxing ring with Kim Jong-il, I could KO the dictatorial bastard in short order. Hell, just about any of us could: he's a frail old man who, by most accounts, has suffered a series of strokes in recent years. Plus, he has a bouffant. Who couldn't drop a man with a bouffant?

I mention this to illustrate that Kim Jong-il alone has no power whatsoever and certainly can't rule North Korea by himself. To maintain his position, he must continually curry the favor of a small but defined group of North Korea elites - what Bruce Bueno de Mesquita has termed the "winning coalition." If Kim doesn't appease these fellows, he likely follows in the footsteps of Nicolae Ceauşescu.

This appeasement extends to the selection of Kim Jong-il's successor - that is, his third son, Kim Jong-Eun, who was feted this weekend with one of those full-on, goose-stepping military parades. Had the Winning Coalition not approved of Kim the Younger, Papa Kim would be unable to shoehorn him into the office, as even a dictator faces limits on his power.

Which is why I don't expect much of a change in policy from one Kim to the next. After all, the son will have to placate the same hateful interest groups that supported his father. Of course, Kim Jong-il has 40-plus years of experience in navigating the perils of power in North Korea, so he knows the whos, hows, and whens of placation. The danger of (dynastic) handovers of power is that the son might inadvertantly step on the wrong general's toes and find himself without a Winning Coalition.

For this reason, among others, any transition will be smoother if Kim Jong-il is able to stay alive for another decade and properly groom his son to take the throne. Yet, as Ted Galen Carpenter argues in this recent Cato podcast:

If Kim Jong-il does not stay in power - in other words, stay alive - for at least 6-8 years, Kim Jong-Eun's chances of being anything more than a figurehead are minimal, and he might not even be a figurehead. Accidents certainly do happen in North Korea. And if Kim Jong-il died within the next few years, I think the chances of this 28 year-old actually holding supreme power in North Korea would not be favorable at all. In fact, I wouldn't want to be the company issuing the life insurance policy on him.

Carpenter goes on to lay out three possible scenarios that could occur if Kim Jong-il were to croak in the next 2-3 years:

• The military, which likely undergirds the North Korean regime, could take power.
• An economically reform-minded regime could emerge, allied with and seeking to emulate China.
• The Juche hits the fan and all hell breaks loose. Cue chaos.
  

And who knows what might happen if Kim Jong-il decides to take up boxing in the near future?

Read More