Colin Picard
South Korea’s economic success in recent years finds its basis in several economic, social, and technological factors. South Korea not only is a major exporters of manufactured goods, the most notable being cars, but also has a major domestic shipping industry, one of the largest in the world. The super corporations of South Korea that have survived the many economic disasters that have struck Korea are incredibly powerful. Korean society itself has traits that agrees with economic success.
South Korea has managed to survive the recessions of the recent history due to what forms its economy, primarily its position as an exporter and its large corporations. South Korea is a positive net exporter, meaning the value of its exports is higher than the value of its imports. Korea has the seventh highest net export amount in the world, giving it a major asset when calculating GDP, when many countries with Korea’s economic powers are net importers. Korea also has a collection of powerful corporations that, having been baptized in horrific economic collapses, control most of Korea’s economy, Samsung and Hyundai being the best examples. During the meteoric expansions of Korea’s economy, they suffered equally powerful contractions, but the companies that survive those contractions and recessions have immense power in both the economy and the government.
The labor force of South Korea is also exceptionally strong as a result of the societal beliefs of the country. The value put into education is literally a major boost to GDP, while the educations themselves are a major input for labor in the country. Gender equality in South Korea is one of the lowest. South Korea’s women, although highly educated, are usually not in the labor force. The elderly are often more likely to be unemployed; the corporations base their wage scales on years of service, so an easy way for the companies to save money is to cut the older employees who are making the higher income. The equality gap of South Korea is also exceptionally large, due to fiscal policy meant to encourage foreign investment in the country, which has fallen heavily since the recession began.
The corporations that form the main contributors of the GDP through Investment and Net Exports also are a major liability for Korea. South Korean politics is quite corrupt as a result of the competitive nature of the corporations and the economy is highly dependent on them. The companies are de facto family businesses, so if the family head mishandles the company, the entire Korean economy is threatened. Korea’s economy has pushed to the limit of its PPF, but the lack of government regulation leaves it highly sensitive to disturbances in the global economy.
http://www.economist.com/node/21538104
Wednesday, November 16, 2011
The Great Depression- Jules Klose
During the "Roaring Twenties," Americans expensive items while also keeping a close eye on the stock market. Although businesses were doing very well, wages were not necessarily going up with them. With large amounts of spending without much increase in wages ,a great imbalance between the rich and the poor came about. On October 29, 1929, also known as "Black Friday," the stock market crashed, triggering the Great Depression. Still to this day the Great Depression is the worst economic collapse in the history of the modern world. From the end of 1929 until the early 1940s, 15 million Americans were out of work and mass amounts of banks and business' failed.
President Herbert Hoover, who many people believe was the cause of the Great Depression, brushed the crisis off, explaining that everything will be back to normal in 60 days. Hoover, a strong believer in individualism, felt that the government should not offer relief to poverty stricken areas in the country. Franklin Roosevelt, who was the governor of New York at the time, created the "New Deal," which gave him enough popularity to be elected as president in 1932. Immediately after taking office, Roosevelt took action. During a four day span, the government created the Emergency Banking Relief Act in order to stabilize the banking system. Very early in his presidency, Roosevelt established the groundwork for the New Deal that ended up saving the United States Economy.
This was the major case when the United States government started to care for the citizens in need as well as regulating the economy. The New Deal that Franklin Roosevelt campaigned was a ground-breaking event that to even this day, changed the way our government deals with economic crisis.
http://www.pbs.org/wgbh/americanexperience/features/general-article/dustbowl-great-depression/
Tuesday, November 15, 2011
Greg Long - Original - Herman Cain
Republican presidential hopeful and former CEO of Godfather's Pizza, Herman Cain, has quite an innovative, and bold plan for America. Cain has acknowledged the fact that the current administration has left the economy in a complete mess. High taxes, more government spending, and more lost jobs, mainly to other countries, are all signs that our economy is getting worse and worse. One of the ways that Cain wants to right the ship is his "9-9-9" flat tax plan. 9 percent sales tax, 9 percent income tax, and 9 percent tax on businesses. This flat tax would replace the old complicated tax code that has made economic life miserable here in America. What a flat tax does is make so that everyone pays in proportion to what they make, not unproportionally like now. As of now the millionaires and billionaires, the ones that boost the economy, pay more in taxes than anybody not because they make more, but because the government wants to take from them all of their hard earned money just because they're more fortunate and, usually, more hard working than others. It is communist and evil to take something that is not yours and give to someone else (welfare) but that is for another time. What Cain's plan does is make paying taxes fair for everybody. Nobody should be unfairly taxed because they worked harder than others did. Every person would be paying 9 percent of their income to the government with the exception of those living below the poverty line (about $22,000 for a family of 4) who would not have to pay taxes. What the best part of Cain's plan is to lessen the tax burden on corporations who literally drive the economy. Without companies such as Ford, Kraft, Nike, and Microsoft, there would be no jobs and no opportunity to move up in society. Lowering the tax on businesses makes this a America open for business again and I believe that many international companies would want to expand here, bring jobs here, so they would not have to pay high taxes elsewhere. Critics of Cain's plan as how is this country going to make money? The answer is simple, taxes. The U.S. cannot keep spending and spending and spending without any regard for what this massive debt is doing for our economy. America is going to face tough times ahead of us and we will all need to cut back. Government programs must be either cut drastically or thrown out all together. Once America can balance the budget (spend less than what we take in, there's a thought) then we can grow stronger and stronger everyday, but until we do our economy and nation as a whole is going to fall right off the charts and into insurmountable debt, of which we will never be able to get out of. Herman Cain and his conservative view on the economy is exactly what this country needs. Cain's plan boosts the economy by giving coonsumers more money in their pockets and allows businesses to keep more of what they make so they can put that money back into creating jobs and keeping prices low for all of us. Cain's plan is fair for everyone and is exactly what this country needs too get going again. Article: http://www.washingtonpost.com/politics/herman-cain-tweaks-999-plan-to-include-opportunity-zones-for-lower-income-americans/2011/10/21/gIQAfBlh3L_story.html
Why the Super committee matters -- Colin Illar
One of the many indicators of an economy's health is the state of it's government debt. This is unfortunate, since the United States is currently facing a deficit of almost $10 Trillion. This problem has been a key talking point in the 2012 Republican debates and this past summer forced the government to a last minute budget deal that led to a decrease in our national credit store.
As part of the last minute deal, in order to appease both the left and right wing, a provision was instituted that requires a group of 12 bi-partisan congressmen called the Joint Selection Committee and widely referred to as the Budget Super-Committee are required to find between $1.5 and $1.2 trillion dollars in spending cuts by November 23rd or larger spending cuts will automatically take place from programs that both parties would want to protect. The terms of the bill require the committee to continue making cuts in December as well, but these first sets of cuts are important in all respects. From a political standpoint, neither party wants the 6 congressmen they each appointed to cave on any issues. Democrats will not want to accept any cuts to the entitlement programs that are a foundation of their platforms, such as Medicare and Social Security. At the same time, Republicans will refuse any attempt to raise taxes or eliminate tax cuts.
The lack of any progress can be concerning in many ways. For one, the gridlock in Washington led to this initial compromise in the first place. Rather than choosing to make large and effective spending cuts right away, the Congress chose to push back their decision, leading to a lowering of the US credit rate and causing further uncertainty in the markets. A strong initial spending cut of $2 to $4 trillion in the summer would have helped convinced investors that we are approaching the deficit immediately and effectively. By pushing back the cuts until now, Congress looks more like kids procrastinating doing their homework than a group of policy actors approaching important problems.
In order to make a major and effective dent in the deficit, Congress should have committed to larger spending cuts, which would create a greater sense of security in the market. Larger spending cuts now to programs that will increase our deficit in the future would also provide for better economic growth on the long run, and allow for continued spending now on infrastructure and other stimulus to help create more jobs and lower our unemployment.
A lot is resting on the shoulders of this "Super Committee", including the long term success of our government and the growth of our struggling economy.
Charla Henley-News Article Blog Entry 1
South Korea’s economy
What do you do when you reach the top?
South Korea, one of the poorest nations in the world just fifty years ago, is now thriving thanks to a great deal of development aid from around the world. The author of this article states that,
“By the end of 2011 it [South Korea] will be richer than the European Union average, with a gross domestic product per person of $31,750, calculated on a basis of purchasing-power parity (PPP), compared with $31,550 for the EU. South Korea is the only country that has so far managed to go from being the recipient of a lot of development aid to being rich within a working life.”
South Korea is said to have bettered themselves by following in the footsteps of great nations before them. The concern now is that South Korea has “reached the top” and they will not be able to stay afloat with no “footsteps to follow.”
The article focuses on what South Korea should do now to maintain a stable economy but there is also a lot of information about how they managed to expand their economy and some things that did not help so much. For example,
“Yet in 2010, GDP grew by 6%. This year’s expansion is likely to be 4%. The unemployment rate is now a covetable 3%. Some of the recovery is the result of Korea’s happy dependence on China: it exports more capital goods to China relative to the size of its economy than anyone else, even Germany. But this is only part of the explanation (which is just as well given China’s slowdown). The government also initiated a public-works scheme that is mopping up over 2% of the labour force. It introduced an old-age pension and began, then expanded, an earned-income tax credit. All this from President Lee Myung-bak, who was once chief executive officer of Hyundai Construction and is widely assumed to be excessively friendly to big business.”
I wanted to focus on this quote here because there is so much to talk about within it. As we know, GDP growth displays economic growth, which was what South Korea needed. The fact that unemployment is so low shows that South Korea is utilizing all their resources. They have also made it a fact to export more than they import, which is also a key to economic expansion. The government in South Korea also created a number of jobs by initiating a “public-works” scheme, which ultimately brought more people back to work. Currently, the average woman in South Korea does not hold a job other than to raise her children. In the future, if South Korea needs to increase production more, bringing women into the workforce would help them to do that. Also in the quote I pulled from my source is talk of introducing a pension and an “earned-income tax credit.” These actions will help decrease uncertainty and allow people to invest more freely, bringing more money into the economy. Another great thing South Korea has going for them in their support of education. In this article, the author reports, “Korea spends a larger share of GDP on tertiary education than any rich country other than America. Given relatively low wages, this superbly educated workforce is hard to beat.” The fact that the workers are educated past a high school degree is promising because it is likely to increase the possibility for technological advances and ultimately greater economic expansion.
You may be wondering why there is need for concern in this article since South Korea seems to be doing most things right. The following quote helps to identify some of the concerns:
“But with Korea already top of the league tables, it is harder to generate further jumps in income from big increases in hours and skills. Indeed, the immediate problem is merely to maintain its excellence. According to Yeong Kwan Song of the Korean Development Institute (KDI), a think-tank, companies are starting to worry that graduates are emerging from university with the wrong skills. On some estimates, half of recent graduates are failing to find full-time jobs and are going into further study or part-time employment. So while general education remains good, some industrial skills may be declining.”
As displayed here, there’s concern that the increase in higher education may be decreasing the “worker” skills needed in South Korea to work in the industries that run the economy. Another concern is that the country is exporting profitably, but isn’t providing well for itself. As the author reports, “Over time, their [the small weak firms] performance seems to be getting worse. Korea, in short, has first-world manufacturing exporters and third-world services.” This is a concern because the third-world services are also declining instead of improving so if something isn’t done to improve them, certain issues could arrive within South Korea such as famine or disease. Any internal issues could cause economic contraction if it causes a loss of workers.
So does it all balance out? Or will South Korea see contraction as quickly as it saw expansion? This author seems to think that
“If it [South Korea] can increase public spending a little to reduce inequality and poverty, boost its labour supply by encouraging more women to work and avoid compromising its educational standards and penchant for hard work, then it should be well placed to pull ahead of Europeans and catch up with America, too.”
I think I can agree that if South Korea can increase public consumption and utilize the rest of its resources they will be in good standing but one of the bigger concerns that I had for South Korea was the fact that the internal services aren’t so strong. Perhaps an increase in public consumption would strengthen them, but regardless, internal services should definitely be monitored if South Korea wants to “pull ahead of Europeans and catch up with America, too.”
Article can be found by following this link: http://www.economist.com/node/21538104
Monday, November 14, 2011
Should the Fed buy bonds? by Cole Brundage
The Federal Reserve has an important role as the central bank of the United States. With the economy in its current state, people are looking towards the wisdom of persons in charge of decision making at these banks to adapt policy to stimulate the economy. Some investors and bankers are suggesting that the Federal Reserve should buy additional bonds. This sort of bond buying, termed as “quantitative easing,” should help stimulate the economy. This sequence would be the third, or QE3. Many point out that the first two sequences of quantitative easing have not done much to help the economy, stating that the unemployment rate has not changed in a positive manner, and the extra boost to the money supply has had limited effect. There has been some growth in the economy, but it has not been as large as one would expect given the amount of bond buying that has occurred throughout QE1 and QE2. This is due to the fact that the actual world economy is not a simple mechanism. The Federal Reserve cannot always rely on its suggested ability to buy bonds and get a proportionate level of economic growth in return. We have learned in class that there are external factors that effect people’s concern for investing and taking out loans. If people are not feeling confident about the economy, they are not likely to invest and take out loans, regardless of the apparent money supply or the interest rate. The interest rate is extremely low, but people are still not confident enough for it to make any major difference in the economy. There are many factors that give people concern, the constant source of news via the Internet never takes economic issues off of people’s minds, and thus they are bombarded with news about economic struggle, and they fear investment and loans. Many experts suggest that the only thing that will heal the economy is the passage of time, and this, I believe, is very true. The interest rate has been low since 2008, people have had several years to get over their fear, but the growth remains very slow. In conclusion, the Federal Reserve will most likely engage in additional quantitative easing. Whilst this may not quickly cause stimulation in the economy due to fear and uncertainty within the population, the basic economic principles suggest that it would. If the quantitative easing does not work, time eventually will. People will eventually forget about what there is to be afraid of, Businesses will begin hiring again, and the economy will begin a more noticeable period of growth.
Source:http://money.cnn.com/2011/10/26/news/economy/thebuzz/index.htm?iid=SF_BN_LN
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