 Okay, so nice to see you guys. Thank you for coming to Center for Korean Studies, the seminar series. Today's title is about, it's not now, you know, when you think about the South Korea now is a lot of talking about sociology, culture, especially for the K-pop, you know, and the Lingus language history. However, it's a relatively not discussed touch in our seminar series about the issue in Korean economy. And although Korea has shows very dynamic evolution from the bottom of the world in terms of economic power to be a one of the OECD member at the moment. However, although maybe just impression is about the bright side of the miracle of the Korean economy grows, it could be the benchmarking cases for other developing economies with a similar situation and condition. However, there's a lot of debate on to what extent. Okay, Korea economy can be sustained, can keep the maintain sustainable development, a lot of debate on it. So I think the two days of seminar will be very helpful and then very insightful for discussing about the not just past current and the future Korean economy situation, not just for the future, but also for those country which face the similar situation with Korea. So let me welcome to the Jejun to our presenter today. I'm currently professor in economics in the Dufour University in Chicago. He has a very interesting background. He's not his background is not just academic career. He started his career with industry in Maryland as an analyst. As well as he has experience of a policy experience making the policymaking in OECD, as well as IMF, you know, so also currently work as an academic and teaching and then research on the economies mainly macroeconomy also in terms of region, like the Korea and the East Asia as well. So this is he recently published book and about the Korea but not just touch for the past is about like the confronting South Korea next crisis you know the title is the the rigidity polarization and the fear of definition. Okay, so I'm well welcome Jejun to our seminar. Okay, to for this presentation, our format of presentation will be sort of he he mainly lead this presentation about his topic his book, and then we will more than welcome you guys to ask any question during the presentation, either by chat leave the questions in the chatting box or as I said, please click the raise a hand, and then you will have opportunity to ask directly to Jejun so we are going to have a more lifetime interaction, you know, about the Q&A. Of course, I will set around 20 to 30 minutes Q&A session and the end of the presentation so if you want to make your question and the end, yeah, feel free to do it but if you want to ask directly and then you can ask Jejun to directly your question. It's okay for you guys. Okay, Jejun off you go. Yeah. Thank you so much for the introduction. Hi everyone. It's really nice to meeting you and it's my great pleasure to present my new book coming up from the Oxford University in June next. Is that two months? Yeah, two months time. And again, I really appreciate hosting this book presentation, this, you know, center of the Korea study. So, okay, without any further ado, let's get started. So let me show the screen. Okay, so you can see the screen. Okay. So, the title of my talk is actually the same as my book. So, the cover look like this. Let me start with some as introduction, right. This K as you can recognize this is a initial of the Korea. This is a K drama. So K, the same K, but then during this, you know, pandemic, we heard about K shaped recovery. So for example, manufacturing doing better compared to service industry, you know, contact, you know, intensive industry so you can see that came some sectors and then some sectors not doing well. So, you know, this is an organization, which I'm going to talk about in Korea context. So that could be another one. But then in a bigger picture, though, at this moment, in my view, Korea is at the peak pinnacle. And then question is whether Korea can sustain the, you know, high growth into the future continuously taking this outward trajectory or it's going to be actually coming down from it. I don't know the question, but hopefully this, you know, the cover convey that kind of a senses before actually talk about set the agendas, which I'm going to talk about today because there's a lot of multiple issues covered in this book. I'll give you some snapshot, but when I actually had a privilege to work at the Bank of America, Madeleine's as a chief Korea economist from 2015 and until 17. I had an opportunity to closely watch the Korean economy, although I'm from South Korea, but I spend the most of time after my PhD, outside, you know, in the US and then, you know, France and some other countries. So I never actually had a real chance to study more carefully, but during this period, I actually had a time. I written a quite a lot. 145 market oriented research in North Korea and emerging market Asia. There are a lot of people, including market participants, institutional investors, and government official, not just Korean government officials, but in Asia, for example, Malaysia, Indonesia, Thailand, because they also heavily, you know, invest in like a Korean bonds, things like it. So I had a lot of the engagement with the clients and government official. So I struggled with a lot of a question. And then when I came back to academia, 2018, I was actually thinking, Well, I'm going to write a maybe on Korea for the reason that I described. So here, if you look at today's Korea, then Korea has achieved advanced nation status in many aspects. And as I'm going to lay out Korea today, confronting a lot of issue in domestic and then external. And more importantly, from economic point of view, then this unpleasant downtrend, such as a lot of Koreans struggling with a slow income growth, rising inequality, social polarization, widely spread poverty among the elderly, and also multi or high youth unemployment recent years, and also mountain of household debt. On top of that, rapidly, you know, rapid population aging, and very low fertility rate. Last year it was like a point nine well below the replacement rate like a 2.1. Stokes, you know the fears of a justification, meaning whether Korea could become a today's Japan, which is suffering on more than now, three decades, low growth economic slump under the high debt, both private and then public sector debt, and also aging. But then, if you look at a domestic then politics in this array, although these days, yes, a lot of countries are having a domestic problem but Korea. It's not an exception, you can say that but this actually making even worse given the oldest other economic problems social economic problems, we have to deal with it. So it's these days it is very difficult to see them left and right, you know, across the aisle, I tried to do some productive, you know, conversation we don't see that. So that actually more concerning. But then if you look around then disruptive technology, and also fast changing business environment, partly because of rise of China. That clash with your long standing structural issues in Korea. And to give us some sense. In 2017, you know, quite a numbers of 14 investment banks, including our Goldman Sachs. RBS, BVBA, and UBS, Barclays, Mercury, and then the Indian banks, they all exited from Korea. Clearly, there's something going on, right. And you can tell Korea may be losing the attractiveness as a place to do business. You have to do this kind of a somewhat gloomy aspect. You might know this Bong Joon-ho so famous, you know, parasite movie. In an interview with the Guardian, he was saying I quote, Korea on the surface looks like a very rich and glamorous country right now with a k-pop high speed internet IT technology but wealth between the rich and poor is widening. And the last one, younger generation feels a lot of despair. So how come right, so we're going to talk about it. And indeed I'm going to show that there are multiple sources of risk. It can threaten to, you know, perpetuate low stagnant growth, something look like you know the Japan situation. And this dramatic shift in the perception is quite a surprising, even for Koreans, but less unknown to the outsider. And that was my motivation for me to write this book to consider what type of issues with Korea dealing with and also what could be the way forward to address those, you know, the issues. I was to mention very few, you know, at the very beginning. There's a lot of studies in Korea. So, you know, this, this book is not the only one and more importantly, the economic miracle rapid economic development great achievement. There's still the demoration among the development economists that has been extensively studied. So name a few Alison Amston. She now passed away but when she was at the MIT, she wrote a book about Korea, the potential at the time. And then Steve Haggard and the song done now actually that was the, the previous the Oxford published in a Korean book by the Korean scholar, but then I can green. He's a renowned economic historian. And the white Perkins, Harvard, they co-authored with the Korean scholars about modern economy. But as you can see here, most of the book written in English about South Korean economy is pretty much about past economic development experience including rather than contemporary issue, as I described earlier, and then future issues so this book in terms of a literature then this book is placed to address this issue, filling the gap in the literature and I'll show you the topics maybe one best way to do it. So this book has a four parts, as you can see, laying out the first, you know, long term economic challenges and issues. So starting with the some secret perspectives, what has been, you know, different this recent recovery, and then taking on the long term economic growth. And then also talking about this Japanification, household debt, you know, whether this going to be a sort of systemic risk factors that may turn the Korean economy into Japan style stagnation, if not then European style, you know, been more milder, but it is still you know the stagnant economic growth. And then also I'm going to talk about inequality you will be surprised to hear me saying that inequality is actually high among the industrial countries and then what are the causes and then I'll try to make a connection with the this slow growth underlying the structural problem that also has to do with this inequalities in some important way. But then I'm going to talk about some aspect of a political economy, because a limited time, I might be able to talk about this political business cycle in Korea, presenting a new evidence. And also I'm going to touch upon last to two presidents, Park and me and then Moon Jae-in, Moon Jae-in government actually term is going to be over first week of May, so we have a new president elect coming in, but I'll talk about this with an experience. And then there's a, you know, international trade component trade and finance, but I'm going to talk about some aspect, and then North Korea, obviously every Korean book, you know, the book on Korea should have some North Korean issues. But in here, again, a lot of books actually written about North Korea, I'm not the actually North Korea export on that particular subject. However, as you already now have some sense of what this book is about. And from that aspect, one of the big if there is any economic cooperation, or even better, say, you know, feasible unification with the North Korea. Some people, you know, it can be a game changer like the bonanza, right. So, can it actually be catalyst to solve the South Korean economies, you know, problem so I'll talk about if I have time. And final thoughts, you know, the last chapter is about more about the future role of the government, looking back, you know, development states, you know, the famous, you know, the East Asian model or Korean economic model. And but I'll try to put that in the context but okay so with some very broad so the descriptions. I'm going to actually start with this some economic growth aspect. Okay. But another actually I forgot, you know, the about a book but what actually unique about this book is the focus on the high impact questions, rather than giving you overview of the current economy because a lot of this is existing in the market, or let me give you a lot of a introduction to how the Korean economy works, etc. But this book is more oriented by the big questions. So, hopefully, you know, this presentation will give you some sort of a storyline and narrative. I'd like to cover all of them, given the so many topics and then 650 pages long book. So I won't be able to do everything but I'll try my best, you know, cover the most important story. Okay, so let's start with this. Many condoms think that Korean economic rapid growth period ended around 1997 1998 financial crisis. As you can see in the left hand side of panel this is a GDP growth rate and then 1999 strongly rebounded 11.5% from a minus 5.1% 1999 1998. So, rebounding 1155% V shaped shop recovery and then 2009.1% so at the time people thought all Korean economy fully recovered from its own worst financial crisis, but since then on average growth rate about 4.9%. Close to about a half what Korean economy used to sustain before our financial crisis. For example, from 1960 through the year 1996. It was 9.3%. So clearly you can see that the growth rate has been around the half of it. The global financial crisis came 0.8%. Again, strongly rebounded like 6.8%. So at the time, a lot of a forecast, including a bank of Korea, I'm math. They thought Korean economy will go back to 4 to 5% you know growth range at the time, but it never actually materialized. So 2011 last and half of a previous year 3.7 2015 2.8% 2019 2%. So even before a pandemic hit the economy 2% that represents the actually a second worst in the last 20 years. And also, if you look at the, you know, components, the contribution then government consumption and government investment spending contributed 1.7 percentage point. So, you can easily see that even if there was no government spending, then real GDP growth rate might have been even much lower. So that's showing the quite a dramatic shift down with the shifts in the growth. You can see it on the right hand side as well. I'm going to give you more pictures in here. Manufacturing capacity utilization, you can see it here down turn clearly well below the historical average. You can see it. They're starting around 2012 and you know. Now, on the right hand side, you can see the red line, the youth unemployment youth unemployment age group are like a 15 through a 29. You can see that much, you know, clearly, over the trend blue line is the overall unemployment. During this period, more than 40% of unemployment nationwide actually accounted by the youth unemployment. So much so that 2015 around the period, you know, we get to hear that the world like hell, just on just on is the name of the country before Republic of Korea right before of Japanese, you know, the colonial period. And what they're trying to say is the lack of opportunities job opportunities. You know, I'm going to talk about some of the data but you know, Korean, Korea is famous for the zeal for education right over education so much so that. You know, the college educated workers in the age group like 24 to 34, then it is among the top in the whole world, and yet, economic situation slowing down economic growth, and then a lot of multi you know big companies went off, you know, offshore. You go to China, many other low cost countries, at the same time, more depend on the capital and machine, the technology, so that demand actually shrinking, but at the same time, you know oversupply of this college education aggravated on this unemployment problem driven by the labor market rigidity and which I'm going to highlight. But then this one is really shocking, because we heard about this 1% 10% right. So, you know, PKD and science data famous one now. But if you look at this, for example, 10% income share the black line, then about a two decades ago, starting around the 36% then now is 49% greater than actually US case, 48% currently. So it in here but 1% not as extreme as the US but from 9% 2000, but now is accounting for 14%, compared to say 18%. And then on the right hand side that this is a disposal income journey coefficient, excluding Chile, Mexico and Turkey. And, you know, they have a high, excuse me, high inequality, but then Korea standing in here. So among the very high level. And also, as I mentioned that in here, due to a lack of weak, you know, the social security, especially for elderly population, poverty rate, mainly because of this elderly poverty rate, and among the top. I'm going to also highlight that lots of structural issues later on but this non regular workers, non regular workers are typical you know the limited time contract temporary workers daily workers, depending on the institution. For example, OECD has their own definition of non regular workers Korea has a bit different definition but nevertheless, what really stands out in here is a pervasive you know non regular workers. So about a half of what regular workers get paid, either at a large corporation a small corporation. And then, again, you will see later data and then analysis. This is also a manifestation of the structural problem labor market, and also some, you know, the relationship between the large and the small company like a large corporation and then versus you know self contractor companies. So there are a lot of components to structural components. And right now is like 36%. And I don't have time for this one but what I'm saying in here is this inequality, this type of inequality, well so many other nations face as well but Korea never had this type of bad things coming together. So if you recall the 1993 World Bank, East Asian miracle, famous studies, they characterized the growth of rapid growth in Korea, Taiwan and Singapore and other nations. And this, the virtuous, you know, the passive you know the feedback group between rapid growth and then low, low inequality, but now this virtual circle is no longer, you know, relevant, rather it is a slowing down growth at the time of rising inequality that actually cause a lot of problem and I'm going to highlight it how we can cause the further economic stagnation down on the road. But then I'll give you some more snapshot, you know, before I get to some explanation detailed what happened in the recent decade in terms of growth. This is my first topic but give you some sense. This is another headaches. You can see the blue line in the left hand side. That's debt. Okay, credit to GDP gap. 18%. This is actually all time high even compared to be a nine before 1997 financial crisis or before the before after the global financial crisis. This is a comparison then Japan 1999 before bubble worse, they had a 24% because this is one of the very, you know, important indicator, the debt buildup right, you can see the red line on the right hand side household debt, standing at 106% of GDP, 174% of disposable income is among the high level in the industry country, and then recent years, corporate sector debt also has gone up. So this is household debt. One of the big question here is, is it going to actually cause the financial crisis. I'll explain but my short answer probably not. Okay, there are a lot of good reason to think about that way. Rather it'll be more a slow burning the issues like this. On the right hand side, I'll get to the more detail later but he's showing you when you have a such high household debt then consumption growth will be constrained because you have not so much room for for the spending because you have to service that debt. The service ratio as a whole nation then about 36% compared to say 10% in the US as a discharge of income percent of the sports of income so you can see the consumption room is quite limited going forward. But then, you know, in the context of a second and economic growth in recent years that I described earlier. Another alarming. The picture is this. You see it here are the marginal company the share of marginal company. What do you mean by the marginal company marginal companies that has a interest interest coverage ratio less than one meaning operating income. Before tax cannot cover the interest expense. So, so many companies now struggling under the debt, right, and even before a pandemic, it has been rising. So, you know, 46% 1999 2019 but then went a further 42% and then one of the underlying problem here red line, the big decline in the sales revenue throughout this, you know, 10 years, exception has been this 2017 18 as you might recall that there was a brief global growth pickup before it actually ended with the start of the US and China trade war 2018. But what really means that is not only the financial risk which I'm going to talk about later but again that normally, you know, dampen the economic growth. So consumption investment under the weight of the debt household that incorporate that actually will also dampen the economic growth, you know, on top of a structural factors, you know, which I'm going to describe. And what is actually being restructured the recent days, either for a workout or liquidation, you can see that uptrend, missing years, even before a pandemic. So that really concerning but I'll come back later. And also finally this aging. I mentioned that to you earlier. So many people, you know, so, you know, concerned about aging, especially the speed of aging because if you ask me right now then still, you know, 15.7% the elderly population as a percent of a total population. It is still below the OECD average is what you can see it on the left hand side, the speed of, you know, aging is alarming. Yeah, it took only 18 years, compared to say us, you know, took 71 years Japan, 24 years but by year 2015 then probably, you know, take over Japan as a most the greatest, you know, the greatest society in the whole world. Yes. So that's actually scary. And also, among the Korean economists actually KDI done Korea leading think tank government sponsor think tank. And they actually published that big studies on this, you know, risk of definition comparing a Korea today and then Japan's lasted 20, 30 years. And this is not very scientific but quite popular among the economist. Look at this 1964 that's the year of a solid summer Olympic Games in Tokyo 1988, some more Olympic game hosted by, you know, Korea in Seoul. So you're meeting this, you know, the two different years and then juxtapose this GDP numbers. Then you see it here. Quite strikingly similar path. So people connecting the dots say aging is coming a big time and then seeing what happened in the last two to three decades, even before we think about it. And, you know, to Japan, then we have to remember the big bubble burst. Yeah, and then banking crisis. That's actually very important but people look at this type of data and then aging. Many people think probably we might look like it. Again, so today, and of course, I mean, there's so many reasons, including myself, I should be worried about it. But also I'm trying to highlight it. Is it going to be another way extra Korean economy will turn into stagnant economy. I already give you two ideas like one could be the debt, right. And then another one could be aging. And then another one which I'm not, which has not introduced yet but this inequality social polarization, what actually has to do with the stagnation I'll come back to that later. So please remember that those. But then, what actually concerning in terms of aging and then what look like, you know, Japan type of crisis or long term stagnation. Look at this. In Japan and then Greece and Italy, they have some commonality right, not only the stagnant economy right but also they have a very, you know, high ratio of the elderly population. So these, it'll translate into high fiscal you know burden later on. So that's kind of scary. And this is kind of the backdrop. The current economy is actually is contending whether today, but I'll make it more precise down the road, but given that so much story I can give, you know, I thought maybe the starting with those pictures may be more useful to give you sense of what's going on. So let me turn to the what happened last, you know, 10 years you saw that, you know, very secular decline. Clearly, there's a lot of components, you know, see critical external and then structural factors. And let me first talk about some secret code, you know, the nature and then external components. So what I'm showing in here is I did look at it 11 business cycle. It's been a year since 1970. And one of the most striking feature I found was absence of strong rebounding export and investment. In the past, it wasn't like that. During the recovery past then investment export used to strongly rebound, pushing the economy back to the previous session trend, but it didn't have. And also, we can think about a lot of factors but my interpretation of data and then my argument here is not only that this slowing economic growth after the global financial crisis, but there was a lot of components, some of the unique to the Korean industrial structure, export structures, and also close tie with China. Those actually compounded together. This is not necessarily bad. In a sense, Korea has a highly concentrated export product semiconductor petrochemical and petroleum machinery automobile stills you name it right. The nature of this highly concentrated this export, you know, the nature of the shocks oil price collapse China slowing down those type of things actually more heavily affected you know Korea. So that's my interpretation and why has been so weak. But things but okay let me skip and then let me just point it out here. So this is a annual compound, you know, the growth rate and you can see the last recovery period expansion period. The average growth rate to 3.2% annual rate and your rate, but then you see it consumption was a pretty weaker than previous period. You see it investment nearly half of it. Single digit now export really small previous you know always like a double digit, but now we don't see it. And then productivity even turn negative. And the exception has been pretty much this public consumption. So government spending held up you know economy to some extent, but it was not strong enough to turn around it. If you extended it you know until 2019 before a pandemic, the same story line goals. Yeah. And then here's a graph visualization you can see at the blue line is the last, the most recent recovery, very weak. In Bank of Korea, my policy fiscal governments, every single year except the 2014 every single year we had a fiscal stimulus. And yet also a most recent recovery period, Bank of Korea cut the interest rate, despite we call it a recovery period. Normally they raise the interest but they cut the rate. And yet, the government short term counter secret policy was not enough to put the economy back on the rapid growth. You see the investment here. This is what is really almost a flat. Look at this. And yet, one shocking, the data I'm going to show you but before I do that, let me just make a quick observation in here. Korea expert import trade openness 3.8% at the peak around the right after the global financial crisis but now it's around 70%. Just in point though, direct, you know, the, the, the, the export current export as a direct destination, the EM emerging market, not the developed market accounting for around now 65%. There's a lot of export going to including China, right. Of course, many of them also rerouted right eventually go to US and Europe, but you know that involves the global supply chains, but clearly, as an immediate destination the emerging economy is really very important. So, China. Yeah, so we did in your mind. Look at this is quite striking Korea export moves almost a lockstep with the export of China and also global trade. So no wonder, many of the institution, including like a bank of America, they include the Korean export data as a leading indicator, because Korea has a free trade agreement with your 56 countries, accounting for about three quarters of the world economic output. And the data also comes out just the day after the end of the previous month. So, the speed of the data publication, and then extent of current export right to the major market in the whole world, then make it ideal indicator right. But also you can see it, it has married because it moves in very closely with the world's trade volume and China. But here's the problem. You can see it, Singapore and Taiwan on the left hand side, left hand side. They are, you know, highly exposed to China as well. And yet, for some reason, Korean export actually underperformed those countries. But then China we know that also making a lot of progress in terms of a sophistication right over their own export. And then now processing export is down to around 27%. Two decades ago was around the half of it. And also their own domestic content rising, meaning 1010 years ago when China was rising, then there was a boom to Korean exports, because of a gap in technology, right. And then Korea has so much to offer at the time but clearly now is China is quickly catching up. So give you some sense. 2012, 10 years ago around, then Hyundai, Hyundai Motors had a market that shares 11% in China and also global market 11%. But down to now 2% in China market, down to 5% in the global market. How about Samsung? Samsung, yes, still a dominant semiconductor provider and their smartphone, but smartphone for example, 2012 in China, you know, commended around the 23%, but now is a less than 1% market share. Globally from above 30% now around 20%. And then it shows some, you know, maybe indication of mature products of Korea specialized, probably there's a lesser room for other growth, and also Chinese and other computers actually catching up closing on the Korean product. So shipbuilding, I don't have a chat, but I can mention that, you know, during this, you know, the stagnant growth period last 10, 20 years, Korean shipbuilders also had a hard time. Korea shipbuilding used to be number one, still number one though, we took it from China last year, but about a 15 small medium size that shipbuilders all bankrupt, now only we have three. So, there are a lot of sense, you know, not only external factors, but also domestic, some of the major exporters also had a problems and struggled in recent years. And this is a market share. And also, not only that, it's really less known to the people, but Korea think about this way. Korea import crude oil 100%. But Korea specialized in export of petroleum and then petrochemicals. Therefore, 2014, for example, when the oil price collapsed from above 100% $100 to now $30 per barrel, you know, barrel, January 2016 is supposed to be a, you know, beneficial to Korean economy as a net import of a crude oil right. But it's not because during this period, petrochem and then petroleum export, including shipbuilding, think about it, oil tankers, and then deep order oil extraction platforms. And at the time, many Korean shipbuilders actually specialized on it. This together account for a 28% of Korean export. So when the oil price collapsed, it heavily hit, you know, a hard Korean export so that's what I'm trying to say. But only the global trend is slowing down after the global financial crisis, and then China growth slowing down, so that Korea as an exporter to China 25% of it. So heavy exposure, and then some erosion of the Korean products market share in China and elsewhere. And then on top of that this type of a highly concentrated export, but very also unique in a sense, about a 28% of our current expert at the time exposed to the oil price. So this actually things compounded together dramatically we can be economic growth at the time, from a secret point of view. And, but then also nowadays we're talking about a fat, you know, the significant rate hike, maybe coming in, when May, right, 0.5 percentage point hike, due to inflation but you can see it here when the federal tightening the raise the rate then it impact on the Korean GDP numbers and export although it is they tend to recover. So that also happened between 2015 and 18 from a secret point of view, going for the external environment pretty tough also globalization in retreat, and also China if anything continuously slowing down. They are heading toward a consumption driven economy, given the Korea export to China, 75% is actually intermediate could not the final good. So, Korean export model currently doing very well but I mean last several decades but when the China is going down at the same time, turning inward yes consumption driven economy. There is a lot of questions. How the Korean exporter should adapt right, and then the political factors I didn't mention it in here but China retaliated Korea. After the Korean government decide to deploy the American anti missile system known as a dog in response to the North Korea as a nuclear test, and then ICBM launches 2017. And so actually that hurt it also Korean economy. The relationship pretty much strain as well. Despite the fact, Korea and China signed the FDA governing around $300 billion trade 2015 is supposed to be a game changer to put the partnership between this country in a new level but actually it deteriorated instead of a progress. And the global that is concerning public that concerning so if you look ahead then they're a lot of, you know, concern, or I may not have enough time for this one but just give you some number. So, when China, you know how the landing scenario 5% decline then you might have a direct impact, shaping off about a point 5% GDP growth, and then on top of that indirect channel from China weakening, then all the rest of the world goes weekend, you know, through the global trade, etc. And then the international market volatility that comes with that, then he can bring down the GDP growth by 1% but that's just the passing and also, I'm not going to have much time on this several issues but let me touch upon some important events. This is the best way to show you the public sentiment. Look at this self area disaster and then Mercer's outbreak of 2014 and 15, we're speaking about recent recovery period domestic factors, and also impeachment of the president back in a you might know that. And then Joe books scandal, it might sounds quite strange, but that symbolizes some of the, the underlying Korean society's problem but let me make a quick comments on it. So fairy Merce outbreak, you know at the time. It may sounds very strange to many outsiders, but this was a one of the turning point. So fairy carrying more than 470 passengers at the time but they loaded twice the cargo limit. And when this fairy, you know, starting to sink. This course card that has actually arrived arrived the scene. But our not to be for that actually complete thinking of the fairy. But that they bungled in a rescue effort. So in the end what happened. 100 people died. And then only 170 people are rescued but many of the victims actually a high school senior on a field trip to Jeju, Jeju Island at the time, but it symbolized the failure of the government course guard and in effectiveness response, and also neglect of the safety. Like, you know, the captain told the famous the, you know, the story is said but tell the students, you know, stay input, and then he escaped and abandoned the ship. And that show that symbolized that this deep running culture of corruption that actually haunted the people and, you know, almost the nation to get a little bit was mourning this, you know, the fallen victims, you know, several months. And also, most outbreak, maybe it prepared the country is better. This time pandemic but at the time, also, governments were not really well prepared to handle. So it dented in a public trust, and we know that this park in the government, although she had a pretty good reform agenda. If I have time actually I'll mention make a case. In the end, and with this political corruption actually, you know, going together, I'll make some detailed explanation about a moon government, the current one, but pointing here, whenever this type of a sentiments going down. It shows, you know, bearing on impact on the sales, like a consumption or investment, you see it here. So that's the main point but let me talk about the interest of time so let me hear. Let me talk about this moon governments a few, I have a few slides for you, because I may not have time to talk about that modita later on so here. After the parking it was impeached, you know, there was a new hope right and new governments comes in and it has to be a catalyst for a sweeping reforms right, but bottom line though, in the end, many people are disappointed, it didn't took long. Sadly, including myself, I had a high hope for this new government. But in the end, though, they adopted more ill advised, very blunt policies so lot of questions, you know, either labor market, and then economic growth, and then business regulation, and also we have a very strong nuclear energy industries but in the housing market. But all each, you know, issues requires a lot of thinking and careful plan, careful consideration of conflicts of interest. You have to navigate all this, and yet they impose boom and boom and boom, and then what in the end though, pretty much the opposite what they wanted to achieve, standard, you know, job creation, denting the business confidence, housing market, sword, worsened the inequality. And that came actually from the series of policies under the moon government. And one of the famous one income read growth meaning idea is if you raise the wages and income then these people will go out to spend money that boosting economic growth by increasing aggregate demand. But what they actually neglect is the cost aside of this wage increase. And I showed you earlier the labor productivity has actually pretty low in the sluggish and that wage increase actually has been very steep, like a minimum wage increase reduction in the labor work hours, wage the tax. So they did it all together. Obviously, you know, I'm not blaming some of the motivation, but more is about how it is implemented, whether there's a complimenting a measures combined together or not. How they actually finance there are a lot of things actually, in a way, didn't go well, and then result was a pretty bad. And let me show you here, for example, minimum wage increase but many ways from the start of 2018 was already high but 2020. I have a table later on but now 60, almost 63%, 63% of median wage, very high compared to say Germany, Japan, any other industrial countries. Meaning, the cost is very high but even more serious. Minimum wage is actually bounding to 25% almost of the total labor workers always and then a salary workers. So, this type of a 33% increase in minimum wage over the last few years, meaning its impact the labor market way more than any other country. For example, in the US million wage debate has been a very active in the last 10 years, but the minimum wage for example, federal minimum wage $7.25 cents is a binding only about a 1.2% of all the wage and salary workers. So, look at that, how much impact in my head. No wonder the employment job creation almost stopped 2018 and you see it here, manufacturing many other industries actually hard to hit. And then, first, you know, ironic but non regular workers jumped like this 36%. Okay. And then let me, yeah, this is a housing market issues, housing, bottom line what they tried to do is that they wanted to actually cut the price. You know, I remember my former colleagues at the Bank of America's whole office, they actually sold the house because they believe that this government policy, you know, will bring down the housing price but instead actually went up. And what they did was that they focus on the demand side so making harder to buy the house how so making a harder difficult to borrow money through the macro prudential tightening, and at the same time, they heavily taxed all the kinds of a transaction and an ownership. And some of the elements actually has a merit, especially like ownership of the property tax is actually has a merit but they did it all together. And then supply side actually neglect you can see the housing permit going down like this. So, limited the supply. And then, so many people have still had, you know, cash, and then stock market was a pretty bad shape. So where you go. I mean, if you look at the data, I'll actually have it in the book but you know the ownership of the type of an asset held by the household then about a 76% held in real estate, mostly housing. Why because the rate return is much higher say they already know that. So, if they anything then they want to buy the house but especially when you see that lack of supply plan then you can conclude. Ah, you know the supply will constraints apply and they give me a lot of liquidity right, still in the economy. So, people will, you know, buy the more house, despite the fact it is a more difficult to buy, due to a tighten the borrowing of the ownership. So that actually drove the you know the rising crisis in depending on the data in here, typically, you know the community, the KB bank data is actually standard the measurement 40% compared to previous government 10 11% of 6% decline in the previous government, but some of the data like a 10 million large data, the data is showing that even much bigger so some prime location could be more than double. So it also combined with the debt. So that actually showing that some secret nature, and then also I just, you know, you know, in a broader sense, what recent government policy might have gone wrong, making actually economic growth downtown even more actually more pronounced that's my main point. And let me move to the more structural aspect. And one of the things I just want to point out here. We already know that you heard me a growth rate has slowed down but look at this Asian tiger like Taiwan and Singapore and Hong Kong. Actually, Korea used to grow faster than those countries but income level is still around the 62% of their average level. And yet growth rate is not any higher. And the Korean government, the Korean, the financial industry, the people used to say that the Korean economic growth, you don't have to work harder to figure that out. You simply added whatever US growth rate or plus 23%. Look at this in all days and 7% compared to US 3%. So, you know, in the know 2000 pav. So you can add it to 3% then create growth. Maybe that range, but that doesn't work anymore. Right. So, that's some question but where are we going to start from a scholarly point of view. This is the we're going to start from a convergence argument, because as the economy getting richer and richer, even inevitably slowing down right that's for sure. And that this is the most salient features in empirical growth and 2% convergence rate. So let's start from there. But if you run a standard economic growth regression like this, I can do the accounting right so at the bottom panel you can see it growth rate from 6.9% and 99 is now in two decades down to 2.9% about a 4% point of decline on average. Okay. All this, you know the prediction from standard economic growth regression, it predicts only about a half. So my conclusion in here in this exercise, clearly the magnitude of growth of deterioration actually much larger than expected from convergence point of view or this type of a growth, you know, regression. So obviously, yes, we talked about it secret call external factors, it must be part of the story. Yes. But as I'm going to highlight from that we that caveat, I'm going to focus on the structural aspect. The next line that let's think about, okay, if that happened then what drove this, you know, the significant decline in growth. So we can do the accounting, labor productivity, employment rate and then participation rate and then working age population then what you see in here. When the GDP growth rate slow down like that is driven by the slowdown shop slowdown in the labor productivity growth. In terms of employment labor ratio, then it actually from minus point 4% to about zero right, decade average, and then live for participation gone up. Even today if you look at the data then you know big chunk is actually coming from elderly population because I mentioned that you elderly poverty is very high so that so many elderly workers actually seeking a job. They do a well paying job but they want to, you know, they need to find that income source but that's part of the story, in part, yeah. So it helped but big decline in the labor productivity more than officers so much so that GDP growth rate has gone down. And then also on part of that easing slowing down work age, you know, the population slowing down now 2019 it was outright a negative yeah. So that started actually declined 2018. So that's the now productivity story. Then now, let's think about it, what then explain the productivity decline. So we can take the growth accounting by account is going to be either a capital per worker, human capital per worker total factor productivity. So productivity is measurement of a narrow sense technical progress but in a broad sense is the economic efficiency. And that's Bob's all those original view but also current generation of a macro economist think that that's the case, and then you will see that why I'm emphasizing this. So if you do this, I'm going to skip this technical stops but if you do the calculation then here's the one. So try to understand the productivity growth to slow down like this then main template is this total factor productivity from one point now is almost zero. But then human capital about a steady and then capital accumulation for workers also going down on shop. So two things slowed on investment capital accumulation and then slowed on the total factor productivity. So that's the one major tentative conclusion right but we are not there yet yeah there are several things I'm going to show you now. As you're going to see in the next slide. This, we can do the also a level account level account this is from 2019. Okay. And what do you see the level of the labor productivity output per labor hour us is 100 okay for the to make the comparison easier, then you can see Korea is about half. If you measure the labor productivity for worker then this is a bit better. 56% because Korean workers actually working longer hours, yes, but here per hour. Okay, 52%. But then you can see it. This is mainly due to what low level of the total factor productivity. Human capital about on par. And then, if you look at a lot of studies done in Korea then there's a lot of issues quality of higher education. I mentioned that you earlier college enrollment rate, you know around 2008 80 over 80% now down to around the 70% but nevertheless, I told you that the young generation like the age between 25 to 34 is having a 64%. 64% of them have a bachelor's degree and above. This is the highest level in the whole world. And yet, we have a lot of questions. When I especially talk about this technical progress, so the skilled biotechnology progress. Actually, we don't see any acceleration of this skill bus technology progress, but taking advantage of this abundant right abundant highly educated workers. And that is why right why it's not happening. And my argument here is I have to do with the quality, but even we put aside quality issues on par. And then capital, you know, operation above that. So you can see it, and then try Taiwan and then Hong Kong and Singapore you can see they have a much higher productivity ratio because of a higher up TFP. And it's, you know, Paul Krugman all in young, you know, in the 1990s and then 2000 but I don't have time for that. But yes, there's something specific, you know, in Korea, happening is low productivity. So now we have a two component productivity has been slowing down in part because of a slow down dramatic slow down a total factor productivity growth. At the same time, 2019 the current, the productivity level is very low. So let me put it this way. If the current labor productivity recent trend, let's say us recent trend in the practical growth, both has gone down after the global financial crisis but actually us is higher than the career. If the recent trend to continue, then Korea will remain below this level. Next 10 years and 20 years. I used to tell these things, you know, to a Korean policy makers like a bank of Korea. Do you accept, can you accept these things being half productive, you know, as a whole nation, you know, is it acceptable as a whole society. That's a big question right. But this TFP and then low productivity is not actually our life you can you see that. This is actually very well established the, you know, empirical fact, meaning TFP is very important. Determinance of a productivity as you can see, either high or low right. And speaking of those things, I'm going to get to that as some data highlight what's the problem but Korea has a lot of structural issues on top of a lot of a secret for external like this labor market per market regulation and then outdated and also backward institutional setting. It all has a cost, you know, to the society in terms of chipping away at the productivity and growth holding back the productivity potential. A lot of studies, you know, the, for example, this set, you know, the 2016, they look at the European case and then they also conclude sluggish economic growth in Europe in general compared to let's say US is as to do with this regulation. Why? Because regulation, putting off the remove the competitive pressure, this carries the new company with a new technology and also labor market rigidity that also this carries the companies are timely adjustment of a labor force to the changing technology and business opportunities. In other words, it cause a misallocation of the resources so that it has a misallocation of resources, which has a negative impact on the productivity. And that's a storyline storyline that I had. And speaking of the highly educated workers in Korea, for example, when they find out excess supply, how many people you know the college workers, compared to say jobs actually requires the college education skill level. That is about 30%. So it is a structural nature, you know, misallocation, and this reached the regulation actually hampering that type of resource, you know, the movement, but then also corruption. Nowadays actually that of a big news headline news today in Korea is about, you know, the overhauling the prosecutors office in the nation, and then judiciary system but the desk also has a problem but look at this. This is the data, World Bank governance matters and then a crime freedom, regulation, legal system overall to show quality, oftentimes Korea lacks far behind. For example, labor market regulation, hiring a firing cost 120 out of 17057 countries so at the low, you know, at the bottom almost it has all cost in terms of a practical growth. I didn't show it in here, I mean just text but it has all significant status, because it is significant, this regulatory measures, and then I calculated how much if Korea, you know, improved the this different areas of regulation environment and then this, then what's the gains, you know, in productivity growth. And then you can see it, for example, regulatory quality, matching this Australia, Canada, Germany, you know, go on average yes, then GDP growth, productivity growth rate again like 0.7 and then employment gains are another 0.1% from the Auckland slow, then together 0.8% could be higher. And then you can ask where this low productivity actually coming. Manufacturing, especially Samsung or Hyundai, they're doing very well, but most of the small companies like this, only about one third, the productivity level. Service is very unproductive as well, but 70% of employment Korean employees actually working in a service industry and they have a barely one third of a manufacturing. No wonder this productivity. This is not only the, you know, explaining the unproductive nature of the Korean economy, but at the same time, as I'm going to argue later, is underlying a cause of the wage gap inequality gap. Yeah, so that's the things Korea has to handle but again in the interest of time and let me move quickly so you can project aging. Also, how many people will participate. And then the global economic recovery, then reasonable, you know, the assumptions under the reason of assumption I can make it, you know, it can go down to a 1% or with some improvements the global economy and labor force participation drive up to 2%. Although, if there is a meaningful reforms, as I described earlier, labor, the product market, institutional quality, a change is then he has actually quite higher upside potential in my view. So, this exercise clearly show, you know, the countries is that the critical juncture. Because, if something, which I'm going to bring in a minute, aging, more, more, and then this household debt issues, which I mentioned earlier and then inequality. That actually could put the economy 1% or even below. If you look at last 10, 10 years and Japan growth rate are barely average 1%. And if you ask Korean columns these days and they are a lot more pessimistic. A month ago, Korea economy association conducted the survey and asking, what do they expect growth rate next 10 years, and then about 40% answer that you could be below 1% right so some of them are even more pessimistic than me right but but clearly that's showing that Korea, you know, if either domestic or external condition do not improve, then there is a great risk, it might go down to 1%. But I have not added yet in the projection, household debt, and then, you know, the, the, excuse me this, the financial risk, and then other channel like the inequality how it actually impents the discards the economic growth, I'm going to come back in a minute. So, that's the question but this is really concerning recent study showing that household debt rising inequality. It's not just symbol, the symptom of the macroeconomic imbalances but it is also quite a robust predictor of the financial crisis. You already saw the data, the private debt is pretty high, although I have a reason, probably it's not going to happen, but here's a scenario. I have another put down this risk in the scenario 102. So it could be below 1% growth toward the 2030. So what they are, one, I'll write the financial risk, the crisis. It could come from household debt. If there is a big negative shot on the housing market. So in American style housing market decline or collapse, and then so many household, you know, default on the debt. You could spill over to the banking crisis, right. That's the common story. But as I gave you already my answer, it's unlikely to happen unless the shock is really big at the moment. But then more, more likely channel is the negative feedback loop between soft power growth and then financial distress, especially highly indebted household and then company. And also this rising quality polarization, according to some of the index compiled by the Korea Institute of social health and social affairs, social cohesion index is at the bottom of the among the OECD country for the last 20 years. Lack of the social capital, lack of the socioeconomic inclusiveness mobility, and also government, the old politics political systems management of a social conflict. So all that raising the big question because, you know, it may be a breeding ground for populist, you know, the fiscal policy, which is already happening. We've already seen in the Latin America yet. So it's not that obvious yet, but it has been happening in recent years. And also it also making a lot more difficult to actually bring this reforms in the first place, because existing rules and invested interest in the existing industries, industry insiders, versus a new technology new firms right. And then governments actually cannot do well. I mean, ranging the navigating this conflicts of interest. So, one of the example is the Tata is like a Uber Korea version of the Uber but they went out of business or 20, 20, April because of a impart heavy lobby by the industry, but also, you know, government, eventually the past law, make it almost impossible for them to continue to operate. But they had a very popular, you know, 1.7 daily users, and then also internet banking is another one eventually happened but existing regulation although I'm saying some of this regulation is pretty for the good reason, which is very good actually, because we don't have that Japan style stung market collapse and spill over to the banking crisis. We are not going to have that because of the existing regulation but same type of regulation actually hurt the this emergence of internet banking fintech. I'm not trying to highlight some of the problems. And then, but still I'm saying that there is a huge potential but look at this. A thing we have to be careful about it. Yes, I'm concerned about a waging but less so because why look at this. Working age population going down a 15% in Japan, Germany going down about a 6% since 1999 and yet level force up 30 or 4% in Japan and then up 9% in Germany. As you can see, many of the older workers actually they are employed because of a, well, many of them actually still healthy due to medical improvements, etc. But also, many people now willing to work right. So that actually telling us the aging is a concerning but you know, many of the studies I have to also tell you, based on the economic reasoning not based on the realized economic impact of aging. So, still, yes, I'm including myself I have a reason to worry about it but probably not as the single cause of Japan style of your stagnation that's my main point. Something concerning but maybe not, we have to worry about it and also Korea, unlike Japan has a 14 workers working in the Korea so about a 1 million legal workers, and then about less than 4% at the moment but if you include illegally, you know, working in South Korea like a half of them. No, the half of the 14 workers are coming from Manchuria area, Korean ethnic group, we call it Joseon Joe, they speak Koreans, and about half of them from there, and then the other half of them, mostly from South East Asia, including Mongolia, Vietnam, Cambodia, you know, Indonesia, Bangladesh. So, that could also, you know, complement aging workers. So that's actually something we think about it, but then what about the bubble burst and then financial crisis. Look at this housing market or stock market we don't see that Japan type of extreme bubble yet. Although I told you it's not shown in here clearly because of a scale right since I putting together Japan but we have seen a quite sharp appreciation of housing price, but in combination of household debt. So, maybe, again, I don't have much time but my bottom line is due to robust regulation. Okay, let me say that we don't expect that financial crisis. So that's why I'm saying that it is more slow burning issues clamping at the dampening consumption investment, and then also non performing law is only 0.5 so we don't see that unless negative shock either interest ratio income shots or housing market collapse, on a negative scale, unless that happened then we don't see that financial crisis right away but nevertheless, this high debt will constrain investment consumption that's why I still see that stagnant economic risk down the road very significant. And then I'm going to skip this inequality. Maybe we can save it for a future discussion later on but then, let me just point it out. There's also interesting aspect that this left hand right political business cycle look at this. Since you know the election of Kim Dae-joon. I highly respect him personally but he us the according to the Wikipedia US and the diplomacy cable described Kim Dae-joon as a first left wing president. But including him and then no more and and then a moon Jane, there's three a left wing government. Very typical story. They rely on the heavily you know the spending right, and then right wing conservative government back in it when then even back you see that smaller tax again they collect and then labor market. Well, depending on the perspectives political perspective you may call it this. What do you mean quality is that the one the most stringent regulation yes in here but look at this more stringent yes under the left wing government that's quite a typical, but the question is no following. We see that type of a differences in policy stance. I'll show you some right in here but does it translate into the different policy, the economic performance and the convention wisdom saying it's not because of why Korean context, you know open economy, either radical left wing government, try to do something crazy or populous government comes in then it will dent the exporters are competitiveness, and then car upon deficit, and then capital flows out then it will obviously a scare off all these people, even the, you know, left wing government so they're not going to do it. I don't know any difference exception maybe North Korea, national security issues and some politically you know sensitive issues but in terms of economic output, the result maybe not so much different. And then I'll show you in here, if anything the red line is the left wing. So GDP actually outperformed the employment gain. The same. But I'm sorry, I'm arguing that in this event study. This is mainly because of our export performance because of the exception, the current mungin government, the past two left wing government had before global financial crisis export was a, you know, supercharged the double but we don't have that anymore right. So that's the one superficial answer, but look at this in a political, you know, the political economy literature, we can do more on empirical estimation. So what I do here, whether governments in the office, conservative one or liberal left wing the minus one or first three years and then last one years and head. If you look at an entire five year period, then we don't see it any so consistent with your convention wisdom, right, controlling for all the other, the variable then we don't see any significant level from the political factors, explaining growth or components of GDP. But if we look at it the first three years, then no longer actually is a positive point 4% but remember I put the dummy is not one zero one and one minus. So what it telling us is a first three years. And so the government's intent to outperform about a point 8% the growth advantages, and then striking me that comes with the lack of the consumption or investment by the government. And also they tend to improve the current calm balance in here although it's not significant, but then last, the three, excuse me, last the three, the three or the six quarters then it completely reversed. There was a left wing government to catch up with the recoup the, you know, the compensated on the performing, you know, outcome in the first three years. They, you know, recover that by growing much faster almost 1.2% higher than the conservative. Because they spent a lot of money, fiscal spending and then investment. And at the same time that also a source of deterioration of the current calm balance. So I'm saying in here, look, you know, this type of left wing and right wing didn't show up in the data, partly because of when we had a strong export performance but we don't expect that strong export growth anymore, right into the future. And therefore, this left-wing right wing will be more prominently show up in the data. And they're there for a lot of a steak for the nation, get the policy right. And I'm going to just almost time, you know, for a QE will start so I'm just going to show you a couple more slides, but then I'm going to stop. Okay, so one thing though, I want to highlight. There is some good news though. Good news is, not only Korea is became a rich country, but the next 10 years and above beyond, create economy will continuously accumulate a net 40 and so 2015. I predicted the net 40 NASA position at the time around 14% of GDP will exceed the 35% by 2021. And you can close. Actually, it might have been achieved a year earlier. I made a prediction 2015 but 30% 2019 but then we have a pandemic. Actually, current common surplus was very high. So they're still on track to achieve the 35% with my prediction but what happened was this very big negative valuation effect. What happened was Korea, a stone market recovered a much stronger than US and elsewhere. But anyway, my prediction new prediction is a year 2030. In about a nine time span, then it might reach the 62% because of this structural nature of a current concept plus saving continuously go up. I mentioned it to you earlier, aging is one of the big components and also uncertain economic future then people have a stronger precaution saving motivation that drive the savings of trend. And then weakening economic growth, meaning a weak investment right so both explaining the driving current concept plus, and I did some exercise to construct this forecast but anyway, those the prediction but for the scholarly debate though most actually interesting question is this. Why Korea actually became a net credit nation only 2014. In fact, for example, since 1980, 1980, 98, every single year Korea ran a current concept plus. This is the blue line is the showing them some of the current concept plus because an effort in answer by definition, some of the current balance and subject to the valuation effect. And then the short answer is valuation has been shocking in very big so for example, it had a catalyst 45%. It is because of a very unfavorable which is not uncommon among the emerging market, but heavily skewed to other foreign reserves, low yielding US Treasury bond, for example, and yet for reliability they heavily, you know, skewed toward the stock market domestic stock market, and then the bond market so they tend to pay a lot more higher rate than Korean that actually the valuation effect and plus it changed the movement. And, but I'm telling that well it's going to be better. So now, for the new germs already very high, and yet Korean perspectives we don't have much reason to accumulate even more, rather we can actually start to have more high yielding asset. Therefore, it will be better. And that's the basis for projection. And then what else. There's a lot of calculation but I don't think I have time and then North Korea we can talk about it. Because of some issues in the book, but then, you know, what should be the role of the government. But let me just say one thing and then stop. I give you some sense of the structural nature, like uneven manufacturing versus vastly stagnant service industry service sector again accounting for about 70% of employment. There's a heavy weight of the regulation labor market rigidity duality business regulation and some of the outdated regulation in light of this new technology or new business environment. And at the same time, this lack of a political leadership, who can orchestrate all this structural changes of reform that actually sort of driving the current difficulties facing Korean economy. And I think in here though, if there's any guess, the current president new elected made a lot of a promising, you know, promises, the, the, how they're going to change better right, but until we see it actually that I'm concerned, which I'm going to come back in a minute but if there is any reasonable guide we can take from the recent history then most likely irrespective left and right. This is the same thing job creation, short of the economic growth, and then strengthening a social safety net, and then some crafting an industrial policy, and then some other issues like North Korea issues and others more closely aligned to the left and the government or parties. But this is what exactly they have done in the last 10 years and plus, and then we know that they couldn't change the this secular, you know secular downturn, in terms of economic growth, and yet at the same time, rising inequality, social polarization, rising dead, easing youth unemployment, all these problems actually compounded together, and they're not effectively dealt with. That's why I'm saying it has to be, you know, much deeper structural changes reform. But if you look at a current seat in the National Assembly then supermajority actually held by the current incumbent, the left wing, right. If a new government comes a new president, coming from conservative party, he will try to do something actually, you know, revive the, the lightning the regulatory environment, and then try to do some other new investment, allowing the new technology, but, but many of them has to be also accompanied by the changes in laws and regulation, many of them actually written in the law. And it's literally held by the opposition party. So there's a lot of the pessimistic we can think of because they need to talk together, negotiate, but they do not have a very good record track record of doing that in the past. You know, I wrote it in the book where we might actually have to wait for a new generation of the politician who knows, but, but nevertheless, also I made it clear in the book. I'm not actually saying that this type of current difficulties is a ceiling off the Korean faith, arguably, you know, previous generation, they had a much bigger, you know, difficulties right when they, you know, made this economic miracle out of ashes right from devastated by the Korean War. So current challenges may not be a comparison to what they actually go through. So I don't want to actually sound too much pessimistic but, but at the same time was just starting to talk about this several issues then clearly eventually it boils down to the political leadership. And also I go through this, you know, idea of development, development, the state, you know, government business cooperative mechanism, and all that very important issues but probably they lived, you know, their, their, their own life and then future governments probably won't be the same as they envisioned two, three decades ago when this, you know, priming and scholars educated certain mechanisms. So let me stop in here and hopefully I conveyed a story of this book and hopefully we can do some interesting discussion in here. Thank you so much. Okay, thank you. Yeah, with a short time, judge and touch various aspects. Okay, related to the economy, related to the economy system on education system social system. Yeah, everything is impact on what happened in Korea. So I think people have questions maybe raise a question or their own argument maybe sort of any question. Yeah, you can type in a chat box or just press to raise a hand we can discuss around next to any minute. Okay, any question please. Okay, let me let me start maybe maybe have some question because I don't have an clear answer on my hands as well. Like, you you bring the several factor okay impact on this kind of structural problem. Yeah, we can't say if each one is more, more important issue but for the practical issue for the government policy point of view, or, or in terms of like the independent issue like could be education issue could be, you know, the macro micro level, or so sort of the regulation issue. If you are the person who can make any decision making, and then have unlimited time right. So, what is going to be the point you want to start the fundamentally, like, like, whether it's a matter of policy, or another policy is a matter of the economic structure, with a matter of the population policy or it's a matter of education issue or a matter of any labor. What are you going to touch at first. I mean, clearly, there are a lot of multi dimensions in terms of structural issues because of structural issues. In some sense, the data even survey data where we career rank. Oftentimes it is very abstract manner but out. If the government. You know, want to do something meaningful then. First of all, they need to look at what's the bottom neck. You know, Danny Rodriguez and then other people invented this word growth of diagnostic. Meaning, you know, just like you're asking, when once we think about it all this either good things or bad things going into this economic growth. Then we have an infinite number of exactly right infinite number of factors we have to get it right. And we cannot do that, obviously. So we have to think about it then where they actually the bottom neck is they're hurting the most. And then I'll point it out the two things. One is the labor market and business regulation business regulation I mentioned that to you earlier. And for example, new technology and then Tata is like, you know, show writing the company but it didn't happen I told you they went out of business. So this type of the illustration of several things. Number one conflicts of the existing industry insider versus outsider, then conflicts interest among them. And yet, unless somebody in here of course has to be government and political system, navigate these conflicts of the interest, allowing them this new technology, bring it brought into the system that's the, what this regulation is about. In other words, regulation is not just about what you can do or not to but also they need to adapt to the changing environment and technology, and then this is something has not happened. In the service sector, you know, advanced the plan. There is a bill, try to make it a service industries, more open to the competition market mechanism, which will might bring in further investment. You can scale up certain type of a, you know, service, you know, business model, and then you can actually jump start to some of the low productivity nature to the high productive natures. Although Korea has a famous for it. Internet speed, you know, you can name it but again, where do we see that evidence of skill bias technological progress happening for example in the US. I think it's not happening because we have a one the one hand highly educated workers, of course we can talk about our comeback in a minute quality. It has a serious problem underneath. But even if you take it at the face value, we cannot somehow system cannot utilize them to the advantage of bringing up the productivity. That's where the that's how we see the regulation actually sitting in between not helping. And also a labor market, look at this subway. Many other nations also have a one way or another. You know degree of employment protection and etc but Korea in employment protection is around the same level as France. And from European model, yes, they might have a very different view about what is the idea society, etc. So I get it and also many people including myself, probably German type of model could be the role model for Korea. Many people think that in Korea, so don't get me wrong but nevertheless, Korea current rigidity and duality of the labor market is quite extreme. And there's a history of that because I explained in the book, you know beginning 1996. At the time my Kim Young Sung government actually tried to do it because at the time they already see the globalization process. So try to give some flexibility to the firm and the labor market so they introduced the temporary workers. But then there was a lot of a protest from the labor union, etc. And then it's told, and then financial crisis came over under Kim Dae-jung. He done a lot of good things, and he actually tried to set up these tripartite, you know, commissions, combining a labor and management and government. But initially labor unions actually were quite receptive because they also thought there's no any option because the economy is in full crisis at the time. So they wanted to do like allowing the collective dismissal of their workers for a manager reason. Which you cannot do now because at the time but they trying the inclined to agree to that in exchange for a strength and the social security center but soon after the strong rebound economic growth, they walked out. And the Moon governments, I thought at the very beginning, he might be the right person to do this labor market reform because he has the political capital with them, and the labor union can trust him. Instead actually he did much the opposite. But the point here is the government have to tackle this labor of rigidity because you saw that 36% of non regular workers. It is a combination of a lot of things, not only the labor rigidity, don't get me wrong though. The environment companies actually going outside the offshore offshoring and also nowadays as semiconductor automobiles is almost, you know, highly automated. If you look at the data then according to the Federation of International robots. The installation of industrial robots per 10,000 Korean employee employee is now number one Korea, about 700 machines, followed by the Singapore, Germany, Japan and the US. That means, given the structure of the industry. Given the worthy created a new value added growth. At the same time this industry by nature high tech nature, they are not hiring as many, although supply side is now so many colleges recorded this clash. Therefore, when the labor market is very rich that then companies are fearing. Well, I know that if I hire more workers when a good time, but when the bedtime comes then I may have to a layer of them but I cannot do it. My colleagues in the solar office bank America they used to tell me that you know what, I'm not going to quit until the day fire me then they can pay me a lot of severance feeding etc. I was in based in Hong Kong then I can be fired just next day right, and that's the clearly differences. When the company is facing this type of a high hiring cost and high hiring, the firing cost, then they are reluctant to hire so on top of a additional reason right a more automated. Remove the reduce the demand offshoring reduce the demand. On top of that, the rigidity also cutting down the incentives to hire. And some of the stole the reform measure in the past under Buckner was the wage pick system in the private sector, meaning, many of the older workers are still under the seniority based pay meaning as just to stay as long as you said and your pay is keep on going up and down. So what they did was a try to cut it about 70% of peak income then exchange for extension of the employment of until age 60, and then making a room for the new hire right for the younger workers, and then they also introduced in the performance today. So private sector to do it and public sector was introduced that too but on the moon government actually they abandoned because of a labor union, labor union has a lots of yes, historical you know reason oppressed, you know right and you can name it but you cannot say that much because there's a data you can clearly see Hyundai workers, for example, the better paid by then Toyota or Volkswagen. That's the current state of the nature so that kind of a regulation, either labor market, that's actually, you know, impinge on the user employment, and then productivity problems, and then not the emergence of a massive, you know, the emergence of a new technology. That's a regulatory, you know, bottleneck, holding off in a way, but the one of the big difficulty though, these, the politician has to agree or not what to do with this big problems. And some aging issues, yes, aging, low birth rate, or pension issues is also a, you cannot wait too long but, but this is a much longer issues compared to those, what, what you can do right now. So, out, put more effort in reviving this, you know, the service sector industry, some of them more scalable like IT related a company, the tech industry, or medicine actually Korean medicine actually very strong and then sophisticated but also tied it to that idea of a non for profit so that also they have to think about it smartly how they can allow the new innovation further and then scaling allow them to scale up and then, you know, one by one they can actually lift you know the productivity in the service sector not all together but maybe some of them and then you can go further and then the education is another one. You know I spoken about a pop list of policy but now the tuition is frozen almost more than 10 years. And back in a government and then at the time, actually, that was the idea because they, they took the idea from left wing party saying, you know, we will promise you cut the tuition they have. And then as a result, they froze the tuition and then half of it subsidized by the government, but depending on the income of the students. That's what they've been doing now but I look at this. As a result, many university cannot actually invest heavily. And if someone, they want to hire from outside and then the salaries are almost the same last 10 years so they cannot offer, you know, attractive position. That's the nature but also a lot of studies done by the Korean export in labor market education they conclude about a 20% of a four year college educated workers and then 50% of a two year college graduate, they earning less than high school graduate. So how come then of course, in my data actually I showed that a lot of connection between productivity and then pay. And then I mentioned that highlighted productivity gap across the sectors between manufacturing service and the within manufacturing high tech low tech, and also a large firm and small firm you name it. Many of them actually this wage gap inequality actually also linked to the productivity gap. That's how I see that Korea maybe in a fortunate place. If you tackle the underlying productivity gap across the different sectors, etc, then not only boosting economic growth but you can also reduce the inequality to some important aspect, not all but some important aspect. So that's the one but education. You know if you look at the several indicated like the top 100 or top 500 university around in terms of research then not a single university belong in the top 100. Right. We can clearly ask right, you know, rightly asked because we just said Korea has a highly most highly educated labor forces in the whole world but then we don't have that kind of an institution. And also we don't see that. You know, like, you know, a smoke low and then auto David auto, and then cuts their labor economy that MIT and Harvard, they studied a lot of this new technology versus wage inequality, etc. But we don't see any endogenous response of the system. And then is a truly oversupply of a highly educated workers truly believe their quality right then they got to be a response of the system take advantage of this abundant resources. So it could be two reasons right one is again regulation or all that environment, doesn't allow the taking advantage to new into the new businesses new industries, using this highly skilled highly educated workers, or secondly, maybe they are not so well educated. So one of the current president of a career economic association, the professor, I actually, I know him very well but personally but I had a conversation a while ago, and then he was telling me that, you know, he could observe 10 years ago 20 years and then current actually students. And then, you know, he, he does see that actually deterioration of the quality of education. He even saying that today's tuition although it is a half and frozen I told you right last 10 years, and yet it's not even worth. So that's from the president of the Korean Economic Association, telling you that the quality of the education so there's underneath a lot of problem and also here's the one still the career. You know, the college education or college admission process heavily skewed to this. The test, but all about a memorizing and also it is very shocking to hear that the Seoul National University top in the whole nation. They wanted to teach you know the advanced calculus for the freshman, and yet they found that many of the students were not prepared qualified to take this course. So they have to introduce introductory course of that introductory advanced calculus, because many of the students were not, you know, taught well enough to do that so there's a lot of, you know, the anecdotal evidence, and also many people depending on the emphasis. Some people think that why Korea economy is now been suffering like this low growth in the last 10, 20 years. That to mention that the pessimistic outlook in the future is the failure of the system education system to address that, you know, more quality, and then emphasizing a creative thinking, because a new industries like a fourth industrial revolution, and that's AI, biotech, you name it, those all one way or another, blurring the existing business line, once again regulation on the one hand, but also it requires the lot of, you know, adaptive skills, and then creative thinking, and in multi disciplinary way of approaching issues, but existing education clearly not doing that. And in the past decade, tremendous you know when the economy was catching on mode. Then, this type of well educated workers, average workers is a big plus. But now you get to the close to the frontier then we really need someone can provide that insight and then create the way of doing it. And that's not simply coming from memorizing all the stuff, you know, over and over again. So, in my sense, many people understand this problem. It's not new. I'm not the first one to say this problem but more what I did in the book though. I want to mobilize the data to show that how this slow growth can be having a direct impact on that, you know what we see measures the data right in the sense in is new but otherwise, or many of the idea we have this is that problem. Actually, in a quite a well debated the issues in within Korea, including that education problems. Okay, thank you. We have a care around three questions due to the time limit. One question is about how important do you think the income inequality matter to create economic prospect. And here's a question of the Jebel like the conglomerate structure need to be reform or can be reform. Okay, is it possible to be reform. And then last question as a somewhat any sort of collectivist culture make government intervention easier or harder is more. Maybe sort of the Korean mentality or like sort of things make it intervention easier or harder so maybe can you briefly mention on the comments on this three question I think we've seen two to three minutes per question, you know, and then yeah. Okay, so first, inequality. Inequality we we know that like us for example, the great gas be occur, meaning one generation inequality prevented the next generation, you know, move around along the income ladder. Exactly happening Korea Joe Cook. I couldn't spend much time on it but Joe Cook Justice Minister's Sega meaning bottom line is this. He and his wife actually forcibly the documentation. To what to help their children do land on, you know, reputable, you know, the university, good university and then medical school even. And, but he was our spoken champion of this, you know, speaking against the abuse of power wealth by the elite, but he was one of them. The meaning is here inequality is not just the inequality by the material any unequal distribution. No Korean society is highly connected. So, you heard that shrinking job opportunities, but combined with this, this some of these are highly powerful. You know they're connected the world connected the parents will do everything to, you know, the, the open job opportunity for their children. That's where this all this wrong doings, ethical lapses coming from together. And look at the devil devil is another problems but trouble. A lot of people have a very negative opinion, despite the fact trouble was the one of the number one contributor to the economic transformation in the last several decades. Why nowadays we have a second third the fourth generation of a general owner of family. They are actually almost like a dynasty but they're ignoring the law. And then you name it white collar actually cream crimes, like an embezzlement of the money and then elicit the enrichment. One of the tactics of is this anti, you know, the trust point of view do this. I won't actually give my world to my children or grandchildren. I have to pay a lot of taxes, almost 4050%. How can I avoid it. You know, then one of the easiest way is, I want to create a company, but then this big company has a lot of a supplier right. So, you know, I can create my own. And this is a still privately held company right. And then, because of a volume that I can create it all the right. This company, instantaneously a big volume, you know, handling a company. Now, it's not only threatening existing this corporation, the pyramid, right supplier chains. All right. But also, you can actually, at some point you can IPO this company. But before you do that, make sure that this company under the name of your grandchildren or grandchildren's children then instantaneously this they getting owner of the company but also billionaires. Okay, so you can see it, not the dimension of this inequality and the wrong doings, illegal or legal right and then on ethical practices, either education or this enrichment or outright harassment. That also combined with this, Jebel, but, but other than that Jebel actually this, the structure corporate governance though, that has improved a lot. So for example, except now Hyundai and Samsung, all of them actually under the holding company and also under the current law. There will be a new circular, the equity investment prohibited. In other words, the trick is this. If you look at the equity ownership structure then Samsung is a young has a very very tiny single digit about around the 45% of ownership of Samsung Group. But how come he is an owner, right, why people call him an owner because he said, you know, holding company or previously some of the main parent company, the main companies on the company B and then B company on the C and C company on the D then you circular and then come back to this company so with a tiny by controlling this parents company I can control the entire the group of the companies okay that's the on the pining this this circular equity investment but now it is a prohibited and in the past, the governments put a lot of regulation quite a successive, you know, successful you know in the last 1020 years that they make it harder to hold that kind of a circular existing circular investment relationship, and then curtailed on the one hand, at the same time they prohibited a new that type of circular investment so now is a much of it cleaner transparent, but still there are a lot of, you know, abusive like this, creating a inside the inside a company and then using this as a tactic to, you know, inherit the growth, right, and still, you know, fair trade a convention, doing a lot of job, sometimes it may be viewed as anti business but I think that this is a very important why I mentioned that this labor market reform but one of the reason why parking a labor reform didn't succeed is this. You, you have to convince the labor workers or position leaders or Seville's you know the groups about the Jenny intention of this collectively a good cause this has to be done. One way or another, some of the workers have to sacrifice because it'll make it a lot easier fire them more easily right, but the problem is, they have a long this, you know the deep seated suspicion about this, you know, the large company I mentioned that you this in legal illegal enrichment of their family right. So they also have a belief that they have so much to share with us. Why you tell me to sacrifice. So that's actually show up in a very aggressive wage bargaining, labor union just to go out to the street or they just sabotage you know they start to work. You know this is very well known pictures of Korean, the labor union but, but at the same time we have to also know that the reality, and also not to mention the abusive you know relationship between travel and the subcontract to many of the you know, under the name of a competition is the Chinese company blah blah blah and then they squeeze down the price meaning this small company cannot have a capacity to pay or even invested in R&D. Now to mention that some of the outright stealing those their companies, the technology saying that you know what we're going to do for my partnership, but in the end what they did try to do was stealing this technology and then once they have it then. They don't need it. So this type of a lot of an ethical business regulation has been dealt with in many years so it has improved quite a lot but you can see it. This is not purely anti-empire trust matters itself. It has an implication for the inequality right as a result and also, you know it has a show up in the wage inequality and etc. So I hope that I address some of this. Yeah, so the final question was the collective culture make whether make government intervention whether easier or harder. What is your opinion on any. I think that Koreans have a very strong for the group reason, strong tradition of government intervention, because we had a very successful in economic development. Well, on the back Johnny, you know, back Johnny still remembered as the number one greatest leader in modern history, despite some of the human rights abuse and all that, you know, deterioration of the democratic, you know, all that attached to it but nevertheless overall his contribution to the country is way more than actually, you know, any other downside. So because of that strong tradition of the government intervention, meaning whenever things come up then Korean citizen have almost automatically they expect the government to do something for them. So, in a sense, this type of a tradition rely on the government, one the one hand, but at the same time, you heard me saying that so many failures, small and large. And some of them, despite a good intention though right. So, who what kind of government or what kind of president want to do something bad right intentionally. So it happened either process or many different layers. You know, sabotage that all this progress but but the problem is here. This type of strong interventionist expected by the citizens could be bad also again, government has to do something all the time. And I actually struggled with this question because a scholar debate oftentimes, you know, put it highlighted say, Oh, free market, or you like the government intervention. Probably, the right answer is a somewhere in between as always. And in doing so, once you start to studying at the current economy today modern economy then we have actually more problems with this potential government failures. But at the same time, I do recognize government has still a lot of things to do. Ensure that this type of a well functioning labor and then business regulation I mentioned that you all year even Jebel is a problem. It can be viewed many different area right, even this enrichment, right the problems, and then and violation of anti trust, you know, all that things, but this take the actually enormous of political leadership. So they need to put a very clear guideline meaning under the name of a law and then provisions. But there's a famous you know the joke in among the Korean, whoever in charge of that, they are drawing the line as they running. So, as they like they can go to the beach and they can go to mountain. They can go many other places. So there's no any big principle guided sort of low, rather they do it as they come in that means somebody who get close to that running with that could decide that you get benefit but then some other outsider will like behind that kind of political aspect. There are so much, you know, how do I say compound, you know, the, the some genuine effort. Therefore, the collectivist culture is very big deal. But you could make it easier or harder but I will say, make it easier in one sense because they get people expect them to do it on the one hand, but at the same time, what they expect to do the task is no longer the kind of a things governments can easily decide or you do this and that. For example, you cannot do it anymore. So I summarizing my last chapter saying that probably the, you know, most productive role of the government future government would be in terms of more as an enabler. So how you're going to support the market system and then focus on the welfare, but at the same time don't forget the structural changes and then reforms right only the government can do right the politics in general right so they have to focus on those, and then they need to revive the sort of bipartisanship. Right. Is that the collective, I don't know. But they have to still speak to each other. And then the rest of them. I think many of the private sector can do well actually without an intervention but clearly so many existing business regulation blocking those type of a new voluntary and then spontaneous entrepreneurship I think that's the current state of the problems. Okay, so actually quite interesting and then we believe or not, we spend over two hours now to have a discussion but I didn't expect always already two hours but yeah quite a good questions and then. Jejun brings a lot of good point and then critical point with the clear data and figures easily show, explain about the trend and the structural problem. So it gives some, I would like to say he tried to keep, he didn't try to give solution, but try to keep some sort of starting point to objectively and then systematically to think about how can it deal with the newly emerging various issue on Korea economy. And so I personally want to summarize in that way, yes, Korea, the evolution of the miracle economy miracle, consider as a good benchmarking for the or other emerging market, and then hopefully, yeah. If we Korea as a facing sort of the new challenges, based on very structural problem. Hopefully, and then I believe we can be a new benchmark to deal these all kinds of the issues and changing to show continuous, you know, sort of the role model for the development engine for other developing economy. I think we can have another chance to talk and discuss further in depth and then other issue more talk about the implication for other countries, you know, so hopefully we can make a chance and next time in the new time in next academic year will promise you will arrange that sort of the discussion. Any other final questions or comments. Okay, yeah, no. Okay, thank you so much, Jejun again for your insightful touch on this topic. It was, I was personally I will really enjoy your presentation and then I would like to read your book again, and then to study more to have a better and then good discussion next time we do and then I believe our tendencies today, or so they got some sort of new insight about the Korean economy more in detail in a more, more sort of systematic away let it and just read from like the newspaper, you know, like or just just, just so, oh, great. But so hopefully this chance give more, give the put more interest about the Korean economy and then about the Korea. Okay, so thank you so much everybody. Thank you so much. And it was a great pleasure to present the book. Thank you so much. Okay, thank you. Bye.