[Opinion] Institutional Competitiveness

According to a survey conducted by the Journal of Economic Literature, Koreans accounted for 10% of graduates in the field of economics who won their doctors degrees in the U.S. from 1987 through 1995. Given that the country takes about 0.75% of the global population, the result comes as a big surprise. Some might take pride in the figure, what they see as superiority of Korean people. On the other hand, however, people need to realize that a lopsided approach in learning knowledge could end up limiting creative thinking.

▷Since the 1997 financial crisis, the country has accommodated a wide range of global standards, which are in fact mostly American ones, in earnest. As a result, the characteristics of American capitalist system have become the economic norms in this country - maximizing shareholder values instead of seeking economies of scale, addressing the concentration of economic activities on conglomerates by pushing for reforms, letting the capital market decide where to invest by limiting bank loans, and creating a flexible labor market for businesses to push for restructuring if necessary.

▷What is interesting is that most advanced countries, except some Anglo American states, are fast losing their faith in the American standards. It is because businesses and financial institutions, which were eager to advocate the American system, have seen little improvement. In line with disillusionment, scholars are also emphasizing the importance of institutional competitiveness, which is tailored to individual countries. For instance, if a country is seeking to improve its technological prowess by focusing on high-tech industries, it may well embrace the American free market competition institution. If it aims to develop technology to boost productivity for motor and brick industries, it is better to adopt a flexible market institution of a European style.

▷Professor Michael Porter at Harvard Management Graduate School, who is well known for his international competitiveness theory, also stresses that the American system is not a panacea at all. He notes that American enterprises have lost their long-term vision by focusing too much on short-term results and dividends for shareholders. As a result, he points out, they fail to boost facilities, research and development, organizational structure and human resources, further leading to distorted economic growth that widens the gap between the haves and the have-nots. Then, we need to look into our system to find whether the indiscreet introduction of the American institution is the cause of the contraction in the investment market.

Lee Chan-guen, Guest Writer/Professor at Incheon University, ckl1022@incheon.ac.kr

Mun Myeong-ho, Editorial Writer, munmh97@donga.com