Chang Ha-joon '86 is a very busy economist. In the last decade, he has authored more than 10 books, dozens of articles, edited and contributed to many more books and has been honored with two prestigious prizes. He is a sought-after lecturer not just in academic, government and corporate circles in Korea but also at the United Nations, and particularly in development circles in the United States and in South America. His theories on economic growth stake out a middle ground between the two extremes of Korea’s ideological spectrum.

SNU invited Chang on April 7 (Mon.) as a special lecturer. He gave a lecture titled"A Time of Flux for the World Economy" to about 500 SNU students.
 
Here are excerpts from Chang’s interview with a press that day.

Q. You became a professor at the University of Cambridge at just 27 years old. In 2003, you became the youngest recipient of the Gunnar Myrdal Prize for best monograph and, two years later, of the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought. Were you a prodigy, or do you have a secret studying method?

A. I don’t consider myself a prodigy. I am, in fact, a man of industry. I just liked studying, so I kept delving into it. Perhaps that is my secret.

You got your bachelor’s degree at Seoul National University. What is it like teaching in a second language?

I’ve lived in Britain for 23 years now, but I still have a Korean accent. I am still not sure when to say “the.” When I write something and ask my friends here to have a look, they tell me that I’ve thrown “the” around in a random, careless manner.

Neoliberalism is faced with mounting criticism. Why it that?

Neoliberals believe that the market has the power to adjust itself. And that is based on the premise that humans make rational choices. But even Alan Greenspan (former chairman of the U.S. Federal Reserve) said at a hearing he’s having doubts about the liberal market model that he used to live by.

Do you think that the age of neoliberalism has ended, or will it survive in other ways?

It will be hard to do away with it overnight, since we’ve adopted the policy for decades. It will continue to be challenged and undergo pains. Changes are inevitable.

If the recession worsens, neoliberalism could degrade into a peripheral ideology. If the economy recovers somewhat, it could find a new viability. But it would be safe to say that the free market economy of the 1980s and ’90s is over. Even Jack Welch said that “shareholder value is the dumbest idea in the world.”

A report at the recent G-20 summit in London predicted the economy will grow by 2010. Do you agree?

It’s difficult to predict at this moment, because there are so many derivatives at work in countries around the world. For instance, during the subprime fiasco, the U.S. government initially said that the scale of the damage was between $50 billion and $100 billion U.S., but it’s ended up injecting about $1 trillion so far.

It’s not because those who are making these predications are stupid, but because the derivatives are so complex. And we haven’t even begun touching the credit card problem. The household loan-GDP ratio in the U.S. and U.K. go well beyond 100 percent. Once those who lost their jobs become incapable of paying these debts, credit card companies will collapse.

The International Monetary Fund in 1997 told the Korean government to let hopeless companies go bankrupt to improve competitiveness. But U.S. is saving companies with bailouts. What are your thoughts?

It’s a double standard. In the 1997 Asian financial crisis, the IMF demanded that the Korean government make a financial profit worth 1 percent of our GDP. With that, about 100 companies went into bankruptcy every day. The U.S. predicts the financial deficit to GDP ratio to be between 12 and 13 percent while Britain expects it to be 11 percent. Even British Prime Minister Gordon Brown admits it [the IMF] forced other countries to implement policies that even Britain doesn’t adopt itself.

What are your views on the relationship between politics and economics?

I believe politics is extremely important. The Roh Moo-hyun administration said that it would confer all authority on the market, but then all politicians and government officials would have to quit. Amassing wealth is impossible without capitalism and a free market economy, but because these are imperfect, government and politics exist - so that they can right the wrongs and regulate what must be regulated. Politics define the boundaries for the economy, so to speak.

President Park Chung Hee is criticized as a dictator, but some say because he used the efficiency of dictatorship, he was able to put into motion a strong growth engine. Do you agree?

There is that side to the story, but there is danger in generalizing that dictatorship will bring economic growth. Although not perfect, Japan, Finland and Sweden all achieved economic growth while maintaining democratic leadership. Scandinavian countries also built strong states through consensus among their citizens.

Of course, it remains in doubt whether or not Korea could also have created such a consensus in its society. There isn’t a country - even the most advanced - that became a democratic state before having a per-capita income of $3,000 to $4,000.

You support the jaebeol (Korean conglomerates). So is your theory that foreign financial capital is more ruthless, uncontrollable and, as a result, more harmful to workers than the jaebeol?

The jaebeol used to be interested in developing new industries and creating new jobs. But foreign fund managers are not interested in those things. Once they are offered a profitable payoff, they sell their slice and leave. That’s the modus operandi of foreign financial capital.

Nokia, the Finnish communications corporation, began as a paper manufacturer. After it became a communications corporation, it took the company 17 years to make a profit. What kind of foreign shareholder would wait that long without any dividend? It takes 10 to 30 years for a company to become an international corporation. But because of its innate characteristics, foreign financial capital doesn’t care about long-term development.

Are you a believer in the growth theory that recovery should come before redistribution of wealth?

Decades ago Korea’s per capita income was $80 and infant fatality was 78 out of every 1,000 births. Recently I saw children in Haiti eating mud rice cakes due to a hike in the price of grain. Infant mortality there is 74 of 1,000. I don’t mean that we need to sacrifice everything for growth, but I’m just saying that growth is not trivial, as some people think.

April 8, 2009
SNU PR Office