Thursday, October 28, 2010

The Relationship between US Federal Deficit and Private Nonfarm Payroll Employment


It seems that many economic experts forecast the move of private nonfarm payroll employment like the above. Do you think their forecasts are correct? If yes, why? If not, also why not? Can you share your opinion?


By Luke Hohyung Lee (luke.h.lee@gmail.com)

Monday, October 25, 2010

A New System for the Real Market as a Solution for the Current Economic Crisis

By Ho-Hyung (“Luke”) Lee

In the Industrial Age, one plus one equaled two, using simple arithmetic. However, in the Modern Information Age, one plus one could produce 5, 10 or even 20, given the possibility of geometric progression. Such integration or synergistic effects can be achieved relatively easily with the increased communication capability that has resulted from the development of IT and networking technology. Moreover, the global information exchange enabled by the World Wide Web has made them more broadly realistic.

However, this increased communication capability has greatly influenced and brought major changes to all participants in the market. Almost all of the individual units on the supply side have greatly increased their productivity and efficiency. As a result, the ratio of employment to investment has been reduced. On the demand side, consumer knowledge and recognition have increased greatly, and this is directly linked to the abrupt escalation in consumer needs and wants. It is likely that this pressed the increase in consumer spending on the demand side.

On the other hand, the efficiency and effectiveness of the market as a whole must not have changed much since there were no major changes in the existing market systems. Market systems are result of a series of individual actions that realize the market process. That is, no major changes were made in the consumption of products and services supplied from the supply side, and the increase of employment must have weakened.

It could be said that the market requirements for consumption and employment have increased in a geometrically progressive way together with the development of information, while the market results have changed only in an arithmetical way. This mismatch might have caused the chronic decline of consumer spending, and as a result, a serious imbalance and a vicious cycle between the supply side and the demand side must have occurred.

To prevent this vicious cycle, we have had little choice but to adopt expansionary economic policies. In the old market paradigm, these could increase the level of consumer spending to promote growth and prosperity, but in the modern information market paradigm, these have been adopted only as a stopgap to postpone the inevitable vicious cycle. In addition, these policies have caused the creation of bubbles in all parts of the equity market and have worsened the budget deficit at both the local and federal levels as serious side effects. Even more serious was our failure to effectively regulate the creation of numerous sub-prime financial products. Despite the potential risks of these products, we went ahead anyway, as they encouraged higher levels of consumer spending. All of these side effects and abnormalities contain the huge risk of lowering the level of consumer spending suddenly, which would force the economy into deeper recession.

It seems that these side effects and abnormal phenomena happening worldwide have been already significantly aggravated; and the possibility for these to be an economic tsunami is very high. Then, do we have to execute the exit strategies as soon as possible? Paradoxically, it is also expected that the execution of exit strategies would immediately decrease the level of consumer spending as well. It looks as if we are in a serious dilemma, and we have no solution to avoid the upcoming deeper recession.

To make things clearer, let’s go back to the fundamental question: Why have the market results changed in only an arithmetical way?

Because the distributions and deliveries of real (i.e., physical) products and services and the activities of providers and customers are directly restricted by time and space, there must have been many different and complex rules and standards for the transactions in the real market process. To construct an efficient transaction system or application, we should simplify the rules and standards first. We have developed numerous transaction systems and applications such as eBay and Amazon.com by simplifying the rules and standards through the use of IT and networking technology. Here, a serious mistake has been made, but nobody has recognized yet what that is.

The mistake is that in developing those systems and applications, we have tried to simplify the rules and standards only by manipulating (i.e., classifying or limiting, etc.) the constituent factors of the transactions such as products, services, providers and customers. Let’s look at some examples. E-Bay’s auction system is an effort to simplify the rules and standards by a product or a service, and Amazon.com’s E-seller system is an effort to simplify them by a company (i.e., a seller). However, they have made a mistake: giving up the opportunity of facilitating competition among providers. The developers of E-Bay’s or Amazon.com’s E-marketplace system or home shopping system have tried to simplify them by the character of products or services. In this case, only products or services that are not sensitive to the rules and standards can be efficiently traded through these systems. Some big companies have tried to simplify them by their buying powers to manage their purchasing alone (E-Buyer model). There are also many other cases, but almost all of them have this characteristic, which might be attributed to the desire to immediately increase productivity and efficiency. Because IT and networking technology have been mostly used only for this, the employment situation has continuously worsened in the market. Things have been wrong from the beginning. In this situation, the more the Information Age has developed, the more the employment situation has worsened, and policies aimed at the improvement of the employment situation have been unsuccessful. Moreover, in this situation, almost absolutely, geometrically progressive market results could not have been drawn from the market.  

We need to consider a basic question once more: Why have many different and complex rules and standards for the transactions been made in the real market process? Have they been made due to the constituent factors of the transactions such as products, services, providers and customers, or due to the restriction of time and space itself? I believe the latter is correct. In order to simplify them, the restriction of time and space itself should have been directly overcome. That is, IT and networking technology should have been used in such a way as to directly overcome the restriction of time and space. Unfortunately, there is no such case in the world yet.

We have experienced the synergistic effect in information with the Internet. It neither participates nor influences directly the activities of the constituent factors of the information transactions such as information providers, recipients and information itself. It simply provides direct, fast and efficient links to them. Because each member in the provider side can easily develop other applications on its own by using this communication infrastructure, it will be able to increase its own competitiveness by expanding its effectiveness in the open Internet. Numerous applications could be easily developed for information transactions, based on unlimited imagination. Information transactions are not restricted by time and space, so, it was relatively easy to develop a system like the Internet.  However, real transactions are directly restricted by time and space. Without overcoming the restriction of time and space, it would have been almost impossible to construct a system like the Internet in the real market process.

I believe that such a system can be easily developed for the real market process that will effectively overcome the restriction of time and space by appropriately using IT and networking technology. It will neither participate in the production activities of the supply side nor influence the consumption activities of the demand side directly, but provide direct, fast and efficient links to both sides. Because each member can easily develop other applications on its own by using this with other outsourcing service providers, it will be able to increase its own competitiveness by expanding its effectiveness in the open system. Numerous applications could be also easily developed in the real market, based on unlimited imagination. If it is developed and implemented in the real market, market results could increase, geometrically and progressively, and narrow the mismatch with the market requirements in the market. Such a system could be a real solution for the economic crisis which the world now faces.

The world economic crisis is getting worse, moving inexorably toward another Great Depression. We do not have time to delay action any longer. To stave off this impending crisis and revitalize the economy, the governments in the world must initiate and support the development of this new system and actualize it in the market as soon as possible—before it is too late.


             Ho-Hyung Lee (luke.h.lee@gmail.com) - Ho-Hyung (“Luke”) Lee is by training a lawyer, an international businessman and entrepreneur – and an inventor.  He is currently the president of Ubiquitous Market System, Inc. (UbiMS). Ubiquitous Market System is nothing less than a new synergy market system that will put us on the real path to prosperity. 

            

Saturday, October 16, 2010

The Economic Sisyphean Task: The Endless and Unavailing Economic Task (Diagram)





















Without breaking down the logic of the existing maddening economic condition, we might eventually be able to stabilize and revitalize the economy, but I strongly believe that it will take too much time at too much cost. Accordingly, our national prosperity, social security and competitiveness will be seriously eroded.  Moreover, much of the middle- and lower-income class will be reduced to a new poverty class, and social and political unrest may result.



By Luke Hohyung Lee (luke.h.lee@gmail.com)

Sunday, October 10, 2010

A Real Stimulus and Rescue Package

<This article was written for Newly Elected President Obama on November 23, 2008>

The long presidential campaign is finally over.  The voters’ demand for change has been heard.  Many Americans believe the new president will have the vision to see us through the worst economic crisis since the Great Depression.  It may be a forlorn hope.  For, if the new administration doesn’t offer a vision for the Modern Information Age, then change for change’s sake will be useless.  The Fed’s lowering of interest rates, the Troubled Assets Relief Program (TARP), the rescue plans, and the economic stimulus plans will not forestall the inevitable catastrophe.  None of these actions – let alone wishful thinking -- will do any good if the market process is not overhauled, and overhauled soon.  It’s not just the economy; it’s the market process.

The rapid spread of information has brought major changes to the quality of life for most Americans over the last twenty years.  But this is misleading, for the gains are rapidly being overtaken by the costs to society as a whole.  Weaknesses in the overall efficiency and effectiveness of the process call into question those who like to sing the praises of the Internet and the shrinking of the world from globalization.  With no changes in the accompanying market process, these gains can no longer be sustained.  If the economy collapses, then all of those gains will have been for naught. 

With this in mind, let’s take a close look at what has happened in the market and society for the last twenty years; and, let’s also take off the rose-colored glasses, so that we can avert the collision course we are on.


Communication Changes in the Modern Information Age

In the Modern Information Age, communication has rapidly transferred from existing single-source based communication to multiple-source based communication.  Moreover, with the development of networking technology, these multiple-source based communications could be re-integrated.  Because this multiple- source based networked communication is very economical all over the world, and also possible in all directions, its potential impact was, and is, far greater than ever imagined.  The result is a new paradigm, which could create far greater effects on efficiency and effectiveness than the prevailing paradigm.  That is, single-source based communication, from which only simple arithmetical changes could be expected, has developed into the multiple-source based networked communication system, from which multiplying changes or even geometrically progressive changes (synergistic changes) can be expected.  Moreover, by breaking down the existed local restrictions through the development of the World Wide Web, communication was no longer restricted by time and space.


The Development of Information Process in the Modern Information Age

The information process has rapidly matured, developing numerous synergistic information systems in the Modern Information Age.  It has been made possible with the realization of dramatic efficiency increases and rapidly enlarged universal application devices (digital devices) through the Digital Revolution and also with the construction of IT Infrastructure for the Internet Revolution and the development of numerous synergistic information systems (digital contents, software applications or digital synergies) by applying multiple-source based networked communication. Because these synergistic information systems were developed with the base of digital code, they have been freed from the restrictions of time and space.  Moreover, the logical development has been made possible with a fair rule and standard.  That is, the efforts and investment for synergy development in the information process were not only economical, but estimates of the results could also be more accurately predicted.  Accordingly, there have been no limits in maximizing the synergy effects in the information process.  It has depended principally on imagination.

Therefore, with the rapid, economical spread of information itself and information-centered knowledge products and/or services, and the easy development and application of other information-related systems, such as automation systems with information devices, which benefited considerably from synergy effects, all of the individual members and units on the supply side could have greatly increased their productivity and product or service development capability.  On the demand side, all individuals’ knowledge and recognition has increased, and this must have been directly linked to the escalation in the needs and wants of consumers.


The Development of the Market Process in the Modern Information Age

In the market process of the Modern Information Age, multiple-source based networked communication has not been utilized to its fullest potential, and, as a result, only arithmetical changes could have been expected from it.

There are too many different rules and standards in the market, which is also restricted by time and space.  To make the multiple-source based networked communication more efficient in the market process and to develop synergistic effects, we must start by developing fair rules and standards in the market.  However, until now, we have not found the ways to develop those conditions; instead, we have developed other ways to improve the market process, as follows:

Ÿ         Market-Store Systems such as Wal-Mart and Target.  Instead of developing marketplaces with multiple stores, market-stores with multiple products have been developed. They could produce market-store (or product) synergy effects to some degree, even if they are almost meaningless, but they also bring some negative effects to the market such as direct job reductions without any contributions for indirect job increases and marketing manipulations for maximizing their own profits.
Ÿ         E-Auction and E-Retailer Systems such as E-Bay and Amazon.com.  Although they had every incentive to use the multiple-source based networked communication, they adopted single-source based communication instead and blocked the possibility of producing synergy from the start. E-Retailer Systems also have similar positive and negative effects as Market-store systems.
Ÿ         E-Marketplace Systems such as E-Bay’s Marketplace System and Amazon.com’s Marketplace System.  Even though they adopted the multiple-source based communication for direct transactions between suppliers and customers, they still did not equip it with fair rules and standards in their marketplaces.  Also, they still do not use the multiple-source based networked communication for the whole market process, including the actual supply chain process.  Therefore, only products and services, which are not sensitive to the rules and standards, could be transacted through these systems, and the synergy effects from them are much less than expected.
Ÿ         Numerous Collaboration Activities: Because they are mainly constructed by a multiple-to-one adding relationship, only arithmetically changing effects (or adding effects) could be expected from them.

The market process could have had some positive adding effects from widespread collaboration activities.  That potential was never realized much.  The market-store or product synergy effects made from Market-Store Systems and E-Retailer Systems could be offset by some negative effects made by them in most cases.  The synergy effects from E-Marketplace Systems were too weak to be influential on the market.  Therefore, the market process has remained virtually unchanged even in the Modern Information Age, because only arithmetical changes have been realized. 


The Structural Gap between Market Requirements and Market Results

Numerous synergistic information systems with multiple-source based networked communications and other information-related systems such as automation systems with information devices have been developed in the Modern Information Age.  Anyone influenced synergistically could also have multiplying effects in the market.  So, we have had the capability of producing numerous geometrically progressive market changes; while on the other hand, the market results made through the market process which comprised the existing market systems could still have only produced arithmetical or limited progressive changes.  As the requirements made through market changes could only have been satisfied by the results made through the existing market process, a structural gap has occurred in the market.

Major defects resulting from this structural gap have appeared in the market.  They include:

¨     The Innovation has not contributed significantly to Indirect Job Increase.

Most economic experts have viewed the advances in information technology only in terms of technological progress, with little downside.  That is, even if there is a direct job reduction, more indirect jobs would eventually be created due to innovation.  However, in the real situation, the advances in information technology have done the opposite.  Rather, there has been little room for indirect job creation in the domestic market.  (Japan experienced this change earlier than others, because it had developed the capability of productivity and commercialization mainly due to the rapid development and spread of a lean production system like Toyota’s production system and by the broad automation process.)

Suppliers and service providers positively have adopted the advanced information systems and automation systems to increase their competitiveness and to make more profits.  On the other hand, many ordinary workers lost their jobs, but not many indirect jobs have been created.  This situation intensified the conflict between labor and capital.

¨     Only Globalization, Standardization, Commoditization-Oriented Activities have been facilitated.

The existing market process has not provided satisfactory consuming effects structurally to the market.  This is because only arithmetical changes of effects on efficiency and effectiveness have been expected from the existing market process.  On the contrary, the market, which has been directly influenced by the new communication paradigm, has required more multiplying or geometrically progressive changes.  Thus there must have occurred some gaps structurally between the consuming effects provided by the existing market process and the market requirement.

Theses structural gaps eventually appeared as the missing phenomena of consumer spending in the market.  That is, because consumer needs and wants increase faster than consuming effects, consumer spending will ultimately be curtailed.

Because the existing market process could create new businesses and jobs only in an arithmetical way it could not create enough income to satisfy existing market requirements.  It is as if consumer spending was held back due to the limitations of the market process.      

This curtailment of consumer spending has brought the abrupt increase of consumer price sensitivity, and this must also have caused the abrupt increase of excessive price competition in the market. This situation must have developed concomitantly with the rapid expansion of efficiency-increase-oriented (cost-oriented) globalization, standardization and commoditization activities such as off-shoring and outsourcing toward foreign countries with lower labor costs, and this must also eventually have been directly linked to the decrease of jobs or the reduction of income in the domestic market.

Moreover, because the existing market process has a fixed and closed marketing channel, it could not have handled all products or services.  Keep in mind that there has been an increase in numbers and kinds of new products and services in the Modern Information Age and due to this, it should have required more marketing and distribution costs for new products or services.  What this means is that the existing market process has actually impeded the creation of new businesses and jobs in the domestic market.

As a result of all this, the employment condition for lower- and middle-income workers has rapidly diminished, and this must also have widened the inequality of earnings between affluent and poor. Accordingly, the situation of consumer spending capability on the demand side must have been aggravated.  Under these circumstances, a serious imbalance has occurred, culminating in a vicious cycle between the supply side and the demand side in the market.

To overcome this situation the Bush administration adopted a series of economic stimulus policies to improve the employment picture by promoting investment and consumption, rather than trying to change the outdated market process.  Ironically, these measures have not only been ineffective in stimulating the economy, but they have also created numerous abnormal phenomena in the market.  These include bubbles in the equity markets across the board, and an increasing economic strain on those in the lowest income bracket.  These phenomena brought numerous economic and social problems such as the sub-prime mortgage failures, the credit crunches and the financial meltdowns we have witnessed in the past year.


The paradoxical economic situation

In order to stimulate the economy, we seek to promote business investment and consumption to increase jobs with expansionary stimulus economic policies.  When the sum of increased consumption and increased consumer confidence by job growth is larger than the promoted consumption increase, the economy usually responds positively and is revitalized, so the argument goes, and a positive cycle for economic growth can achieved.  Therefore, the economic stimulus policies are only a short-term expedient to be used only temporarily and in a limited way for inducing a positive economic cycle.  

Yet, under present conditions, no matter how powerful the economic stimulus policies adopted, we will still fall short.  When the degree of job growth created by the stimulus is weak, and the sum of increased consumption and increased consumer confidence is less than the promoted consumption increase, the economy cannot be sufficiently stimulated.  Even if we had not adopted the stimulus economic policies, a vicious cycle between the supply side and the demand side would have been introduced into the economy.

Under the changed economic circumstances, we have had to adopt stimulus economic policies to avoid the vicious cycle in the market or economy, without finding any other longer term alternatives over the last several years.  Moreover, as globalization activities such as importing, outsourcing and off-shoring have been activated, we’ve had to expand the degree of the stimulus policies to an extreme degree. 

To make matters worse, financial deregulations have been excessive and abrupt, and as a result, the weight of consumer debt in consumer spending has rapidly increased.

One could contend that the sum of increased consumer debt, increased consumption by job growth and increased consumer confidence were similar to, or larger than, the promoted consumption increase.  Yet, to so argue is to ignore the introduction of numerous abnormal phenomena such as the weakening self-generation capability of the domestic market, not to mention the further losses to the “Missing Class.”  That is, even though the stimulus economic policies were adopted to stimulate and revitalize the economy, they have rather created a paradoxical economic situation, as only abnormal economic phenomena were intensified instead.  (The “Missing Class” is Princeton University sociology professor Katherine Newman’s term for the near poor who are technically above the poverty line but still far from a middle-class standard of living.)

This paradoxical economic situation has now persisted over the last several years, and our national competitiveness has steadily weakened, while the safety and welfare of the nation has worsened.  Moreover, many unusual economic problems such as the sub-prime mortgage failures, and a vast financial meltdown and credit crunches, have now worsened economic conditions.  We should expect many other economic and social problems in the very near future if we do not correct this paradoxical economic situation now.


What are the real causes of the current economic malaise?

Plain and simple, it’s the market process.

It is now widely accepted that modern information technology has been a boon to modern society.  However, not everyone has benefited.  Moreover, the market process has suffered.  That is, a situation has been created in which some have benefited more than others.  But, more importantly, the reduction of jobs in the domestic market has been a structurally unavoidable phenomenon, given the nature of the market process.  No economic stimulus is sufficient to offset that decline in job growth.  Rather, paradoxically, only economic abnormalities have been created by these stimulus measures.  This time will be no different.


Solutions and Recommendation

I believe that economic and social conditions are now so imperiled that they require changing the existing outdated market process to a more flexible, open market process, one that is better suited to the modern information age.

Some people might think what I am recommending is tantamount to economic heresy.  “Why change the market process?” they say.  Why not leave things alone, and they will correct themselves, as they always have?  No, they will not correct themselves.  However, we can take comfort in the fact that our free market system can provide all the necessary conditions we need such as information technologies, facilities, devices, and people for the development of a new market process.  It is a restructuring, not changing free market capitalism.

The new flexible and open market process I recommend will contribute immensely to job growth in the domestic market and also the consuming effects on efficiency and effectiveness.  Accordingly, it will provide a policy for better working conditions, solve numerous economic and social problems, and eventually stimulate and revitalize the economy.

¨     A Proposed Solution

The basic principle of the Digital Revolution is the development of mutually complementary relationships for the rapid increase of efficiency through the construction of a standardized format (digital format), and the rapid spread of universal application devices (digital devices).  This creative and explosive power of a mutually complementary relationship is possible not only in the information process but also in the market process, even though many standardized formats need to be constructed.  Therefore, if this principle is applied in the market process, efficiency will be increased and the universal work providers will benefit enormously.

The basic principle from the beginning of the Internet Revolution has been construction of IT infrastructure to make possible the development of abundant digital contents (digital synergies).  It is also possible to construct IT and work process infrastructures in the market process by defining and clarifying the lines of responsibility.  That is, no matter how far the distance or complex the connection, the entity responsible for protocol must always be specified and made clear.  The need to define who is responsible became apparent through the development of the information age and has made outsourcing possible for networks involved in the work process.  With that as a base, the conditions for fair rules and standards could be easily constructed in the market process.  Many work process contents (work synergies) could thereby be developed; and the effectiveness of the market process would be significantly increased.

Therefore, increases in efficiency and in the number of universal work providers resulting from outsourcing have the potential to create many new businesses and increase the number of jobs as a whole through the development of mutually complementary relationships and numerous work process contents in the domestic market.

A new mutually complementary relationship could then be constructed between the information market or economy and the real market or economy, and this would revitalize the economy, solve many of our current economic and social disparities, and strengthen national competitiveness and the welfare of the nation.

The present paralyzed economic situation could then be changed practically overnight.  This is the kind of “stimulus and rescue package” we need.

Therefore, to prevent the rapidly deteriorating damage of economic self-generation capability and avoid potential economic collapse we must construct a new market process as soon as possible.

I believe our current economic malaise is not just the United States’ problem, but also a problem for most Western countries, including England and Germany, and Japan and Korea.  It is the most urgent issue we face, if we are to save the world economy. Therefore, I strongly recommend the governments and leaders of the Western countries, and the new U.S. president, initiate the development of a new market process, and provide the active assistance and support necessary to revitalize their own economies and also the world economy, and that we do so immediately.


Author:                      Ho-Hyung Lee (luke.h.lee@gmail.com) - Ho-Hyung (“Luke”) Lee is by training a lawyer, an international businessman and entrepreneur – and an inventor.  He is currently the president of Ubiquitous Market System, Inc. (UbiMS). Ubiquitous Market System is nothing less than a new synergy market system that will put us on the real path to prosperity.

The Current Economic Recession, Analogous to a Serious Diabetic Disease (Diagram)




















Why the market process? Because the market process provides connections (bridges) to all members in the market and society. It may be thought of as a bloodstream. 


By Luke Hohyung Lee (luke.h.lee@gmail.com)

Digital Revolution, Internet Revolution, and What Should Have Been Followed?




















By Luke Hohyung Lee (luke.h.lee@gmail.com)

Saturday, October 9, 2010

What has Happened to the Economy of the Modern Information Age; and What Should We Do About It?


When we see the relationship between the supply side and the demand side of the economy as a system of human activities related to the production, distribution, exchange, and consumption of goods and services of the nation, the supply side not only (1) supplies products and services to the demand side, but (2) provides jobs.  At the same time, the demand side (3) purchases products and services from the supply side. Therefore, in order to ensure a sound and improving economy, there must be a mutually positive balance among the three without damaging the economic self-generation capability.

In other words, the economy should develop the self-generation among (1) the degree of consuming effect made through products and services from the supply side, (2) the number of jobs provided by the supply side and (3) the degree and character of consumer spending made in the demand side.

When we knew the economy was headed for a downturn in the past, an increase of employment could be achieved through the temporary promotion of investment and consumption mainly by economic stimulus policies.  This could also be linked to the further increase of consumption again, and thus the stagnation of the economy could be prevented. That is, through economic stimulus policies, a mutually positive balance among the three could be realized without damaging the self-generation capability.  

Today, however, the promoted investment and consumption by economic stimulus policies have not been linked to the increase of employment as much as desired.  Accordingly, a chronic consumer spending insufficiency has crept into the market.  In other words, economic policies cannot serve any more as stimulators as they have in the past.  

What has happened in the economy then?

Let’s see how the world has changed.  Over the last 20 years of the Modern Information Age, we have experienced greater increase of efficiency and effectiveness from information exchange and application than could have been imagined in the past. We also experienced the world wide information exchange through the development of the World Wide Web.  With this, the rapid and economical spread of information has greatly influenced and brought major changes to all individual participants in the market. Almost all of the individual units on the supply side have greatly increased their productivity, product development, and commercialization capability. The ratio of employment to investment has been reduced. On the demand side, consumer knowledge and recognition have increased greatly, and this is directly linked to the abrupt escalation in consumer needs and wants. This must have operated to press the increase in consumer spending on the demand side.

On the other hand, the efficiency and effectiveness as a result of the process made from the market as a whole must not have been changed much since there were no major changes in the existing market systems. Market systems are the systemic series of individual actions that realize the market process. That is, no major changes were made in the consuming effect of products and services supplied from the supply side, and the increase of employment must have weakened.  

As the pressure for the increase of consumer spending in the demand side kept increasing, the situation on the supply side remained as it was.  As a result, a serious imbalance and a vicious cycle between the supply side and the demand side have occurred.

To overcome this situation we erroneously attached too much weight to temporarily solving the issues of consumer spending and employment, only we did so by rigidly adhering to economic stimulus policies that worked in the past, instead of trying to improve the market as a whole.

This excessive use of ineffective economic stimulus policies has greatly damaged the economic self-generation capability of the nation, and also contributed to the numerous abnormal phenomena in the market we have witnessed the past year.

The real issues are these:  How can the existing outdated market systems be transformed into the new market systems, which are more suitable to the Modern Information Age; and how can we develop a new market process better suited to the Modern Information Age?

The new market process we develop will significantly increase the consuming effect of products and services supplied from the supply side by greatly improving the efficiency and effectiveness of the process itself.  It will also improve the condition of employment. The economic self-generation capability of the nation will be recovered gradually, and the creation of abnormal phenomena in the market will also be reduced.

Fortunately, information technologies, facilities, devices and people are already in place to develop this new market process. The only issue remains how to develop it.

To prevent further damage and to revitalize the economy as soon as possible, I strongly recommend the government initiate and support the development of this new market process for the Modern Information Age.

Written by:     Ho-Hyung Lee (luke.h.lee@gmail.com) - Ho-Hyung (“Luke”) Lee is by training a lawyer, an international businessman and entrepreneur – and an inventor.  He is currently the president of Ubiquitous Market System, Inc.

The Real Cause of Economic and Social Problems in the Modern Information Age -- and a Solution for them


A Discovery of an Important Fact

If I were to say 1+1 is 2, people will quickly agree I’m right. But, if I were to say 1+1 is 5, 10 or even 20, most will not agree with me at once, and vehemently deny it.  However, I intend to prove 1 + 1 = more than two. 

The development of information technology and networking technology in the modern information age has made possible the development of numerous synergy systems, which could produce geometrically progressive (or synergy) effects. We have already used, wittingly and unwittingly, numerous synergy systems, such as Google, Internet Explorer, numerous software applications, digital contents and digital synergies, and numerous automation systems with information devices.  Almost all individuals and market units could have increased their productivity significantly by using these synergy systems. 

If the present market process is closely examined, it will be seen that the synergy systems have not been developed as fully as they could have been. For the existing market process does not allow for geometrically progressive (or synergy) effects in the market – but it could.


Structural Problems in the Modern Information Age

From this gap of synergy effects, many structural problems have accumulated in the market as a whole.  These structural problems are staggering.  For all the benefits the Modern Information Age has produced, we are now faced with problems of monumental proportions.  They include:

1.      The steady worsening of employment condition for lower- and middle-income people
2.      The slow increase of consuming effects
3.      The abnormally intensified price-oriented competition
4.      The increasing “Missing Class”
5.      The abrupt increase of welfare expenses

These structural problems are all related to each other, mutually and complimentarily, to constantly worsen economic conditions.

If these structural problems were left as they were, a vicious cycle, ever spiraling, between the supply side and demand side would occur.  This would be directly linked to a recession. To avoid the possible recession, and revitalize the economy, western countries must have insisted on adopting the expansionary economic policies they had typically adopted under similar circumstances.  Most of these policies have not worked, nor will they work now.  Rather, they have exacerbated the conditions for economic and social problems.  In fact, current economic problems such as the housing market crash, sub-prime mortgage failures, credit crunch and financial market meltdown point to the failures of those economic policies.    

Economic and social unrest is appearing in all quarters of the world. That is, the high monetary liquidity, which has been accumulated over the last several years has moved from the slumped real estate and financial markets to the oil and gas crisis, food and natural resource price increases, and inflation generally.  Together with this, the “missing class” is falling into the poor class, and this will cause numerous political and social problems that will have economic consequences.

Yet, it seems that politicians and policymakers are still clueless about the real causes for the current economic and social malaise.  It seems to me that their policies are far from revitalizing the economy; rather they are worsening it.              


A Discovery of the Real Causes and a Proposed Solution 

The real cause of the structural problems we have cited is the outdated existing market systems. Market systems are the systemic series of individual actions that realize the market process. The existing systemic series of individual actions do not or cannot produce enough geometrically progressive (or synergy) effects.

The solution starts with the development of new market systems, which can produce enough geometrically progressive (or synergy) effects.  Until these new synergy market systems are developed, none of the old economic policies can be effective.

But, if these new synergy market systems are developed, before it’s too late, the competitiveness of the nation and individual companies will be strengthened significantly.  The real modern information age could be realized at last.


Author:  Ho-Hyung Lee (luke.h.lee@gmail.com) - Ho-Hyung (“Luke”) Lee is by training a lawyer, an international businessman and entrepreneur – and an inventor.  He is currently the president of Ubiquitous Market System, Inc. (UbiMS). Ubiquitous Market System is nothing less than a new synergy market system that will put us on the real path to prosperity.  1 + 1 truly equals more than 2.

Friday, October 1, 2010

The Economic Illness and a Radical Cure


The economic catastrophe we are now facing is analogous to an illness.  Time will tell if that illness is benign or malignant.  What I offer is a cure.

Revitalizing the Economy is now the most important national issue facing not only the United States, but all the leading economic nations, including Japan, France and Korea, as well as the new giants, India and China.  Even though each country has attempted through policy efforts and investment to revitalize their respective economies, most of them have not been effective.  Rather, they have made the situation worse. We do not know which policies to adopt, even as the world is slipping into an ever spiraling stagflation.    

Why have the existing policies not been effective?  Why did this situation happen in the first place?  Even though many experts are studying this issue, none have found the clear answers let alone a solution.  Could they be looking in the wrong places?

I believe the economic situation is analogous to a serious diabetic disease. Generally, it is difficult to detect diabetes from a single, simple symptom until it develops into a serious complication. It is because the one symptom, apart from the others, does not look to be harmful to the body or because it is not easy to connect the relationship between the symptom and a disease. Likewise, we can say that it will not be easy to determine the real causes for the current economic conditions which afflict us.  If each complication is treated separately, the real treatment will escape us.  Moreover, it may also cause other potential, perhaps fatal, complications.

I believe I have found the real cause of the problem.  Because of recent developments in the modern information age, we all have greatly benefited from the rapid flow of economic information. Thereafter, the marked improvement in productivity and the significant increase of product development and its commercialization have been achieved in the supply side, and the expansion of needs and wants has been experienced in the demand side. We have had ample opportunity to expand employment opportunities under this situation, and also to significantly increase the consuming effect.  But, sadly, we didn’t.  It seems that the employment condition has actually worsened, and the consuming effect has increased far less than expected.              

It is time to question the efficacy of the “Invisible Hand”, and the numerous economic theories and policies it has spawned – though some may find that bordering on sacrilegious.  Yet, I believe we are no longer justified in thinking that the “Invisible Hand” will automatically bring a balance and development to the market.
            
Furthermore, if there is a serious problem in the market process, no matter how powerful and aggressive economic policies are adopted, they will not be effective.  Rather, they bring the likelihood of causing greater ill effects. 

Every western nation has adopted policies for economic revitalization with greater urgency over the past year, but I believe most of them have been ineffective, and created instead numerous abnormal phenomena in the market.  A cold and objective review of the current conditions in the market leads one to conclude that there must have been a serious problem in the market process. That is, the existing market systems, which realize the market process, might not have been able to satisfy the requirements of the modern information market. In other words, the outdated existing market systems could be the real cause of the serious economic situation which now engulfs us.  

If this hypothesis is correct, and I contend that it is, it means that we must develop new market systems with infrastructure, the sooner the better, which can satisfy the requirement of the modern information market.  Then perhaps “the Invisible Hand” can perform its role appropriately in the market process again. That is, until new market systems with infrastructure are developed, no matter how powerful economic policies are adopted, we will not get out of the current serious economic malaise which engulfs us.

Therefore, in absence of a better alternative, I strongly recommend governments initiate a plan to develop more suitable market systems with infrastructure for the modern information market as soon as possible and apply them to the market quickly and effectively, with the close cooperation of leaders in the private sector.

Ubiquitous Market System is just such a market system with infrastructure, and was designed for that purpose.  Through it, the employment condition could be improved practically overnight, and at the same time the consuming effects could also be increased significantly. The “Invisible Hand” could then work its magic again in the market process, and this will make the economic policies effective as they were originally intended.

The disease is serious, but not malignant.  But the time to “operate” is now.



Author:    Ho-Hyung Lee (luke.h.lee@gmail.com) - Ho-Hyung (“Luke”) Lee is by training a lawyer, an international businessman and entrepreneur – and an inventor.  He is currently the president of Ubiquitous Market System, Inc. (UbiMS).