America’s Losing Decade

<Please note:  This article was written about two and a half years ago (March, 2008), during the worst of the financial crisis.  I still stand by it.  I tried then, and even earlier, to warn the country that our economy was in peril.  But, sadly, my message did not reach the right people or they simply refused to listen.  Things are now unraveling just as I predicted. (I have carefully kept a record of all my correspondence and articles since August 2007, and even prior to the initial sub-prime mortgage collapse, and can thus demonstrate that my predictions came prior to the fact.) Considering the currently deteriorating economy, we do not have time to delay any longer. We should take action as soon as possible – before it is too late. If you think I am right, please share this with your friends, and if possible, urge our leaders and decision makers to come to terms with the actual situation and do something as soon as possible.>

Americans have looked aghast at Japan’s rapid economic decline in the past decade.  “Better them, than us,” is the unspoken refrain.  But could America be next?  What caused Japan’s decline?  Americans like simplistic answers.  Such as, it was their hubris, their excessive acquisitiveness, or their unwillingness to work more closely with the rest of the world as it moved towards globalization.  That’s nonsense. 

Many US economists believed, and continue to believe, that Japan’s failure was of its central bank and finance ministry to take decisive action.  It was a case of poor timing by waiting far too long to take steps to revive Japan’s economy, plus several macroeconomic policy mistakes.  As a result, Japan’s economic slump lasted much longer than expected with a stretch of stagnation that has become known as Japan’s lost decade. That’s a better explanation, but it too is incorrect.  Our inability to understand the causes of Japan’s decline could mean that we are about to make the same mistakes.

Ben S. Bernanke, the Fed chairman, even offered a prescription for Japan’s malaise in a 2003 speech in Tokyo:  a more aggressive monetary policy and “explicit, though temporary, cooperation between the monetary and fiscal authorities” to stimulate the economy.

Now, it looks like its our turn. Many economists believe our economic decline is very similar to Japan’s in the early 1990s, such as:

·      Housing-driven downturn plus sharp plunge in the real estate market

·      Sub-prime mortgage failures plus bad loans

·      Financial troubles

·      The falling of consumer spending and slow job growth

As expected, the Fed has finally acted decisively (if slowly, as some would say) to cut short-term interest rates sharply, twice, lowering its benchmark rate to 3 percent.  The Bush administration has followed by proposing a $168 billion stimulus plan.  And Congress has moved uncharacteristically rapidly to approve the package.  Moreover, it looks like the Fed is willing to lower more interest rates even more to lift the economy, despite serious concerns about the risk of higher inflation.

Many economists and policy makers look satisfied with what they have done, and, yes, the American economy will eventually (!) be revitalized.  But it may also deteriorate further before things turn around.

Let’s take a moment or two to reflect on what we’ve done.  How can we be so sure those policies are working well? Did they work in Japan? Are they a real solution for the real causes of the current economic malaise? What are the real causes?   To find the truth, we need to closely examine the real causes of both Japan’s and America’s economic problems again.

Japan showed a remarkable productivity increase and economic growth in the 1980s and the early 1990s.  This was made possible mainly by the rapid development and spread of a lean production system like Toyota’s  production system and by the broad automation process. Even though competitiveness in the international market and sales for export could be increased this way, job growth in their domestic market was comparatively slow. That is, economic growth without job growth became possible.

The funds that flowed in from its exports and the existing high savings rate could have significantly increased the domestic monetary liquidity in Japan, and this could have been directly linked to the activation of the real estate market.  As the income that increased through real estate investment was much greater than that through other productive business activities, this abrupt increase of net wealth effect in real estate must have been linked to the rapid increase of consumer spending.  Moreover, the savings rate must also have been rapidly reduced. Japan’s savings rate – a phenomenal 20% of household income in the mid 1970s, fell to an uncharacteristic 14% as recently as the start of the 1990s.

   

The overheated real estate market, without the support of employment increase, must eventually have created massive bad loans, and the falling of the real estate market must have been directly linked to the decrease of consumer spending and job growth.

Over the last 15 years, Japan has steadily adopted expansionary economic policies to revive their economy without finding clear alternatives for job growth.  Japan remains in a semi-permanent slump, and its economic situation has worsened, such as:

·      Rapidly worsening Japanese savings rate;

4% of household income in 2002

2.6% in 2004

Now almost zero or in a negative condition.

·      High annual fiscal deficit; more than 10% of gross domestic product

·      Continuing economic stagnation

·      Persistently high unemployment

·      The rapid aging of the population

·      Near-zero interest rates on bank deposits

·      Long-term decline in stocks

·      Pay cuts and job shortages

At one time, most of the Western countries, including the U. S., looked with envy at Japan’s post-war economic rise.  No longer.  Due to the abrupt increase of productivity and commercialization capability through the rapid development of IT in the modern information age, the ratio of employment to business investment and/or consumption is rapidly decreasing.  Due to the excessive and lasting expansionary economic policies over the last several years, a bubble has formed in the equity market across the board; and, accordingly, the financial markets are in a very unstable condition.  Consumer savings rate continues in a near-zero or minus condition.

The question now is, not how can we be like Japan, but how can we avoid the economic slump that Japan is experiencing?  Can the powerful economic expansionary policies, including the Bush Economic Stimulus Plan, lift the economy again?

My answer is simply “No, it cannot”. Because under the current market or economic condition with the low ratio of employment to business investment and/or consumption and the increasing inflation possibility, the expansionary economic policies will not work effectively.  Rather, other unexpected abnormalities will possibly occur.  Instead, America’s losing future will eventually be unavoidable.  This will also become, not just America’s lost decade, but the world’s lost decade.

What is wrong with our market or economy? What is the real cause of the current economic problems?  It’s the market structure (or process).

Under the existing outdated market structure, we cannot increase job growth as much as desired and create greater effects on efficiency and effectiveness from the market or economy, no matter how powerful and aggressive expansionary economic policies are adopted.

One of the main reasons why Japan had this structural economic decline almost ten years earlier than other countries is they had a traditionally more fixed and closed functional market structure than others, along with faster developing capability of productivity and commercialization.

Therefore, to avoid the persistent decline Japan has undergone, we should convert the outdated existing market structure to a new market structure as soon as possible, which can improve the ratio of employment to business investment and/or consumption significantly, create greater effects on efficiency and effectiveness from the market or economy, and provide a policy for better working conditions.

Fortunately, the conditions and circumstances for the development of a new market structure are already in place.  If decision makers are willing to make the hard choices, it will be relatively easy to implement – if we act soon enough.

Therefore, I strongly recommend the governments and leaders of the Western countries initiate the development of a new market structure better suited to the modern information age, and provide the active assistance and support necessary to revitalize their own economies soon.  It is that or a decade of decline reminiscent of Japan’s lost decade.

<If you wish to know more details on new market structure (process), please take a look at my another article entitled "Overcoming an Economic Sisyphean Task – Or, the True Path Back to Economic Prosperity". - http://savingtheworldeconomy.blogspot.com/2010/09/overcoming-economic-sisyphean-task-or_07.html>

Author:           Luke 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 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)

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. 

            

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)

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)