The Chaebol Returns To The Presidency 1967 [EN]: Chapter 129

129. Poorest Country Playing with Money?

The President was lost in reminiscence.

“We also built factories with loans from the UN to lay the foundation, so it doesn’t feel like someone else’s problem.”

“We help underprivileged neighbors, so we should naturally help poor countries as well.”

“But they say the more they trade and receive aid, the poorer they become. Where should we start addressing this?”

“That’s the problem, Your Excellency! Food aid is only a temporary fix. It’s like pouring water into a bottomless pit.”

“I think the leaders have no concept of industrialization at all. If a leader has an empty head but power, this vicious cycle often occurs. And the people accept their current state as if it were their destiny.”

“I think so too. They don’t know how to take the first step.”

“They say even the king can’t alleviate poverty, but we can’t interfere with a sovereign nation. Simply giving them dollars or consumer goods doesn’t solve the root cause, and they don’t have the ability to build and operate heavy industries… Let’s think about this.”

As a leading UN nation, we now had to take care of things outside the country as well.

*

The President’s building, rooftop.

After dinner with Chairman Jung, we sat in the gazebo, drinking tea and discussing solutions to the North-South poverty problem.

The President asked,

“Our country used to be in a vicious cycle of poverty too. How did we lay the foundation back then?”

“There are many reasons for the vicious cycle of poverty, such as access to dollars, resources, and favorable geopolitical location, but ultimately, it’s about people. Economic development is done by people, not resources.”

“That’s right. I agree.”

“The root of the problem in underdeveloped countries is that the thinking of leaders and citizens is pre-modern. They rely on farmland and natural resources instead of mass industrial production, and only the privileged power holders live well. They resist industrial change to protect their own interests. They are trapped in the past, blocking the road to the future.”

“Hmm…”

“If they don’t have the ability to break out of their shell on their own, they will either rot from the inside or someone from the outside will have to break it for them. I eliminated political leaders who engaged in factional strife over trivial matters, like in the Joseon Dynasty [Korea’s last dynastic kingdom, lasting from 1392 to 1897], under the guise of freedom and democracy. As long as such social leaders are entrenched, nothing will really work. They will nitpick, find fault, and raise procedural issues… The separation of powers is a framework suitable only for highly advanced people.”

“Hmm, there’s a point. We didn’t achieve the separation of powers organically; we transplanted it, and our minds are still stuck in Joseon. The politicians are acting exactly like they did during the five hundred years of Joseon. Let’s say we can seize politics by revolution and force, but what about the economy?”

“Haha, you’re hitting a sore spot.”

“……”

“That was my limit. I thought things would go well if I issued economic guidelines as presidential decrees. At first, it seemed to be working well, like the military. But like pressing down on a balloon, side effects kept popping up here and there. The economy is the most difficult thing. That’s why Your Excellency, who comes from a chaebol [large industrial conglomerate], has achieved such prosperity.”

“You flatter me.”

We each took a sip of tea, poured hot water into the teapot, and poured the steaming tea.

The President said,

“It only matters to the people if we catch both rabbits: politics and the economy.”

“That’s right. The economy is something that needs to run on its own, not just by laws. The more government intervention there is, the more the economy slips away like water and flows to unexpected places.”

“That’s right. No matter how many laws we use to nail down real estate prices, it’s useless. As you said, the side effects are greater. It would be simple to increase the supply according to economic principles.”

“Exactly. Unless there is a special situation like the oil shock, the government should only play the role of removing obstacles that hinder the flow of the economy, rather than interfering.”

The President suddenly asked,

“Chairman Jung, what do you think is the best economic policy I’ve implemented as President?”

“Definitely the funds. The retirement fund and the sovereign wealth fund.”

“Funds…”

“You solved the fundamental problem of wage earners becoming impoverished no matter how diligent they are, with funds. Raising wages is passed on to the cost of goods, which raises prices and repeats the vicious cycle, but compensating wages with high fund investment dividends creates a magical situation where prices remain stable even as labor income increases.”

“……”

“At first, I thought of funds as just playing with money and hated it. I looked down on people who sat in bank chairs and crunched numbers to get paid without sweating. But my prejudice was shattered by funds. Originally, the profits were all taken by financial conglomerates like banks and investment firms, but the sovereign wealth fund recovered the profits and redistributed them to the people, which is the flower of economic democratization.”

The President suddenly clapped his knee.

“Ah! Now that I think about it, we can apply the fund!”

“What…”

“Thank you, Chairman Jung! You are my teacher!”

“I don’t know why, but a teacher is too much…”

“This time, we should export the national transformation project.”

*

The President’s office.

I called Song, the newly elected Secretary-General of the Asian Development Bank (ADB).

The Asian Development Bank (ADB), established in 1966, is an international organization for Asian regional development. Its main mission is to provide low-interest, medium- to long-term loans or technical assistance in areas such as infrastructure, agriculture, and poverty reduction in developing countries from developed countries, which is official development assistance (ODA). It plays a supporting role to the World Bank in the Asian region.

Korea also received support from the ADB for the construction of the Gyeongin Expressway.

During Chairman Wang’s time, we borrowed $4 billion in foreign currency when we faced the foreign exchange crisis.

Japan and the United States, which led the establishment, each hold about 15.6% of the shares, making them the de facto joint major shareholders. However, the United States delegated Asia to Japan, which was doing well in the 1960s, and all the presidents have been Japanese.

However, although it was a bank led by Japan, its headquarters were strangely located in Manila, Philippines.

This was not because Japan conceded, but because Tokyo, Japan, lost the vote to determine the location of the headquarters.

As a heinous war criminal in the Pacific War, without a shred of remorse, they acted as if they were the only developed country in Asia, showing off their arrogance. As a result, the member countries cast a vote against them.

Compared to the fact that the headquarters of the World Bank, the International Monetary Fund (IMF), and the Asian Infrastructure Investment Bank (AIIB) are located in the capitals of their respective leading countries, it was an indelible scarlet letter of war crimes for Japan.

The President met the elderly Secretary-General.

Usually, ADB executives are financial executives from each country who are about to retire, so most of them were older than the President.

“Your Excellency, you called for me?”

“Yes, you have a lot of hard work to do even though it’s your twilight years.”

“Are you going to give me a mission?”

“I should let you live comfortably in your old age, but I’m sorry to make you work.”

“When Your Excellency called me, I was already prepared. After meeting Your Excellency, everyone receives a bundle of homework. But I am happy.”

“……”

“I felt like I was on the last car of the twilight train, but if it’s a mission for the country, it feels like I’m going back to first class, and it will be fun.”

“Hahaha, thank you for thinking that way.”

The President got to the point.

“Although you lend at low interest rates, the ADB is ultimately a bank that only lends to projects that can be recovered.”

“You’ve hit the nail on the head.”

“No matter how cheap the interest is, the debtor has to repay the money and interest, and if the project fails, they are branded as a debtor country.”

“That’s right.”

“The World Bank, which has more than 10 times the capital of the ADB, is also providing such loans to developing countries, but the poverty of developing countries is getting worse. Even though they are giving money.”

“Unfortunately, that’s the truth, Your Excellency.”

“So, instead of the current simple loan method, what if we create a development fund where half of the fund is invested in the industry of the debtor country and half is invested in finance?”

The Secretary-General’s drowsy eyes widened as if his hand had been burned.

“A fund? Did you just say financial investment, Your Excellency?”

“Yes, that’s right.”

“So, you’re saying that the debtor country will invest in a fund?”

“That’s right.”

The Secretary-General shook his head.

“Your Excellency, how can a developing country that is struggling to make a living play with money? It would be more useful to buy corn and shoes with that money for people who are starving.”

“What happens when they eat all the corn and the shoes wear out?”

“……”

“The fatal flaw of current aid to developing countries is that it is not sustainable.”

“That’s true. But I’m sorry, but I’ve been in the financial industry all my life, but I don’t understand fund investment at all, Your Excellency.”

“The basic concept is the same as our sovereign wealth fund and retirement fund. The ADB creates a fund bureau, and the ADB fund bureau directly manages the money lent to developing countries, makes profits, and gives it to the developing countries.”

“……”

“Hahaha, why do you look so dumbfounded?”

“Your Excellency’s proposal sounds plausible, but it also seems impossible, and it’s a form I’ve never heard of before, so I can’t get a grasp of it at all, Your Excellency.”

“It’s simple. It’s already been successful in Korea. We’re just transferring that model as it is. The only difference is that the entity executing the fund is the ADB fund bureau, not the debtor country. All the infrastructure and profits generated there go to the debtor country.”

“The fund management entity is the ADB…”

“The ADB doesn’t receive interest, but rather distributes the fund profits.”

“So, you’re saying that the ADB will directly execute the money.”

“That’s right.”

“If you only give the dividend 수익 [profit] to the debtor country without transferring the money, I don’t know what the fundamental difference is from dollar cash aid, in terms of sustainability.”

“That’s why we need to attach a condition that the debtor country must provide labor, not just aid. Dividends will be paid in return.”

“……”

“And there’s another important loan condition.”

“What condition is it, Your Excellency?”

The President explained in detail.

The Secretary-General’s eyes widened as he listened to the story.

The Secretary-General, who had emptied the cold tea, spoke after listening to the President’s story.

His voice was very excited.

“That’s a really good idea, Your Excellency! Then it will be sustainable. It’s already been verified. Moreover, since 정신 [spirit/mindset] and life education are included, I’m going to do a rewarding job that I couldn’t do with money all my life, Your Excellency!”

Since the money business is fundamentally about taking the interest from the money that others have earned, he always felt guilty in his heart as he had dealt with countless bankrupts while working in the financial industry all his life.

“Hahaha, you finally have life in your face. This time, we’re exporting the national transformation project. Let’s do it together.”

“National transformation project! Your Excellency, of course!”

“And Korea will expand the capital of the fund.”

“Ah, if that happens, our stake will be larger than Japan’s in addition to the existing contributions, Your Excellency.”

“Let’s have Korea be the next ADB president.”

“I understand, Your Excellency! I will export the national transformation project!”