Resignation of Kang Sun-woo.

• Kim Hyun-ji (Presidential Office Chief Secretary) called to convey Lee Jae-myung’s (President) directive: “It seems you should resign.”
• Expressed “endless apologies to the President,” yet no apology to the aides who were the victims of the power abuse controversy.
• This is the first time an incumbent lawmaker has fallen since the introduction of the confirmation hearing system.

Who Sent the Wrong Signal?

• In a JoWon C&I poll, 60% said Kang Sun-woo (Minister of Gender Equality and Family nominee) is unsuitable. Only 32% found her suitable.
• Woo Sang-ho (Presidential Office Chief of Political Affairs) once stated that the ruling party leadership’s opinions were crucial in pushing Kang Sun-woo’s appointment.
• Remarks like “The relationship between a lawmaker and their staff is different” and “Power harassment is subjective” worsened public opinion.
• Criticism arises not only for failing to read public sentiment but also for needing to reassess the vertical party-government relationship.
• Related Link.

What Matters Now.

Japan Settles on 15% General Tariff.

• Under the name ‘Japan Investment Initiative,’ $550 billion will be invested in the U.S. That’s 760 trillion won. Masayoshi Son (SoftBank Chairman) proposed it first to Scott Besant (U.S. Treasury Secretary), with support from the Japanese government.
• The rice market will also be partially opened.
• Defense spending increased from $14 billion to $17 billion.
• An additional 100 aircraft will be purchased.
• Participation in the Alaska LNG project is also planned. This largely meets U.S. demands.
• The general tariff was reduced from 25% to 15%, and the tariff on automobiles was lowered from 25% to 12.5%.
• Automobiles account for 80% of Japan’s trade surplus with the U.S. The final tariff rate on Japanese cars will be 15%, in addition to the existing 2.5% tariff.
• Related Link.

South Korea’s Growing Burden.

• South Korea’s negotiation team planned to buy time but is now feeling rushed. To give less and receive more than Japan, they must present more dramatic offers.
• The U.S. demands a $400 billion investment from South Korea. This exceeds 80% of last year’s South Korean government budget.
• The conditions to open rice and beef markets and participate in the Alaska LNG project are the same as for Japan. There’s also pressure to increase defense spending.
• Speculation arises that Lee Jae-myung recently met with Koo Kwang-mo (LG Group Chairman) and Chung Eui-sun (Hyundai Motor Group Chairman) to discuss investment. Utilizing the Korea Investment Corporation (KIC)’s sovereign wealth fund is also mentioned.
• Kang Sung-jin (Korea University Professor) predicts, “Ultimately, the government will likely entice private companies to invest, leading them to take the initiative.”
• An anonymous expert analysis suggests, “It seems difficult to raise more than $100 billion.”
• Related Link.

Rice and Beef: The Red Line.

• The red line is a boundary that must not be crossed.
• Rice and beef were kept off the negotiation table, but if weaknesses are exposed, the situation worsens. Proposing to increase bioethanol fuel crops is an option, but they are already being imported and fall into a different category.

Deep Dive.

Is There a Problem with Lee Jae-myung’s Personnel System?

• Many argue that Kang Sun-woo’s resignation shouldn’t be the end of it.
• Kang Yoo-jung stated, “The resignation was a response when the suspicions raised by the media or the public exceeded what could be tolerated in personnel verification, and there is no problem with the system.”
• Lee Ki-beom (CBS NoCut News Editorial Writer) pointed out two issues. First, the standards did not meet public expectations. Second, there is doubt about whether reputation checks were conducted properly. Lee advised, “Do not apply the political calculus of ‘yield and you lose, hold out and you win’ to personnel issues.”
• Shin Seung-geun (Deputy Editor-in-Chief, Hankyoreh) emphasized, “The closed personnel system of the presidential office needs to be reviewed,” adding, “Ensuring more citizens are informed and rigorously assessing morality and competence is the path to the success of the Lee Jae-myung administration.”
• Related Link.
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Park Chan-dae’s Timing.

• Park Chan-dae (Democratic Party member), running for the Democratic Party leadership, posted on Facebook that “a decision must be made” and 17 minutes later, Kang Sun-woo announced her resignation.
• Speculation arises whether there was a tacit understanding between Park Chan-dae, known as ‘Myeongshim,’ and the Presidential Office.

The Personnel Chief is a Former Blunt YouTuber.

• Choi Dong-seok (Chief of the Personnel Innovation Department) once said, “Personnel appointments are code appointments.” A month ago, he appeared on a YouTube channel and claimed, “The Moon Jae-in administration ruined the country with very stupid standards.” He also remarked, “As long as a worker is physically strong, arguing over past morality is truly stupid.”
• Kim Kwang-ho (Editorial Writer at Kyunghyang Shinmun) pointed out, “Choi Dong-seok’s appointment is no different from Yoon Suk-yeol’s mistake of appointing a far-right YouTuber as the head of the Talent Development Institute.”
• Related Link.

Song Ki-ho vs. Seongnam Line Tensions.

• Song Ki-ho (Director of National Situation Room), personally appointed by Lee Jae-myung, has moved to the position of Economic Security Secretary. Kim Jeong-woo (former Democratic Party lawmaker) has taken over as Director of the National Situation Room.
• Some speculate that Song Ki-ho found the National Situation Room duties overwhelming, while others suggest his position was limited in the presidential office dominated by the Seongnam Line.
• Related Link.

Another Take.

High-Growth Firms Decline.

• The proportion of high-growth firms with over 20% sales growth fell from 11.9% in 2009 to 8.1% in 2022.
• Kim Min-ho (KDI Research Fellow) analyzed, “It’s not enough to simply increase startups; focused support is needed in the scale-up phase (8-19 years in operation).”
• Related Link.
• Related Link.

The Real Reason for Falling Corporate Tax Revenue.

• From 104 trillion won in 2022 to 63 trillion won in 2023. Last year, it increased to around 84 trillion won (estimated).
• Gu Yoon-chul (Minister of Economy and Finance) said, “We expected that cutting taxes would lead to corporate investment and a virtuous cycle, but growth, consumption, and investment are all declining.” Lee Sang-ryul (JoongAng Ilbo Editorial Writer) criticized this as “distorting the facts.”
• It’s true that the Yoon administration lowered the top corporate tax rate from 25% to 24%, but the bigger reason for the drop in corporate tax revenue in 2023-2024 is the poor performance of companies like Samsung Electronics.
• In fact, Samsung Electronics paid 7.7 trillion won in corporate taxes in 2021, 4.3 trillion won in 2022, and 0 won in 2023. While it’s true that they paid less due to poor performance, this doesn’t fully explain the 41 trillion won drop in corporate tax revenue.
• Kim Woo-chul (Professor at University of Seoul) argued, “Expecting a significant effect from a 1% point cut is contradictory,” adding, “The tax cut itself wasn’t large enough to significantly revive economic vitality.”
• Related Link.
• Related Link.

What Tax Cuts to Trim?

• The Ministry of Economy and Finance has a task at hand. They are reviewing 72 tax exemptions set to expire this year, mostly affecting the working class, middle class, and small businesses, which makes it a heavy burden.
• Notably, the income deduction for credit card use exceeds 4 trillion won. It was introduced for tax transparency, but scrapping it now would increase the burden on wage earners.
• The same goes for tax reductions for small businesses. It’s not easy to abolish a system that has been in place for 33 years.
• The National Assembly Budget Office advised, “Even if there is validity and effectiveness, if the policy goals have been achieved, the abolition of the system should be considered in principle.”
• Related Link.

111 Trillion Won in Unpaid Taxes.

• The National Tax Service is another entity tasked by the President.
• Lim Kwang-hyun (Commissioner of the National Tax Service) stated, “We will conduct a full investigation to reclassify all defaulters.” The plan is to use every means to collect hidden assets, both domestic and overseas.
• Of the 110.731 trillion won, 83% is classified as ‘collection deferred’ and deemed uncollectible.
• Related Link.

A Case That Was Always Bound to Be Innocent.

• A woman once spent six months in prison for biting the tongue of a man who attempted to rape her. She was tried while detained and sentenced to 10 months with a two-year probation.
• At a retrial 61 years later, the prosecution requested a not guilty verdict. They argued it was “self-defense, not illegal.”
• This was stated by Jeong Myung-won (Chief Prosecutor, Busan District Prosecutors’ Office). “In the past, the prosecution took the wrong path in this case. We inflicted immeasurable pain and suffering on a victim who deserved help. We apologize.”
• Choi Mal-ja (the victim) exclaimed, “I won.” She was 18 then and is 78 now.
• The verdict hearing is set for September 10.
• Related Link.

Can the Cart Lead the Horse?

• “It’s a warning against making stock prices the goal of economic policy.”
• Lee Hyun-sang (Editorial Writer at JoongAng Ilbo) remarked, “Stock prices are merely a reflection of the real economy; they cannot drive the economy themselves,” adding, “While a rise in stock prices is expected to boost consumption through the ‘wealth effect,’ the actual impact is uncertain and limited.”
• Jack Welch (GE Chairman) once called “shareholder value the dumbest idea in the world,” a defense for his failure in management despite boosting stock prices fiftyfold. He stated in a 2009 Financial Times interview, “Shareholder value is not a strategy but an outcome. It’s merely the result of management, employees, and products working together. Your primary stakeholders should be employees, customers, and products.”
• Lee Hyun-sang criticized, “Blindly setting stock prices as a policy goal is as foolish as cutting open the goose to find the golden egg.”
• Related Link.
• Related Link.

The China We Knew Is Gone.

• Drones 70%, electric vehicles 60%, secondary batteries 68%, robots 40%. These are China’s global market shares. Thomas Friedman (New York Times columnist) once said, “If you used to look to Silicon Valley for the future, now you should look at Huawei.” Huawei spent 200 trillion won on R&D over the past decade. The CEO is in his early 40s, and there are hardly any employees over 45. Lee Jun-ho (Huawei Vice President), who joined Huawei after stints at Samsung Electronics, Daum, and Naver, said, “All I could think was how terrifying it is.”
• Related Link.
• Related Link.

Cash Support? Incentives Need Careful Design.

• Not spending as much as received is the issue. Hence, some suggest direct support to small business owners is more effective.
• The 14 trillion won disaster relief fund during the COVID-19 pandemic had a Marginal Propensity to Consume (MPC) of 0.24. Receiving 100 won led to an increase in spending by 24 won.
• Seoul’s emergency living expenses support for the bottom 50% income bracket had an MPC of 0.59~0.69. This is why there’s a call to focus on low-income groups rather than distributing to everyone.
• Kim Hyun-chul (Professor at Yonsei University Medical School) highlights an experiment in Hangzhou, China. Instead of cash, Hangzhou provided electronic vouchers that subsidized a portion of spending above a certain amount. If you spent over 40 yuan, the government supported 10 yuan. This could be used up to five times.
• Hangzhou’s electronic vouchers had an MPC of 0.34~0.58.
• Kim Hyun-chul emphasized, “The effect of boosting consumption depends on ‘how, to whom, and under what conditions you give.’” He argues for policy design based on data and evidence rather than political logic.
• Related Link.

‘White Roof’ Cuts Cooling Costs by 27%.

• Korean rooftops are mostly green. That’s because of waterproof paint. Jo Yoon-seok (Director of the Ten Years Later Research Institute) calls himself a ‘cool roof evangelist.’ On the day he met with a Korea Times reporter, the white-painted roof was 38.1~39.6 degrees, while the green roof was 51.8~56.2 degrees. It can reach up to 70 degrees during peak heat. It’s common scientific knowledge that white reflects more light. In the U.S., a reflectance of 70% or more is recognized as cool roof paint. A simulation showed that applying cool roof paint with 77% reflectance on an 82㎡ single-story house reduces heating and cooling demands by 27.2%. A can of cool roof paint, 18 liters, costs about 150,000 won.

Spraying Water on Roads Lowers Temperature by Up to 6.4 Degrees.

• Seoul Health and Environment Research Institute’s analysis. When a water truck passes, road temperature drops by 6.4 degrees, sidewalk by 1.5 degrees. Lasts 30 to 60 minutes.
• Seoul’s 25 districts will add 116 water trucks and increase cleaning frequency from 6 to 8 times.

ICYMI.

40% of Murders Involve Family and Relatives.

• An incident occurred where a father shot his son with a homemade gun. He even made an improvised bomb after watching YouTube, but fortunately, it was dismantled just before exploding.
• As of 2023, there are 309 victims of murders involving family and relatives. This accounts for 40% of all murder cases. That’s an average of 0.8 people per day.
• There have been 59 cases of parricide.
• Related Link.

Births Increase for 11 Consecutive Months.

• Increased population in early 30s plays a big role. Government and local birth support policies are also seen as having a positive impact.
• As of May, the number is 20,309.
• Total fertility rate is 0.75.
• Jae-hoon Jung (Professor at Seoul Women’s University) predicts, “As the number of women of childbearing age decreases, the number of births may also decrease in 3 to 4 years.”
• Young-tae Cho (Professor at Seoul National University) suggests, “Most infertility support focuses on increasing the number of attempts, but we should invest in research to improve pregnancy success rates with fewer tries.”
• Related Link.

Seoul Apartment Deals Plummet to a Third.

• In the metropolitan area, transactions fell by 69%, and in Seoul alone, by 78%.
• Some complexes nearing completion have negative premiums exceeding 100 million won.
• Yang Ji-young (Shinhan Premier Specialist) explained, “After loan regulations, a wait-and-see attitude has intensified,” adding, “Adjustments are happening, especially in areas with unsold units and fewer jobs.”
• Related Link.

Has the Expectation of Rising House Prices Faded?

• The Bank of Korea’s ‘Housing Price Outlook Index’ is a psychological indicator reflecting expectations for house prices a year from now. It dropped from 120 in June to 109 in July. A figure above 100 suggests that house prices are expected to rise compared to now, so it is accurate to say that expectations for an increase remain.
• Lee Hye-young (Head of Economic Sentiment Survey Team, Bank of Korea) stated, “It’s slightly above the long-term average of 107 over 20 years,” adding, “We need to keep watching the trend of price deceleration.”
• Related Link.

Worth Reading.

Lee Jae-myung’s Robot Taekwon V.

• “The public sector is like Robot Taekwon V; who holds the steering wheel matters.”
• This is what Lee Jae-myung said at his one-month inauguration press conference.
• Jung Jae-hyuk (Kyunghyang Shinmun Editorial Writer) noted, “Robot Taekwon V operates well when the pilot’s values are firm,” adding, “If values without practicality are blind, practicality without values is hollow.”
• As Kang Jun-wook and Kang Sun-woo passed through, scratches appeared on Lee Jae-myung’s pragmatic appointments. The ruling party watched the presidential office’s reactions.
• Jung Jae-hyuk warned, “Hollow practicality easily becomes a convenient alibi for taking care of one’s own people.”
• Related Link.

Why Chosun Ilbo Disagrees with ‘Lost but Fought Well’.

• It wasn’t a good fight, nor was it a close loss.
• Kim Chang-kyun (Chosun Ilbo Editorial Writer) remarked on the current mood in the People Power Party, questioning if “‘Lost but fought well’ is just an excuse while they’re secretly calculating something else.”
• Reform might mean losing nominations in the next election. Incumbent lawmakers are primarily concerned with local vested interests. Kim Chang-kyun questioned, “Isn’t the selfishness of ‘as long as I survive, it doesn’t matter if the party fails’ hiding behind the slogan ‘Lost but fought well’?”
• Related Link.

Big Questions, Immediate Problems.

• “How was the universe created?” Such grand questions were replaced by limited ones like “How does a stone fall?” marking the start of modern science.
• This is a quote from François Jacob (Nobel Laureate in Physiology). “For enormous questions, only limited answers were possible, but limited questions gradually led to general answers.”
• Answers to small questions accumulate to form a system of thought. This is the essence of science.
• Kim Min-hyung (Director of the International Centre for Mathematical Sciences, Edinburgh) pointed out, “Heroic scientific narratives appear as adventures ending in great conclusions after long, deep thought, but in reality, scientists rarely ponder issues like the origin of the universe.”
• There is no need to abandon deep questions. It’s just that “how well one maintains a proper balance and equilibrium between the questions deep in their heart and the practically solvable problems seems to determine their academic capability.”
• Related Link.

What Happened?

• There’s a passage in Kim Ae-ran’s (author) novel ‘Like Raindrops.’ Jisoo decides to fix the leaking ceiling before dying. A Filipino woman, not fluent in Korean, arrives.
• “What happened?” Hearing this, Jisoo decides to live again.
• Perhaps one thing humans do better than AI is imagining from another’s perspective.
• Shin Hyeong-cheol (literary critic) wrote in the preface of a Sewol memorial essay collection, “Saying ‘I’m tired of it’ about another’s sorrow is a cruel act. If there’s one lifelong task, it’s studying sorrow.”
• Hwang Kyung-sang (Kyunghyang Shinmun Data Journalism Team Leader) confessed, “We’re forgetting how to ask in Korean,” adding, “I’m more afraid of people losing sensitivity than AI becoming human-like.”
• Related Link.
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Feedback.

One Labor Inspector per 10,000 Workers.

• “From the start, labor inspectors have very low proficiency. This is due to the practice of filling new inspector positions with entry-level Grade 9 hires, where the less experienced you are, the more work and responsibility you have. Hence, many resign, perpetuating a cycle of low proficiency. Seeing articles claiming there are too many inspectors without this context makes my blood boil.”
• There were some rebuttals related to recent reader feedback, so let me introduce them.
• The feedback suggested that despite the number of labor inspectors, inspections are not being carried out properly, which might not have been explained well.
• “The appropriate number of labor inspectors should be based on the number of workplaces rather than the number of workers. Considering Korea’s high self-employment rate, it’s hard to see the current number of inspectors as adequate.
• The ILO’s Labor Inspection Convention (Convention No. 81) also highlights the number of workplaces as the primary criterion for determining the appropriate number of inspectors. Although Korea is not included in the comparative data by country, given the significantly high self-employment rate, it seems inappropriate to consider the current number of inspectors as adequate.
• Even if the standard is one inspector per 10,000 workers, it’s hard to say Korea has enough inspectors. According to the ILO’s official standards, Korea has about 2,126 inspectors, which is 0.75 per 10,000 workers.
• However, according to data released by Prism, there were 3,122 inspectors as of December 2021, which slightly exceeds one per 10,000 workers. The absolute number of inspectors in Korea is lower than in countries like Japan and Germany, and it’s not a rate that can be confidently said to be the highest per 10,000 people. It actually seems closer to the European average.”
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