Schumpeter and Gaeseong merchants

Joseph Schumpeter, an economist who formulated the concept of entrepreneurship, in which risk taking and innovation are encouraged to create profits, predicted capitalism will not last permanently. His prediction is ironical given that entrepreneurship that he preached is the essence of capitalism. In his book titled “Capitalism, Socialism and Democracy,” Schumpeter forecast that excessive success of capitalism would drive it toward destruction. More precisely, he predicted that the rise of rich and educated people would attack the vulnerable moral foundation of capitalism represented by unfair income distribution, damaged social justice and pollutions. Although his prediction turned out to be wrong, the problems he pointed out still remain in society.

According to a survey conducted by the Korea Chamber of Commerce in celebration of the Week of Entrepreneurship, 82 percent of entrepreneurs said that “entrepreneurship has weakened.” Korea ranked 43rd in the Global Entrepreneurship and Development Index released by the Global Entrepreneurship and Development Institute, following Oman and Chile. Many economic organizations point out in their reports that anti-business regulations, political attitudes of criminalizing businessmen and anti-business sentiments are the main causes of constricted entrepreneurship in Korea.

Scholars suggest various measures to stimulate entrepreneurship. Experts including Jeong Un-chan, the director of Shared Growth Research Institute, and Kim Jong-in, the former member of Saenuri Party task force team, explain that the Korean economy has matured, so that just easing regulations cannot boost investments from conglomerates. They say economic democratization, which aims to resolve polarization and promote SMEs, will be a shortcut to elevated entrepreneurship and sustainable growth.

In Korean history, merchants from Gaeseong were famous for their great entrepreneurship. Despite the social atmosphere of disdaining merchants, these merchants led international trade connecting China and Japan and ran a profitable red ginseng business. There is an anecdote that Gaeseong merchants were ashamed of spreading the smell of roasting meat to the next door no matter how rich they were in times when meat was only available for the rich. They strictly regulated merchants who deceived customers or made undue profits, but were generous enough to lend funds without any collateral for those who suffered losses. If today’s entrepreneurs can inherit this kind of spirit from Gaeseong merchants, Schumpeter’s prediction may just turn out an unnecessary concern.

Editorial Writer Shin Yeon-su (ysshin@donga.com)