Author Archives: KT Lee

It is time for Greece to leave EU.

Thesis: Greece has been left with no other choice but to leave EU

There has been no single day when I do not find articles regarding Greece’s financial crisis from media since January, 2015. Greece has been brining spectacular events including ECB’s bailout, Greece’s appeal to ECB, and the Greek Financial minister’s letter to ECB that promised for the future reforms of Greece. Despite all the efforts made, what has been proven is that Greece is unable to overcome the financial crisis on its own. Neither does it appear to have willpower to confront crisis as Greece keeps on indirectly threatening to withdraw EU if Germany does not lend extra money. It seems that Greece is deteriorating the whole economy condition of EU by contributing to devaluating Euro. Now Greece should see the reality and be prepared to leave EU.

The European Union tried to equalize 27 heterogeneous countries, with different value systems, work ethics, factor endowments, dogmas, languages, and objectives in life. Of course, nothing of this has happened, and the cost of integration has exceeded the benefits for the Europeans. Citizens have lost their jobs due to competition from the other country-members and from other foreign nations with which the European Union has signed free-trade agreements. Prices have increased because of the common market, goods are moving to markets with higher income and prices—to attract them you have to pay the same high prices, which is impossible for Greece because income there is lower compared to the wealthy manufacturing EU members of the North (U.S News).

Maurice McTigue, Vice President of the Mercatus Center at George Mason University, also argues that Greece’s irresponsible fiscal behavior leading up to the Great Recession caused its current problems, not the recession itself. The recession simply made abundantly transparent what insiders knew, but were unwilling to accept: Greece’s fiscal behavior was unsustainable. Greece is now at a point where it only makes economic sense that they either leave voluntarily or have the European Union expel them.

Greece is at the verge of default and might have to exit the euro zone sooner or later. Then Greece would have to print its own currency, which is drachma, but this measure is likely to cause economic and financial chaos in the nation. In the long term, however, Greece would see some benefits to be gained from its weak currency that is the missing link in allowing the country to pull out of its debt deflationary spiral (WSJ).

 P.S) I learned a lot from this class, especially about the world economy and the U.S economy. I would like to thank Professor. Kimball and Adam for having  run such a great class.

 

Church should pay tax

Thesis: Church should not be exempted for a tax paying

The U.S churches received an official federal income tax exemption in 1894, and they have been unofficially tax-exempt since the country’s founding. All 50 US states and the District of Columbia exempt churches from paying property tax. Donations to churches are also tax-deductible. The debate continues over whether or not these tax benefits should be retained. Proponents argue that a tax exemption keeps the government out of church finances and thus upholds the separation of church and state. They say that churches deserve a tax break because they provide crucial social services, and that church tax exemptions have been in place for over 200 years without turning America into a theocracy (ProCon.org).

I agree with the notion that churches provide social service, and this is why I argue that churches should be a taxation subject; any institution or firms in the U.S that provide goods and services must pay tax so that the government can use the tax as revenue that would be spent for welfare, national defense, education, etc. Exempting churches from taxation costs the government billions of dollars in lost revenue however. According to former White House senior policy analyst Jeff Schweitzer, the US churches own $300 to $500 billion in untaxed property. New York’s nonpartisan Independent Budget Office determined in July 2011 that New York City alone loses $627 million in property tax revenue. Moreover, Lakewood Church, one of the largest churches in Houston, TX, earns $75 million in annual untaxed revenue, and the Church of Scientology’s annual income exceeds $500 million. Such a huge loss in the government revenue could hamper the government from functioning economically as the government would be likely to incur a deficit when the expected revenue to be collected is lower.

After all, there is no Article or Clause in the U.S constitution that state that churches should remain tax exempted. The only reason that the churches in the U.S have been exempted from taxation is due to the government’s generosity. Such a privilege offered to the churches is not a part of the U.S constitution, making it unfair to those who regularly pay tax. In fact, Associate Justice of the US Supreme court, William O. Douglas, in his dissenting opinion in Walz v. Tax Commission of the City of New York, decided on May 4, 1970, stated: “If believers are entitled to public financial support, so are nonbelievers. A believer and nonbeliever under the present law are treated differently because of the articles of their faith… I conclude that this tax exemption is unconstitutional.

Every man in the U.S pays tax as a duty of an American citizen, but some of them may hold no religious belief. The tax exemption on the churches is forcing those with no religion to cover the government deficit that results from the privilege, which seems unconstitutional. Everything in the U.S should be constitutional, and nothing in the U.S ought to be unconstitutional.

#5.Revised Post: Wanna a high GPA?? Make a girlfriend then !

Thesis: Making a girlfriend or boyfriend improves a GPA.

Many college students, including me, are always stressed and pressed down by homework, quizzes, and exams. This is a common problem shared by students globally. Many of them do exercise, play video games, drink, or do something fun to relieve their stress out, but among them is having dates with a girlfriend or boyfriend that does actually contribute to the improvement of GPAs according to my own research.

I, on my own, have collected some data from my friends and the friends of my friends on whether they are in currently relationship with others as well as their GPAs. In addition, I obtained the data about how often they go on date per a week. With the total sample data of 33 students (Unfortunately, I have collected no additional sample data since I posted this blog as a regular blog on April 1 because no more friends of mine were willing to reveal their GPAs), I have run a regression through STATA program to see how the number of dates per a week affects students’ GDP. Below is the result.

STATA result

The program results in a regression model with a calculated OLS:

GPA=2.99 +0.22(number of dates) -0.055(number of dates^2)

What this model represents is that going for a date once a week causes a student’s GPA to increase by 0.165 (0.22*1 -0.005*1). As the number of dates increases, however, the incremental becomes smaller and smaller, which implies that having a date with boyfriend or girlfriend too often could hurt a student’s GPA. And this is why the regression model is not linear but rather a concave. For instance, a student who goes for a date with his girlfriend three times a week is expected to have GPA of 3.16, while a students who goes for a date with her boyfriend twice a week is likely to maintain GPA of 3.21. I guess that having a date three times a week is too much!!! But still better perform than those who have no boyfriends or girlfriends since these solitary souls sadly would be likely to achieve GPA of 2.99 (2.99 + 0.22*0 -0.055*0) on average.

Is the regression model reliable?? Well, there could be some problems with this model that you might carefully consider before taking it into account. One possible issue that possibly resulted from the model includes omitted variables–a professor and student ratio, classroom environment, or amount of sleep– that could directly affect GPA. For example, there is, of course, a different college level, which means that it is easier to get good grades in colleges with a low level of education than colleges with a high level of education. Unfortunately, my sample data has been collected from students from different institutions including colleges in Seoul, Michigan, Washington, and even Hawaii, and this inconsistency in different educational level in the sample data is likely to cause a bias, making the model less valid internally. Also, it is possible that those who maintain high GPA have relatively enough time to sleep compared to those who maintain low GPA, and therefore their academic performance may be attributed to the enough sleeping hours, not having a date.

Nonetheless this is economically significant enough to consider. The standard deviation of GPA of the sample data, as seen in the graph, is about 0.26, and the average marginal effect caused by having a date is roughly 0.10 (this could be calculated easily through STATA), which is about 38% (0.10/0.26) of one standard deviation of GPA; an increase of GPA as much as 38% of the standard deviation should be ignored. The facts that zero is included in the 95% confidence interval and that the F-statistic value is high may imply that the result data is not statistically significant, but there is a considerable effect yielded by the independent variable on the dependant variable, which is GPA.

There are lots of research results that suggest that having a healthy relationship yields positive effects. Partnering can actually give our physical and psychological well-being a big boost. “I think the big picture is pretty straightforward: Good relationships are good for our health and bad relationships are not,” says Christine Proulx, associate professor at the College of Human Environmental Sciences at the University of Missouri (Men’s Journal). It is reasonable that such a positive effect is also applied to academic achievement. Whatever the confidence interval and F-statistic in the table above say, my research result at least does show that love does something good!

Return to the gold standard ?? Unlikely!

Thesis: It is unlikely that the U.S will return to a gold standard like before.

Prior to 1971, the United States was on various forms of a gold standard where the value of the dollar was backed by gold reserves and paper money could be redeemed for gold upon demand. Since 1971, the United States dollar has been a fiat currency backed by the full faith and credit of the government and not backed by, valued in, or convertible into gold. Since its founding in 1776, the United States has had a variety of monetary systems including bimetallic systems where the dollar was backed by both gold and silver (1792-1862), a fiat monetary system (1862-1879), a full gold standard (1879-1933), and a partial gold standard (1933-1971). From 1971 to present the United States has been on a fiat monetary standard (Reuters).

Now some proponents of the gold standard are asserting that the U.S should return to the gold standard by emphasizing advantages of using gold as the standard currency such as a long-term economic stability, the restricted ability of the government to print money as much as it wishes, and a low possibility of inflation. Despite these benefits to be gained from the gold standard, it is very unlikely that the U.S would return to the gold standard

To dispute the advantage of the long term stability brought by the gold standard, I would say that the gold standard would rather create an economic instability due to the fluctuation of the value of gold. Between 1879 and 1933, for example, when the United States was on a full gold standard, the inflation adjusted market price of gold fluctuated from the $700 range in 1890s to the $200 range in 1920s. From 1934-1970, when the US was on a partial gold standard, the inflation adjusted price of gold went from $563 to $201. In 1980, the inflation adjusted price of gold was $2,337, much higher than today’s price of about $1,200 per ounce (Gold price). Such a fluctuation in the value of the gold does hurt the economy based on the gold standard as the value of a dollar would be attached to the value of gold. For example, a 10% increase or decrease in the value of gold would eventually result in a 10% rise or fall in the overall price level of goods across the country, destabilizing the whole economy.

Also, the restriction, caused by the gold standard, on the government’s ability to print money would not be helpful but harmful to the U.S economy. Under the current fiat money system the Fed can use monetary policy to respond to financial crises by lowering interest rates during a recession, raising them during a period of inflation, and injecting money into the economy when necessary. The gold standard would definitely prevent it from performing these functions. After the 2008 financial crash, the Fed’s TARP (troubled assest relief program) created $700 billion to bail out financial institutions and stabilize the economy. Paul Krugman, one of the Nobel Prize awarded economists said that without the Fed’s intervention a powerful deflationary force would have been created (About News).

Furthermore, the former chairman of the Feds, Ben Bernanke, mentioned that ‘the gold standard means swearing that no matter how bad unemployment gets you are not going to do anything about it using monetary policy’. This implies that the Fed would not be able to print enough money to vitalize the economy through the purchase of the government bonds.

The amount of gold available in the world is limited unlike paper bills that can be infinitely printed by the Fed. If the gold standard were accepted, the scarcity of gold would hamper the Fed from intervening and helping out the economy when needed. Therefore, the gold standard as currency is inefficient and unlikely to be enforced.

Economic costs of abortion

Thesis: There are more economic costs to be incurred from abortion than benefits

Abortion, like a capital punishment, has been a controversial issue not only in the U.S but also in the world. Supporters of abortion often refer to three cases where abortion should be legalized and taken. First, abortion is necessary when youth incidentally get pregnant. Secondly, abortion should be taken if parents figure out that their fetus have incurable or genetic problems that would be unlikely to be treated. Thirdly, abortion should be allowed in a case where a woman gets raped and pregnant unintentionally. I personally agree with these ideas and recognize the need for abortion in such a circumstance, but it is true that there are more economical costs than benefits to be gained from abortion.

The pro-abortion economic argument asserts that children are expensive enough to justify abortion. Pro-abortionists claim that the cost of raising children burdens their parents, which also burdens the public with additional welfare spending when poor mothers bear children. Further, they say abortion is necessary to check population growth and costs associated with this growth.

Yet we must be aware that most children inevitably grow into adults. This implies that in the future they would eventually work and pay taxes, or otherwise spend, save, invest, and innovate. Economists attest that even before these children reach adulthood, their very be-longing to a large and growing population spurs economic growth. Author Lawrence F. Roberge also points out that having fewer children means having fewer consumers of child-specific items, from diapers to toys to school books. Fewer children create fewer job openings for teachers, doctors, manufacturers, retailers, and others from whom greater productivity is needed to support more children. Entire industries are geared toward children and families, so one can only begin to imagine the goods and the employees that would be affected by a lower number of births (Priest for life).

In short, a decreased number of babies would result in fewer consumers as well as less demand for goods and services, and fewer jobs. Paul Samuelson, a famous American economist, also noted that a growing population leads to higher levels of spending and may therefore lower unemployment.

Abortion also causes a loss of potential technology development. In the United States, we have a national debt nearing $16 trillion, which has surpassed the nation’s annual GDP. In other words, our federal government is spending beyond our means. Since abortion was legalized in 1973 by Roe v. Wade, over 50 million babies have died, with over 3,000 killed on a daily basis (LifeNews.com).

Among those who have been aborted, there could have been someone who made a great contribution to the world by addressing an innovative, new technology. Or perhaps some of them could have been a mathematician that can solve mathematical problems that have not been solved yet. We never know what contributions and achievements could have been attained by those who have been aborted. Abortion does eliminate talents that could have been used to advance the world further, and this is a huge cost to the world.

Abortion may be necessary in certain situations, but we must consider an opportunity cost of taking abortion. Otherwise, our society would see a slower development and advancement.

Economic benefits of death penalty

Thesis: Death penalty should be enforced as it brings more benefits than costs.

Since the United States’ inception, capital punishment has been used as a form of retribution, incapacitation, and restitution against society’s most vicious criminals. While the federal government has imposed the death penalty for such crimes as espionage and conspiracy, the majority of capital sanctions today are imposed by state governments for murder. At present, thirty-eight states have death penalty statutes, but only seventeen states have executed more than two convicts in the last two decades (University Avenue Undergraduate Journal of Economics).

Some dissidents criticize the capital punishment by casting a moral question whether those convicted of violent crime deserve to die than with whether state and federal governments deserve to kill those whom it has imprisoned. Bryan Stevenson, a professor of Law at New York University School of Law, also says that death sentences are imposed in a criminal justice system that treats you better if you are rich and guilty than if you are poor and innocent. Furthermore, those who oppose the capital punishment emphasize a high cost of operating the capital punishment, which costs an average of $1 million more than a similar case where the death penalty was not sought (Washington State, Death Penalty Information Center).

In spite of such a moral and economic question arising out of the death penalty, I still believe that there are benefits to be gained from it and that these benefits do overwhelm the costs economically.

The most significant benefit of the capital punishment is to prevent future criminals from committing murder. The assumption behind the deterrence effect is that potential criminals consider the benefits and costs of committing a crime, and if they find the costs to be severe or too high, they will refrain from committing murder. Such an economic benefit of the deterrence would lead society to fewer murders and reduce protection costs that could have been incurred with murder.

In addition, spending on the management of prisons would decline if the capital punishment is to be vitalized. According to Legislative Analyst’s Office, California’s annual costs to incarcerate an inmate in prison were $47,102 from 2008 to 2009. This is a huge expenditure per an inmate and could be definitely reduced by inflicting the death penalty on those who have committed a heinous crime. With the absence of the death penalty, those criminals would be life-sentenced, and valuable taxes collected from the pockets of U.S citizens would be wasted every year.

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Some third parties who are not directly involved with each individual death penalty case could also benefit from a capital punishment statute. Families of victims who were murdered often fall into this category. These families receive some level of restitution and increased utility when the executions occur if they believe that justice has prevailed. This emotional relief by the victims’ families can be categorized as a benefit because these families are willing to pay to have the murderer executed. To estimate these benefits, for instance, assume that every American who is a death penalty supporter is willing to pay $1 per year. Assuming the United States population is currently 320,000,000 people and approximately 80 percent of the population favors the death penalty, the total willingness to pay is $256,000,000. Though not all proponents are willing to pay $1, some are willing to pay considerably more. In any event, the benefits of the death penalty from this willingness to pay are potentially quite large and must not be ignored (Martin Kasten, Illinois Wesleyan University).

Forgiving is a great virtue, but there are some types of crimes that deserve no excuse at all. And our society’s job is to make sure that justice exists by eliminating those who commit such a crime.

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No more free meal

Thesis: S. Korea should abolish free meal policy for elementary school

Since 2010, the public elementary schools in S. Korea have been operating a policy for free lunch for all students regardless of their standard living. This policy was so popular that the Democratic Party, which strongly supported the policy, gained the hearts and minds of the public. It was not for long, however, until it turned out to be an inefficient, imprudent policy. Recently, a poor quality of meal provided for elementary students has been reported, and the budget deficit, which resulted from the free meal policy, caused a misallocation of taxes in educational finance. As a result, some provinces declared to repeal the policy by not providing free lunch.

I personally think that this policy should have been abolished much earlier or never brought up from the beginning because it was nothing more than populism that was meant to mislead and deceive the public. There are many problems with such a policy that is based on universalism.

The provision of free meals is a matter of great importance because it is closely related to the nation’s underlying policy of education, welfare, and taxation. Obviously, the provision of free meals entails an immense of amount of budget, but with no increased taxation such a policy would be likely to cause a misallocation of budget, resulting in inefficiency. For example, the budget for vocational education and educational facilities have been reduced dramatically since 2010 as the spending on the provision of free meals has been more than 4 trillion won (4 hundred million dollar), which was four times more than when there was no free meal policy. A decreased budget on educational facilities is causing an inferior environment for education by delaying the improvement of facilities such as heating system, air conditioning system, and repair work of restroom (The Seoul education office).

In addition, the quality of education is declining due to the excessive budget on the provision of free meals. The Ministry of Education has just decided to cut off the budget for the part of science and technology, and the elementary schools have reduced the number of part time instructors from 4,368 to 3,720, implying a decrease in the student-teacher ratio (Ministry of Education, South Korea). A series of impacts incurred by the inefficiency of the free meals policy is indeed deteriorating the whole education system in S. Korea.

What must be done in order to prevent a further corruption of the educational system is an immediate abolishment of the provision of free meals and is to adopt a policy based on selectivism that provides free meals for a target group only who definitely struggles from a  low income. Of course, the provision of free meals helps more students to eat lunch and stay healthy (WSJ), but school is not a place to have lunch but to learn and be educated to prevent poverty from being passed on.

#4.Revised Post: S. Korea should not have joined AIIB

Thesis: S. Korea should not have  joined AIIB

AIIB stands for Asian Infrastructure Investment Bank led by China with an aim to strengthen the economy of the members in the bank through cooperative efforts. In the past weeks, the U.K, France, Germany, and Italy announced their plans to join the bank despite the strong objections from the U.S. S. Korea, of course, as a strong economical nation in Asia has been encouraged by China to join the bank and officially decided to join AIIB after careful consideration.

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The U.S had been constantly persuading the government of S. Korea not to join the bank however. People might wonder why. One main reason is that the establishment of AIIB is considered to be countering IMF and ADB. For example, Chinese’s voting power in IMF is only 1/3of that of the U.S, and IMF seems reluctant in reforming its governance structure. In ADB, the U.S and Japan both have 15.6% shareholding whereas China’s shareholding is only 6.5. Therefore, China is attempting to challenge IMF and ADB with the establishment of AIIB, and the prosperity of AIIB would result in an increase in the value of Yuan. The U.S sees this as a huge threat to the U.S economy and as an attack on the international financial architecture created by the U.S and their allies after World War 2 (Brij Mohan, University of Delhi).

What benefits to be gained for S. Korea from AIIB then? Obviously, the relationship of S. Korea between other members of the bank would be tightened, and S. Korea could expect a cheaper loan, if in need, from the bank as many other nations are about to join the bank, forming competition and resulting in a low interest rate.

In spite of those clear benefits, I think S. Korea should not have joined AIIB for three reasons.

First, AIIB lacks a clear objective as its purpose, future plans, and aims are not explicitly presented by China. This ambiguity in the structure could cause a non-transparency and thus a collapse of the organization.

Secondly, S. Korea is not ready to take the burden of risk that could be caused by less economical countries in the bank. For example, when one of the members of AIIB faces a default economically like Greece, strong economic nations, such as China and S. Korea, would be likely to be required to aid such a nation by lending money. Yet S. Korea is not economically stable to sufficiently donate an aid to other developed nations in AIIB. Even though S. Korea is one of the economically developed nations in Asia, its economy nowadays suffers a lot due to the decreased exports and stagnancy of the domestic market. S. Korea is not in situation to look after other developed nations at all.

Thirdly and most importantly, the U.S has been the strongest ally of S. Korea since World War 2. Not only does it help S. Korea economically, the U.S does contribute a lot to fortifying the national defense of S. Korea against North Korea. If the U.S, a good friend of S. Korea, does not want S. Korea to join AIIB, then the government of S. Korea should reconsider withdrawing from AAIB. Robert Zoellick, former president of the World Bank and former U.S Trade Representative and Deputy Secretary of State under George W. Bush says that “After the Obama administration pressured allies and partners not to join, it seemed to drop the ball,” he says. Close U.S. allies such as Australia and South Korea, which refrained from joining the AIIB under U.S. pressure, actually have been “disadvantaged” by their loyalty. Most likely, these and other countries in the Asia-Pacific will switch course and join the AIIB in due time (WSJ). It is absolutely true that acting imprudent due to loyalty is not rational, but aggravating a strong relationship with an ally for a little profit is more irrational. Besides, China has been a supporter of North Korea, which is the primary enemy of South Korea.

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S. Korea should remember just only thing: who our enemies were during the civil war in 1950 and who our ally was at that time. I guess the answer is simple.

Wanna a high GPA?? Make a girlfriend then!

Thesis: Making a girlfriend or boyfriend improves a GPA.

Many college students, including me, are always stressed and pressed down by homework, quizzes, and exams. This is a common problem shared by students globally. Many of them do exercise, play video games, drink, or do something fun to relieve their stress out, but among them is having dates with a girlfriend or boyfriend that does actually contribute to the improvement of GPAs according to my own research.

I, on my own, have collected some data from my friends and the friends of my friends on whether they are in currently relationship with others as well as their GPAs. In addition, I obtained the data about how often they go on date per a week. With the total sample data of 33 students, I have run a regression through STATA program to see how the number of dates per a week affects students’ GDP. Below is the result.

STATA result

 

The program results in a regression model with a calculated OLS:

GPA=2.99 +0.22(number of dates) -0.055(number of dates^2)

 

What this model represents is that going for a date once a week causes a student’s GPA to increase by 0.165 (0.22*1 -0.005*1). As the number of dates increases, however, the incremental becomes smaller and smaller, which implies that having a date with boyfriend or girlfriend too often could hurt a student’s GPA. And this is why the regression model is not linear but rather a concave. For instance, a student who goes for a date with his girlfriend three times a week is expected to have GPA of 3.16, while a students who goes for a date with her boyfriend twice a week is likely to maintain GPA of 3.21. I guess that having a date three times a week is too much!!! But still better perform than those who have no boyfriends or girlfriends since these solitary souls sadly would be likely to achieve GPA of 2.99 (2.99 + 0.22*0 -0.055*0) on average.

Is the regression model reliable?? Well, there could be some problems with this model that you might carefully consider before taking it into account. One possible issue that possibly resulted from the model includes omitted variables–a professor and student ratio, classroom environment, or amount of sleep– that could directly affect GPA. For example, there is, of course, a different college level, which means that it is easier to get good grades in colleges with a low level of education than colleges with a high level of education. Unfortunately, my sample data has been collected from students from different institutions including colleges in Seoul, Michigan, Washington, and even Hawaii, and this inconsistency in different educational level in the sample data is likely to cause a bias, making the model less valid internally. Also, it is possible that those who maintain high GPA have relatively enough time to sleep compared to those who maintain low GPA, and therefore their academic performance may be attributed to the enough sleeping hours, not having a date.

Nonetheless this is economically significant enough to consider. The standard deviation of GPA of the sample data, as seen in the graph, is about 0.26, and the average marginal effect caused by having a date is roughly 0.10 (this could be calculated easily through STATA), which is about 38% (0.10/0.26) of one standard deviation of GPA. The facts that zero is included in the 95% confidence interval and that the high F-statistic value may imply that the result data is not statistically significant, but there is a considerable effect yielded by the independent variable on the dependant variable, which is GPA.

There are lots of research results that suggest that having a healthy relationship yields positive effects. Partnering can actually give our physical and psychological well-being a big boost. “I think the big picture is pretty straightforward: Good relationships are good for our health and bad relationships are not,” says Christine Proulx, associate professor at the College of Human Environmental Sciences at the University of Missouri (Men’s Journal). It is reasonable that such a positive effect is also applied to academic achievement. Whatever the confidence interval and F-statistic in the table above say, my research result at least does show that love does something good!

South Korea should deploy THAAD

Thesis: South Korea should implement THAAD in its territory

 

Recently, the government of the U.S has proposed to the government of S. Korea that S. Korea should deploy THAAD (Terminal High Altitude Area Defense) so that it would be able to better prepare for military provocation, such as an intercontinental missile, from enemy countries around, especially North Korea. The government of S. Korea is still under the process of reviewing its implementation as the government faces some objections. One concern or probably the biggest obstacle is that the government of China is avidly opposing the deployment of THAAD in S. Korea as the main land of China is within the effective range of THAAD; China is concerned about a possible threat that could result from the strengthened the military power of S. Korea. Thus, many politicians are worried that the implantation of THAAD would worsen the relationship between S. Korea and China, particularly an economical impart from a possible decrease in exports to China.

Nonetheless, I maintain that S. Korea must implement THAAD for not only political reasons but also long term economical merits.

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Regarding political reasons, the U.S has been the closest allies of S. Korea since the Civil War (S. Korea vs N. Korea) in 1950 and supporting the national defense of S. Korea by arranging military forces in S. Korea according to the treaty of SOFA (Status of Force Agreement). Thanks to that, the government of S. Korea has been able to save and spare much of its budget that should have been spent for the National defense if no support had been provided by the U.S. Now such a close friend is making a propose to deploy THAAD for S. Korea’s security; some say that the cost of installation of THAAD, which is about $ 800 million, will be on S. Korea’ expenditure, but this is not true at all because the U.S government is the one who actually bears the cost while the maintenance cost would be borne by the government of S. Korea (CBS). S. Korea would never want to harm the excellent relationship by refusing the U.S’ generous offer even if it would be meant to break the relationship with China.

THAAD is also economically significant when it comes to think about foreign investments. According to the UNCTAD 2013 World Investment Report, South Korea currently ranks 6th among the most attractive countries of South and East Asia for transnational companies. FDI flows into South Korea have been more or less constant in the recent years, around 10 billion USD, but they declined due to external shocks such as the unfavourable international economic context. In 2013, FDI flows declined by 9.4% compared to 2012. South Korea’s appeal in terms of foreign direct investment (FDI) is the result of the country’s fast economic development and the specialization of its industry in new information and communication technologies. However, the lack of general transparency in regulations and threats of North Korea are a major concern to foreign investors (Santander).

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(Graph of foreign investment in South Korea)

The military provocation of North Korea toward S. Korea has never stopped and even been more aggressive. In fact, the cease- fire does not indicate the end of the ward, which implies that S. Korea is still in the middle of war against North Korea. Nobody knows when the Civil War would resume. Foreign investors are very aware of this fact and seem resultant to invest further more as periodic military threats from North Korea are making S. Korea less favorable place to invest. With THAAD, however, S. Korea will be able to better manage such a threat and to force North Korea to refrain from taking imprudent acts and eventually the military stability of S. Korea would maintain and extract foreign investors.

There should be no question on matters regarding national security as it must be always considered above anything else. To S. Korea, THAAD is of importance politically and economically and must be deployed in order to eliminate any threats to the future of S .Korea.