From the TUC

Tim’s East Asian Diary: Part Two – Incredible Innovation

17 Sep 2013, by in Economics

Aditya Chakrabortty’s fascinating piece for today’s Guardian, in which he describes Apple as “turning into a typical American corporation”, is even more fascinating from where I’m sitting. For one more night, I am in Seoul, South Korea, to study this country’s industrial policy. And it’s impossible to speak for long about South Korean industry without mention of the S-word – one of Apple’s great rivals, Samsung.

 I wrote at length about Samsung two days ago and I won’t repeat what I wrote now. In fact, policy makers and opinion formers don’t seem to know what to make of it and the other chaebols, the most famous being Hyundai and LG. These companies drove Korea’s industrial development. It is inconceivable that Korea would be where it is today without them. But there are concerns at the chaebols’ market domination. There are worries at the gap in earnings between those that work for chaebols and those that don’t. About 60 per cent of Koreans work for SMEs (Korea has, by the way, done better in developing medium sized companies than has the UK). Those SMEs typically produce parts for the chaebols, but don’t seem to receive the benevolence that the German mittelstand receives from major German companies. Samsung, of course, does not recognise a union, which means it gets another black mark from me. Yet it is hugely important in its R&D spend. To misquote a famous phrase, if Samsung sneezed , the Korean economy would catch a cold. And if Apple is turning into a typical American corporation, Samsung is a typical Korean chaebol. Ruthless, yes, but an incredible driver of innovation.

In time, Korea must build new industries and they are already making plans. The government is targeting nanotechnology and biotechnology, along with the creative sector. Korea is Asia’s leading nation in terms of developing green industries, focusing on offshore wind electricity generation and smart grid technology. It is due to become the first Asian country to set up an emissions trading scheme. There is a strong sense of government purpose. I have visited both the Korean Labour Institute and the Korean Institute for Industrial Economics and Trade, think tanks set up by the government and that are based in the Prime Minister’s office. Research and development, and innovation more generally, are central to the Korean industrial mindset.  I don’t know enough about Apple to comment, but to all of us in the West, this is what the competition is up to. How will we respond?