Growthology

Why Should Complexity Imply Fragility?

Last week historian Bryan Ward-Perkins authored an interesting Financial Times op-ed in which he compared the present recession to the post-Roman Empire economy in the British Isles. Conditions then, needless to say, were "extremely bleak." Part of the reason for this, wrote Ward-Perkins, was that there was such a long way to fall from the advanced Roman economy. Going further, however, he explicitly links the collapse to the level of advancement--no matter what type of wings Icarus wears, he will always fail simply because he flew so high and close to the sun.

"Almost certainly the suddenness and the catastrophic scale of the crash were caused by the levels of sophistication and specialisation reached by the economy in Roman times. The Romano-British population had . . . relied on widespread markets to sustain their specialised production. When insecurity came in the fifth century, this impressive house of cards collapsed."

Well, there you go: an economy can only push Adam Smith so far. Apparent market sophistication--trade, division of labor--will eventually (and, seemingly, inexorably) become a weak structure, vulnerable to the slightest perturbation, upon which it will collapse:

"The more complex an economy is, the more fragile it is, and the more cataclysmic its disintegration can be."

That second clause seems pretty valid: the higher you fly the further you fall. But I think it's actually quite arguable, and the reason is because the first clause, Ward-Perkins' main point that complexity increases fragility, is wrong. It makes intuitive sense, of course, and the house of cards analogy misleadingly reinforces that intuition. The more cards you add, after all, the more fragile that house becomes; everyone knows that.

But a complex economy is not like a house of cards. Much of the complexity research over the last thirty years or so--however you may judge its worth en toto--has demonstrated the robustness of complex networks. And, as readers of Joseph Tainter know (I assume Ward-Perkins has read Tainter), there is little reason to think that a complex society like Imperial Rome, having weathered many different stresses over several centuries, should all of sudden turn to a house of cards because of the very complexity that made it strong in the first place.

To argue that complexity is equivalent to fragility requires you to increasingly argue backwards for why complexity turns from strength to weakness. The ultimate cause for the collapse of complex societies, as Tainter showed, is not their complexity. It may end up being a proximate cause or contributing factor, but not the ultimate reason. The reason, in Tainter's telling, is the marginal returns curve: at some point, a society's investment in complexity may yield diminishing marginal returns. When and if collapse does occur, moreover, it is not necessarily a bad thing; to be sure, it may bring all sorts of negative consequences. But, if the marginal returns hypothesis is correct, then the disintegration of a once-complex society into several simpler constituent parts should reset that curve and yield, once again, increasing marginal returns. People may be better off and, in many cases, actively choose to dissociate from complexity.

It's easy, of course, to argue too far in this vein and rely wholly on the supposed robustness of complex systems as a reason why they should perpetuate themselves. The reason complex systems persist and survive shocks is not their innate robustness; it is that they contain deep wells of potential adaptations (exaptations). It's also tempting to ascribe too much worth to complexity in and of itself. In social science and many of the natural sciences we continue to equate "complex" with "better," "simple" with "worse." The notion of progress up a ladder of complexity is seductive, and underlies the arguments of both avid proponents of complexity and those, like Ward-Perkins, who see the danger in too much sophistication.

Field of Dreams is an Awesome Baseball Movie, not an Economic Development Strategy

By some estimates, the United States currently has vacant office space running into the hundreds of millions of square feet: law offices, Fortune 500 companies, cookie-cutter glass boxes constructed on sandpiles of debt, etc. And, as discussed previously, commercial real estate (CRE) could very well be the next economic shoe to drop, dragging down whatever economic recovery is materializing. 

At the same time, it's increasingly clear to more and more people that recovery and expansion simply won't happen without entrepreneurs: new companies that bring innovations to market. Entrepreneurs are not the silver bullet solution, yet growth will not occur without them. 

So let's see: how could we possibly address a looming CRE problem as well as encouraging incipient and potential entrepreneurs? Got it! Construct completely new science parks! Ignore both problems and travel a well-trod path that, if not inspired by Field of Dreams, at least follows the same blueprint: Build it and they will come. 

Oh, wait, hold on a second, I'm being told that this idea is already being pursued--it seems that Congress has taken time from its time-consuming BCS debates to pass legislation that will ostensibly "spur innovation [and] economic with development" by building science parks. And wouldn't you know it, the bill miraculously finds empirical support from the Association of University Research Parks. This is a page right out of the NVCA's playbook.

Not that science parks are necessarily bad, but evidence on their effectiveness appears mixed and, in any case, the concept would seem to contradict, you know, the entire history of innovation.

The bill's title is "The Building a Stronger America Act," which should not be confused with Build a Stronger America, an entrepreneurs' movement that seeks, inter alia, to expand the popular notions of entrepreneurship and innovation beyond science parks and venture capital, beyond the idea of walling off our "innovators" from the huddled masses of ordinary humans.

One of the absolute best pieces to read on how innovation happens is J. Rogers Hollingsworth's chapter on "High Cognitive Complexity." Synthesis, not separation, is the key.

Update: Kedrosky has written a wonderfully scathing post focused on the CRE part of this issue.

Breaking Through Barriers to Innovation

The search is on for ideas that will stimulate short- and long-term economic growth in the United States without further adding to the budget deficit. Here's a no-brainer: allow university researchers with innovations that are ready to be commercialized to shop around to different technology licensing offices. 

That's the idea advanced by Kauffman Foundation vice-presidents Lesa Mitchell and Bob Litan in the forthcoming issue of the newly revamped Harvard Business Review. This issue features the top "Breakthrough Ideas for 2010" and, happily, this idea comes in at number 6!

Currently, if you are a professor with a new technology or innovation, you typically must work through your own university's technology licensing office (TLO). This is inefficient for a variety of reasons. For one thing, not all TLOs are created equal: some have greater skill than others, while a handful excel. Several decades ago, federal funding of academic research was dramatically skewed toward those universities that engaged in the most commercialization: patents, licenses, spinoffs, etc. In the last twenty or thirty years, the distribution line of federal funding has flattened considerably, with a greater number of schools receiving money than before. This is not to say that the distribution is equal, but it's much less skewed than before.

Here's the kicker: the distribution of innovation output--patents, licenses, startups--has not changed. It's still skewed toward a handful of schools despite the huge increase in the number of universities receiving federal R&D money. We are not reaping the benefits of innovations that are presumably emerging from all that research and development. 

While some TLOs are more competent than others, moreover, it's also likely that such competence varies by area: one TLO may excel at commercializing life science discoveries while another may have a comparative advantage in computer science. Opening up the market for discoveries and commercialization should help iron out the inefficiencies and barriers that exist.

Kudos to Lesa and Bob for a fantastic article and for advancing a top Breakthrough Idea of 2010.

Entrepreneurship in the U.S.: 2004-2009

By mining Google search data, here is an interesting animated view of changing entrepreneurial interest in the U.S. – by state – from 2004 to today. Click to play.

Picturing Emissions

Great chart from the WSJ today on emissions from the largest nations.  Which do you prefer: per capita, per unit of GDP, or sum total?

Growthology prefers "per capita," because that's the category where the U.S. ranks highest.
 

Credit Supply and Demand: What to Make of the NFIB Survey?

A recent survey by the National Federation of Independent Businesses (NFIB) has garnered some attention for suggesting that demand for credit among small businesses is the problem, rather than a restricted supply due to tighter lending standards. The implication is that, contrary to President Obama's recent proposals to expand the flow of credit to small businesses (and our own discussion here on Growthology), the credit pipeline is secure if only businesses would access it. With consumer demand still rather sluggish, small businesses may see little reason to pursue new credit. 

Clearly, many businesses face difficulties in obtaining credit from banks; indeed, the weight of anecdotal evidence seems to support the notion that this is a supply problem, as do other surveys pointing to a spike in the number of companies reporting difficulty getting loans. I spoke with Ann Meyer of the Chicago Tribune last week who noted that not one company she has encountered in Chicago reports an easy time of getting credit. The Kauffman Foundation's recent work in Detroit seconds this perspective. 

And, indeed, the October Federal Reserve Senior Loan Officer Survey did find that "domestic banks indicated that they continued to tighten standards and terms over the past three months on all major types of loans to businesses and households." Supply of credit, in other words, continued to be an issue.

But that's not the whole story. The Fed survey also indicated that the percentage of banks tightening standards has fallen over the last year--the supply pipeline is easing. In fact, the percentage of banks reporting tighter standards for loans to small businesses is at 2007 levels. Demand, moreover, "for most major categories of loans at domestic banks reportedly continued to weaken," albeit at a somewhat slower pace.

The question of credit, particularly to small businesses, is a thorny issue. Supply and demand both seem to be at work here, with the preponderance either way likely to vary by region. Meyer, in fact, pointed out that a problem with the NFIB survey is that it is skewed toward non-urban regions and businesses and thus doesn't represent the business conditions in places like Chicago. This seems like a fair point and echoes other criticisms of the NFIB. Two further issues require brief mention.

One is the apparently ballooning problem in commercial real estate with, by some estimates, half a billion dollars in bad loans preparing to come due and eat up banks' balance sheets. What does this have to do with credit for small companies? As the Atlanta Fed recently pointed out, the banks holding a large chunk of these CRE loans also happen to be the same banks that lend to small companies. 

Second, any discussion of credit for "small" businesses inevitably elides over an essential corner of the economic universe: new and young companies. True, these are often coterminous with small business, but it doesn't mean the interests of a five-employee startup will coincide with the interests of a five-employee, 25-year-old company, particularly in different industries. Credit problems pertaining to "small" businesses won't necessarily apply to new and young firms, especially since a primary source of financing for the latter category is the proverbial trio of family, friends, and fools, as well as personal credit cards. True, using one's credit card or home equity line isn't exactly easier than it was two or three years ago, but this means an easing of credit availability aimed at "small" businesses may not have (much of) an effect on the fortunes of new and young companies, which are the real sources of job creation in the American economy.

Is college football like a plantation?

Bill Frezza has tough words for the NCAA, likening college football to slavery. Is that a fair charge?

Many of these athletes forego a level of earnings they will never approach for the rest of their lives. In return for what? A shot at pro football? A fortunate few may go on to the NFL but the vast majority will spend the rest of their lives hobbling around on damaged knees. What did they get for it? A brief moment of glory and what often amounts to little more than an honorary degree.

I am sympathetic to the argument that the majority of college football players will never be signed to a pro contract, and that playing this violent game puts them at serious physical risk (e.g. long term brain damage). But I don't think the larger point passes the common sense test. If I had the physical talent to play college football, it wouldn't be a tough decision. I would have played. As for pro prospects, "few" is not the right adjective. With 32 NFL teams restocking every year, compared to about 100 top college teams, the odds are pretty good that a player can "make it" to the pros for at least a couple of years, and that is huge money.

But would it really be so hard to find a way to compensate these young men? That's Frezza's key point, and it's hard to dispute. A creative deferred compensation payout, weighted towards those who sustain career-ending injuries, wouldn't be very hard to design.

As for the slavery claim, Frezza does a fine job of provoking thought, but I think it goes too far. The game was fully integrated in the 1960s. Not long ago the 12-time NCAA champion University of Alabama refused to let blacks play on its team, whereas just this weekend the first Heisman trophy ever awarded to an Alabama player was put into the hands of Mark Ingram, the school's running back who happens to be an African-American. So should Alabama be critized for playing too few?

Upon beginning his Heisman acceptance speech, Mark Ingram finally broke down after uttering the following words: "I'm just so excited to bring Alabama their first Heisman winner."

The good people of that state waited a long, long time for this night. Few place more importance on college football history, and no fan base lionizes its gridiron heroes more than those of the Crimson Tide's. They'll be the first to let you know they take a backseat to nobody -- 12 national championships, 22 SEC titles, 57 bowl berths.

All this points to the larger issue of compensation in a generally wealthy, highly unequal, and supposedly free, society. At least these young men have a choice to "work" for free. In contrast, by increasing the minimum wage three times in two years, Congress has all but made it illegal for many low-skill blacks to find any work at all. With an unemployment rate above 30 percent, the real scandal is why football is one of the few opportunities young African American men are given to escape poverty. I would argue the NCAA isn't a plantation, rather one of the few ways out.

Populism and economic growth in the U.S.A.

"Amidst the debate over systemic regulation, the independence of U.S. monetary policy is at risk. We urge Congress and the Executive Branch to reaffirm their support for and defend the independence of the Federal Reserve System as a foundation of U.S. economic stability."

My post yesterday about the "Tea Party" emphasized the emergence of a populist force in American politics despite the extra-Constitutional 2-party duopoly that defines the status quo. It encouraged some reaction that I expected, articulated by growthology commenter Doug: "If they try and make the know nothing Sara Palin their poster girl, I believe I am going to have to pass." Good point. Today we continue by looking at where the movement might go right and wrong.

The movement's emphasis on smaller, more responsible government fiscally is something worth three cheers. In contrast, attempts to shift its emphasis toward supporting popular control of monetary policy is dangerous. Democracy is good at long-term decision-making, reflected in period elections and intitiatives. But it would be disastrous at short-term decisions like setting interest rates or planning amphibious invasions.

While many politians are scrambling to get in front of the crowd here, the movement remains ambiguous. What interests me is that a theoretical tea party candidate outpolls a Republican candidate! So naturally, Republicans are trying to co-opt the movement, as are Libertarians.

Historically, populism in America was similar to populism elsewhere: a protest of the people against the elites, almost always against the economic inequality where the status quo was, or was perceived as, a plutocracy. And the impact of populism in many Latin American economies is arguably the primary force that stunted economic growth there during the last century. A famous example is Argentina, once one of the wealthiest 5 nations on earth but in stagnating decline since the 1950s (while its neighbors in the region surpass it).

But modern populim in the U.S. mutated into something different. There remain strong tendencies of the orignal, fueled by anger at Wall Street banks and the Federal Reserve. But there is a modern sense, perhaps driven by the higher average incomes and higher levels of education, of protests for less government intervention, not more! That's a huge difference. Perot is no Peron!

Demagogues will instinctively want to channel popular anger for their own ends, and in inendiary times like these, the voices of wise (and disinterested) intellectuals are especially needed. That's why I am proud to see so many economists signing onto the petition quoted above.

Robot kills terrorist leader

Years ago, the headlines might have featured a soldier, maybe a fighter pilot, daringly taking out the leader of terror cell intent on killing Americans. This theme dominates the hit series 24 and its hero, Jack Bauer. But the actual headline today about fighting bad guys features a robot as the central figure:

"There are strong indications that senior al Qaeda operations planner Saleh al-Somali has died," a senior U.S. official told ABC News.

Al-Somali was believed killed in a drone strike Tuesday that likely was part of the CIA's continuing program that uses armed Predator drones to target al Qaeda terrorists operating along the lawless tribal areas of western Pakistan that border Afghanistan.

Read more about the MQ-1 Predator drone system here and here.

Why the Media Doesn't Understand the Tea Party

If you added up all the words in the MSM about the Tea Party phenomenon, the snark would outweigh the insights by a 2-1 or maybe 3-1 ratio.  The Tea Party is not some right wing extreme within the Republican party, rather it is an intelligent, if populist, and almost predictable reaction to the failure of the 2-party duopoly to restrain both the growth of big government and the yawning deficit. Unfortunately, the media paradigm is stuck with a binary view of politics in America: Democrat/humanitarian/labor/biggovernment versus Republican/militant/corporate/antitax. It's a false frame, and the Republican party has been especially hypocritical in the last half century.

Look, this quasi-movement could easily start morphing into a third party... "The notion that the Tea Party movement is a vocal minority in the Republican Party may have been put to rest today. A new three-way generic ballot from Rasmussen Reports finds that a Tea Party candidate would fare better than a Republican candidate, 23% to 18%, with the Democratic candidate coming out on top at 36%. The poll also found 22% remained undecided." Wow.

As Rick Santelli, who may have inspired the tea partiers with a famous March 2009 rant said to Chris Matthews, "This isn't a left and right issue." (Seen here in this link to a good Megan McCarlde blog post).

I just wonder why it's so easy for my highly educated friends to dismiss the tea partiers, as if they were rabid. The Rasmussen survey confirms the hunger for a huge swath of Americans - the same kind of folks who backed Ross Perot in 1992 - to return to the limited federal role enshrined in the Constitution. They have been bubbling under the surface because the political system has effectively kept them locked out.

"Debt is the salve on the wound of rancorous politics. It fixes everything! Until the bill comes due" says WaPo's Joel Achenbach in another mini-masterpiece.  Well, not quite. Debt is the result of a broken political process, not a salve or side-effect of a functional process. And deficits will not be fixed without a better politics -- less gerrymandering, fewer election laws that favor incumbents and incumbent parties, and zero restrictions on free speech. Bets on that kind of reform happening?

Every two years we get candidates who promise to change the ways of Washington, to forge a bipartisan consensus. The result? Highly evolved creatures that speak glowing centrist rhetoric and produce hyper-partisan legislation the spends more and taxes less. And it is getting worse.

If you want to understand the anger about "re-using TARP money" to pay for a new job stimulus, just remember this: Americans were promised the $700 billion in TARP funds would be repaid in full. This was investment, not spending. And now? 

twitter thoughts and update

I just updated my twitter account. TimmerKane. http://twitter.com/TimmerKane

Thanks to the founder of Sprouter.com, Sarah Prevette, one of speaker's at Canada's Global Entrep Week event who showed me how to tweet.

Funny thing about twitter -- two of the folks I follow(ed) have a bad case of Logorrhoea. I had to block them. This is a weird experience, blocking out my friends because they talk excessively. I've long though facebook would improve dramatically once it allowed users to prioritize friends (so that a 5-day old post from a 5-star friend would appear before the 83 daily posts of a 1-star friend). Maybe it would nice if people could prioritize their own posts, and not just with ! icons. A thought. How do you all resolve this?

The Case for Startup Visas

Call it what you will, an entrepreneurs’ visa, a startup visa, or something similar, but the case for creating something like that in the U.S. has never been stronger. Venture capitalist Brad Feld and I make the case in an OpEd in today’s Wall Street Journal. 

While there are many ways to approach the issue, we argue for two things. First, we want to make it easier for science & technology graduates to stay in the country and create companies. Second, we argue that the U.S. needs to drive job creation by opening up and making it easier for small, growing companies around the world to relocate to this country. Given the fundamental role that Kauffman research shows that young companies have on job creation, both would have be big steps towards creating a more entrepreneurial U.S. economy with more jobs.

Is this a quick fix? Of course not. It is one step, perhaps even a small step, toward a sustainable economic recovery in the U.S. But given this country’s entrepreneurial culture, and given the U.S.’s job creation needs, a step in this direction is timely and important.

Small is the New Big

This is the text of the speech I gave in Seoul, South Korea during Global Entrepreneurship Week:

This week, 87 countries around the world are celebrating global entrepreneurship week. Last week, Germany, Europe, and the world celebrated the 20th anniversary of the fall of the Berlin Wall on 11/9/1989. Perhaps these two celebrations are closely related, more than we might think at first glance.

First, let me thank our hosts, as I am deeply honored for the opportunity to speak to you today thanks to the support of Small and Medium Business Administration of Korea. My talk today has the theme “Small is the New Big.” Let me explain what that means.

Korea is a small country, but its economic growth over the last 50 years has been faster than anyplace on Earth at any time in human history. But the synopsis of how Korea did it in textbooks is this: big Chaebol companies guided by the government was the strategy.

Maybe that is true, maybe not. But one thing is certain. Big firms cannot and will not be able to power such fast growth in the future. All advanced economies face the same challenge: in Korea, in the U.S., in Europe, in Japan. Big is slow. An economy dominated by big firms can do very well in copying ideas, but it cannot innovate and lead without the cutting edge of entrepreneurs.

As you know I have been at times in my life a small businessman. My father was the president of small business as well. You probably do not know that in 1981, my father’s small company was hired by the Korean Air Force to build liquid oxygen tanks. I still remember when he took the big trip across the Pacific and came back with stories of this wonderful and hard-working country. Ten years later, I too travelled to Korea to live and serve in the military alongside my brothers in the Korean military. The word “ally” is something that I will always associate with this country. And I came here, then as now, more to learn than to lecture. So it is with great humility that I return again for this visit.

As you must know, many people around the world look at the Korean peninsula and see the DMZ that divides the North from the South. They see a choice between two systems, capitalist or socialist, exactly like the concrete wall that split Germany in two. Differences abound, of course, but the cause for these differences is less understood. The GDP of the North is a fraction of the South, and the height difference between the Koreas is five centimeters. So did North Korea slide back or did South Korea shoot ahead?

As for me, I get tired of the comparison between two Koreas because I think it ignores the dynamism of this country in its own right. What outsiders do not see is how vibrant the economy of Seoul is today in comparison with what it was in 1991 when I lived here, or 1981 when my father visited, or 1971, or 1961 … What we know, especially we in this room, is that there is no such thing as an unchanging economy. The capitalism of South Korea is constantly evolving and improving, with new rules and laws that constantly push human progress forward. My time living in Seoul taught me this lesson about how a dynamic economy creates progress, which inspired me to study economics for a PhD and also to start my own companies.

Today, we celebrate entrepreneurship in all corners of the globe. Right now, thousands of partner organizations are conducting more than 25,000 activities—from simple speeches to advanced business competitions and actual launches—designed to inspire, connect, mentor and engage the next generation of entrepreneurs.

Global Entrepreneurship Week enjoys the support of numerous global leaders, such as: Prince Charles; US Secretary of State Hillary Clinton; President Nicolas Sarkozy of France; President Lula in Brazil; King Mohammed VI from Morocco; Prince Abdelaziz Ben Abdullah in Saudi Arabia; Prime Minister Gordon Brown in the UK; and, many others.

The amazing thing is that what we are celebrating – entrepreneurship – was forecast to go extinct. The one and only chart I want to share with you today is this (show chart), which projects the level of entrepreneurship in an economy over the course of its development. On the left side is an economy at its poorest, most agricultural, rural stage. In those economies, everyone is an entrepreneur because there is no large-scale organization. And before 1800, this was the shape of all economies. The emergence of industrialization over the years 1800-1900 saw the rate of entrepreneurship decline as more workers became employees. Firms grew larger. Lifetime employment became an option.

Imagine Karl Marx, and later Joseph Schumpeter, interpreting this trend. All the great economists saw this trend line and predicted its eventual conclusion – that one day the economy would evolve to a stage where all innovation was impossible outside of the large, wealthy corporation. In 1950, as giants like General Electric, AT&T produced mass patents, that fate seemed logical.

And I would say that the Korean development strategy mirrored the “big” logic of large companies. History, however, has not been kind to the theory. At the end of the 20th century, just when small firms should have gone extinct, a handful of small computer companies emerged, one after the other. Innovation was happening outside of the large R&D labs. In garages. This is the story of Silicon Valley, Apple, Sun, Microsoft, Dell, Google, Blizzard. In short, small is the new big. And I believe history will see a rebound in the rate of entrepreneurship. Why? Advanced economies are based much more on services and knowledge, the territory of smaller newer firms, and far less on manufacturing, the terrain of industrial conglomerates. Outsourcing and globalization will only accelerate the advantages of smaller, specialized companies.

This story neglects the fact that economic growth is the exception in human history, not the rule. The role for macroeconomists like me, and my employer, the Kauffman Foundation – the largest private funder of economic research in the United States – is to try to discover the underlying reasons for economic growth. And we talk about this place because the rest of the world now looks to the example of South Korea, unique in the world in making the transition from third world to the top dozen economies of the world.

This growth question can’t be separated from the political or the historical. South Korea has always done well because of its engagement with the world.

Under the eighteen year rule of President Chung-Hee Park, per-capita income increased tenfold, as Korea took its place as a world leader in iron, steel, shipbuilding, chemicals, and consumer electronics by opening itself up to the world. Often, this opening was controversial, such as sending troops to help the U.S. war effort in Vietnam or normalizing relations with Japan or the 1988 Seoul Olympics (done after Park’s assassination), but there’s little doubt about the result.

That commitment to economic growth is seen now with President Lee Myung-bak, whose ambition 747 plan, will require harnessing the genius and entrepreneurial work ethic of the Korean people if it is to be accomplished. Seven percent economic growth, an increase in GDP per capita of $40,000, and Korea making it as the world’s seventh largest economy.

Although the initial growth since the Olympics of 1988, twenty-one years ago was fueled by government spending and subsidies, the new South Korean economy must increasingly depend on entrepreneurs and innovation.

Consider patents filed in the U.S. from other nations. In 1978, Korean inventors obtained 13 U.S. patents. By 1998, that number had grown to 3,362. Korea's total jumped another 2.5 times, to 8,731, last year, vaulting it to third place in patents awarded to foreign countries. Only Japan (36,679) and Germany (10,086) had more.

There are further challenges to overcome. A 2008 survey revealed that 42 percent of South Koreans had never spoken to a foreigner, even as the past seven years saw a doubling of the number of foreign residents, to 1.2 million. And rigid labor laws in South Korea make hiring temps attractive, to the detriment of the South Korean economy. The number of contract workers in South Korea is estimated by the government at 5.4 million, or 33 percent of the country’s wage earners.

But hard work and commitment to progress overcome all challenges. And work hard, Koreans do. The Economist reports that the average South Korean works a 45 hour work week, more than seven hours longer than the next highest country in the OECD. Even more impressive is the cohesion of the Korean social network. According to the National Bureau of Economic Research, 28 percent of Korean-American men and 20 percent of Korean-American women own their own business—the highest rate of entrepreneurship among ethnic groups in the USA.

It’s an embarrassment that my country has waited so long to approve a free trade agreement between our two countries. It’s especially foolish as South Korea and India passed a free trade deal that essentially eliminates trade restrictions between these two countries. Another agreement is now in place between South Korea and the EU. I applaud this step forward with greater economic openness, and promise to continue to fight for America to seal a trade deal.

So, 20 years after the fall of the Berlin Wall, we end here talking about openness and globalization. We should remember what exactly the Wall represents. It is not, as I said, a simple dividing line between two opposing systems. The objective of the Wall is only this: to keep enslaved people from emigrating. That is all. Migration is the most basic human right, and without it, there is no freedom.

With migration – the pinnacle of openness – the world’s cities are suddenly changed into competitive units. Evolutionary progress becomes the norm, which we now know means unleashing entrepreneurs, innovation, and growth.

To summarize, I believe South Korea is a shining example of rapid growth, and I believe your future is brighter than your past or even the amazing economy in the present. And this economy is a vital example to others in a radically more competitive world. The new competition is not just between products and services for export, but it is a competition of national economic policies. New kinds of capitalism are mutating and challenging older forms. Those countries that are the most open to trade, open to immigration, and open to new ideas will win. And I think we can see a glimpse of one of the most important new ideas of all: small is the new big.

Thank you.