Note: This article reinterprets Kim Yong-beom's Facebook post in a Q&A format with a fictional financial expert for easier understanding.
Kim Yong-beom, the Blue House Policy Director, poses a critical question in his recent Facebook post: "Is the KOSPI reaching 7,500, and potentially 10,000, merely a sign of stock market overheating, or is it an indication of a structural shift in Korea's industrial landscape in the AI era?" The focus is on the structural excess profits that could arise in the semiconductor and AI infrastructure sectors. If companies like Samsung Electronics and SK Hynix generate profits that exceed historical economic cycles due to demand for AI memory, high-bandwidth memory, and data center infrastructure, the government stands to gain substantial corporate and income tax revenues, along with trade surplus benefits. This is what he refers to as 'excess tax revenue.'
The pressing issue is how to utilize this money. Should it be treated as a one-time economic boom and squandered, or should it be institutionalized as part of a new social contract for the AI era? Kim's concerns are not merely optimistic predictions or stock market forecasts. He suggests that we should discuss how to share the benefits of entering a technology-monopolistic industrial state in the AI era through entrepreneurship, culture, education, welfare, regional development, and retirement security.
Q&A with Financial Expert ABC and Kim Yong-beom
Financial Expert ABCDirector, many have said your writing is difficult to understand. What is the simplest way to convey your message?
Kim Yong-beom
In simple terms, we should not view the current phenomena in the Korean economy solely through the lens of past economic cycles. While it is easy to say that exports are strong, semiconductors are performing well, and the KOSPI is rising, the more important question is, "Is Korea's industrial structure itself changing in the AI era?" If so, we need to reassess taxes, welfare, entrepreneurship, education, and national strategy.
Financial Expert ABC
So, you are saying that the numbers 7,500 or 10,000 for the KOSPI are not the core issue?
Kim Yong-beom
Correct. The index is a result. What we need to focus on is corporate profits. Stock prices ultimately depend on profits. If semiconductor companies' profits rise to unprecedented levels, the KOSPI will also change accordingly. The problem is that we are still viewing the current situation through the lens of the past KOSPI levels of 2,000 or 3,000.
Financial Expert ABC
However, there are counterarguments in the market suggesting, "Isn't this just another semiconductor cycle?"
Kim Yong-beom
That counterargument is valid. The Korean semiconductor industry has always gone through cycles of boom and bust. However, the current AI demand is different from past smartphone or PC cycles. AI is not just software; it encompasses a vast industrial infrastructure that includes data centers, power grids, cooling systems, memory, batteries, robotics, and industrial automation. Particularly, products like high-bandwidth memory create ongoing upgrade demands rather than being one-time sales. This distinguishes it from previous memory cycles.
Financial Expert ABC
The expression "AI is not software but industrial infrastructure" seems significant.
Kim Yong-beom
Indeed. Many people view AI merely as chatbots or apps. However, from a national economic perspective, AI is akin to infrastructure like electricity, railroads, and communication networks. As AI integrates into real industries, what is needed goes beyond models. Countries must possess manufacturing capabilities for memory semiconductors, power equipment, batteries, precision machinery, sensors, and robotics. Few nations have such physical supply chains.
Financial Expert ABC
What makes Korea special in this regard?
Kim Yong-beom
Korea is a rare country that possesses capabilities in memory semiconductors, batteries, displays, shipbuilding, power equipment, precision manufacturing, and industrial automation. The U.S. excels in design and platforms but has limited manufacturing capabilities. China has significant manufacturing power but faces geopolitical trust issues. Japan is strong in materials and equipment, while Taiwan excels in foundries. Korea uniquely combines various manufacturing capabilities necessary for AI infrastructure. This is not just about industrial competitiveness but also geopolitical leverage.
Financial Expert ABC
What exactly is 'excess profit'?
Kim Yong-beom
Typically, when competition intensifies, profit margins decrease. However, in industries with high technological barriers, limited suppliers, and structurally increasing demand, profits can persist beyond the average. This is what we refer to as excess profit. If Korean companies can position themselves in the AI memory and infrastructure sectors, the Korean economy will enter a different phase.
Financial Expert ABC
How does this excess profit connect to the state?
Kim Yong-beom
When companies generate substantial profits, corporate tax revenues increase. Income taxes from high-earning engineers and related industry workers also rise. An increase in exports leads to a larger trade surplus, affecting the value of the won and national purchasing power. The growth in corporate profits does not just end there; it connects to national revenue, citizen income, asset markets, exchange rates, and inflation. Therefore, excess profits can lead to excess tax revenues.
Financial Expert ABC
But didn't we have excess tax revenues during past semiconductor booms?
Kim Yong-beom
Yes, there were excess tax revenues in 2021 and 2022. However, at that time, we did not recognize it as a structural change and did not establish principles for their use in advance. Excess tax revenues occurred during booms, followed by revenue shortages during downturns. If this cycle is larger and longer, we cannot respond in the same way.
Financial Expert ABC
What should the government do then?
Kim Yong-beom
First, we should not only look at existing GDP statistics but also consider exports, trade balances, corporate operating profits, nominal income, and terms of trade together. Second, we need to establish principles in advance for how to use excess tax revenues when they arise. Third, we must redesign systems for entrepreneurship, education, culture, immigration, and welfare that are necessary for the AI era.
Financial Expert ABC
Why shouldn't we focus solely on GDP?
Kim Yong-beom
Industries like semiconductors improve in quality at an extremely rapid pace. When performance, integration, and power efficiency all increase simultaneously, it becomes difficult to distinguish between price increases and actual production growth. Corporate profits may soar, while real GDP appears relatively ordinary. This does not mean the statistics are incorrect; it suggests that they may lag in reflecting reality.
Financial Expert ABC
The most contentious aspect is the 'national dividend.' Is this akin to basic income?
Kim Yong-beom
It doesn't have to be defined that way. The key is not the name but the principle. The excess profits of the AI infrastructure era are not solely the result of specific companies' efforts. They arise from the industrial foundation built over decades through the education, taxes, industrial policies, and social patience of the people. Therefore, we should discuss ways to structurally return a portion of those benefits to the citizens.
Financial Expert ABC
This could be misunderstood as simply giving away money.
Kim Yong-beom
That’s why more nuanced discussions are necessary. It could be used as assets for youth entrepreneurship, as accounts for AI transition education, or for basic income in rural areas, support for artists, enhancement of pensions, or investments in regional entrepreneurial infrastructure. The important thing is that when excess tax revenues arise, we should not use them politically on a case-by-case basis but rather under national principles and social consensus.
Financial Expert ABC
Ultimately, is this a discussion about distribution or growth?
Kim Yong-beom
Both. In the AI era, growth and distribution cannot be viewed separately. Excess profits tend to concentrate. Shareholders, key engineers, and asset holders in metropolitan areas may benefit significantly, while the middle class and rural areas could be left behind. While the nation as a whole may become wealthier, internal disparities could worsen, leading to a K-shaped structure. If left unaddressed, sustaining growth itself will become difficult.
Financial Expert ABC
Why are entrepreneurship and culture important?
Kim Yong-beom
As AI replaces repetitive tasks, simply increasing public jobs will have limitations. The areas that remain for humans involve judgment, creativity, relationships, senses, expression, and meaning. Therefore, entrepreneurship and culture are vital. AI tools can provide individuals and small teams with productivity levels comparable to large corporations. The government must lower the risks of entrepreneurial failure and create an environment where entrepreneurship can thrive in local areas. Culture is not just leisure; it is a strategic industry for preserving humanity in the AI era.
Financial Expert ABC
You also mentioned immigration issues.
Kim Yong-beom
Low birth rates and an aging population are Korea's most significant structural constraints. We need to attract high-skilled talent and ensure a stable influx of essential labor. This is not merely about labor supply; it is a matter of redesigning the national structure. If Korea becomes a stronghold for AI infrastructure, it will also create opportunities to attract global talent.
Financial Expert ABC
Ultimately, what kind of country should Korea become?
Kim Yong-beom
Korea should aim to be the first country to return excess profits from the AI era to human lives, beyond just being a supplier of AI infrastructure. While technology is created by companies, civilization is built by society. If Korea designs this opportunity well, it can present a national model for the AI era, transcending mere export power.
Conclusion and Insights from the Q&A
Kim Yong-beom's writing may seem somewhat unfamiliar at first, as it combines terms like KOSPI 7,500, KOSPI 10,000, semiconductor profits of 700 trillion won, national dividends, and the redesign of the state in the AI era. However, when unpacked sentence by sentence, the logic is surprisingly straightforward.First, in the AI era, memory semiconductors, data centers, power grids, batteries, robotics, and precision manufacturing will be integrated into a single industrial infrastructure. Second, Korea is a rare country capable of supplying this infrastructure. Third, if this position is structurally strengthened, Korean companies can achieve excess profits on a scale different from the past. Fourth, excess profits can lead to increased corporate taxes, income taxes, and trade surpluses, resulting in excess tax revenues for the state. Fifth, we must establish principles now for how to utilize that money.
The core of this discussion is not about "giving away money" but rather about "how to manage new wealth within a national system." During the industrialization era, the state built roads, ports, industrial complexes, and schools. In the information age, it established high-speed internet and digital infrastructure.
In the AI era, safety nets for entrepreneurship, transition education, cultural ecosystems, regional regeneration, retirement security, and skilled talent immigration policies can become the new national infrastructure.
The two main dangers to be wary of are excessive optimism and excessive cynicism. We should not assume that AI demand will last forever, that Korean companies will always win, or that excess tax revenues will automatically accumulate. Technology evolves rapidly, and competitors always emerge. On the other hand, dismissing structural changes with statements like, "Semiconductors always go through cycles," or "National dividends are populism" is also risky.
National strategy is born between optimism and cynicism. We should recognize possibilities while designing institutions with a cool head. When excess tax revenues arise, some should be reserved for managing national debt and future funds, while some should be used to reduce the costs of transitioning to the AI era.
We must create opportunities for youth entrepreneurship and re-challenges, provide retraining and career transition pathways for the middle-aged, ensure stable living conditions for the elderly, and establish new industrial and cultural hubs in rural areas.
The real question posed by Kim Yong-beom's writing is not, "Can Korea make a lot of money again?" but rather, "When we make a lot of money this time, can we use it wisely?"
South Korea has seized opportunities during the industrialization and information eras. Now, it stands at the threshold of the AI infrastructure era. Crossing this threshold could lead Korea back to a typical cyclical export economy or elevate it to a new level as a technologically advanced civilization.
Ultimately, while excess profits stem from corporate capabilities, how excess tax revenues are utilized reflects the nation's character. If the process ends with collecting taxes from corporate profits, it remains mere finance. However, if that money is reinvested in people, regions, and the future, it becomes civilization. The path Korea must choose now lies precisely at this intersection.
* This article has been translated by AI.
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