[Viewpoint] How Can We Learn from Repeating History?

We often hear the phrase "Learn from history." If history repeats itself, it is only natural to draw lessons from it. However, while it is easy to say that we should learn lessons, it is difficult to know specifically "how to learn" and "how to apply" those lessons.

When we look at historical events to learn lessons, we generally focus only on specific phenomena that occurred, concentrating on what happened and what it means. For example, when talking about the "Tulip Bubble," most people try to learn lessons from the rapid rise and fall of tulip prices and the collective mania for speculation that was displayed.

However, directly comparing the formation and bursting of the Tulip Bubble to the present is very difficult because the historical context is different and our society's understanding of finance differs significantly. Nevertheless, many people obsessively focus on the event itself, feeling compelled to find lessons applicable to the present.

The rapid rise and crash of tulip prices, which had no value other than as luxury goods, does not seem to offer many cases that can be perfectly applied to the current situation. Even if one tries to apply it to coin prices that moved similarly to tulip prices at the time, it leads to the difficult question of "Do coins have value?" which is hard to answer at this moment.

Because of this obsession, we often miss the fact that meaningful lessons to be learned from historical cases can be found more in the events before or after the case itself rather than in the case alone.

To learn specific and currently applicable lessons, it is important to recognize recurring patterns. The first step to recognizing recurring patterns is to face historical events directly. Then, one must understand the social, historical, and political background and context of those events.

Returning to the example of the Tulip Bubble, understanding the economic and consumptive circumstances and processes that led to the Tulip Bubble, the impact of the Tulip Bubble on the Dutch national economy and capital markets, and the contemporary perspectives on how the subsequent international conflict (the Anglo-Dutch Wars) was influenced is more important to us now than the collective mania shown during the Tulip Bubble itself.

Applying this to the present, considering the context that the tulip market during the Tulip Bubble absorbed funds that should have been allocated for war or national policies in the capital market, causing the Netherlands to fail in raising capital needed for timely naval construction and thus losing the Anglo-Dutch Wars, we can analogize that the coin market, by absorbing capital needed to stimulate the economy through quantitative easing, makes it difficult to raise capital necessary for real economic growth, and as a result, when interest rates need to be raised again, the economy may fail to recover. This is applicable to the current situation.

Simply put, to derive implications from past events that help us understand the present situation, we must understand the before and after of the event in social, political, and economic contexts rather than applying a forced one-to-one comparison focused only on the phenomena that occurred.

Based on this understanding, the core of learning from the past is to intuitively apply and utilize the insights gained from the case to the current context, which differs from the past. Especially in understanding financial and economic history and deriving meaningful implications for the present, understanding the macroeconomy and economic mechanisms of the time is very important.

Hong Ki-hoon, Professor, Department of Business Administration, Hongik University

This content was produced with the assistance of AI translation services.