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[OUTLOOK]Job One: Make Korea wealthier

Feb 23,2003
The most immediate and pressing economic problem that President-elect Roh Moo-hyun will face after his inauguration is the downturn in the Korean economy. The circumstances at present are extremely gloomy. The possibility of a lower credit rating, the increase in international oil prices and the plunging of the stock market are indications that the Korean economy may face hardship ahead. The real interest rate in Korea is close to zero, and while banks are overflowing with money, corporate investment remains stalled because Korean corporations, psychologically constrained, have lost the desire to increase production.
In such an atmosphere, stimulating the economy through monetary and fiscal measures is unlikely to be effective. Consequently, to revitalize the economy, an active corporate policy aimed at encouraging investment and production should be pursued. Making companies more active through improving the business atmosphere and reducing business risk will not only bear short-term results, but will also be effective in creating jobs and raising the growth potential. The implementation of such a policy is therefore all the more pressing.
In the particular case of South Korea, the factor that most constrains companies is the unstable corporate-labor relationship. The government’s proper role in business-labor relations is not to correct the “imbalance of power” but to guard the public interest by sternly and fairly implementing the law. Stabilizing labor relations within the framework of law will lead to a nation in which it is good to do business.
The incoming administration promised to balance growth and the distribution of wealth, fairness and welfare. The question is whether the administration will attain these goals. That there are inevitable trade-offs between growth and welfare, efficiency and fair distribution is common knowledge introduced in Economics 101. In other words, welfare and fair distribution of wealth are a sort of goods that a national economy purchases with money. A clean environment, a good education system, a social infrastructure and competent government institutions all need to be paid for.
Advanced countries tend to have quality welfare systems, environmental regulations, education systems and social infrastructure. For Korea to become a nation that values welfare in the true sense of the word, we need to acquire the wealth necessary for purchasing all the items listed above. South Korea remains a developing country, and there remains poverty around us. These are the reasons why the Korean economy needs to grow further. There has never been a state with a good welfare system and a per capita income of less than $10,000. South Korea’s was $8,918 in 2001.
How much the Korean people would have to pay for welfare and equality is entirely up to the ability of the government. For example, we need to think about what advantages we derived from the separation of medical and pharmaceutical services and how much we had to pay for it. The incoming administration’s efforts for growth and welfare should not repeat what happened with that measure.
The incoming administration has decided to call itself a “participatory government” and says it will increase grassroots participation. But it needs to distinguish respecting the public opinion from becoming embroiled in public opinion. While it is important to accommodate the will of the people, it is up to the professionals and scientists to actually attain that goal, just as a medical doctor respects the wishes of a patient’s family but provides medical services in accordance with his professional judgment.
All economic problems spring from the fact that, inevitably, we can’t do everything we want to do and we can’t have everything we want to have. The basic principle behind managing a nation therefore should be discipline. If radical arguments, unprofessional policies and interest groups’ demands are reflected in government policy in the name of promoting a participatory government, the Korean economy will walk the path of destruction.
The information revolution and the integration of national and global economies, processes that show signs of continuing in the 21st century, have affected Korea and the world. These trends in the future will defy existing collectivist thoughts, sense of equality, school and regional ties and closed-minded ethnocentrism. Every society from now on will inevitably become open and rational, where freedom and creativity are guaranteed, based on the principles of liberalization and competition. In the competition of the 21st century, our choice is either to change or to fall behind. I hope the Roh administration correctly fathoms the trend and writes its name into history as a successful government that raised the level of the Korean economy with an open mind and a balanced view.


by Kim Jong-seok

* The writer is a professor of economics at Hongik University.


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