Balance amid chaebol reform

President Moon Jae-in has formed his economic policy team. Kim Dong-yeon, president of Ajou University, chosen as deputy prime minister for economy and finance minister, is an iconic figure in the bureaucratic community who ascended to the vice ministerial post in the finance ministry from a humble background of poverty and night school. Chang Ha-sung, liberal-minded professor of economics at Korea University who had been championing overhaul in family-run chaebol predominance to ease inequalities in the economy was named his chief of staff for policy. But what matters more than their epic rise is their policy-making.

Through his choice of an economic team, Moon has specified the direction for generating growth through income increase for his economic policy. Chang will be spearheading reforms with another chaebol critic, Kim Sang-jo, named as the chief of antitrust agency Fair Trade Commission.

Moon said Chang is the best person to change economic and social policy toward people and small and midsize enterprises from the current system that revolves around chaebol and large companies to ensure more equal and balanced growth. He’s stayed true to his campaign pledge of chaebol reform. Chang in a press conference said the corporate habitat that breeds jobs must run on a system where everyone can gain. He said the goal of reform is to invent a new structure. The first set of appointments suggests overhauls in the prosecutorial and corporate systems are the top priority of the new administration.

Kim Kwang-doo, a professor at Sogang University, tapped to the second highest position at the new National Economic Advisory Council after the president, is a moderate conservative scholar who claims enhanced social security is possible only through tax hikes. The new economic team could study revisions to the tax code to raise sustainable funds for stronger social welfare.

The appointments raise hopes that some of the structural weaknesses of the Korean economy could finally be addressed. But experimental policies could be harmful. Since many of the figures are recruited from university with theoretic beliefs against chaebol reform, companies could be chased with demands for ownership restructure and higher taxes. They must be pursued regardless of the immediate harm if they end up reviving the economy. But textbook theories also point out that regulations and tax hikes can damp corporate investment and economic activity.

The new economic team must not direct real policies with blind faith in their theories. The economy is too fragile to survive experiments and mistakes. The national competitiveness could weaken if public policies are led in the opposition direction of other trading economies. The new economic team should balance reason and pragmatism in their reform drive. Its policy must aim to fix the unfair and outdated practices and rules while adding vitality to the economy.

JoongAng Ilbo, May 22, Page 34