Latin American lessons

Lee Jong-wha
The author is a professor of economics at Korea University.

People hoped that elected politicians would run the country properly. Yet those in power became another elite group and enjoyed privileges. Good positions at public agencies were occupied by political brokers rather than capable experts. People grew angry and participated in an election to take power from the unethical and corrupt leaders. They voted for a new figure and party, criticizing the corruption of the elite and advocating the people’s representation. But it didn’t take long for them to realize they were deceived again. The newly elected president and party held absolute power and began to be corrupted again.

People are often deceived and disappointed by politicians’ false promises and the corruption of the privileged. They resent politics and grow indifferent to voting. Those who are dissatisfied, angry, isolated or seeking interests participate in elections and cast votes for the politicians who could represent them. Political parties mostly present promises to divide the nation and secure support bases rather than seeking integration or long-term economic growth. Both the leftist and rightist parties competed to impose higher income and property taxes on the middle class and businessmen while offering pork-barreling policies to the low-income class that formed the majority. Economies declined because of policies excessively concentrated on redistribution.

Many Latin American countries went through the aforementioned cycle in the past half century and ended up with unstable politics and sluggish economies. Some scholars argue that Central and Latin American countries are plagued with poor politics, economic systems and populist policies. Francis Fukuyama said that the major cause of the development gap was Latin America’s system. In many Central and South American countries, as predatory systems to protect the elite class’ interests were established, economic inequalities grew. Populist governments emphasizing anti-corruption and redistribution of income to appeal to the public won majority votes. But MIT Prof. Daron Acemoglu argued that protection of the right to private property is slack in Latin America, and populist governments excessively executed redistribution policies, undermining investment and technology development of private companies.

Korea took a different path. Economic development was attained through the protection of private property, rule of law and market opening. Mexico, Brazil and Argentina, whose per-capita incomes were higher than Korea’s in the 1980s, are now much poorer. Private property was also guaranteed by the Constitution and excessively populist economic policies were never implemented. After democratization, political power has been checked. In Latin America, it is not rare to see a power-holder nationalize private companies, impeach Supreme Court justices and replace them as he pleases, while oppressing critical media and opposition figures.

Yet Korea’s elite is not free from corruption. In 2017, the president was impeached and removed, and chaebol families stood trial for corruption. A former chief justice and many judges and prosecutors are also facing trials. The Moon Jae-in administration advocated the eradication of long-standing evils and championed anti-corruption reforms and a fairer economy. Yet it is not free from power abuse and corruption. There have been a number of whistleblowers with allegations, and a former minister was indicted for blacklisting officials who served under the conservative administrations. Ministerial nominees were allegedly involved in real estate speculation, tax evasion and favors for employment for children. The public criticized real estate investment and job solicitation of high-level officials and lawmakers.
What happened in Latin America should not be repeated in Korea. Corruption of the elite, splitting the people to win elections and competition for pork barrel policies should not happen. Otherwise, most citizens and the future generation will suffer long-term damage from a government’s populist policies.

To prevent corruption of power, a healthy media, civil groups and expert groups are important. A fair human resources system should be established to find ethical and capable people who understand the policy of the president and ruling party at the same time. To execute the law fairly, reform of the prosecutors, police, the Fair Trade Commission and the Board of Audit and Inspection is needed.

Reforms to prevent excessive succession of wealth and create a fair society must continue. When economic disparities grow and social mobility shrinks, people will grow sour. A populist government will prevail and over-the-top redistribution policies will follow. An open economic environment of fair competition should be created by preventing the concentration of wealth and correcting evil practices of major conglomerates. Economic policies to protect the socially vulnerable and to create quality jobs are needed.

Most of all, the rule of law should not be broken. Once the independence of the judiciary to check on political power disappears, predatory policies violating the right to private property will come as in Latin America. It could discourage the middle class’ will for production and businessmen’s will for investment. That will make our economic development regress. Korea must maintain and develop healthy market capitalism.

Translation by the Korea JoongAng Daily staff.

JoongAng Ilbo, April 4, Page 31