[VIEWPOINT]Economic growth versus welfare

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[VIEWPOINT]Economic growth versus welfare

The presidential election race has recently been characterized as an ideological confrontation between conservatives and liberals after it became a two-man race between Lee Hoi-chang and Roh Moo-hyun.

Voters can see the differences in the candidates' ideologies by looking at their policies concerning the economics of welfare and income redistribution.

Both parties, Mr. Roh's Millennium Democrats and Mr. Lee's Grand Nationals, are promising the moon and the stars to get votes but in the end, the conservative candidate will look askance at welfare programs and the liberal will stress income redistribution. That is an old familiar argument: which to stress ?growth or equality?

The presidential campaign is also at the point where debate moderators will ask the candidates' opinions on issues such as progressive taxation and on the power of the central government.

But welfare policies are far too complicated to be put in black-and-white terms. The next government will probably turn to ideology rather than economic theory to form its policies on the growth-vs.-distribution question. In fact, distributive justice is itself a very subjective issue.

It is not necessary to be obsessed with growth first and distribution later or follow the paths of other developed nations in welfare policies. The central point is whether the majority of people here are ready to accept the current state of our distribution and welfare policies.

The worsening discord between classes will stir up and destabilize society, leading to hastily-thought-out welfare plans designed by politicians. It will also disturb our nation's finances and growth possibilities, so if the administration really wants to meet people's expectations, it will set a target level of income distribution in the longer term and apply policies to get to that goal gradually.

Citizens must be able to tell the difference between a reasonably designed policy and one that just plays on their fears. The Korean economy will no longer be able to meet the growth rates of the past; in addition, the distribution of income has worsened since the economic crisis. That will stir class conflict, and there is a danger that politicians will choose sides without dealing with the long-term issues.

Our national finances are also in danger of collapsing. The government has given a large amount of funds to local companies and has dim prospects for getting it back, and our pension funds have been mismanaged and are running up huge deficits.

The social contract will begin to unravel if welfare issues are put aside, and our national treasury will be threatened if redistribution of income is pushed vigorously.

The two major candidates, therefore, should remember that this is not the time to make the same old ideological arguments; voters are watching and will be disappointed. Whoever the next president is, he should try to come up with sound plans that are suitable for our economic and social conditions. The government's revenue sources should be conserved. That money, mostly our citizens' taxes, should be spent effectively and equitably.

Taxation policies should be focused on a stable revenue stream. It is desirable to make sure that everyone is paying the proper taxes, whatever they are, rather than rely on progressive taxes to redistribute income. It is also necessary to strengthen income redistribution through the tax system by targeted government expenditures that will improve the welfare of the lower-income classes.

Social welfare is not only a government issue; the private sector also has an important role in keeping the social contract with our citizens.

If the distribution of income is unbalanced, the gap between rich and poor will continue to widen. It is increasingly harder to wrestle the system back into any semblance of fairness.

Economists say there is no such thing as a free lunch; there is no gain without a sacrifice being made somewhere.

But it is possible to strike a balance; it is possible to pursue policies both to stimulate growth and to make our nation's welfare system more humane and income distribution more equitable.

* The writer is a professor of economics at Ewha Womans University.

by Chun Chu-song

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