[VIEWPOINT]Let the rich spend cash here

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[VIEWPOINT]Let the rich spend cash here

Our economy, which has been barely sustained by exports, is staggering because of surging oil prices. Because oil prices have constantly increased over the past three years, they are not likely to fall in the short term, unlike during the Gulf War of 1991. But the Blue House takes the position that it cannot loosen up on reform because the economy is in trouble. It intends to raise long-term growth through reform rather than hasty problem-solving. This is a good principle, but I can’t help feeling that something’s lacking when I look at the contents of major reforms being proposed.
First, most arguments that emphasize reform, distribution, and equity have a vision limited to domestic problems and lack international perspectives. A good example is the transfer of the capital city. If we only focus on the problems of an overcrowded metropolitan area and the income gap between Seoul and the provinces, we should move the capital city elsewhere. But from a broader perspective, building a large industrial belt that connects Seoul to Incheon and Gyeonggi province could be more effective to promote our global competitiveness. Despite the importance of balanced development, we should work to achieve upward standardization through encouraging provinces to compete to attract companies and should not impede the development of a specific region. I doubt if focusing on balanced development alone will promote long-term economic growth.
The same is true with the troop deployment to Iraq. Considering only national pride and international criticism against the war, we should repeal the decision to dispatch troops. Nevertheless, we should realistically support troop deployment because of the potential for conflict between Korea and the United States if we decide not to deploy.
The likelihood alone of the reduction of U. S. forces stationed in Korea can have a great impact on our economy. Who will bear the burden of increased costs for national defense arising from the reduction and increased foreign borrowing resulting from a downgraded sovereign credit rating? It is not just naive but also irresponsible to assert that if George W. Bush is not reelected, the problems will be solved. If the Democratic Party wins the election, would it thank us for not supporting Mr. Bush? While we are engaged in an ideological controversy over whether to follow national pride or practical benefits, it is becoming harder to be appreciated for sending troops even if we do so.
Second, since arguments for reform only centered on cleaning up the past, they failed to show a blueprint for the future. Because people with money, power, and education sought their own interests in the past, a bout of revenge is inevitable now. How can the people not go to extremes after seeing the slush fund scandals of former President Chun Doo Hwan’s family and conglomerates’ expedient inheritance practices? But there is a big difference between destroying the old and creating the new. We are following a direction of reform in which we stick only with clearing out the past and keep silent about the future we have to build.
If we break up large companies in our situation where the 30 largest companies out of 600 account for more than 80 percent of the investment, what is the method of revitalizing investment? If universities are standardized to reduce private tutoring costs, how can we educate competent people equipped with international competitiveness? If we introduce a wealth tax, which sees the rich as evildoers, will there be incentive for businessmen like Bill Gates? If we want to go beyond taking revenge on the rich and set a policy goal of fostering the respectable rich, increasing the inheritance tax and property tax would be more desirable than introducing a wealth tax.
Some may argue that if we are not impatient and just wait a little longer, the results of reform will become tangible. But I worry bcause my common sense about economics gives no examples of successful policies that have advocated distribution and reform without suggesting a blueprint for the future. A good case of failure is the fall of socialist countries; this is why Brazil’s Lula administration adopted a conservative economic policy.
As business conditions worsen, demands for distribution and equity will become stronger. To save the economy, the government should encourage businesses to invest in whatever region they want, establish non-standardized prestigious high schools to keep the money sent overseas for our children’s education at home, and build golf courses in rice paddies or dry fields to attract Korean tourists to our provinces instead of going to other East Asian countries. If people with money, power, and education make these arguments in our society at present, they are apt to be jeered. If the ruling party, untainted by the past and supported by the people, goes beyond clearing out the past and carries out future-oriented reform, the economy can take off.

* The writer is a professor of economics at Seoul National University and director of Korea Fixed Income Research Institute. Translation by the JoongAng Daily staff.


by Lee Chang-yong
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