[OUTLOOK]Good but naive intentionsPrices of real estate near candidate sites are skyrocketing as speculators flock to the area designated to be the new capital city. Only a few months ago, trillions of won (billions of dollars) flooded into the market for residential-commercial complexes.
That alone is proof enough that there is money around. Yet the stock market is crawling near the bottom and small and mid-sized businesses are suffering from a shortage of funds. Economists might not be calling this a recession, but the people feel in their hearts and pockets that the economy is in serious condition.
A competent government would try to lure surplus funds into domestic industries, but an incompetent government would leave it to investors. An incompetent government would blame it all on a “failure of the market.”
The current Korean economy is clearly not in a crisis, but people are feeling a sense of crisis from the way the government repeatedly warned people not to make a fuss over crisis theory.
We’re holding on in exports of semiconductors, automobiles and digital and electric appliances. Our $10,000-income per capita is being sustained by the efforts of a few conglomerates. On the other hand, the number of low-income and impoverished households is rising. Domestic demand, household incomes and job security are all shrinking.
What use is it to “warn” the public not to worry? The economy might not be in crisis but there is certainly a crisis in the way our government looks at the economy.
It is commonly thought that conservative administrations rake in money while progressive administrations spend it. If the governments in Europe that brought economic prosperity were traditionally conservative, those who shared the fruits of this prosperity with the people were the leftist ones.
This was a fine distribution of roles, but things have changed since the 1980s. In many countries, as wealth distribution policies started to weaken national finances and impede economic growth, many leftist governments started to turn to leaner fiscal policies as well.
Bitter complaints poured out from laborers and low-income earners, but even the leftist governments were left helpless in face of a growth pattern that could not create enough jobs. Only by maintaining economic growth can a government acquire the ability to redistribute wealth. The problem is further complicated by fiscal deficits.
The advanced countries in Europe are facing a “tri-lemma,” a three-way crossroads where they must give up at least one of their three goals: health in national finances, economic growth and social distribution of wealth. The United States and Britain have long turned towards maintaining their finances and growth. Germany is in a slump, still suffering from the enormous economic costs of unification. Sweden, led by a leftist government, is holding on to the axis of finance-distribution but is finding it increasingly difficult to implement large distribution policies as it did in the past. That is because it hasn’t seen any economic growth in the past few years to back up such distribution policies. The leftist parties in Spain also turned away from a distribution-demanding struggle to a growth-focused strategy after experiencing the harsh reality of a 20-percent unemployment rate in the mid-1980s. Thanks to this change, Spain is fast becoming the most popular place to invest in and it has been able to maintain its average income of $15,000 per capita.
The leftist government in Korea, too, is trapped in a trilemma. There is nobody to oppose the basic economic focus on distribution, and many people are applauding the government’s efforts in breaking down the social barriers of economic discrimination and authoritative exclusivity that the conservative forces have built up.
This liberal administration has made great progress in politics and in the social arena. But the economy is a different matter. It cannot be repaired by stubbornness and ideology. The circular formula of distribution speeding growth and growth helping national finances ended with the 1970s. It is a crisis in itself to attempt to revive the present-day economy with the economic logic of the 1970s. It is a crisis in itself to call the ongoing talk about a crisis a conspiracy. It is a crisis to think that domestic demand will revive if the government increases spending and prints more money as it did in the 1970s. Distribution policies such as welfare policies that focus on raising the public’s purchasing power might help but high-cost policies that center more on dispersing money rather than distributing wealth are a problem.
What would a leftist government in Europe do if the country it was elected to run had a fiscal deficit of 165 trillion won ($137.5 billion), or about 23 percent of gross domestic product? Moreover, this country is plagued by an aging population, a high unemployment rate and a sharply increasing number of credit delinquents. If it also had a major issue of irregular and temporary employment on top of that, a prudent government would surely think twice about pursuing high-cost projects like transferring the capital city, supporting agricultural areas and building new cities.
The opposition to the transfer of the capital city is not a movement to throw the administration out. It is heartfelt advice given in the hope that the progressive government’s ability to pursue other reforms would be heightened through economic success. National projects that require heavy financial costs usually tend to solidify the political basis of the government rather than boost the nation’s global competitiveness. The progressive government and the entire country with it may find that the road to an economic slump is paved with good but naive intentions.
* The writer is a professor of sociology at Seoul National University. Translation by the JoongAng Daily staff.
by Song Ho-keun