[GLOBAL EYE]‘Sick man’ of Northeast Asia?

Why has the German economy, which was envied by the whole world for its “miracle of the Rhine” and “power of the German mark,” fallen to become “the sick man of Europe”? Professor Min Kyung-kuk of Kangwon University, who received a doctorate in economics from Freiburg University in Germany, presented his research on the German economy under the title “The German Economy is Falling,” at the Korean Hayek Society held last spring. His analysis that the decline of the German economy was not due to the astronomical cost of unification but rather to internal problems, is one that we should pay attention to.
Germany is widely recognized as a workers’ heaven. The inflexibility of the labor market and high labor costs are the worst in the world. Everybody receives the same wages, decided by the labor union, regardless of their skills, so people do not have much incentive to do better.
Even worse is the collapse of education. In the beginning of the 20th century, 45 percent of Nobel Prize winners were German and 80 percent of natural science theses were written in German. Today, internationally known German scientists, philosophers and economists are scarce. This is due to the downward standardization of all universities. Teachers and professors are civil servants who are guaranteed to work until retirement age, and there is no differentiation or competition among them.
The traditional predominance of Germany in the automobile, machinery, electricity and chemical industries has disappeared, and it is now 30 years behind America in new industries such as communications, information technology and life sciences. Entrepreneurs do not take risks and are conservative in decision-making, because workers participate in management and the profit of enterprises is socialized.
Forty percent of earnings are taken as taxes and spent on a high level of welfare for the aged. It is the retribution to the society that made a sharp turn to the left in all fields, including politics, the economy, society, education and culture. They say it is the natural result of egalitarianism and the experiment in social justice that was brought about after the rise of the left-wing Frankfurt School of intellectuals called “the ‘68 Cultural Revolution” in 1968.
The German economy is holding out with the accumulated science, technology and industrial strength of the past. Left-wing Prime Minister Gerhard Schroeder even said, “A society without inequality will result in the disappearance of individuals. We need to give thought to equality in opportunity, not in results,” and turned to consider labor reform and education reform.
The labor union of Siemens AG even agreed to work 40 hours a week without additional pay after the company threatened to move half of its jobs to Hungary, if the workers insisted on working 35 hours a week.
The Korean left wing gets its ideology from Europe, and is trying to realize in particular the German social market system as its model for reform in Korea. The cynical remark of a British researcher on Korean affairs, that “Korea is in the era of the left-wing belatedly, not in 1968 but in the 21st century,” is right on point.
The new world economic order of 2050, predicted by Goldman Sachs, is summarized as a battle between “the Big Six” (the United States, Japan, the Unted Kingdom, Germany, France and Italy) and the “BRICs” (Brazil, Russia, India and China). Korea, which is supposed to be the center of Northeast Asia, is missing from the list. The long-term prediction of the Bank of Korea last year, that if we do not solve our problems such as activating investment in production facilities and making the labor market more flexible, our country will fall 10 years from now to the same level as a South American country with a national income per capita of $12,331, just adds more uneasiness.
A market economy is, of course, not a goal in itself. But there is no better solution than an advanced market economy system for enlarging the social pie by accelerating investments and increasing production and consumption.
Regulations and supervision of business should be based on global standards, and anti-entrepreneurial reforms that violate the fundamental rights of shareholders should be discarded. Germany shows our future like a mirror. What does it mean that China is more market-friendly than Korea? It is my hope that the leaders of reform realize that the belated experiment of the leftwing is far from making Korea the center of Northeast Asia, but has a greater risk of making our country “the sick man of Northeast Asia.”

*The writer is the editor in chief of the monthly publication NEXT.

by Byun Sang-keun