[OUTLOOK]Rethinking market principles

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[OUTLOOK]Rethinking market principles

The principles of a market economy have become the mantra of Korean conservatives since the 1997-98 financial crisis. After foreign and domestic analyses showed the Korean economy had stumbled because its structure hadn’t lived up to the global standards, Korean conservatives began to push for a market economy.
The conglomerates that had begun to become internationally competitive and wanted to shed government interference encouraged this move. Even when the leftists, who stressed distribution policies, started to loom large as the mainstream about the time of the financial crisis, the conservatives stuck adamantly to market principles as an alternative. But are the Korean conservatives truly protecting the market economy by their actions?
The Korean development model is that of a capitalist developmental state. As an alternative to the free market economy of the United States, the social democratic economy of Europe and the planned economy of the former Soviet Union, Korea chose to apply the principles of capitalism to create a middle class and a market, and to create national wealth through exports.
Businesses achieved the productivity and export goals set by the government, and in return received protection from the labor unions, foreign competition and foreign capital. At the same time, the government tried through various regulations and interference to prevent the negative side effect of a free market economy, namely, the concentration of wealth.
While holding frugality and thrift sacred, society was encouraged to shun imports, especially imported automobiles. And the government regulated excessive accumulation or display of wealth, that was formed under government support and protection, through measures such as putting a ceiling on the building cost of apartments.
As a result, the Korean economy became one of the 12 biggest economies in the world. Although it did not reach the degree of efficiency that pure capitalism could achieve, nor the equity of a social democracy, the Korean model achieved a success that surprised the entire world. However, the financial crisis in 1997 made many believe that the capitalist developmental state wasn’t capable of either growth or distribution. As a result, supporters of the market economy and those who stressed social equality began to dismantle this model.
The conservatives chose to focus on the market. However, if the conservatives must choose, they should have chosen the “developmental state” part rather than the “capitalist” part of the past model. In other words, they should have chosen statism. Statism means that individual property and distribution of wealth among different classes must bow before the national interest. Therefore, when pursuing statism, the interests of each class and individual are sometimes overlooked.
In the past, the state had been guilty many times of violating the interests of the individuals and the classes. Democratization refers to the process of setting up procedures to check such abuses of power by the state authority. However, this does not mean that the state should be weaned of its power or dismantled.
Many say that such thinking is anachronistic. However, the existence and role of the state has become more and more important with the waves of globalization and the developments in information technology that quickly bring down the boundaries between countries.
Neither the market nor the labor unions can protect the interest of the Korean people from the onward rush of capital, technology and human resources coming from the rest of the world. When the capital and the labor unions clash, the only mediator available is the state.
In recent news reports, some young legislators were quoted as saying they realized the vital importance of the market economy after they had visited China. China has chosen the capitalist developmental state model over pure capitalism. Without strong leadership and development policy for its industries, China’s economic progress would have been impossible.
Of course, as we can see in the case of Korea’s past and today’s China, one of the main elements of a capitalist developmental state is the long-term political stability provided by an authoritarian regime. Therefore, in a situation where globalization and democracy are achieved, we cannot re-enact the construction of a capitalist developmental state that requires authoritarianism and dictatorship. Nevertheless, it is the capitalist developmental state model that we must pursue ― at least until our average income per capita reaches $20,000. What are we to do then?
The answer is clear. Only the voluntary cooperation of the government, labor and businesses can sustain the capitalist developmental state system. The problem is that there is no such consensus even among the conservatives. Rather, many conservatives in Korea today think that we should use the market to dismantle and “overcome” our developmental state model. But they must remember this simple truth: The efficiency of the market and the guarantee of private property cannot exist without the progress of the state and the accumulation of national wealth.

*The writer is a professor of international relations at Yonsei University. Translation by the JoongAng Daily staff.

by Ham Jae-bong
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