[OUTLOOK]It’s the poor who suffer most

As the economic recession deepens further than it did during the International Monetary Fund’s stewardship, poor families are disintegrating faster and faster. Because they cannot pay for a basic livelihood, the divorce rate rises sharply and the number of children deserted at child-care centers increases.
The government recently released a report that said the number of students who went without a meal and households that could not pay their utility bills increased more than expected. The report definitely shows how seriously deluded our government has been about the economy, as it crowed over a few macroeconomic indicators, including higher exports and high foreign exchange holdings.
Actual power-holders in the governing party, including those from the “386 generation,” and some civic groups have criticized those who worry about the economy as ill-intentioned conservative forces that are trying to subvert the government’s reform policies. But they do not seem to understand that when the economy slows, poor people suffer first.
Our economy should advance not so that the rich people in Gangnam, southern Seoul, can live better but so that our country’s poor people, who can hardly make a basic living, will be able to lead a dignified, more prosperous life as a human being.
When I visited less developed countries, I found that those who underwent hardships were not the rich but the poor. When I visited a rich neighborhood in Makati in the Philippines, I saw the people in the region protected around the clock by guards, enjoying no less a luxurious life than those residing in the top neighborhoods of Washington, D.C.
It was a stark contrast to the slums in Manila, the Philippines’ capital city. Because labor costs were cheap, rich families in the Philippines or Indonesia could hire kitchen maids, gardeners, nannies and chauffeurs, and live a much more pampered lifestyle than their counterparts in advanced Western countries, including the United States and Britain.
Economic development can be the best way for a government to enhance the human rights of its nation’s people. If so, what is the difference between developed and less developed countries? After comparing the economies of developed and less developed countries over the last decade, McKinsey & Company, an international consulting firm, found that the economy’s productivity, not the people’s intelligence quotient, played a critical role in making the difference.
McKinsey concluded that advanced countries’ high productivity was possible only in a true market economy where there was no monopoly or unjust intervention by the government and where fair competition dominated.
On the other hand, many experts point out that abundant natural resources can be obstacles to economic development. Saudi Arabia boasts the largest per capita natural resources with the largest oil reserves in the world, but its economy has failed to reach even the level of a semi-developed country due to its high unemployment rate and unstable security situation, as can be seen from the fact that most of the terrorists involved in the Sept. 11, 2001, attacks in the United States were Saudi Arabian men.
Likewise, other countries rich in natural resources, including Brazil, Argentina and Indonesia, have been unable to escape poverty because of widespread corruption and ethnic and religious conflicts. Only some resource-rich countries such as Canada and New Zealand have joined the ranks of advanced countries thanks to their high productivity and the maintenance of a genuine market economy.
But a true market economy is a system that is easy to talk about but much harder to achieve. Once it reaches the level of an advanced country, the market economy can make progress relatively smoothly.
Because the middle class is already solidly established here, populism won’t work, however eloquently political agitators might advocate it. But during the transition from a less developed or semi-developed country to a developed country, it is highly probable that the market economy system can be easily undermined.
There are hidden dangers everywhere like those with vested interests who are vaguely anxious about the future as the economy rapidly develops; political agitators who attempt to use the wave of populism to seize power; labor unions that turn into political forces; and opportunistic civic groups.
To overcome these obstacles and join the ranks of advanced countries, a country needs a good leader. Argentina and Philippines once were poised to become advanced countries in Latin America and Asia, respectively, but they fell into poverty because they had the wrong leaders.
In contrast, Singapore became a developed country within 30 years, since it faced a crisis after the withdrawal of British military bases, which had contributed to 20 percent of its gross domestic product. The reason? It had a good leader.
To save the poorest classes from further declining by developing the market economy and its high productivity, the president should roll up his sleeves and take the lead, rather than leaving the matter to a few economists in the ruling party and the government.

* The writer is a professor of international banking and finance at George Washington University. Translation by the JoongAng Daily staff.

by Park Yoon-shik