[OUTLOOK]Left-wing? We’re honoredWhen certain conservative politicians and corporate leaders called the present government a “leftist government,” Prime Minister Lee Hae-chan reacted instantly. “We are not a leftist government. If you continue, we will not sit still.”
He is right. The present government is not leftist. It might be more left-leaning than the administrations of the past, but it does not meet the criteria of a leftist government. If there are policies implemented by this government that could be called leftist, they would be the comprehensive real estate tax system and the regulations that limit companies from investing more than 25 percent of their own assets in other affiliated companies and the newspaper and broadcasting-related laws that are currently under revision.
The focus of this government’s policies is on increasing rationality and transparency, decreasing the evils of monopoly and oligopoly and reinforcing the foundations of the market economy. The government’s explanation is that it will push its policies despite the “costs of conversion” because the policies will soon result in growth. This is a completely right-wing way of thinking. The reason the government still hears itself being labeled leftist is because of its political rhetoric inimical to the establishment here and its display of wishful thinking that ignores the actual economic conditions.
There is no need to discuss that rhetoric yet again, but the economic rosy picture is more important. Lee Joung-woo, the Blue House policy chief, remarked in an academic seminar last September that there has never been a government more unfairly criticized than the present government and that its achievements would one day come to light like a “moon hidden by clouds.”
That would be very nice and could indeed be the case. But that does not change the fact that those sentiments are also wishful thinking and economic policies must both rein some things in and release others. The evils of the old system were corrected and the water might have gotten cleaner, but there are no gates for new water to enter and leave.
Real estate policies are a classic example. The government has managed to control real estate prices, but it killed off the construction economy that was the last support of domestic demand. It is uncertain whether the demand for construction, that washed out like a tide, will revive with the plan to transfer the capital and the expansion of public construction projects. It is irresponsible to blame the lack of an upturn in domestic consumption despite the export boom on structural changes in the world economy. Saying “It was supposed to happen, but strangely, it didn’t” to business owners and tradespeople about to go out of business would only cause resentment.
The economic statistics that the Blue House prefers are not those that the people feel in their daily lives. The Blue House denies that there is an economic crisis by pointing to the debt ratios of big firms, industrial production and the profitability and growth of companies, all of which are improving. The president points out that Korea has the highest growth rate among the members of the Organization for Economic Cooperation and Development. Yet our potential growth rate is decreasing. The economy as felt by the people is directly related to the sharp decrease in consumption. That lower propensity to consume, falling wholesale and retail sales, the lack of domestic investment in plant and equipment are also part of this economy. The reason that the Blue House’s optimism is a reason for despair to the people is because, putting aside wishful thinking, the cost of conversion involved in the government’s policies is just too high. The slow economy has continued for over two years and it is strange that we aren’t hearing stories about “policy failures” yet. Policies that have good prospects but are not backed by reality are nothing but paper policies.
Here are some examples of a leftist government. In the mid-1990s, Sweden was in the midst of an economic recession. The ruling Social Democratic Party included bank loans in consumption expenditures as a measure to encourage consumption. If loans were counted as part of the cost of living, the tax burden would be lighter and consumption would grow. As a result, Swedish domestic demand revived and an economic recovery followed. In Korea, housing loans are partly tax-exempt, but the exemption is too low. What’s more important, the Swedish with their social democratic system are known for their corporate-friendly policies. The firms face a high tax rate, but they are given much freedom in their corporate activities. Sweden chose to organize supply in the labor market to fit the corporate demand of management. This is a reverse application of the Keynesian principle of managing demand to absorb the labor force. For example, if the labor unions and the government organize a “wage demand waiver” and “an association of productivity” through a social contract, the firms work to create profit and enhance their competitiveness. The insufficient amount of wages is supplemented by the welfare system paid from corporate profits. This “reverse Keynesian” idea is what makes Sweden’s “corporate-friendly but labor-friendly” policies possible. A rightist government leaves consumption and labor to the market and a leftist government “organizes” consumption and labor. This government that is not leftist should consider it an honor to be accused of being so.
* The writer is a professor of sociology at Seoul National University. Translation by the JoongAng Daily staff.
by Song Ho-keun