[EDITORIALS]Growth before redistributionPursuing wealth redistribution beyond a certain level at this stage could hamper the economic development of the country, according to a national policy research institute.
At a public hearing held to formulate the government’s medium-term fiscal management plan, the Korea Development Institute reported that “redistribution-oriented policies heighten dependency on social welfare policies and discourage voluntary economic activities in the private sector and could hamper economic growth because it clashes with other policy objectives.”
While we cannot completely ignore wealth redistribution as an objective, concentrating too much on it would compromise our growth potential and ultimately damage, rather than help, our very ability to implement distribution policies.
While the institute report put it in a roundabout way, in the end what it’s trying to say is that at present our best option is to pursue growth in order to reform our redistribution structure.
A major reason our economy has been suffering recently is because of the debate within and outside of the government on whether growth or redistribution should come first, which does not solve the immediate economic problems or help to reform the long-term economic structure.
As the institute has pointed out, our country’s welfare spending is not high compared to advanced countries. But our spending is bound to increase dramatically with the aging of our society, and should we include “hidden” welfare policies, any intentional increase in redistribution could bring a serious financial burden.
On the other hand, the exhaustion of our growth potential is fast becoming a reality. Our recent economic growth rate has fallen below the potential growth rate of 5 percent that could guarantee new jobs for young people without causing inflation.
We previously pointed out the harm of impractical redistribution-oriented policies and how they could hamper our potential growth. We have also expressed active support for President Roh Moo-hyun’s statement that “the best redistribution policy is to create more jobs through economic growth.”
We hope that this will end the debate on growth or redistribution that has been going on since the “participatory government” stepped in, and that there will be no more confusion in its policy line.