[OUTLOOK]Roh and the ‘winner’s curse’

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[OUTLOOK]Roh and the ‘winner’s curse’

In countries where labor unions exercise a powerful influence and where the legal system for the protection of workers is well established, paradoxically the unemployment rate is higher. Professor Gary S. Becker expressed this paradox as the “winner’s curse.” In other words, the winner will ultimately bring disaster on his own head. The winner’s curse can be applied to politics too. It can be applied all the better to the “politics of division.”
To a political leader, a confrontational social structure is an attractive political means with which he can combine his support forces. The people will be interested in his argument that to achieve social unity and move toward the future, the old evils should be wiped out and groups with vested interests should be destroyed. This task is usually carried out under the cover of reform.
At times, the public’s anger is used as the “fuel for reform.” All the statesman needs to do is raise his finger and point it at a particular place as the “den of evils.” The more a society is in confusion, the more the public tries to get comfort for the situation by bringing accusations against someone. A statesman will never miss this opportunity. This is well demonstrated by the remarks of a figure from the ruling party that “politicians can make a living only by doing business of selling reform issues for 10 years.”
The Gangnam area in southern Seoul, Seoul National University and Samsung Group have now almost become “public enemies.” They made ordinary people feel deprived by becoming rich through real estate speculation, burdened the parents of students with overheated competition for college entrance, and became social forces based on their vast economic power. But people in Gangnam are not speculative forces but just members of the middle class who support our country. Seoul National University is the provider of talented people who determine the national competitiveness of the future. Samsung is a global company that strengthens the national economy. Samsung Electronics has a high shareholding ratio of foreigners because they trust Samsung.
The so-called X-file scandal was the ace card with which a statesman could trap the conservative press, conglomerates and politicians of the past all at once. He obviously knew the principle that rejects illegally obtained evidence like illegal wiretapping, but he advocated the people’s right to know.
Let’s take the case of the United States, for example. Richard Nixon was the first U.S. president to step down during his term in office because of illegal eavesdropping. At that time, no question was even raised over what the contents of illegally recorded conversations were or what damage the illegal eavesdropping did to the Democratic Party. The reason for President Nixon’s impeachment was the infringement itself of the people’s basic rights by a state agency. It is preposterous to boldly attempt to summon those involved in the X-file scandal as witnesses for a National Assembly inspection based on the “charges” alone.
Dividing people into sides can cause confusion in policy due to the reversed cause and effect. A representative example is the problem of polarization. The government says distribution of wealth should be placed above all to resolve the problem of polarization. But polarization is the result of low economic growth. Given the size of our economy, a 1 percent decrease in the growth rate will result in “losses of opportunities” of 7 trillion won ($6.8 billion).
Supposing pay represented 45 percent of gross domestic product, 1 percent lower growth would result in an annual loss of 3 trillion won in salaries. This means 150,000 jobs of 20 million won in annual pay have disappeared. If the growth rate drops, the economy worsens and the pay for workers falls. The controversy over the distribution of wealth should be replaced with measures on poverty with the focus on the establishment of a social safety net. What we need to relieve is not jealousy but poverty.
At the midpoint of the presidential term, what the people want is for the president to improve their livelihood. His defense that the economy has always been the first priority of state affairs is empty, because the economy can be demonstrated by the result alone. The economy has become difficult because excess politics and ideology has harmed investment psychology and the spirit of entrepreneurship.
Economics seems complicated but it can be summed up as matters of “psychology” and “flow,” and “incentives.” Therefore, the president should stabilize economic psychology by removing uncertainty, and rely on a market-friendly economic policy to make the flow of economic sources smooth. And if he eases regulations that are obstacles in grasping the opportunities in the market, the economy will regain vitality.
There is not much time permitted to the “participatory” government, and the aged society is close at hand. From now on, he has to adopt practical policies. If he makes and attacks public enemies that do not even exist, he will just call in the winner’s curse.

* The writer is a professor of economics at Myongji University. Translation by the JoongAng Daily staff.

by Cho Dong-keun
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