[OUTLOOK]Clear self-destructing elements firstAs the year of the rooster comes to an end, we cannot expect the Korean economy to vigorously recover in the coming year of the dog. Once the leader of the rising economies, the Korean economy which used to boast constant rapid growth, has lost its dynamics and fallen behind in the race. While we try to console ourselves with the theory that now Korea is on the verge of joining the rank of developed countries, it cannot be expected to grow as rapidly as it did as a developing nation, it is not enough justification for performance falling far short of our growth potential. Thanks to a worldwide surplus of liquidity, our per-capita gross domestic product is expected to exceed the $15,000-level soon and the stock price index has soared to pass a record-breaking 1,370 points. However, it seems like a mere numbers game lacking substance.
So what has gone wrong? Blaming external factors such as the constantly rising price of oil and other raw materials, the emergence of giant manufacturing-oriented econo-mies in China and India and tricks played by foreign capitalists that transcend national boundaries is a lame excuse. The fundamental causes of the failure can be found in Korea. Korean society is a minefield full of self-destructing elements.
Firstly, we remain the slave of antiquated production concepts. In the late 18th century, the archetype of a worker according to Adam Smith was a factory laborer producing tangible goods. The Scottish political economist ignored the creation of value from intangible services, such as a performance by an actor or a lecture by a professor, which disappear as soon as they are created. He failed to predict the advent of a service-oriented society following the industrial society. In the 21st century, the global economy is connected in a specialized network: Developed economies focus on research and development, design and branding of goods, while emerging economies are in charge of assembly and production. The former group pockets far more added value than the latter. As long as we consider factory workers and farmers as the mainstays of the world, we cannot shake off the fetters of backwardness.
Secondly, the labor force of an industrial society can be mass-served with a monotonous education, like goods produced on the conveyor belt in factories. However, a knowledge-based society demands a diverse educational system that targets the specialty of each individual. The government and the teachers’ union are still obsessed with educational standardization, a concept that should have been abandoned a long time ago.
Thirdly, the egalitarianism prevailing in Korean society is cynical towards market and competition, just as mass education impedes academic excellence. The wealth of a man is considered to be proportional to the magnitude of his evil. We can hardly find a country with fewer heroes in history than Korea. While we have economic heroes that accomplished an economic miracle from the devastation of war, they have all been tainted and young Koreans can hardly feel inspired by them. Just as 18th century satirist Bernard de Mandeville pointed out in “The Fable of the Bees,” a society can benefit from the creation of jobs, tax money and donations when individuals are allowed to accumulate wealth through greed. An ascetic monk might be able to enter heaven by himself, but he cannot support tens of thousands of people in this world as an avaricious businessman can.
Fourthly, the market economy is a sensitive plant that can only blossom in a climate where the property right of goods is protected and business contracts are respected. Only when the government strives to enforce laws and maintain order, can economic activities be successful. Externally, inter-Korean tension is always an uncertainty. Internally, the authorities are powerless in front of militant labor unions in most labor disputes. Civil and criminal cases happen several times more in Korea than in its neighbors. Survivors often exploit the loss of family members and bargain for compensation money. Politicians encourage moral hazard by clearing the debts of farming households and pardoning those with bad credit records. When fabrication is rewarded and honesty is punished, that society can never become an advanced nation.
Lastly, an important fact is the anger and mortification that law-abiding businessmen feel. Gangsters extorting money from merchants used to be an object of contempt. Nowadays, politicians secretly backed by companies often become lawmakers and earn respect. When their illegal dealings are discovered, those who gave shady money tend to get harsher punishments than those who took the bribes.
The process of making an advanced economy should start with cleaning out the rubbish.
* The writer is a professor emeritus of economics at Sogang University. Translation by the JoongAng Daily staff.
by Kim Pyung-joo