[OUTLOOK]Cart-before-horse economics

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[OUTLOOK]Cart-before-horse economics

The polarization of society, in particular economic polarization, is not a phenomenon that suddenly appeared overnight, and Korea is not the only country to be experiencing it. When globalization began in earnest in the late 1990s, the inequality among nations, and disparity among national sectors, industries and classes, began to grow. In the course of responding to intensifying global competition, the growing importance of knowledge and information and the rapid development of technologies, the gap between winners and losers inevitably widened.
A few small trends illustrate the general trend. The first is growth without employment combined with fixed underemployment as a result of technological development. Last year, the global economy grew by 4.3 percent but the average unemployment rate remained at 6.3 percent.
The second trend is that productivity rises but the wages of workers decline in proportion to overall national income. Moreover, the international migration of workers leads to an increasing supply of workers who are willing to accept lower wages.
The third is that salaried workers have increasingly disparate levels of pay. In the United States, the top 10 percent of salaried workers account for half of all the money used to pay wages. The top 1 percent earns more than the aggregated wages of the bottom 50 percent. These “superstars” are paid enormous premiums. The gap between the employees of prosperous companies and the employees of smaller, less successful companies is striking.
Fourthly, wealthy countries become more prosperous while struggling nations fall into a vicious cycle of troubles. A century ago, the ratio between the average life standards of the wealthiest nation and the poorest nation was 10 to 1. Today, the ratio is 75 to 1, and by 2050, the difference is estimated to climb as high as 150 to 1.
The global economy is going through an upheaval that is as epochal as the Industrial Revolution in the 19th century. If the steam locomotive was the engine of the Industrial Revolution, Internet search engines are the power behind the knowledge and information revolution. In this era, the motto of the net-savvy generation is, “I search, therefore, I am.” Therefore, the resulting problem of polarization has to be approached from a global perspective and with the logic of economics, not politics.
It is necessary for us to find a new growth model that fits Korea, while observing closely what changes in the economic structure caused the amplification of polarization.
The Roh Moo-hyun administra-tion has labeled polarization as the fundamental cause of economic distress to the people and declared that it would “dare to start a war” against polarization. Not only has the government defined polarization as the “time bomb of the Korean economy,” it is willing to deal with all other problems, from social issues to educational concerns, according to how they affect polarization. Is polarization in Korea so serious that it must be considered a time bomb?
Korea’s economic embrace of globalization is still mediocre, ranking 63rd among 123 nations. The top 20 percent earns 5.4 times what the bottom 20 percent makes, which is not a particularly dramatic gap compared to 15 times in the United States, 11 times in China and 7 times in Britain and Australia. Yet in Korea’s case, the problem is not the polarization between the rich and the poor, but the fact that the income of the wealthy is not growing significantly while the middle class is collapsing and a general economic decline has resulted in wider poverty.
In the corporate sector, only a handful of companies are thriving. In the educational sector, the breakdown of the public education system and the overall decline of standards as a result of standardization are bigger problems than polarization.
The issue of polarization cannot be solved by nature and can only be alleviated at best.
It is the government’s role to encourage the top to thrive and to support the bottom with a social safety net and a welfare system that helps them to grow. The governments of developed countries tackle the problem not by trying to resolve polarization or iron out differences but by assisting the poor and helping them earn more money.
Even China, which has its own ticking time bomb in the form of the widening gap between the rich and the poor, advocates letting the rich get richer.
Any attempt to reduce the gap by discouraging those who thrive or taking away their wealth and by advancing populist politics that emphasize equality will only lead to all of us living equally in poverty.

* The writer is a senior columnist of the JoongAng Ilbo.


by Byun Sang-keun

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