[OUTLOOK]Economic model can build Korea

Japan became an advanced country thanks to the Meiji Restoration (1866-1869). But the country later fell into a long-term recession after it failed to upgrade the development model.
Meanwhile, China is developing at a rapid pace using a model developed by Deng Xiaoping, and some worry that the country is going too fast. China is facing problems like a widening income gap between the rich and the poor and environmental issues, so it will soon have to present a more suitable development model.
Korea has been developing so far using a model created by Park Chung Hee. Power is focused on the leader of the country so he can exert almighty influence. If the leader is competent he can advance the economy a great deal, but if the leader is incompetent the economy can be ruined at one stroke.
Leaders who came after Mr. Park have criticized his model, while enjoying the enormous power it endowed on them. When our country fell into an economic crisis, Korea’s leaders abandoned the Korean model and introduced a foreign one emphasizing short-term financial gains. As the country pursued this model, many problems arose. More than half of the 30 top conglomerates were dismantled, many companies were sold to foreign owners, national wealth was drained and the unemployment rate surged. Most of all, distribution of wealth became increasingly unfair.
The Roh Moo-hyun administration, also known as the participatory administration, thus invented an economic model focused on fair distribution. However, in any country where it has been tried, this model almost always leads to worsening disparities in income and weakening growth potential.
An economist has categorized the economic models we have adopted into three. The first is Park Chung Hee’s model, which focused on industrialization. The second is an imported model, which we adopted during the financial crisis in the late 1990s. The third is a model focused on fair distribution designed by student activists-turned-politicians in the incumbent administration. The scholar said Korea has an economic disease as the three models are entangled with one another, and that the future of Korea’s economy depends on the economic model we design.
As our country is now the world’s 11th-largest economy, it needs to upgrade the old politician’s model to fit a knowledge-oriented society. Of course, we should look at foreign models as references, but we cannot copy them as a whole because of cultural differences. In different times, different models gained popularity. In the 1960s, a Swedish model was widely adopted, in the 1970s, it was a German model, in the 1980s, a Japanese one and in the 1990s, a U.S. model was pursued in many countries.
However, in order for us to compete on the global stage, we need our own strategies. The goal is to become one of the top advanced countries. Basic ideologies should emphasize a free-market economy and liberal democracy.
The new model should aim at creating more jobs, increasing incomes and enhancing the competitiveness of our country. For that to happen, there are five things to do.
First, the enormous power concentrated on the leader must be decentralized. A professor at Harvard University said Korea should no longer pursue growth led by the government. Regulations on business should be eased or lifted to the level of advanced countries such as the United States. Flexibility in the labor market is also needed.
Second, large companies that represent our country abroad should be promoted and increased in number. Then people can find good jobs, earn high wages and make money with stocks.
Third, we should create banks and financial companies that can also be global contenders. In the global market, financial transactions in which people earn money by simply investing money are increasing. For example, the assets of the Union Bank of Switzerland are double the value of Korea’s gross domestic product.
Fourth, we should have a globally ranked university. Such a university will produce experts in a variety of fields. That is also a prerequisite to become a leading country.
Lastly, pilgrims in the United States set aside sites intended for religious purposes and schools first. Our government thinks building houses to provide shelter for people, thus ridding the country of real estate speculation, is the most important issue. But it should learn a lesson from the founding fathers of the United States.

*The writer is a professor emeritus at Seoul National University.
Translation by the JoongAng Daily staff.

by Song Byung-nak