Best policy? Create jobsA report on South Korea released Wednesday by the Organization for Economic Cooperation and Development demonstrates how far the government’s praise of the economy is from the truth. The organization points out that the government’s attempt to widen its spending on welfare is not good. The organization says in its report regarding government spending on welfare that the government needs to be careful and devise systems that enhance the will to work. This means that by using only welfare policies it will be hard to resolve the income gap and polarization of the haves and have nots and maintain a healthy balance sheet. The organization recommended that a safety net for the poor be expanded, but welfare spending in other areas needs to be restrained. This is in line with our argument that the best welfare policy is to create jobs so that the poor can escape poverty and develop their own ability to stand on their own.
In its report the organization questioned the government’s policies targeting the housing market, on which the government has put its focus while ignoring other needs. “Despite the merits of the objective of stabilizing housing prices, some of these policies have the potential to create substantial harm if allowed to persist in the long term as they tend to reduce the supply of housing,” the report said. It also suggested that the government needed to lift restrictions on the use of land and on the housing supply to increase the availability of private houses. The language in the current report is somewhat less strong than a draft in early March, which said that government measures to set a limit on housing prices and publication of apartment costs are against market principles and need to be scrapped.
Nevertheless, the key points remain the same. The organization changed its original draft upon request from the Korean government, which argued that the current policy was unavoidable in light of the country’s realities. But it did not change its original judgment that the government measures are against the market. This also is in line with our argument that relaxing restrictions and increasing supply the fastest ways to stabilize real estate prices. At base, the thoughts on how to employ healthy economic policies do not differ, whether they are from within the country or from abroad. Maintaining a healthy economy while creating jobs by relaxing restrictions and employing economic policies that are in line with market principles is what we have to do. The report by the organization just underlines this simple fact.