[Outlook]Finding the balance

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[Outlook]Finding the balance

‘How should we raise our kids?” a presenter of a late-night TV debate program asks.

An expert on the right side answers, “We should leave children be so they can discover their talents on their own. Children will then develop their creativity and become successful.”

An expert on the left side opposes the idea. He tells a story in which parents didn’t care enough about their children and the children later became drug addicts.

The first expert tells another story about the sons of one Mr. Go. Go never pushed his children to study but all of them became professors at prestigious universities in the United States.

A mother who has been watching the program turns off the TV and lies down, feeling confused.

“If I leave my child be,” she thinks, “Will he become a drug addict or a scholar?”

This dichotomous type of debate divides our society.

One side argues that a free trade agreement between Korea and the United States will cause an economic tsunami, while the other maintains the deal will make us an advanced country with a per capita income of $30,000.

Some say we should increase the scope of the government in order to be better off; others say we should minimize the government’s reach and reduce taxes in order to take the next step in our development.

We should ask those who argue that opening our doors will ruin our country this question: In the Netherlands, trade volumes are greater than the gross domestic product. Is this because of Guus Hiddink’s magic?

We should also ask those who maintain that cutting income taxes will raise the growth rate of the economy. The U.S. economy grew at the fastest pace in the 1950s and 1960s, when the highest income tax rate reached 90 percent. How could this happen?

Opening up and having a small government are two major pillars of liberal economic policy. But constant confusion is being caused by the question of what the actual results of a liberal economy are, one of the most important topics we now face, with people who didn’t study economics at the center of the debate.

This does nothing but leave bitter feelings about economics in general. But real economists always make tremendous efforts to avoid the risk of jumping to conclusions from a few stories of success and failure.

Economists observe around 100 countries and try to find general relationships between economic policies and growth rates. Their research presents them with difficulties. If a country opens its doors but has careless financial policies which lead to a state deficit, economists need to find the right statistical method to discover whether the resulting low growth rate is due to the opening of the doors or the state deficit.

For the past 20 years, countless world-class economists have struggled with this question and hundreds of theories have poured out. Many produced contradictory conclusions but the majority of scholars agree on a few things.

First, countries that have opened up their product markets have a tendency to have higher economic growth rates than those that haven’t.

Second, countries where the government’s expenditure takes up a smaller part of the gross domestic product tend to have a higher economic growth rate.

However, these conclusions are not always reached when different statistical methods are used. They are not strong enough to confirm that opening the doors a little bit wider and reducing the government a little bit more will result in a surge in the economic growth rate. That is, a detailed analysis favors liberalism but it is far from a decisive victory.

As people with different characteristics should be educated in different ways, countries with different traits can have different policies that suit them best. However, an average picture of the world presents a direction in which economic policy must aim. These results also teach us that we should suspect both those who maintain that liberal economic policies will ruin the country and others who say such policies will make our country an advanced one.

In a crucial debate, if one group maintains that a certain policy will reduce our country to ruin while another says the same policy will push us to the next level, can they win over the hearts of the public? Panels exaggerate their flimsy stories, describing them with melodramatic confidence. When actors do that, the audience usually doesn’t buy it.

Tomorrow is the 60th anniversary of the foundation of the Republic of Korea. Nowadays there should be more people who can judge both sides of the story, standing in the middle between bizarre, extreme stories of failure and nostalgic legends of success.

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

by Song Eui-young

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