[Viewpoint]A Korean brand of capitalism

The Korean economy is swaying unsteadily as ripples from the financial crisis in the United States spread out. The Korean stock market is dancing to the U.S. market’s tune, and as funds in the U.S. dry up, Korean financial companies are also getting thirsty. It is apparent that the U.S. economy will fall into a recession due to the aftershocks of the financial crisis. Then our exports, which have been barely holding on, will collapse. The fire of the financial crisis spreading on the other side of the ocean is now showering sparks on our heels.

For its own economy to survive, the United States will take care of the financial crisis in its own living room, no matter what it takes. The process may be hard and the aftershocks and pain could last a long time, but it will survive. Certainly, it will look different from the country we knew before the crisis.

But never mind the U.S. economy. What is urgent for us is to take care of the Korean economy, which has been hit by a stray bullet from the financial crisis. The foreign exchange crisis 10 years ago was caused by big mistakes we made, but this time we cannot be blamed.

This fire was caused by unexpected lightning. We did not do anything wrong, yet it seems that we will suffer burns from a fire that started outside our house, and our economy will be in tatters, bruised and cut.

There is no way the United States, which has to save its own skin, will help us. We must learn to avoid being bit by flying fire, and treat burns and bruises ourselves.

These days, varying expert diagnoses and prescriptions regarding the current financial crisis and the Korean economy are rampant. Progressive economists say that American neoliberalism has come to an end and claim that the Korean economy, which has been based on the American model, needs to change its direction.

Specifically, they say that the government should discard the advanced financial system pursued by the Lee Myung-bak administration and strengthen regulations in the finance sector, taking this crisis as an opportunity to do so. They are also against the plan to privatize Korea Development Bank and ease regulations on the separation of finance and industry.

Although he is not one of the progressives but rather a scholar who uses a systematic approach, Professor Ha-joon Chang of Cambridge University has also defined the situation as “the bankruptcy” of neoliberalism and has raised objections to government policy that nurtures investment banks and reduces taxes. On the other hand, the voices of economists who support the Citizens’ Coalition for Economic Justice and pursue shareholder-centered capitalism, or economists with traditional liberal tendencies, can hardly be heard.

Generally, the anti-neoliberal camp is raising its voice as if this is their time, while the neoliberal or traditional liberal camp is remaining silent. While people are openly throwing stones at American neoliberalism, people who defend the free market economy are strikingly absent.

So which way should the Korean economy go? The assertions of anti-neoliberals are diverse, from the extreme theory of government intervention to the theory of partial government mediation. Although they share a criticism of neoliberalism, they are not able to come up with a clear alternative on which they agree. Although there are differences of degree, it is clear that government regulations and intervention in the market should be increased, instead of maintaining the policy of one-sided liberalization. Coming down on the side of anti-intervention is editorial writer Joung Suk-ku of The Hankyoreh Sinmun. Joung takes the position that the failure of the neoliberal market should not necessarily lead to the revival of government intervention and stronger regulations. In essence, he says there is no guarantee that the government will do any better simply because the market has failed.

Seen from the above perspective, the debate on the direction the Korean economy should pursue can be summarized by deciding to what degree the government’s role should expand.

Even anti-neoliberals are not saying that the capitalist economy should become completely socialist. Ultimately, the focus of the discussion comes down to the problem of adjusting the degree of government intervention in the market while maintaining the structure of a market economy.

In this case, there is room for rational discussion. This is a good chance for us to create a Korean model of capitalism through sincere discussion and social consensus instead of extreme confrontation staged in an “all or nothing” manner. Taking this opportunity, it would be good for scholars from various fields to hold a full-scale debate in search of a distinctly Korean brand of capitalism.

*The writer is an editorial writer of the JoongAng Ilbo.

by Kim Jong-soo