[Viewpoint] Visioning a new political economy

It is worrisome that a sense of relief that we have survived the economic crisis might lead to irresponsibility and inaction.
This economic meltdown is not an ordinary economic recession or a slump, but a paroxysm forcing a historic turning point to undertake structural change in the international order and balance of power.
We hear the good news that leaders at the G-20 summit have forged an international alliance to recover from the crisis, and the stock markets including Korea’s have become active again, as shown in a recent rally in stocks. However, we should be careful not to make a serious misjudgment that this is evidence of recovery to the status quo ante, before the crisis occurred. Instead, we should pay special attention to the global trend that sees the recovery process as a historic opportunity to create norms and institutions for a new era.
First, the global financial crisis took place as everybody was absorbed in expanding profit margins in the market while neglecting the social balance guaranteeing the public good, especially just distribution of benefits for low and middle income people. We should strive to promote the realization of broader social justice, rather than return to the past.
At the gathering of leaders from democratic nations held on the theme of political implications of the global economic recession right before the opening of the G-20 summit in London, the importance of making policy-oriented assessments was underlined.
They should address questions such as to what degree public investment may contribute to achieving social justice, and how it may be linked to support low and middle income people, in relation to a radical expansion of public investment as an emergency measure to prevent economic failure.
In other words, although market intervention by mobilizing government spending has been an unavoidable measure for protection of public interests, we will face a difficult political choice in how we should distribute the people’s burden arising from the increase in national debt in the long term. These are questions our own political community should ponder as well.
Second, the economic crisis led us to rethink a theoretical question about the most preferable relationship between the market and the government. Most of the states facing market collapse have actively intervened in the market without any significant resistance, in order to protect the public good.
However, for whom and of whom and by whom, does a country exist? The answer is directly related to the question whether the choice made by a government to recover from the current economic crisis may contribute to democratic development or excessive expansion of the power of the state.
To provide for an ideal relationship between the state and the market that would contribute to the successful institutionalization of democracy, a philosophical understanding of basic nature becomes as important as that of structural problems of political economy.
In this regard, the argument by Adam Smith is still inspiring. He argued that the survival and development of the market is impossible without social trust, even though the desire of humans to pursue profit endlessly is the driving force behind the market.
The question — How should a properly functioning relationship between the market and the government based on social trust be institutionalized? — is floating as a vital agenda to link with the current economic recovery and democratic development.
Third, the current economic crisis serves to give a great momentum for undertaking reform and development in the global order in both political and economic dimensions to cope with a new era.
Against this backdrop, the three neighboring Asian countries — Korea, China and Japan — could play a considerable role in the reform process. Setting aside the assertion that the center of civilization is moving into the east, the magnitude of United States dollar reserves possessed by the three nations forecasts a predominant status for Northeast Asia while the balance of power undergoes major reform.
However, no one can assure how swiftly and wisely the three countries can solve the problems arising from their gaps between rapid economic integration and slow political integration, the same issue that even Europe has not yet resolved completely.
But it is truly fortunate that Korea, China and Japan are expanding their shared awareness about the fact. Only when they strive to facilitate their coexistence-oriented relationship and step forward in the same direction, will breaking daylight cast its light on the future of Asia as well as the different countries.
Above all, efficient economic resolution is required to recover from the economic crisis.
The leaders of the three nations and their people hold the key to developing the preferred future for the Korean Peninsula, the Asian community and the global village. Thus, we would like to mark a new chapter of political economy with a vision beyond the current crisis.

*The writer, a former prime minister, is an adviser to the JoongAng Ilbo. Translation by the JoongAng Daily staff.

by Lee Hong-koo