[Viewpoint] Social ills spell economic woes

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[Viewpoint] Social ills spell economic woes

Since the late 1980s, nearly all of Korea’s social indices have been deteriorating. According to data presented by Professor Kwak Seung-young at the Economics Joint Conference in February, the lowest 10 percent income bracket accounts for only 2 percent of the total income, while the top 5 percent income bracket accounted for 41 percent of total income in 2006, up from 32 percent in 1995.

The number of criminal incidents per 100,000 citizens has increased from 2,540 in 1989 to 4,356 in 2009, while the number of suicides has risen from 10 per 100,000 citizens in 1985 to 25 in 2005.

Meanwhile, the suicide rates of major developed countries fell in the same period, decreasing from 12 to 10 per 100,000 in the United States, from 8 to 6 in the United Kingdom, from 18 to 10 in Germany and from 17 to 11 in Sweden.

In the last 15 years, Korea has become the country with the highest suicide rate among the members of the Organization for Economic Cooperation and Development. The rate in the over-55 age group is incomparably high. In contrast, the fertility rate is constantly dropping to the world’s lowest level.

Korea has become a country where citizens are reluctant to have children and are most likely to kill themselves. Is Korea a happy nation? Have we accomplished the status of a developed country? Korean society needs to pay serious attention to this trend. It is not that Korean citizens are born with DNA instructing them to have fewer children or be more suicidal. The tendency is a product of various policies. It is about time we review various economic and social policies and systems and seek a change of direction.

We are pursuing economic policies based on the growth-driven mind-set of the 1960s and 1970s. Increases in economic growth, export growth and the trade surplus have been considered the biggest economic accomplishment of the Lee Myung-bak administration. In contrast, the government has paid little attention to the growing income gap and poverty levels.

When most citizens were poor, the income gap was small, wealth was relatively evenly distributed and relatives and neighbors worked together. The growth-oriented policy direction was a reasonable choice.

But the situation has changed. The rate of economic growth and per capita national income are values that only represent the average, not an index that reflects the general condition of life.

In the past, growth meant increased employment. However, globalization drastically reduced the correlation between growth and employment. In 1990, a 1-billion won increase in production in the manufacturing sector created 40.8 jobs. In 2008, the same growth created only 5.5 jobs.

In the U.S., most of the fruit of economic growth fell into the hands of the top 1 percent of income earners, especially the top 0.01 percent. Researchers found that their income and savings did not lead to increased investment and employment in there. That makes us think about the long-term consequences of the economic system and growth-oriented policies that Korea has been pursuing.

The government also needs to craft economic policies to maximize employment. The major objective in macroeconomics is not growth but maximized employment. The government should pay special attention to the improvement of employment conditions because the wage gap between employees at large corporations and small businesses as well as between regular and irregular workers has been growing continuously since the late 1980s. As of 2008, an employee at a small business makes 42 percent of the wage of an employee at a large corporation. An irregular worker makes only half that of a regular worker.

Along with globalization, most countries are experiencing a growing income disparity. The tendency is more evident in Anglophone countries. However, their societies are not as unstable and heartless as Korean society has become. They have social buffers since their social safety networks are better and the redistribution of wealth is more effective through tax collection and government spending.

I’m not trying to underestimate the importance of growth, but if the social indices continue to deteriorate we may not be able to defend the market economy in the long term.

Rather than increasing social benefits, we need to review and redesign the overall tax system, the government spending structure, macroeconomic objectives, fair competition, the market structure and the employment system.

It is a task necessary to prepare for the post-unification era. Since democratization, government policies have been designed to please the public or to gain votes. The policies are affected by vested interests so we failed to take into account the ultimate result 20 or 30 years into the future. The time has come for us to undertake national discussions with a long-term perspective.

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


By Cho Yoon-je
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