[Viewpoint] The perils of immiserization

“You have worked hard enough. Enjoy your trip!” is a popular advertisement slogan from a few years ago. Perhaps because of the polarization in wealth, the copy has been twisted to “You have worked enough. Yet you have nothing.”

More and more people are in despair. Their livelihoods have worsened even though they have worked so hard. The feeling has spread to most jobs. Office and factory workers, small company owners, mom-and-pop store owners and farmers are experiencing it.

In their eyes, the conglomerates are doing great but not spending their profits. Financial companies appear to have feasts of money from their easily earned profits. Is this right? Dissatisfaction becomes despair and then turns to rage. With Occupy Wall Street protests as a catalyst, similar rallies and protests have spread around the world in an expression of the rage. It seems that the pent up anger is about to explode.

It is not just the economic minority that is dissatisfied. The dissatisfaction has spread to the middle class. A few days ago, I saw an office worker in his 40s who said angrily, “Why do bank presidents receive billions of won in salary without any hard work?” Another manager of a foreign company in his 30s said, “I hate the conglomerate families who are born with silver spoons in their mouths.” He said his annual salary was more than 100 million won ($87,700).

Their feelings of relative deprivation are serious. They do not want to listen to logical explanations. Instead, they pay more attention to provocative words. The remarks from the manager of the foreign firm with the high salary show the situation clearly. His words were no different from that of the protesters.

Borrowing an expression from the Indian-American economist Jagdish Bhagwati, this is the result of immiserizing growth. This phenomenon describes the economy of a developing country in which the country becomes worse off after economic growth. It can happen in heavily export-dependent countries due to worsened terms of trade.

It is also a term used to describe wealth polarization in which economic growth is driven by conglomerates while small companies and working-class citizens become poorer.

This has not happened overnight. It is an outcome of globalization and the rise of China. Under this situation, conglomerates enjoy profits, but others do not. Despite high profits, conglomerates also do not increase employment, hence the jobless growth.

Although opposition parties often criticize governance structure here as the cause of the problems, their claims are not always true. In 2005, the World Bank compared the health of 80 countries’ corporate governance structures, and Korea was ranked 21st. It was ranked higher than Italy, Spain and Greece, so the ranking was not bad.

The cause of the current situation came from outside the country, but the government can only respond with domestic measures. That is what makes it harder to find a solution. The Roh Moo-hyun administration stressed the importance of wealth distribution, but the outcome was great wealth polarization instead. Unfortunately, this is not a matter that can be resolved instantly.

Accumulating dissatisfaction in society can easily build up into calls to change the administration. In 2006, at the end of the Roh administration, Park Seung, former governor of the Bank of Korea, said, “The ruling party will lose the presidential election. And the next ruling party will lose again in five years.”

He repeated the remarks once again recently at a debate, pointing to the worsening polarization in the country. To resolve the situation, drastic reforms are necessary, but no administration is capable of enacting them, he said.

The Grand National Party, indeed, won the presidential election, but it is now cornered. If Park’s remarks are true, both the ruling and opposition parties will take turns in experiencing the backlash - and benefits - of the polarization. While they take turns and win power, they will resolve nothing and then lose in the following election. It reminds you of a pendulum.

It is worrisome what immiserizing growth can produce. Between growth and poverty, what else can we expect to see from globalization?

You, who have worked hard, should seek out the answer with a cold heart.

*The writer is social news editor of the JoongAng Sunday.

By Nahm Yoon-ho