[Viewpoint] Striking a balance for Korea’s sake

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[Viewpoint] Striking a balance for Korea’s sake

The banner cry of “We are the 99 percent” is nothing new historically. During times of great transformation, revolutionaries stormed the streets with similar cries as they toppled feudal monarchies to build republics and challenged capitalism to replace it with communism. The same slogan is being shouted on the streets of financial hubs in major democratic societies across the world.

The West in past centuries has undergone economic and social structural changes, provoked by internal conflict. The struggle between landowners and farmers in feudal societies has shifted to one between capitalists and paid workers amid industrialization and urbanization. The widening gap in wealth and deepening urban poverty sparked communist theory and revolution, replacing leaders across Europe with socialists.

Just two decades ago, the world had been bisected into capitalist and communist worlds. In just over a century, the size of capitalist governments quadrupled, established with various welfare, labor, and fair trade legal systems. Government spending in most European countries today exceeds gross national income by 40 percent.

But rapid globalization and the rise of Asian economies prompted Western societies to pay heed to their spending behavior. As frontiers in capital and human resources broke down, governments had to reduce taxes and build corporate-friendly environments to bolster economic competitiveness. Such steps reduced tax revenue, which resulted in decreases in welfare benefits.

But the populace, long used to welfare benefits, cannot easily agree to giving them up. It is the economic and political dilemma shared by troubled Western economies. The neo-liberalist policies that champion open markets and liberalized trade have exacted wealth inequality and financial crises as well as aggravated social and political conflicts.

The factors are more complicated and dramatic in our case. We are undergoing structural changes in just a half-century that panned out in Western societies over several centuries. Before we have come to a consensus and built a new system, we are swept up in new wave in a different environment. No other society in world history has faced the test of industrialization, democratization and globalization in one generation. The sources of disparities and conflicts are naturally great.

The condensed prosperity has brought about disagreement within our society over policies to foster internal growth while juggling international demand for globalization. In my 2009 book “South Korea’s Power Structure and Economic Policy,” I coined the phenomenon as a collision of the vertical and horizontal. The vertical problems are our challenge to meet the public needs from rapid economic prosperity and higher income levels. The horizontal problems are the country’s external risks as it stands against a borderless, fierce global economic environment.

Korean economic authorities must make policy choices to address the challenges that require a different direction and solution. To meet the vertical demands, the government must increase its budget and reinforce the welfare system as done by Western societies in the past. But on the horizontal axis, it must move in sync with today’s Western societies by scaling back the budget and taxes. Authorities must prioritize fairness in vertical policy and efficacy on horizontal policy. The clash surfaces as a struggle between liberals and conservatives.

After a tragic war and ongoing ideological tension with North Korea, our society has been hyperprotective and sensitive to liberal viewpoints and demands. Everything had been simplified to either black or white. Anti-government was tantamount to pro-North Korea.

But as our society matures, liberal demands are gaining more ground. We must come to the self-realization that few other countries with our level of living standards are as ungenerous to the weak. We, however, cannot afford to emulate the rich welfare benefits Western societies offer. Western societies are trying to scale back on welfare spending, and we should at least meet them half way.

Economic policies and social systems evolve with the times. No systems that have been experimented with by civilizations are impeccable. Growth is the best answer to feed the poor. But after having reached a certain income level, growth alone cannot ensure security and happiness in a society. We must choose the path where both vertical and horizontal, or liberal and conservative, needs can be fulfilled.

We must further liberalize and open up through free trade deals while at the same time bolstering protection for the weak. The budget should be appropriated to ease income disparities. Fair trade and competition should be strictly supervised to alleviate wealth polarization and concentration. Harmonious policy design is our society’s biggest challenge.

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

By Cho Yoon-jae
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