Dangerous legacy of welfareIt took Greece 30 years to move toward the brink of bankruptcy. It all started when the Panhellenic Socialist Movement became Greece’s first social democratic party to win a majority in the Greek Parliament in 1981. The socialist government placed top priority on enhancing welfare benefits and wealth equality. Its slogan was to give the public whatever it wanted. But the Greek politicians failed to take account of the so-called “welfare pit.” Once people are used to welfare benefits, there is no going back. The public’s demands rose and politicians had no choice but to oblige them in order to stay in power. Government debt, which took up 28 percent of GDP in 1981, ballooned to 120 percent last year.
Other European peers are also sinking under the weight of welfare costs. The fiscal troubles of Italy and Spain also derive from the heavy cost of financing welfare benefits for their people. Britain, the Netherlands and Sweden suffered greatly in the 1970s and 1980s due to welfare spending.
Such policies can also generate generational conflict. Older people can enjoy the immediate benefits, but these may not be conferred to younger or future generations. As such, it is hardly a surprise that young Europeans are pouring out onto the streets to protest their uncertain future.
Korea will soon face the same problems. Park Won-soon, freshly elected as Seoul mayor, signed a plan to expand free school lunches to all elementary schools in Seoul. The Seoul Metropolitan Government will also use its budget to subsidize college tuition fees. Meanwhile, the main opposition Democratic Party is trotting out more free-for-all policies.
They may be affordable now - but not for long. If parties use their campaign pledges to compete on cutting costs or raising state subsidies, the toll on the budget could be severe. Politicians promise all kinds of new spending, but they are strangely quiet on how they plan to finance this. Such spending will increase the budget deficit, and the government debt will mean more taxes or bills for younger people.
The Ministry of Strategy and Finance released a shocking estimation on the price future generations would have to pay for welfare expenditures. Even without any new spending, they will have to pay more than double what taxpayers fork out today. Politicians should heed the Greek tragedy unfolding in Europe, and younger people should not let themselves be sweet talked by politicians into footing today’s bill tomorrow.