[Viewpoint] No growth, no welfareNobody talks about economic growth anymore. If you argue for growth, you are bound to be scorned as a capitalist of the old school or a senseless follower of neoliberalism. You would invite a lecture on the drawbacks of growth-oriented logic.
The voters who cast their ballots for President Lee Myung-bak, an entrepreneur who helped to industrialize the Korean economy, once proudly had faith in his campaign pledge to reach an annual economic growth rate of 7 percent. Now, they are snubbed as naive. The word growth has become taboo.
Under the government of President Roh Moo-hyun, there had been fierce debate between proponents of growth and supporters of redistribution. The dichotomization of growth and redistribution is hardly realistic, but at least been people were thinking about these issues. The Lee administration envisioned ambitious growth that would give Korea that world’s seventh-largest economy and per capita income of $40,000. But its enterprising march was stalled by the nationwide protests against American beef imports in the summer of its first year and the global financial crisis in 2008. The Lee government’s growth-oriented policies failed without ever being fully tested.
In 2008, the second year of the Lee administration, economic growth slowed to 2.3 percent and deteriorated to 0.3 percent in 2009. The economy expanded 6.2 percent in 2010, recovering slightly, but this year, the growth rate is expected to slip below 4 percent, certainly a lackluster performance considering what the country could potentially achieve. The slowdown is partly due to the credit crisis that has gripped Europe and elsewhere, but it has also occurred because the government has more or less given up on endeavors to stimulate the economy. Both the ruling and opposition parties are bogged down with their efforts to expand welfare benefits to have any time to consider economic growth. The Lee government also paid little attention to bolstering economic fundamentals for long-term growth because it was more preoccupied with pork-barrel projects.
The Bank of Korea now estimates that the economy will grow by 3.8 percent this year, sharply below its earlier forecast of 4.5 percent. Next year’s estimate is lower and stands at 3.7 percent. And the government has made no effort to dispute this pessimistic forecast in any way. By not setting its own growth target - which is usually more optimistic than the central bank’s conservative one - the government implies that it will not likely employ tools at its disposal that could jumpstart the economy next year.
The government’s favorite political term, “efforts to enhance growth,” has been watered down in the blueprint for next year’s economic governance by emphasis on endeavors to expand the social security net and welfare system. Politicians on both sides, regardless of political affiliation, are jumping on the welfare bandwagon and dare not even mouth the word “growth.”
But the truth is that providing additional welfare is impossible without growth. If the economy does not expand, the government has no funds to finance increased welfare spending. Increased growth can generate revenue, without which there is no welfare. A welfare system can be sustained through continuous expansion in both economic production and income. To deny such basic economic fundamentals is nothing but ignorance or political rhetoric.
Critics say that economic growth is meaningless these days because it does not create new jobs but simply increases economic polarization. Without the creation of new jobs, the income of the general public remains the same or decreases. But no growth whatsoever means zero jobs created. If jobs are the problem, authorities should try to come up with ways to stimulate growth and create jobs at the same time - not give up on growth policy altogether.
We have our direction laid out. We must find ways to redesign our economic strategy to drive an economy that can generate jobs and revenue. The domestic services sector is the answer. The fields of medicine, legal services, tourism, education and social services form an infinite market that can create new jobs and income. If domestic consumption picks up again in these industries, there will be more jobs available and people will enjoy more equality in income.
But politicians and the government have been looking elsewhere for solutions. Deregulation and liberalization plans have been stalled by strong opposition from interest groups. But without a revitalized domestic market - especially in the services sector - economic growth will not come easily and all the rosy promises about welfare could be in vain.
*The writer is an editorial writer of the JoongAng Ilbo.
By Kim Jong-soo