[Viewpoint] Time to turn to growth

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[Viewpoint] Time to turn to growth

Five years have passed since the collapse of Lehman Brothers. Are we nearing the end of the tunnel? Various overseas and local economic data show positive signs. Better days are yet to reach homes, but the economy overall is slowly picking up speed.

The economy is estimated to have grown around 3 percent in the first quarter and likely to expand by around 4 percent for the entire year if the current pace keeps up. It is important to re-examine the economy to study what push it needs to leap forward.

Without growth, the economy cannot generate jobs necessary to secure welfare. But politicians primarily offered competing welfare platforms during the election campaign and paid no attention to economic growth.

Even with political and ideological bias aside, they may want to avoid discussing growth for fear of sending the wrong impression that they are interfering with the economy or being overindulgent with growth at the expense of distribution. But their thoughts need to be corrected.

The government has an important role in driving growth. South and North Korea are seas apart in economic size. North Korea runs a rigidly state-controlled economy while South Korea has an open capitalist system.

Even under the same capitalist model, the South Korean economy remained sluggish in the 1950s because entrepreneurship and corporate activities were suppressed. From the 1960s, the government eased its grip on the foreign exchange rate and promoted exports, paving ways for companies to make inroads overseas and helping to spur the economy.

The government still has room to drive growth. It does not have to encourage consumption or investment. It has learned in the 1990s that stimulating demand only fans inflationary pressure, breeds insolvency and causes various economic disasters. Instead, the government should initiate restructuring to increase supply capabilities.

Raising productivity is imperative in order to keep the economy running above the potential growth of 4 percent amid challenges from an aging society. The education services sector should be upgraded to reinforce human resources and welfare policies modified to be more work-friendly.

Companies should be encouraged to compete fiercely in investment and technology as well as in honing productivity, while state corporations should be privatized to expand the market. The market should be opened further so that Korean companies can better compete in the global market.

It is not easy to balance growth and distribution. But it is not entirely impossible. It just needs highly sophisticated work from the government. Many working people live in poverty because they lack skills to compete in the global market.

The government should provide productive training programs to increase their work capacities and encourage them to continue to engage in economic activities. The relationship between large companies and small and midsized companies does not have to be a zero-sum game.

Heightening competitiveness of small companies is as important as establishing a fair commerce order. There are too many noncompetitive small companies in our society compared with advanced economies. They don’t venture to invest in technology, develop new markets overseas and launch individual brands. Authorities should provide customized services to marshal them to overseas markets and direct restructuring to improve their competitiveness.

The Sahara used to be lush until climate change altered the area to a sandy desert. As land needs rain to sustain life, the economy too needs continuous flow of creativity and efficiency to precipitate growth.

The habitat and climate may not be benevolent, but the economy could come out stronger if it pushes forward against the headwind.

Translation by the Korea JoongAng Daily staff.

*The author is the president of the Korea Development Institute.

by Hyun Oh-seok
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