Neoliberalism at risk

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Neoliberalism at risk

Calais is a port city in the northern French province of Pas-de-Calais. It overlooks the Strait of Dover and is the closest part of the European continent to England. Despite its proximity, Calais historically was a symbol of the deep-seated rivalry between France and England. The two countries waged the infamous Hundreds Years’ War from 1337 to 1453. England’s King Edward III’s claim to be heir to the Kingdom of France provoked the war and the siege of Calais in 1346. As the war dragged on, the French got the upper hand, led by heroines like Jeanne d’Arc.

Yet the town remained annexed to England and served as the gateway for trade, being referred to as the “brightest jewel in the English crown.” The French sent 30,000 troops to reclaim the Port of Calais in 1558. It was defended by 25,000 British soldiers. The French won. Queen Mary I was shaken by the loss and died soon afterwards.

Calais remained a flashpoint for disturbances and conflict. Calais and Dover are separated by the 34-kilometer English Channel. Transport has gotten easy through the undersea Channel Tunnel between Folkestone in the United Kingdom and Pas-de-Calais. Calais now swarms with 6,000 refugees from Africa and the Middle East trying to get to the United Kingdom to live. French police guard the tunnel entrance to prevent them from succeeding.

British citizens chose to leave the European Union in a milestone referendum in June, largely because of a distaste for immigrants and even refugees. They were not happy about sharing their jobs and welfare benefits with them. Former London Mayor Boris Johnson, who championed the so-called leave option, claimed a restoration of British sovereignty was the primary factor that led Britain to the choice — not immigrants. But few would agree.

When given the choice, Euroscepticism in British people flared amid concerns about and disgruntlement with immigrants. Brexit, or the decision to withdraw from the EU bloc, has become a symbol of challenge to neoliberalism, which stands for both liberalization and globalization.

Inequalities were an inevitable by-product of neoliberalism. Minimum government interference and a freer flow of products, services, capital and labor are what neoliberalism is all about. Deregulation, labor flexibility, and privatization were the outcome.

British Prime Minister Margaret Thatcher and U.S. President Ronald Reagan, who saw eye-to-eye in most affairs, both championed liberalism in the 1980s and it eventually became mainstream dogma in international trade. The upside was clear. When regulations and barriers were lifted, the playing field got bigger. The downside was that the wins went to the strongest. The faster, more intelligent, keener and sharper reaped more. Less was left for the weaker. Inequality grew and grew.

The undereducated and underprivileged took a stand through the Brexit vote. They manifested their sensibility in a collective show of rage and intolerance for inequalities. Their angry roar has thrown a fundamental question to the world about the very foundations of the international order, where wealth is concentrated among the notorious 1 percent.

Korea is no exception to this universal problem. Policy actions are needed to make amends to the weaker. Some suggest more taxes on the rich, higher incomes for the underclass of contract workers and a hike in corporate taxes. If these problems are not addressed, the world would become more polarized and isolated. The world will be doomed if anger prevails and protectionism grows.

Will all the problems go away and the world become fairer if the rich and companies are taxed more and base salaries of the working class are raised? Distribution alone cannot narrow the gap. The best solution is jobs. People need jobs, and jobs are created by companies. Deregulation, structural reforms and labor market flexibility must proceed.

The British and EU will soon enter negotiations for an exit deal. It won’t be as violent and lengthy as the Hundred Years’ War, but both will drive a hard bargain to defend their own interests. The EU does not want to compromise access to the single trade bloc unless the British accept free flows of products, services, capital — and labor, meaning people. The world is in for a bumpy ride in the process of their negotiations.

British skepticism towards Europe runs deep. Thatcher bluntly said, “Most of the problems the world has faced have come from mainland Europe, and the solutions from outside it.” She welcomed a single market, but opposed a single currency and political unity. Geoffrey Howe, the longest-serving cabinet minister under Thatcher, disagreed. The chasm between the two over Europe exploded with Howe’s scorching resignation statement and criticism of Thatcher. The resulting uproar dealt a heavy blow to Thatcher and Thatcherism. The British and EU must try to come up with a new solution without jeopardizing the concept of free trade and globalization.

JoongAng Ilbo, July 6, Page 28


*The author is the head of the international business news of the JoongAng Ilbo.

Kim Jong-yoon
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