Time for pragmatism
The author is the chief editor of the JoongAng Ilbo.
An online post debunking the government’s real estate policy instantly drew likes and many comments. The writer blamed the government’s “ludicrous policy” for fanning runaway home prices in Seoul. “No one could have done better work” to generate the completely opposite result the government desired from its package of a heavy tax on transactions by multiple homeowners, tax exemptions for a homeowner living in a residence for two years, and loan regulations. “Homeowners are dancing because skyrocketing prices of apartments in Seoul are about to touch the moon,” he wrote. In a comment on the post, one person sneered, “The surge in home prices should be credited as one of President Moon Jae-in’s biggest achievements.”
A series of measures to curb real estate prices has only made prices in Seoul rise. A new apartment in southern Seoul sold for 100 million won ($89,702) per pyeong, or 3.3 square meters. The ludicrous apartment values in Seoul are widening wealth inequalities amid eroding job security and decreasing earnings among the bottom-income class as a result of spikes in the minimum wage. Even those most loyal to President Moon are about to turn their backs on his administration.
After winning a third term in June, Seoul Mayor Park Won-soon announced an ambitious redevelopment plan for Yeouido — home to the National Assembly and headquarters of financial institutions — and Yongsan district, which used to be home to an American military base. That fueled speculation in those areas and beyond. The mayor of the same liberal party as the president did not discuss the plan with the administration. Minister of Land, Infrastructure and Transport Kim Hyun-mee threatened heavier taxes, but could not rein galloping real estate prices. “I cannot know whether the move was intentional to collect more taxes or whether policymakers are simply dumb,” the blogger fumed.
Over the weekend, Mayor Park said he was calling off the redevelopment plan due to the repercussions it was already having on the real estate market. How a mega urban development plan can be chucked away overnight is hard to imagine.
Most key policies of the Moon Jae-in administration have come under challenges. The president holds the key to solving his mounting problems. With his innate sensitivity and warmth, Moon must use his charm in policy-making. While on the campaign trail in April 2017, he stopped by an event trying to find owners for stray dogs. When Moon, a dog owner, affectionately scratched a dog, it reacted positively. Other candidates did not get the same response. The scene could have moved the votes of 1 million who have a pet in their homes. Moon’s appeal and warmth — which even makes an animal happy — should be applied to policies affecting people.
The government must redesign its economic policy and its hikes in the minimum wage. Instead of pushing ahead with the almost certainly disastrous income-led growth policy, it must focus on generating innovation for growth. Facilitating investment in new industries by removing regulations is the answer. The petrochemical and components sector nurtured by presidents Park Chung Hee and Kim Dae-jung still form the backbone of Korean industrial power.
What kind of vision does Moon have? The Blue House had planned to announce deregulatory actions, including easing the banking law to promote online banks, but that plan met with protests by civic groups. Many key aides in the Blue House are from civic activist groups. It couldn’t have been that hard to dissuade them.
The government vowed to offer a 12 trillion won subsidy to mom-and-pop shopkeepers and small merchants struggling with the spike in the minimum wage. But it ignored their demand to apply the minimum wage rate differently according to industry and region. Japan and the United States, where the self-employed aren’t as numerous as in Korea, have different minimum wage levels for different businesses. In order to prevent bankruptcies of the self-employed, the government must pay heed to their desperate pleas.
A permanent workplace will become meaningless in the age of mobility, automation and digitalization. A labor market must be systematized to allow flexibility, but the transition is fiercely blocked by militant unions. Moon must break the union cartel. Soon after his inauguration, French President Emmanuel Macron met with union leaders and implemented labor reforms. His unpopular moves have sent his approval rating down to around 30 percent, but he nevertheless presses on with pension and other controversial reforms.
Moon must challenge the combative unions neglecting their true social role. The Korean Confederation of Trade Unions has returned to the tripartite body for labor negotiations, but remains opposed to reforms. German Chancellor Gerhard Schröder pushed labor reforms even with his job at stake and set the ground for Germany’s economic renaissance. Moon must decide whether he wants to be popular now or someone who can be honored by later generations. Moon’s approval rating is skidding. That should help open his eyes. He must open his ears too.
JoongAng Ilbo, Aug. 27, Page 31