The author is an editorial writer at the JoongAng Ilbo.
U.S. General Douglas MacArthur predicted it would take 100 years for South Korea to recover following the end of the devastating 1950-1953 war. He would have been stupefied if he had lived to see how fast the country turned around. Korea’s rags-to-riches transformation remains a wonder to the world. The economy has long lost its former sizzling pace. But growth nevertheless is essential. Like a bicycle, the economy cannot stop moving forward or it will topple. The economy will stumble and fall down if it stops pedaling.
In a speech to the National Assembly to pitch his 2019 budget, President Moon Jae-in used the words “growth” and “together” over and over again — 25 mentions each. His definition of growth is prosperity for all and creating a country in which every single individual receives equal treatment. Co-prosperity is a universal value for all mankind.
The question is how. Moon sticks to his original recipe — growth propelled by income increases, innovation and fairness. “We have achieved the dream to live well thanks to people’s efforts. But the dream of living well together remains far-fetched,” he said.
The Korean economy has aged. It no longer can grow according to the input of labor and capital. Improvement in productivity across the board is the key to pushing the economy to a new level. Productivity sprouts from inventive ideas, fair competition, an environment supportive of risk-taking and radical innovations. But too many stumbling blocks are in the way. Colossal unions refuse to yield their vested power. Because of their iron grip, fewer jobs go around for the young, while the self-employed segment is almost wiped out. Large companies still go on with predatory practices, stealing ideas from smaller counterparts and overcharging them for their services and supplies. Various regulations choke the business field. Productivity cannot go up when the environment overall discourages adventurous challenges.
The income-led growth policy through hikes in the minimum wage, job sharing and conversion of irregular workers to full-time status is entirely led by the government. The measures cannot be lasting if they are not also taken up by the private sector. The government cannot force them on the private companies. Inflating incomes cannot solve the many challenges facing the Korean economy. The government vows innovation-driven growth. But it more or less is supplementary to its key income-led policy. Joseph Schumpeter, champion of innovation, said there were two types he did not trust: a builder who promises to build a building at a cheap cost and an economist who claims a cure-all solution.
The answer lies in the basics. In order to share fruits, a tree must be able to grow fruits. A reservoir must first be filled to send out its waters to those who need it. The water must flow to pave the way for a bigger ocean. All the unnecessary stumbling blocks in labor, regulations, and industry must be washed out. The economy must be recharged with fresh blood through painstaking reforms. “We must live well together. We can live well together,” was the president’s closing remark to the National Assembly. But he should have added a promise to press ahead with reforms to reach that lofty goal.
JoongAng Sunday, Nov. 3, Page 34