How do we spell relief?
The author is an editorial writer of JoongAng Ilbo.
The table at a restaurant in northern Seoul was loaded with dishes, from pork barbecue to egg rolls. The seafood stew featured all kinds of fresh ingredients. Hygiene was as good as in a hotel. Each customer was given a holder where masks could be kept and a disposable apron. The meal cost 15,000 won ($13.60) per person. I’ve never seen so lavish a meal at such a modest price. It was as if the restaurant was daring customers to refuse its bounty. Still, the oncepopular restaurant was mostly empty. The three people at our table enjoyed the lunch in a quiet ambience.
On the same day, Prime Minister Chung Sye-kyun explained the hardships the self-employed were going through as a result of the pandemic in a teary voice at the National Assembly. He might have been sincere. Gyeonggi Gov. Lee Jaemyung has repeatedly campaigned for universal relief handouts to comfort distressed people and stimulate consumption in hard times.
But politicians should see the bigger picture and keep their heads cool. They must study the possible side effects of government policies. The question of fairness is the most important to be addressed. The first relief checks handed out to every household and costing a whopping 14 trillion won ($12.7 billion) have been projected to have achieved only 36 percent of their expected effect on economic recovery, according to recent research by a government- run think tank. Since the money was given out through charges on credit cards, it would have had to be spent one way or another.
There are plenty of people unaffected by the Covid-19 crisis. More than 850,000 people earned more than 100 million won last year. This year, lawmakers raised their salaries, which are funded with taxpayers’ money, regardless of the hard times in the country. Salaries for the president and 1.1 million others on government payrolls also increased. Those fortunate enough to work have no reason to worry. oreover, if people owned an apartment or invested in stock last year, their wealth would have increased, at least on paper.
Devastation came for the selfemployed and mom-and-pop store owners at the lower-end of the spectrum. The wealthiest 20 percent increased their monthly incomes by 2.9 percent in the third quarter from a year-ago period. At the same time, the poorest 20 percent’s monthly incomes declined by 1.1 percent after social distancing measures wiped out their jobs. During the first universal relief handout, a four-member household earning more than 10 million won a month could receive the maximum payout of 1 million won.
Politicians are jumping on the bandwagon. The fourth round of government relief is being pushed speedily ahead of the April 7 mayoral by-elections in Seoul and Busan. Ruling Democratic Party (DP) Chair Lee Nak-yon hinted at another round of universal payouts. Gyeonggi Governor Lee again proposed payouts for his constituents. Prime Minister Chung pitched the idea of subsidizing losses for the self-employed. President Moon Jae-in has ordered systematization of such universal handouts.
The measures could help relieve the immediate pain of the self-employed, but many are worried about the ramifications of the government’s reckless spending. Interest rates on government bonds have sharply risen after concerns about a rapid surge in debts arose. If the national debt increases, it ends up aggravating woes for the economically underprivileged.
Everyone likes freebies. Polls showed the majority welcome relief packages. During the first universal handout, 99.5 percent spent their payments. But populism has a catch. The proposed subsidy for the selfemployed, forced profit-sharing for large companies and mandatory contributions by public institutions to create a social relief fund all serve the purpose of helping the needy. But at the same time, they can distort the market and steal the share that could have been better spent on the poor.
DP politicians point to the United States, which has been handing out stimuli checks. But America’s social and economic structure greatly differs from ours. Moreover, the U.S. has the privilege of printing the global reserve currency, so it can print as much as it wants, and layoffs are much easier than in Korea. We must find solutions that fit our conditions. Money should go to the needy, not to the rich. That’s the way to keep populism in check.