The people are watching

Hong Jang-pyo, architect of the income-led growth policy of the Moon Jae-in administration, is tipped to become the next head of the state think tank Korea Development Institute (KDI). Hong was Moon’s first senior secretary on economic affairs and chaired the income-led growth committee. Appointing the designer of a policy, which has battered the economy, as head of the government think tank with just a year left in the presidential term raises serious concerns.

Income-led growth policy was a highly experimental theory of putting the carriage ahead of the horse, as it argued that increased income from wage hikes could prop up domestic demand and economic growth. Minimum wages were raised by double digits for two consecutive years. The economy has stumbled ever since. The unskilled low-income class lost jobs and the income disparity widened to the worst ever. While jobs in major economies boomed in 2018-2019, employment in Korea worsened except for tax-subsidized temporary hires of seniors. The Covid-19 pandemic aggravated the woes of the self-employed.

Putting the architect of the disastrous policy as head of KDI could lead to serious consequences. The KDI, responsible for presenting the government’s long-term macroeconomic direction, may become instrumental in justifying and repeating its failed or risky policies. Rep. Yoo Kyung-jun of the People Power Party who used to be a senior economist at the KDI said the appointment would put an end to an institution that has helped design the growth of the Korean economy over the past 50 years. Hong was shortlisted among three candidates for the public enrollment for KDI president.

Other cheerleaders of income-led growth policy also have been promoted to head state institutions. Jung Hae-gu, who chaired a presidential policy committee, was appointed to the head of the National Research Council. Hwang Deok-soon, former senior secretary on jobs, became the head of the Korea Labor Institute. A former aide is also expected to succeed the seat of the head of the Korea Institute for Health and Social Affairs after the term ends this month. The Korea Institute of Public Finance and the Korea Institute for Industrial Economics & Trade whose presidency term ends in April also will likely follow.

Rewarding appointments have been handed down over all the governments. The practice has led to slack management and policy distortion that causes harm to the nation and people. Former environment minister Kim Eun-kyung was found guilty of abuse of power to enforce irregular appointments. The vicious cycle must end. The people are watching.