Free money catches on
The author is a senior editorial writer of the JoongAng Ilbo.
The dispute over “growth or distribution” has weighed heavily on every modern government. The conservatives have backed growth and the liberals distribution. Blinded by ideological reasoning, they have overlooked that growth versus distribution is not a question of choice. The western hemisphere strengthened social welfare with the prosperity experienced from World War II until the 1960s.
The case of Korea was different. As it started out in poverty after the war, the economy was merely focused on growth from the 1960s to the 1980s. It came to a rude awakening after the 1997 Asian financial crisis that forced national and economic restructuring in return for an international bailout. Basic social allowances to cover basic needs for the poor were adopted around that period. When the country finally turned attention to distribution, the economy lost steam and entered a single-digit growth phase. As growth slowed, money thinned. There were not enough reserves in national coffers to strengthen social security. The wealth gap began to widen. Low birth and fast aging required more spending. As money was restricted, the debate over growth or distribution got intense. When the liberal camp returned to the governing front after a decade, it experimented with the novel concept of “income-led growth.”
The talk about “basic income” first surfaced in the early 2000s. Since it requires colossal spending, it was simply brushed off as a fantastical concept. Universal basic income would pay every adult a certain amount of money on a regular basis without any conditions attached.
The universal basic income theory resurfaced over the last few years amid evolution in the fourth industrial revolution. Automation, digitalization, robots and artificial intelligence machines have come to replace human jobs. Wealth concentration deepened. Daron Acemoglu, a professor at the Massachusetts Institute of Technology, projected the U.S. economy would lose 5.6 jobs upon addition of a robot. Countries like Switzerland, Finland and Canada have been experimenting with their restricted form of basic income. The call gained ground as the Covid-19 pandemic shook middle class around the world. It has support from famous entrepreneurs like Mike Zuckerberg of Facebook, Jack Dorsey of Twitter and Elon Musk of Tesla. In his Harvard commencement speech, Zuckerberg called for ideas like universal basic income to give everyone “a cushion to try new things.”
Basic income has become an agenda item for both the liberals and conservatives in Korea. Kim Chong-in, then acting chief of the Democratic Party, publicly floated the idea ahead of the general elections in 2016. When he became the chairman of the conservative party last year, Kim pushed the same platform arguing that “there cannot be freedom if there is no money to buy bread.” The agenda item is eagerly pursued by presidential aspirants such as Gyeonggi Gov. Lee Jae-myung, Seoul mayor Oh Se-hoon, and Jeju Gov. Won Hee-ryong. In their co-published book “Economic Policy Agenda 2022,” five veteran economic bureaucrats argued for the need to introduce the so-called “negative income tax” system in which the state makes payments to the poor when their income falls below a threshold, while taxing them on income above that threshold. The co-authors tweaked the theory popularized by Milton Friedman for application in the Korean society. Although the idea is nothing new, it still raised a stir to underscore simmering social interest in basic income.
The thought is fledgling and there are many issues to be addressed. The first question is whether the benefit should become universal or selective for the people in need. When 100,000 won ($89) is distributed to every adult a month, it would cost 62 trillion won per year. Some also argue how much of a help 100,000 to 200,000 won will do. Selective distribution would surely raise controversy over fairness. Combing the existing social benefits is another challenge. If there is a need for tax hike, the move requires public approval.
The debate must strictly keep populism at bay. The platform can be turned into a reckless spending competition ahead of the presidential election in March next year. Presidential aspirants all have populist slogan. Gov. Lee of Gyeonggi proposes 10 million won to subsidize young people who do not enter college. Lee Nak-yon, former DP chief, suggests a 30-million-won handout to every Korean when they finish their military duty. Chung Sye-kyun, former prime minister, wishes to give away 100 million won to every college graduate to help their start in the society. Presidential hopefuls from the opposition front also will come up with their own ideas to woo young voters. The populism fever will only build misconception about basic income and hinder productive debates on the theme.
Knee-jerk opposition citing a lack of funding also won’t help. Such a thought is behind the times. The society is on agreement of the need to the help the weak. Basic income cannot be a panacea but can offer society security.