What is the story, Mr. President?
Chang Duk-jin
The author is a professor of sociology at Seoul National University and a steering committee member of the JoongAng Ilbo’s Reset Korea Campaign.
President Yoon Suk Yeol has delivered his third address to the National Assembly since his inauguration in May 2022. Surprisingly, the prosecutor general-turned president got off his high horse this time. That is a positive change. But as important as the newfound humility is the narrative. Though the president certainly took a step in the right direction for the future of the country, the speech lacked storytelling. The people could understand what his administration wanted to achieve, but could not comprehend why the government must do so.
President Yoon’s explanation about next year’s budget was comprised of two parts: the principles of drawing up the budget and the details on budget spending. The president first mentioned the principle of fiscal integrity, which will “contribute to controlling inflation, buttressing our sovereign credit rating, and reducing financial burdens for the future generation.” He added that “the International Monetary Fund and global credit rating agencies highly appreciated this direction.” Then the president summarized the areas where the government wants to spend next year’s budget, such as “national defense, the rule of law, education, and public health, to strengthen the state’s fundamental functions, protect the vulnerable, and secure future growth engines.” Audiences immediately knew what it meant. Nevertheless, his speech did not convince them to accept what he said, and follow his lead in earnest. That’s because there was no storytelling in his address.
Korea is turning into a southern European country, as scholars warned more than 10 years ago. Aside from external variables like war, a state’s fate is determined by two axes: fiscal health and reasonable policy. Saving the budget is not always meritorious as you must spend it when necessary. But there is a precondition: government policies should be rational. There’s another. Policies should be sustainable — and in the long run, more taxes should be collected than the budget spent. Korea was able to weather repeated economic hardships thanks largely to its stubbornness in not wasting the budget.
But the atmosphere has changed. Though Korea’s welfare-to-GDP ratio is the fourth lowest among OECD member countries, it has grown at the fastest speed over the past decade. If left unattended, the ratio will approach the OECD average soon. Coupled with the aging factor, taxpayers will decrease rapidly and welfare services will be reduced swiftly. The lion’s share of welfare expenditures must go to the national pension and medical coverage, the country’s Achilles’ heel in a super-aged society.
The government must keep in mind that though the country’s fiscal health may look sound now, it could worsen quickly in tandem with the rapid aging of the population. As recently pointed out by the JoongAng Ilbo, Korea’s welfare expenditures are anticipated to reach $240 trillion won ($181.7 billion) annually by the end of the Yoon administration.
To make matters worse, the opposition Democratic Party (DP) will most likely present more spending as its campaign strategy in the upcoming parliamentary election and the 2027 presidential election. Koreans already experienced a big government which nearly doubled the size of the country’s national debt in just five years. They also discovered that a sugarcoated promise by the DP’s presidential candidate to heartily open state coffers — as exemplified by his pledge to ensure basic income for all citizens — could lead to a razor-thin defeat by 0.73 percent in the last election. Whoever gets elected as the presidential candidate of the liberal party after four years will likely champion a big government in the next election.
Fiscal expansion is only possible when government policies are rational. Unfortunately, Korean politics is still stuck in demonizing opponents and is headed toward populism, as we saw in southern Europe, where a massive fiscal splurge dominated the political landscape.
A big difference between the Korean economy and the Greek economy is that the former is more open than the latter — and that Korea is a manufacturing powerhouse while Greece is not. But despite such fundamental differences, Greece’s political incompetence and succumbing to the temptation of spendthrift policies suggest a lot. Until the early 1980s, the Greek economy was full of vitality. Just like the two mammoth political parties that alternately took power in Korea, the liberal Socialist Party and conservative New Democracy did the same in Greece for a long time. Just like Korea, Greece suffered the authoritarian rule by a military junta in the 1960s and ‘70s. The Socialist Party played a role similar to the democracy fighters in Korea and became one of the two major parties today.
Unfortunately, a pivotal tool for both parties to compete against each other was fiscal policy. After taking power in the 1980s, the Socialist Party multiplied the fiscal deficit. However, after the New Democracy took power in the early 1990s, Greece succeeded in reducing some of the deficit. But the cut was not popular to the Greeks who had tasted the sweetness of free welfare. The conservative party had to hand over power to the Socialist Party in 1993. The progressive party reigned the country for 11 years by incrementally raising the fiscal deficit.
After taking back the power in 2004, the New Democracy did not forget the lessons it learned from the election defeat 11 years ago: it started to spend money more extravagantly than the Socialist Party. When the splurge and the swollen government debt combined with the 2007-08 global financial crisis, Greece collapsed. The meltdown finally stabilized after ten years of painful restructuring, but fiscal tightening is required for two more decades.
A result of the repetitive splurge was the surge of workers in the public sector, nearly tripling the OECD average. At the height of the eurozone crisis in the 2010s, I had a chance to interview a deputy welfare minister of Greece in Athens. Three of us, including me, met with two Greek officials, including an aide to the minister. After knocking on the door, someone brought in tea and sandwiches as snacks. The Mediterranean sandwiches tasted fantastic, but there were more than 20 sandwiches. I wondered if the Greeks ate that many sandwiches for a snack in the afternoon. But I couldn’t ask the question to the minister.
The answer came from a University of Athens professor at dinner that evening. Bursting into laughter for a while, he came up with this answer: “The man who brought the sandwiches must be a public employee working for the welfare ministry. Because of the ongoing restructuring of the public sector — led by the troika of the IMF, the European Commission and the European Central Bank — the man must prove the value of his service if he is not to be fired. To do that, he must back it up with numbers. That’s why at least four sandwiches were delivered per person.” That was a farce showing how a country can go bankrupt from the spending splurge.
With less than five months left before the next parliamentary election on April 10, the prospect of victory for the People Power Party (PPP) in Korea is not so bright. Can the governing party resist the temptation to splurge, unlike the New Democracy party of Greece? Even if the PPP manages to repress such impulses this time, could the party really do so if the president is in a vegetative state after the party fails to become a majority party with only a couple of years left before the next presidential election? Would the government be willing to take the unpopular — yet vindicated — path the conservative Greek party took?
To do so, the government must share with the people a narrative on what kind of a situation they are under, what should be done from now, and what determination the government has in order to keep the country afloat. Put simply, the president must make clear his duty as the head of state.
President Yoon’s approval rating hovers between 30 percent and 45 percent at best. He must pass through the deep valley surrounded by rough political terrains. In polarized politics, the political terrain hostile to the government can change when it can convince the people to support what the government must do. The president can lower himself in the process and does not have to compare his government with the past one. If the president does what he must do, the people themselves will compare the two divergent administrations. That’s what they expected from the president from the beginning.
Translation by the Korea JoongAng Daily staff.
with the Korea JoongAng Daily
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