Beware of all the sweet talk from Lee

Lee Sang-ryeol
The author is a senior editorial writer of the JoongAng Ilbo.

The run-up to the April 10 parliamentary elections shows Korea is not free from populism. Political parties and their candidates only talk about cutting taxes and handing out cash. Most would likely vanish into thin air as soon as the election is over, but some could linger to weigh in over public policy. Majority Democratic Party (DP) leader Lee Jae-myung’s proposal to dole out cash gifts for the entire population and his flattering comment toward China could be some of them.

Lee is pitching the idea of giving away 250,000 won ($185) to every Korean, or 1 million won for a family of four, in community vouchers to help boost domestic demand. The sweet talk won’t likely be approved by the conservative government and the People Power Party. Still, free money can tempt people who need every bit of support to survive the economic slump. They could resent the ruling power if it rejects the idea.

No country becomes addicted to populism from the beginning. But once it gets used to the helicopter drop, there’s no looking back. If cash or vouchers are handed out, there could be an immediate boost in domestic demand. Lee could gloat and lecture the government, “It’s the economy, stupid.” But if the method is so smart, why didn’t all advanced economies do the same?

Stimulus payouts have been scorned by mainstream economies due to their brief and questionable effect. Korea also went through it. Each citizen received 250,000 won, or 1 million won per a family of four, during the Covid-19 pandemic. It certainly helped relieve some of the pain of the self-employed, but the effect did not last long.

According to the Korea Development Institute, the effect of the cash handouts on their revenue increase stopped at 26.2 to 36.1 percent of the fiscal spending. Some individuals chose to keep the extra money from the government as savings instead of spending it. Moreover, the excess liquidity prompts inflation. From where would the 13 trillion won needed for the handout come? Since tax revenue is short, the money would have to come from additional debt, which is eventually paid by taxpayers. Lee goes beyond that. He proposes providing 200,000 won monthly for every child aged from 8 to 17 and giving a 100-million-won loan to each newlywed. Lee also wants to make tuition at national universities free.

Nobody would say no to a freebie. But there is no such thing as free lunch. Populism always calls for a dear price: Inflation jumps and public finance is wrecked. Many countries descended to their doom due to such bad habits.

Majority Democratic Party (DP) leader Lee Jae-myung on April 1 backs a DP candidate running in an Incheon district ahead of the April 10 parliamentary elections. [KIM SEONG-RYONG]

In a campaign speech, the DP leader said, “Why provoke China, when you can just say ‘Thank you’ in affairs related to China as well as Taiwan.” He went on to say, “Why should the cross-strait affairs matter to us?” Of course, keeping amiable ties with other states is important. But being “all-appreciative” does not ensure peace and prosperity in international relations. If Taiwan falls into a crisis due to a confrontation with China, the Korean Peninsula will inevitably be affected. Some even say that North Korea could exploit the situation for another invasion. It is also shortsighted to entirely blame the worsening Korea-China relations for Korea’s increasing trade deficit with China. The bigger reason is intensified rivalry in secondary battery, petrochemicals, steel and other mainstay trade.

Former President Moon Jae-in was outstandingly appreciative of China. When he visited Beijing in 2017 for a summit with Chinese President Xi Jinping, he referred to China as a mountain peak and Korea as a “small country.” He was left to help himself for eight out of the 10 meals during his stay in China and yet did not complain even once. Beijing nevertheless slapped economic retaliation for Korea’s installation of the U.S.-led Thaad missile defense system. President Moon did not interfere with Pyongyang’s persistent nuclear and missile development. Still, Lee seems to believe that just saying “Thank you” can solve all the problems with China.

Many dread the aftermath of the election. They fear that irresponsible politics coupled with sweet talk will prevail. The troop of Lee loyalists who were awarded with the ticket to run in the legislative election will fight hard to save their boss from going to prison for corruption charges once they enter the National Assembly. The legislature checks the government. But the DP does not check its leader. That is the Achilles’ heel of Korean politics.