Establish a new model to prop economic security

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Establish a new model to prop economic security

Published: 25 Aug. 2024, 19:52

Lee Jae-seung
The author is a professor of international studies at Korea University and head of the Ilmin International Relations Institute.

With economic security risks escalating than ever, trade protectionism — an inevitable offshoot of nationalism — will most likely gain traction in the divisive international order whoever wins the U.S. presidential election in November. Europe, Japan and China are also raising domestic barriers to protect their own economic security. Building defensive networks against the shockwaves is unavoidable. Korea has so far established bilateral economic cooperation systems with major trading partners by swiftly enacting the Special Act on the Materials, Parts and Equipment Industries, the Basic Act on Supply Chains and the Special Act on Resource Security to jointly detect — and effectively respond to — a lack of supplies from outside.

Now, Korea must move on to the next stage of economic security. The key to approaching the levels of its major trade partners, including G7 members, lies in “ensuring stable supply chains,” a new buzzword for advanced economies. Certainly, Korea has a weakness in that category, but it is also a field to which the country can proactively contribute thanks to its unrivaled strength in the production of chips, batteries, reactors and other high-tech products. There are many countries who want Korea to invest and cooperate with them.

To turn economic security into an asset, Korea must address two urgent challenges: One is to lift its national competitiveness by boosting economic fundamentals and the other is to hone its ability for “networking” to create symbiotic international partnerships. What matters here is what “leagues” the country should join on the global stage. It would be the best if Korea can reflect the uncontested value of “economic security” in developing its new national competitiveness model befitting a G10 country.

Korea joined the Organization for Economic Cooperation and Development (OECD) in 1996. The country has been participating in G20 summits since 2008 — and hosted one in 2010 to demonstrate its elevation as a key player in Northeast Asia and the rest of the world. As Korea has been repeatedly invited to G7 summits since becoming one of the top 10 economies in the 2020s, the country is required to play a bigger role — politically and economically — around the globe. Korea’s remarkable growth in soft power over the past decade also helped lift the country’s global rank dramatically. A country who joined the OECD and advanced to higher ranks in less than 10 years is almost unprecedented. But the cost for the country’s compressed growth was also high as evidenced by the critical imbalance among industries. The chip boom was overshadowed by the doom of other declining industries and the self-employed. The reduction and fast ageing of its population clearly represent a socioeconomic crisis which can’t be left unattended. Generation conflicts also have reached their limits — among the grandparents who experienced a war and poverty, the parents who lived through fast growth, and Gen MZ who was born in a developed country but fell into the trap of low growth, for instance. Their positions and views on nearly all issues are quite different from one another. If some of them chant the significance of the United States for security reasons, others cherish China for economic reasons. While some insist on employers’ concession to labor unions, others say the opposite.

But there is no consensus on the future direction of Korean society. A critical dearth of mutual acceptance and coexistence only deepened distrust of other generations and industries. Instead, moral extremism, nostalgia for the past, and cynicism replaced them. Politicians champion pragmatism, but their politics, mostly driven by impractical battles, is utterly susceptible to populism, which bodes ill for the future of the country.

It is time for the country to establish a new growth model. Did we have a promising development model over the past 30 years? Since the 1997 Asian financial crisis, the economy has managed to grow while agonizing over which path to take between neoliberalism and globalization on the one hand and domestic welfare and anti-globalization on the other hand. But a common denominator was missing. According the IMD World Competitiveness Yearbook 2024, Korea is ranked 20th, the highest since 1989, when the Swiss-based institution first released the annual report. But Korea stopped short of reaching the rank of top 10 economies. That calls for a new level-up strategy for the country to take a leading role in the international economy. A new growth model must present a vibrant path to escalating Korea’s national competitiveness by bolstering connections at home and abroad.

In the past, Korea was able to find a model for enhancing national competitiveness by comparing advanced countries’ growth models and mimicking successful ones. We still can find some models for our reference, but most of them cannot fit Korea’s advanced stature. We must find our own model for achieving both economic security and heightened national competitiveness.

As Korea didn’t achieve growth through imperialism, it is relatively free from the shackles of the past. The country can control sensitive issues involving ethnicity and migrants more easily than European countries. It’s also a country who still maintains entrepreneurship and conventional competitiveness. Korea must clarify what the country excels in, must excel in, or only can do.

A new growth model must take several competitive factors into account. Due to the decades-long division and geopolitical risks, the model must place top priority on security competitiveness, as nuclear deterrence and crisis management are the core of economic security. Onto this, talent competitiveness from education and immigration, carbon competitiveness for its new energy model, and high-tech competitiveness through deregulation should be grafted.

However, bolstering supply networks and resource security can’t be addressed by Korea alone; It requires the expansion of various types of “minilateral” cooperation beyond the level of bilateral relations. Having “normative competitiveness” to create regulations and standards are also important. If Korea wants to directly participate in establishing international norms, the country must change its defensive stance against damage to proactive stance. Without that shift, economic security cannot be ensured.

Above all, Korea must become a hub in Asia if it wants to be a G10 member. A country who can maintain close relations with the United States, China and Japan simultaneously is very rare. Regrettably, though, Korea maintains relatively uneasy relations with some of its neighbors in political terms.

The new growth model must draw more people with expertise in China, Japan and Asean, including expert groups who monitor and analyze the macroscopic movements of the United States and Europe. Foreign language competitiveness, a victim of the capricious annual college admissions exam, should be restored, too. When English, Chinese and Japanese can be spoken seamlessly in Korea, it will have a big attraction for foreign countries.

The new model must be a dynamic — not static — one so as to reflect the fast change of the times to draw as many common denominators as possible, domestically and internationally, to tackle challenges.

Military or economic security can get traction only when there is consensus on why it’s important. A massive discourse alone can’t ensure national competitiveness and economic security. The K model must reflect microscopic and molecular competitiveness factors at work on the levels of companies and citizens. It requires a process of listening to other views rather than rushing to persuade them. The government must let prominent people in diverse fields voice their opinions. That will enable the country to take another quantum jump within a generation.

The time has come to upgrade Team Korea to confront the turbulent waves in the international economy expected after the November election in America. We must build a broad talent pool to build a new growth model for the country. The government can lead devising effective strategies to buttress the country’s national competitiveness. But it could be even better if the government launches a tripartite body with the opposition and the private sector for the ambitious goal. If the government feels the need, that’s the golden hour to kick-start the mission.

Translation by the Korea JoongAng Daily staff.