A long way to go until achieving an ‘inclusive economy’
Published: 21 Oct. 2024, 19:36
Lee Ki-wu
The author is an emeritus professor at Inha University Law School and a member of the JoongAng Ilbo’s Reset Korea campaign’s special committee on constitutional amendment.
This year’s Nobel Memorial Prize in Economic Sciences went to “Why Nations Fail” co-authors Daron Acemoglu and Simon Johnson of the Massachusetts Institute of Technology (MIT), and James Robinson of the University of Chicago, for their empirical research on the critical role institutions can have in deciding a nation’s success or failure. Their investigation discovered that the condition of a wealthy or poor country is not the work of the Providence but a byproduct of deliberate human choices.
The academics argue that inclusive political and economic institutions knitted together feed a virtuous cycle toward the path of prosperity. An inclusive political system breeds inclusive economic establishments, reinforcing one another. The “inclusive growth” the researchers envision is different from the OECD’s emphasis on balancing growth and distribution or the inclusive state slogan of the previous Moon Jae-in administration. True inclusiveness, defined by the economists, refers to growth based on inclusive political and economic establishments.
The two co-authors of the book use South and North Korea as examples on how their divergent choices led to drastically contrasting outcomes. But South Korea’s inclusiveness is far from being complete. Political inclusiveness requires more than just free and equal voting rights. Power must not be overly centered on a certain institution but be diffused across various political agents to ensure diversity. In Korea, power is heavily concentrated in the president, bestowing an emperor-like authority. Ministers merely act as figureheads of the cabinet. Each ministerial post must come with the onus over the government office he or she is in charge, and the cabinet meeting should be convened like a consensus-based decision-making board.
The legislative power often is also often dictated by the majority party. Lawmakers mostly act as rubber stamps for their party’s decisions. A two-chamber system with a cooperative rivalry between the upper house representing the interests of electoral locations and the lower house representing the national interests can ensure diversity in lawmaking process. A public referendum should be institutionalized to allow voters to enact a veto against unwanted laws. Political parties also cannot represent the interests of people of all walks of life because power is invested entirely in the central leadership. Parties must become democratized and decentralized. The single-member district system also must shift to the multi-member district system to breed more diversity in the legislative composition.
Local autonomy lacks diversity and innovation because power and resources are cencentrated on the central government. Decentralization can take place when regions compete through bottom-up innovation and pave their own way for development and balanced growth.
In an inclusive economy, laws and systems must guarantee private ownership and free competitions so as to open the market to all agents and allow them to fully demonstrate their talents and abilities. The free market order in Korea is undermined by various regulations and collective actions. Mainstream groups profiteer through entry barriers to distort distribution. Too many powers collude with the government or abuse their stake in the government to disrupt the market order. Collective rent-seeking has become an epidemic eating into national progress and innovation. A free and fair market order should be restored through radical deregulation and decentralization to galvanize the bottom-up “creative destruction.”
The ongoing clash over the government’s plan to increase medical school admissions quota is a typical rent-seeking example. The doctor shortage happened because the med school quota is solely decided by the Education Ministry, which has been pampered by lobbying from doctor groups. It’s a by-product of overregulation and rent-seeking by doctors. The Yoon Suk Yeol government has been as unsuccessful as past governments in dealing with collective actions by doctors who take public health hostage.
The answer lies in decentralization by allowing universities to establish or expand medical schools on their own. Local governments must have the authority and responsibility to beef up staffing for primary medical care. Germany could push for an increase of 5,000 students in medical schools with the backing of doctors and unions because enrollment decisions lie with the state governments and local universities.
Germany’s Minister of Economics Ludwig Erhard credited for the postwar Miracle of the Rhine believed fair and free competition was integral to the “prosperity for all.” Korea can enter the advanced ranks only when it does away with unnecessary market interventions to enable all economic agents to prove themselves through fair competition.
Translation by the Korea JoongAng Daily staff.
with the Korea JoongAng Daily
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