It's the growth, stupid

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It's the growth, stupid

Published: 13 Nov. 2024, 20:12

Chung Jae-hong
The author is an international, diplomatic and security news editor of the JoongAng Ilbo.

Former U.S. President and Republican candidate Donald Trump unexpectedly won a crushing victory over his Democratic rival Kamala Harris in the Nov. 5 election. American voters punished the current administration under President Joe Biden and Vice President Harris for failing to curb high inflation and control surging illegal immigration. As the Republican Party also grabbed a majority in both the Senate and the House in the election — on top of the Supreme Court being dominated by conservatives — Trump has set the perfect foundation for a strong policy push during his second term.

The results of the U.S. election reflect a global movement to deliver a harsh verdict on the governing power. Given Korea’s close ties with the United States, it will most likely face tough challenges. Trump’s triumph in the race poses serious implications for a country struggling with its unprecedented slow growth from its ultra-low birthrate and fast aging population, for instance.

U.S. voters chose the Republican Party championing economic growth over the Democratic Party cherishing distribution. In his recent opinion piece titled “How Trump Wins (and Harris and the Democrats Blow it),” New York Times columnist David Brooks analyzed that Americans prefer the Republican Party’s stance on the economy. Currently, Republicans serve as governors of Florida, Texas, Idaho and Montana — states marked by a rapid population increase — while Democrats are governors of New York, California, Illinois, Pennsylvania and Hawaii — states with declining populations. While residents in the Republican-controlled states enjoy affordable housing costs, relatively low taxes and economic vitality, their counterparts in the Democratic-controlled states suffer from high housing costs, heavy taxes and deepening income inequality.

The Democrats still adhere to the expansion of welfare services as in Europe. But the old continent has lost economic vitality, as seen by the sharp decline in the European Union’s average household disposable income being 60 percent of that of the United States. According to the McKinsey Global Institute, large European companies’ investments also fell to 60 percent of their U.S. counterparts in 2022. As a result, their growth rates account for only two-thirds of U.S. firms. Over the past decade, Europe lagged far behind the United States in capital investment, research and development, and productivity.

Many U.S. voters envied Europeans’ long vacations but want economic vibrancy now. Voters in the seven swing states deemed the economy as the biggest issue in the election and supported the Republican Party’s campaign to restore the long-lost economic vigor.

The Democratic Party was perceived as a party for the establishment. In a society where the quality of life largely depends on whether you have a college diploma or not, those who have a degree tend to vote for the liberal party, while those without it vote for the conservative party. High school graduates die nine years earlier than college graduates. The likelihood of the first group getting married is even lower than that of the second group — and the possibility of the former getting divorced is much higher than the latter.

Another problem with the well-educated upper class is the exacerbation of inequality. According to research by Harvard University Prof. Raj Chetty, students from families with the top one percent income were 77 times more likely to enter Ivy League schools than those from families with less than an annual income of $30,000. The wave of global populism could be a revolt against such deepening disparities.

Korea’s situation is worse than America’s. The United States is envied by the rest of the world for its high growth rate and low jobless rate. But Korea is stuck in a swamp of the world’s lowest fertility rate and the fastest population aging. The income gap between college graduates and high school graduates — and between its regular workforce and irregular workforce — has reached alarming levels. Korea wants to offset its sluggish domestic demand with exports, but Trump’s protectionism casts dark clouds over the hope. And yet, Korean politicians are bent on expanding welfare services rather than finding ways to reignite the growth engine.

If Korea wants to overcome the crisis, it must first revitalize the economy. Given America’s solid growth and Europe’s protracted slump, we should choose the United States’ growth model. We must create a business-friendly environment by reinforcing labor flexibility and removing stifling regulations. Trump’ return certainly heralds a crisis for Korea, but it can turn into an opportunity depending on how we tackle it.

Translation by the Korea JoongAng Daily staff.