Three temptations the new administration must resist

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Three temptations the new administration must resist

Published: 18 Jun. 2025, 00:01

Audio report: written by reporters, read by AI

Kim Byung-yeon

The author is a chair professor of economics at Seoul National University.

The new administration has taken office propelled by the momentum of the past. Structural transformation demands a forward-looking vision, yet time and space for such reflection have been lacking. In Korea, the lingering iinfluences of progressivism and conservatism still dominate personnel appointments and policy decisions. At a time when geopolitics, security, diplomacy, trade, economics and technology are deeply intertwined, the government remains entrenched in a compartmentalized mindset, focusing narrowly on ministerial jurisdictions rather than developing an integrated perspective.

President Lee Jae Myung speaks during a meeting with leaders of Korea’s six major business groups at the presidential office in Yongsan, central Seoul, on June 13. From left: LG Group Chairman Koo Kwang-mo, Samsung Electronics Chairman Lee Jae-yong, President Lee, Hyundai Motor Group Chair Euisun Chung, and Lotte Group Chairman Shin Dong-bin. [JOINT PRESS CORPS]

There is public hope that the new administration and the ruling party will govern effectively. But without overcoming these structural constraints, success will be difficult. Excessive use of power or the temptation to push ahead without broad consensus may ultimately lead to failure. In particular, the new administration must resist three key temptations.

The first is the lure of deficit spending. Both Korea’s private and public debt levels are approaching dangerous territory. The Bank of Korea recently warned that the country's private sector debt has exceeded 200 percent of national income, a level similar to Japan’s economy prior to the burst of its bubble. This has become the main constraint on monetary policy. Although interest rates should move flexibly in response to economic conditions, Korea’s central bank is hemmed in by concerns over real estate prices, household debt, a weakening won and inflation.

President Lee Jae Myung speaks in the emergency economic task force meeting with officials held in presidential office in Yongsan District, central Seoul, on June 9. [JOINT PRESS CORPS]

Some argue that fiscal policy, which retains more flexibility, should be used to stimulate the economy. Yet the government’s debt, projected to reach 55 percent of national income this year, already surpasses the average for non-reserve currency advanced economies. At this pace, Korea’s public debt could approach 70 percent within a decade, severely limiting the effectiveness of fiscal policy. Meanwhile, Korea faces heightened exposure to external shocks stemming from geopolitical risks. The worst-case scenario — an economic crisis with no room for policy response — cannot be ruled out.

The second temptation is to pursue growth through the wrong methods. The administration has rightly prioritized economic growth, but how it approaches that goal matters. Recent studies by U.S. economists have identified regulatory reform as the most effective way to promote growth without increasing debt. Public spending, on the other hand, has largely led to more debt, not more growth. Investment in human capital was found to be the only exception with meaningful long-term returns.

Yet successive Korean governments have avoided this difficult path. Rather than pursuing innovation-led growth, they have leaned on debt-financed expansion or insisted on income-led growth. The National Assembly, meanwhile, has tightened regulations, entrenched bureaucracy and stifled creativity. What Korea needs now is to build a fair and flexible institutional system and to invest in educating a new generation of creative talent.

In fields like AI, instead of pouring massive funds into development alone, Korea should aim to occupy key nodes in the global ecosystem and develop related export industries. AI must be integrated into manufacturing and converged with bio and other advanced technologies where Korea can aim for global leadership. A supplementary budget may be necessary, but it should be selective and efficient to prevent a surge in government debt.

The third temptation is a misguided belief in balanced diplomacy. The time for Korea to maintain equal distance between the United States and China is over. Korea is not a small, passive player but a nation capable of shaping a favorable global order rooted in democracy and market principles, alongside its allies. The country must establish relations with China and Russia that are compatible with the Korea-U.S. alliance. If Korea adopts a clearly defined strategic direction, it will have the tactical flexibility to maneuver within that space.

More engagement with China is possible in areas outside of core supply chains and advanced technology. But the notion that Korea can simultaneously embody autonomy, balance and alliance in its diplomacy is unrealistic. As U.S. leadership becomes less predictable, Korea must bolster the alliance framework to reinforce the resilience of the global order. In this context, the administration must approach diplomatic and security appointments with care. Ambassadors to the United States and Japan, in particular, must be individuals welcomed by their host countries.

Finally, the administration must resist the temptation of centralized power. The Economist Intelligence Unit downgraded Korea’s democracy from “full” to “flawed” in 2024. While the immediate cause was the declaration of martial law, the report highlighted a deeper issue: entrenched hostility between political parties and a reluctance to compromise. It warned that Korea’s political system is more fragile than it appears. If judicial oversight is further weakened under a unified executive and legislative government, democracy in Korea could deteriorate even further.

A landmark sign of the G7 2025 logo is seen on the lawn of the Pomeroy Kananaskis Mountain Lodge ahead of the Group of Seven (G7) Summit in Kananaskis, Alberta, Canada on June 16. [AFP/YONHAP]

The ruling party should refrain from overusing its legislative power. Any reform of the judiciary must begin by collecting input from legal experts and stakeholders through an independent, deliberative process.

Korea is entering a period of volatility not seen since the Korean War. Should external shocks collide with internal unrest, the foundations of the state could be shaken. The new administration carries a heavy burden. Neither ideological inertia nor technical competence alone will be enough. The nation must be governed with the integrity and restraint of a scholar and the realism and foresight of an economist.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.