Korea Inc. at crossroads
It's time to discuss stable and sustainable growth
The Korean economy is a total mess.
Economic policymakers will deny it. However, most Koreans, especially working-class people, think so.
The growth rate remains below the average of the OECD, a club of mostly wealthy nations, while exports fall, consumer prices rise, debts swell, the property bubble remains, real wages stay the same, and the income gap widens.
At an emergency meeting on July 4, the government presented three goals - reinvigorate economic vitality, improve the economic structure, and stabilize public livelihood - for the second half of this year. From an abstract standpoint, these pledges, although repetitive, may be OK. But they are unlikely to become a reality.
President Yoon Suk Yeol's economic policies go in opposite ways. Yoon sticks to fiscal austerity and tax cuts for big businesses and wealthy individuals, while merely stressing the importance of supporting the public's livelihood. His officials lowered the growth target for 2023, but offered no stimulus measures. Their economic policies lack three things - vision, crisis awareness, and a will to aid people's lives.
Such a policy has even more problems from a longer perspective.
To be fair, the incumbent administration is not the only one responsible for what's happening now. The ongoing problems are the aftereffects of Korea's "compressed growth" in the past decades. It was possible thanks to skilled and highly educated human resources riding on global free trade trends and relatively cheap and abundant commodities.
All of these things have changed. Major countries have turned protectionist, resources became scarce and expensive, and the once-excellent manufacturing-oriented labor is less useful in the Fourth Industrial Revolution. Without a new workforce and technology with a global competitive edge, the nation may remain mired in a protracted period of recession. In other words, the current slump could be structural and continual, not cyclical and temporal. That means Korea Inc. must have a new strategy - and mindset.
In the short term, it is imperative to strengthen existing growth engines, like IT and semiconductors, while finding new ones, such as biotechnology. The U.S. tech controls against China can be both a crisis and a chance for Korea. Korea must diversify its markets beyond China to Southeast Asia and Europe, while maintaining or widening the technology gap with its giant neighbor. The nation must also widen its doors to foreign investors, not financial but industrial ones, and not by cutting taxes but by removing regulations in its strong sectors to create an even playing field.
In the longer term, Koreans should get used to lower but more stable - and equal - growth. Major economies have long been accustomed to 1-2 percent growth rates. Some economists and sociologists even call for entering the "era of de-growth" to save the Earth.
Korea can ill afford to take such an extreme but inevitable path. The nation's dollar-based global ranking of gross domestic product fell from 10th to 13th place recently. That's worrying enough. However, more serious is that the nation ranks 23rd in per capita GDP. Korea might be a big economy, but is not a well-to-do one even now.
Some ecological sociologists say even "green growth" is fiction, saying technology cannot ease the climate crisis. We hope they're wrong. We still expect technology and more progressive policies to save this planet and its residents. So, Korea must join a global drive to slap heavy taxes on the 1 percent of the wealthiest people and use them to narrow the gap with the bottom 50 percent.
The Yoon administration's pro-business, anti-labor policy may produce short-term results, but goes against global trends. Only when workers, i.e., the ordinary people, have higher incomes and more free time, can they be more creative, the utmost growth engine for the future economy. While many advanced countries experiment with a four-day, 35-hour workweek, this government is toying with a 69-hour scheme.
Already, Koreans are the unhappiest people in the world, showing the world's highest suicide rate and lowest birthrate.
As things stand now, they will grow even unhappier. And people will express their anger and frustration in the next presidential election - if not in the parliamentary polls next May.
Source: Yonhap News Agency