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Trapped in a cave

Sept 12,2018
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President Moon Jae-in speaks about an “inclusive state” agenda in a strategic meeting at the Blue House on Sept. 6. [YONHAP]
Yang Young-yu
The author is an editorial writer of the Joongang Ilbo.

President Moon Jae-in, a persuasive orator, was powerful in an opening address at a recent meeting, proclaiming an “inclusive state” agenda. “Not a single person must be discriminated against in a society in which everyone should be better off. A state must be responsible for the lifetime of each citizen,” he said.

But is such a utopia possible?

Moon’s agenda is not being executed a whim. Moon has long brooded on these ideas. When he ran for president last year, he formed a committee to research the very idea of establishing an inclusive state. Seong Gyeong-ryung, a social science professor from Hallym University, headed the committee. The former policy chief for President Roh Moo-hyun defined an inclusive state as one that pursues growth for all through a closely knit web of employment, economy, welfare, and education policies based on the principles of engagement, innovation and flexibility. Public participation is essential to govern inclusively, he stressed.

An inclusive state is not a proven theory of governance. It is more of a political or emotional slogan. The concept came under the spotlight recently as governments around the world battled with the common challenge of widening inequalities from globalization. The idea was championed in the 2012 book “Why Nations Fail,” co-authored by MIT professor Daron Acemoglu and Harvard University professor James Robinson. They claimed that nations thrive when they develop “inclusive” political and economic institutions or fail if those institutions are “extractive” and restrict power and opportunities to a few.

The idea has been embraced by Korea to increase jobs, ease disparities in the labor market, enhance social benefits and enable free education and balanced growth across the nation. So, is everyone buying the idea? To canteen owners and factory workers in an industrial park in Incheon, it is pure political humbug, mere wordplay from people in high places who have no idea what it’s like living at the bottom.

The economy is struggling. “Business has been halved,” said a restaurant owner. “Last year I used to sell 400 meals a day. This year, 200 is the best I can do.”

The president’s policy chief, Jang Ha-sung, said he too was startled at the pace of the increase in the minimum wage for this year, 16.4 percent. But he doesn’t admit how bad the jump in the minimum wage has been for restaurants and many other areas of the economy. Factories have closed due to the hike in labor cost and the shortened workweek. Income polarization only deepened. The supply chain of major industries like automaking survived, but small workshops or foundries could not. One blue-collar worker in his 50s said four out of 10 employees at his workplace had to quit. He frets he could be next. The paradox is that Moon’s income-led growth policy has been cruel to the poor.

Yet the government does not want to change, convinced that virtuous intentions will prevail in the end. But the question is sustainability. Venezuela and Argentina have gone broke. Once one of the richest countries, Venezuela ran out of money after years of generous spending to increase wages and welfare benefits. Argentina’s expensive doubling of pension recipients to 8 million pushed the nation into bankruptcy.

They are object lessons on the ramifications of welfare profligacy. The government proposes a record budget of 471 trillion won ($418 billion) for next year, of which 34.5 percent is earmarked for welfare spending. Even as job conditions have worsened to crisis levels despite the government’s spending of 54 trillion won, it plans to pour 24 trillion won more to create jobs next year. The spending will translate into 31 trillion won in deficit in the fiscal balance for three years from 2020. Is this how an inclusive state and income-led growth works?

The Blue House and ruling party are trapped in a cave. They see the world through a narrow opening. There is a much bigger world outside. Factory workers, shopkeepers and self-employed are screaming at the experiment in economics.

The public can’t understand why the government is so obsessed with certain terms like inclusive growth. They have never really believed in income-led growth. Now they are being ushered toward a so-called “inclusive future.” The powers that be may be dreaming of holding onto power for decades. To remove the doubts, they must get out of their cave, engage talents across the board, and pay heed to voices from the real world. That’s the kind of inclusiveness Korea needs now.

JoongAng Ilbo, Sept. 11,Page 30