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In an ideological trap

Jan 31,2019
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Lee Chul-ho
The author is a columnist of the JoongAng Ilbo.

A senior reporter with the liberal Hankyoreh Newspaper posed a question to a key member of the militant Korean Confederation of Trade Unions (KCTU) after he finished a lecture. He asked if the KCTU was refusing to take part in the Economic, Social and Labor Council — a tripartite committee of representatives from the government, companies and workers — because of the limitation of leadership in the Gyeonggi Dongbu Alliance. The KCTU official appeared to be startled by the blunt mention of the now-defunct group known to be pro-Pyongyang. “It is true [the pro-socialist] People’s faction, including Gyeonggi Dongbu, takes up more than half [of the leadership at KCTU,] but it is flexible,” he said in a fuzzy way. We last heard of the Gyeonggi Dongbu Alliance during the scandalous arrest of Lee Seok-ki, a member of the Unified Progressive Party, for plotting an armed rebellion and the Constitutional Court’s ruling outlawing the party. Although they were expelled from mainstream politics, the pro-Pyongyang National Liberation (NL) faction of the pro-democracy movement in the 1970s and ’80s lives on by dominating the contentious umbrella union group KCTU.

Lee Jae-young — the late policy chief of the New Progressive Party, which was created by politicians who left the union-backed Democratic Labor Party in protest of the widening influence of pro-Pyongyang members — explained there were no pro-North Korean members of the KCTU in the early days. Although its early founders were student activists inspired by communist theory, the labor activists did not completely trust university-bred activists. But the leadership was soon reversed. The Gyeonggi Dongbu faction penetrated each union and soon overwhelmed the original labor activist faction.

These days, President Moon Jae-in has lunch with Prime Minister Lee Nak-yon every Monday. He meets Hong Nam-ki, deputy prime minister for the economy, every other Tuesday. Hong dines with Kim Soo-hyun, the president’s policy chief, every Friday. The president’s new chief of staff, Noh Young-min, is also well versed in economic affairs. The inner circle has entirely changed from a year ago when the Blue House’s key seats were dominated by hard-line ideologues such as Im Jong-seok, the chief of staff, Jang Ha-sung, the policy chief, and Hong Jang-pyo, the senior economic secretary.

Even with additional practical figures around him, Moon is still bound to his so-called income-led growth policy. He cannot shake off his indebtedness to the union group KCTU and progressive activist group People’s Solidarity for Participatory Democracy (PSPD) for their role in the mass movement to oust former President Park Geun-hye.

The new aides at the Blue House fail to live up to expectations, trotting out one makeshift measure after another instead of fundamental solutions. The government has revived pork-barrel spending to prop up the economy, a tactic liberals strongly criticized when they were in opposition. The government gave a go-ahead to 24 trillion won ($22 billion) in infrastructure projects, exempting them from mandatory preliminary feasibility studies. It pushed through the plan without spreading out the spending projects to avoid the cap of 50 billion won, a threshold requiring prior feasibility study, as President Lee Myung-bak did for his controversial four rivers renovation project.

The income-led growth policy is fundamentally flawed. No makeshift actions can make up for its shortcomings. According to the “Cartoon Introduction to Economics” based on 10 principles of economics from Gregory Mankiw, economists generally agree a minimum wage can distort the labor market and hikes in minimum wages can lead to increases in unemployment of teens and inexperienced workers. The near 30-percent jump in our minimum wage over two years has hurt small workplaces. Employment data from last year showed a surge in unemployment among low-skilled workers and deepening income polarization.

Conditions for this year are worse. The semiconductor industry that has sustained the Korean economy has entered a downturn, hurting exports and investment. The U.S. economy has entered a cyclical downtrend and the Chinese economy grapples with structural risks. Korea’s economy may not grow beyond the mid-2 percent range this year. Experimental progressive agendas — such as income-led growth and higher property taxes — could be highly dangerous. The price may be dear.

Moon’s economic policy has drawn criticisms at home and from abroad. Yi In-sil, a professor at Sogang University who will chair the Korea Economic Association, a group of economists, said its secretariat office is bombarded with phone calls demanding critical input on the Moon administration’s economic policies from economists. Many experts from abroad have been speaking against the policy. Paul Romer, last year’s winner of the Nobel Prize in economics, called it a dangerous model. Harvard University professor Robert Barro advised it was “not a good idea.” Arthur Laffer, former economic policy adviser to the Reagan administration, called the concept silly stuff. The New York Times said President Moon is going in the opposite direction of U.S President Donald Trump with a pro-labor policy of higher wages that has been “discouraging.” The Financial Times warned of a long-term slowdown of the economy if Korea does not shift to a different model.

Korea is the only member of the Organization for Economic Cooperation and Development (OECD), engrossed with a supply-side solution to spur growth through income increases. The government pours out tax funds and repeats the mantra that things will get better. The late progressive economist Kim Ki-won pointedly said the progressives in Korea are experts in dissecting contradictions, yet lack abilities to make society better. He advised seasoned actions. Reckless experiments should be stopped. Joseph Schumpeter famously said, “Add successively as many mail coaches as you please, you will never get a railway thereby.”

Leftists are paranoid about compromising their beliefs. They are obsessed with utopian concepts and blind to practical and realistic approaches. Karl Marx borrowed a story from the Aesop fable “The Boastful Athlete” to chastise fundamentalists: “Rhodes is here, here is where you jump!” to emphasize actuality should come before theories and ideals. The Moon administration must open its eyes wide to the worsening reality and veer away from its infatuation with ideology. Moon, guided by unions and progressive groups, can poison the entire economy with fundamentalism and ruin it.

JoongAng Ilbo, Jan. 30, Page 31