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Inclusive growth for whom?

May 24,2019
Kim Kwang-ki
The author is an editorial writer at the JoongAng Ilbo.

“Inclusive growth” has become the new catchphrase for the Moon Jae-in administration entering the third year in a five-year presidential term. The term “inclusive growth” has been stretched to “inclusive economy” and further to “inclusive nation.”

I searched “inclusive nation” on Google and found no mentions as a government goal. The term is also rarely used in the academic world. There were some articles that introduced Korea as the first country to embrace the concept. As a matter of fact, what country would not embrace national prosperity? Simply put, it is a government’s basic duty.

“Democratic Republic,” which is defined in most constitutions of democratic societies, naturally champions “inclusiveness.” Therefore, a nation defining itself as an inclusive one is just like shouting: “I am who I am.”

Compared to that, inclusive growth is a more familiar economic term used globally. The International Monetary Fund (IMF) advises governments to pursue inclusive growth. The theory is that an economy will grow faster and inequalities will be eased if people are allowed equal and fair opportunity.

For action plans, the IMF recommends regulatory reforms to enable fair competition in the market. Anyone with innovative idea should be able to experiment with “creative destruction.”

For inclusive growth, young people should be given education to broaden their creativity and the social security net must be strengthened so that they do not fear risk taking and failure. The state’s role should also be focused on reforming the system to promote a transition.

Yet the Moon administration’s idea of inclusive growth is quite different. As budgetary spending is the government’s only means to achieve the “inclusive growth,” it has been focused on welfare for income redistribution. The government appears to have merely added “inclusive” in the face of social resistance and criticism against its tax-financed income-led growth economic policies.

To achieve the inclusive growth, government policies must engage all economic players. Yet the government is mostly devoted to workers and the weaker class. On top of that, the establishments — ever-assertive labor unions in particular — feign weakness and interfere with investments in new industries and technologies for creative destruction. As a result, the sharing economy and a for-profit hospital failed to take off in Korea. Militant unions are even stealing work or blocking entries of newcomers to the construction sites.

If regulations are removed, there would be less need for the government to spend so heavily. When the market gains life with new activities, the financial system kicks in and draws in fresh capital. But the liberal government merely clings to one supplementary budget after another without taking deregulatory steps.

Tax revenue may not be sufficient beyond this year. Profits of listed companies have shrunk by 40 percent so far this year and exports have been slumping throughout the year. Investment remains sluggish as companies take their facilities and money offshore. An increasing number of companies and the rich are complaining of excessive taxes, mounting labor costs, and deepening regulations at home. They are stigmatized as “forces of past evils” even when they are responsible for the bulk of the government’s tax revenue.

The government has faithfully paid its dues to the forces that helped push the liberal forces into ruling power over the past two years. In the remaining term, it must govern for a broader population and ideology. It must not attack the conservatives for the behavior of some extreme rightists.

Tax evasion is no longer easy. Companies and rich individuals should be appreciated for their tax contribution to society. There is still time to restore trust, cooperation and integration in our society — that’s the only way for the ruling party to win votes in next year’s general election.

JoongAng Ilbo, May 22, Page 27