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Good growth vs. bad growth

While economic growth does not make all individuals happy at once, it should be a primary policy goal for the nation.
July 28,2017
Good restaurants impress their customers. I applaud whenever I see features about restaurants that use good ingredients, cook in hygienic environments and offer reasonably priced dishes. However, one television program has taken up the task of condemning restaurants that use imported ingredients and artificial seasoning. I doubt, though, that a producer can simply label restaurants as “good” or “bad” at his discretion. An affordable restaurant can be good for one crowd, while an expensive restaurant serving gourmet food can be good for others.

Korea’s economic development is often called the “Miracle on the Han River.” Per-capita income rose from $100 in 1960 to $27,000 today. Compared to other countries that attained rapid economic growth, Korea has also had relatively fair income distribution.

Since the 1997 financial crisis though, economic growth has slowed. Unemployment and irregular employment have increased, the retiree population is growing and the income gap has widened. Korea’s goal has long been breaking the double whammy of low growth and high wealth polarization.

President Moon Jae-in’s government set an economic goal of “prosperity for all” during his five-year term by sharing the fruits of growth with all citizens. The new government vowed to address both low growth and polarization by creating jobs and increasing household income. I hope these good economic policies tackling the problems of our time will bear fruit.

However, I am concerned that some people will try to put top priority on fair wealth distribution and regard economic growth that deepens relative inequality as meaningless growth. I am also worried that past economic growth will be considered “bad growth” as the new administration pursues “good growth.” Even though Korea’s income distribution has not been satisfactory, it has also hardly been “bad growth.”

While economic growth does not make all individuals happy at once, it should be a primary policy goal for the nation. Growth not only boosts production capability and national strength but also enhances living standards for individuals.

In the 1960s, for instance, the Philippines was an Asian power with an economic size 1.7 times that of Korea. But after decades of low growth, its economy is now a fifth of Korea’s, and per-capita income is a tenth. In contrast, Korea has become the 11th-largest economy in the world, trailing the Group of 7, China, India and Brazil. Korea’s diplomatic, military and cultural power on the international stage is supported by its economic power.

China’s economic strength was similar to Korea’s in 1991, but after three decades of rapid growth, it has emerged as a superpower. While China’s growth resulted in aggravated income distribution among regions and classes, no one would say that economic growth which saved 1.3 billion people from absolute poverty was “bad.”

Another effect of economic growth is constantly improving quality of life through technological advancements. Development of transportation like express buses and subways, refrigerators and mobile phones, the internet and even toilet paper are benefits that offer convenience for all people.

Income disparity, relative poverty and unequal job opportunities are problems not limited to Korea. The French economist Thomas Piketty wrote in “Capital in the 21st Century” that income and wealth distribution in many countries has worsened since the 1980s, and found the causes to be capital gains and inheritance. Other researchers point out that technological advancement favoring skilled workers, expansion of international trade and changing divisions of labor also widen the wealth gap. For different causes, we need various plans to improve income distribution.

We must work harder to attain fair distribution through tax reform and gradual expansion of welfare. But these efforts should also be supported by economic growth and innovative policies that seek out new growth engines. Corporate entities should be protected and allowed to engage in free economic activities. Productivity and technology should be enhanced.

Restructuring our export industries, supporting innovative small businesses, training workers in science and technology, educating our students and reforming the labor market are also important. Quality jobs and start-up opportunities should be increased through regulatory reform of the service industry.

If we overly emphasize fair distribution and neglect economic growth and technological innovation, the Korean economy will continue to experience low growth. As Japan’s two “lost decades” have shown, it is hard to get out of the quagmire that is low growth.

From the foundation of our economy’s accomplishments, we should strive to improve both distribution and growth. Even a good restaurant that everyone is proud of can go out of business if customers don’t visit it.

Translation by the Korea JoongAng Daily staff.

JoongAng Ilbo, July 27, Page 31

*The author is a professor of economics at Korea University.

Lee Jong-wha