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Blame it on neo-liberalism

July 27,2018
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Yi Jung-jae
The author is a columnist of the JoongAng Ilbo.

It is a pity that President Moon Jae-in has joined his aides in trying to find scapegoats for our economic problems.

The 16.4 percent hike in the minimum wage this year has wreaked havoc on the economy. Self-employed people and small shopkeepers are threatening to not cooperate with the government-set minimum wage when it goes up another 10.9 percent at the beginning of next year. Yet the government blames their economic problems on their landlords and, in the case of franchisees, the headquarters of the franchises.

Their blame game follows a pattern. First, the government announces a controversial policy: in this case to bring the hourly minimum wage to 10,000 won ($8.9) within Moon’s presidential term. Then, the effects of the policy become evident — in this case, the opposite of what was intended: an actual decline in incomes among the poorest class. But the government must insist otherwise: the Blue House claims the effects of the increases in the minimum wage are positive in 90 percent of cases. That kind of pitch rarely works — especially when 3.5 million small merchants decide to take collective action. So the government looks for scapegoats on which to pin the blame. They aren’t hard to find. It blames the chaebol, other large enterprises and former conservative governments. Ruling Democratic Party floor leader Hong Yong-pyo said recent job losses stemmed from the conservative governments’ economic policies focused on exports and large companies. Since the fault lies with past conservative governments under Presidents Lee Myung-bak and Park Geun-hye, the Moon administration’s solution is simple: do away with everything involved with them.

More broadly, they blame neo-liberalism. The incumbent government deplores everything about an ideology that has defined the global order since the late 1990s. But neo-liberalism alone cannot be blamed for all our current problems. Of course, it has deepened inequalities, but it is also credited for the fast growth of the economy. In fact, the past conservative governments have never been true masters of the model. The Lee Myung-bak administration stressed symbiotic growth, market intervention and green growth — hardly orthodox neo-liberalism.

Former President Lee actually revived the preferential industry categorization for small and mid-sized enterprises and forced grocery chains run by large companies to close on certain weekend days to help small merchants and traditional markets. His finance ministry even tried to control the price of vegetables, and the president was eager to promote solar panels, normally the purview of environmental activists.

A senior member of the Lee administration recalled that his agenda looked more like a leftist one by the time Lee completed his term.
The Park Geun-hye administration tweaked the income tax code to tax the rich more. Her finance ministry sharply raised the cigarette sales tax. An aide to Park said nothing really was achieved during her term.

In fact, neo-liberalism actually shone under leftist governments. President Kim Dae-jung dutifully accepted and carried out the International Monetary Fund’s austerity programs in exchange for an international bailout. He went further than what had been demanded from the U.S.-led IMF in terms of opening the Korean market. His successor Roh Moo-hyun sought a free trade agreement with America and complied with U.S. demands to send troops to Iraq. He abolished the industrial preference system that banned large companies from entering certain industries.

The left in Korea became divided between factions for or against neo-liberalism. Choo Mi-ae, current chairman of the ruling Democratic Party, criticized the legacy of neo-liberalism 10 years ago. “There should be no leftists in neo-liberalism, and no neo-liberalism in the left,” she said.

So why is Moon, Roh’s former chief of staff, making strenuous efforts to distance himself from neo-liberalism legacies? Does he want to wipe out the neo-liberalistic association with the Korean left?

He may have fallen into the fallacy of so-called “relative privation” to find a breakthrough by comparing the situation to the best or worst case scenario. This is like arguing that North Korean dictator Kim Jong-un is not that bad compared to Adolf Hitler or Joseph Stalin. Such an argument does not make Kim’s brutality and cunning go away. Moon may be silently comforting himself that the damage done by his signature income-led growth policy is passable compared to the harms that resulted from neo-liberalism.

But the economy is different from politics. It does not work simply through will or ideological purity. A leader should know how to slow or even reverse course when faced with proof that the direction is all wrong. As Karl Marx actually admitted, the will alone cannot fix economic problems. The same applies to liberal economists and politicians in Korea.

JoongAng Ilbo, July 26, Page 30