Small- and medium-sized companies and self-employed people alike are lining up to file for bankruptcy or announce the closure of their businesses. In the face of surging inflation and declining household incomes, the gust of winter is blowing into low-income households, causing members of this class to worry about their survival. Talk of a second IMF, a reference to the possibility of a recurrence of the near collapse of the South Korean economy in 1997-98 that led to a bailout from the International Monetary Fund, may be regarded by the wealthy as an exaggeration. But it is a harsh reality for many of the nation’s low-income earners.

In spite of the pending crisis, the government does not seem to recall the pain it experienced a decade ago. Ten years ago, approximately three million people became part of South Korea’s new poverty class, as many low-income earners were hit by rising unemployment rates and surging household debt. Countless low-income households went bankrupt and people were made homeless. At that time, South Koreans realized just how important were the precautions taken by the government in preventing the members of the lower class from becoming destitute. Now, at a time when many low-income earners are again on the brink of falling further into poverty, it seems the government needs to once again employ a preemptive strategy by repairing the social safety net.

Unfortunately, however, it seems that the government is going backwards. In the first-half of this year, the government pledged to stabilize the social welfare system to protect low-income earners against inflation, but next year’s budget looks like it will instead concentrate the nation’s resources on tax cuts for the wealthy and orchestrating an economic revival for large corporations.

You Jong-Il, a professor at the KDI School of Public Policy and Management, said, “The economic policies by the administration of President Lee Myung-bak are a mixture of the economic model constructed by the administration of former President Park Chung-hee and the supply-driven growth model supported by the U.S. administrations of former Presidents Ronald Reagan and George H.W. Bush. Both models either expired or failed.”

There are an increasing number of people saying that the government should fully revise its fiscal policy. This means the government should set up a special measure to revitalize the finances of low-income earners via a “Livelihood New Deal.” The argument says that just as the economic programs under the U.S. government’s New Deal in the 1930s focused on increasing social welfare expenditures, rather than civil engineering projects, the South Korean government should put taxpayers’ money into measures for unemployment, education, childcare and medical services that would directly benefit low-income earners.

At the “Conference of Political Parties, Civic Groups, and Important Figures from Various Circles for Overcoming the Economic and People’s Welfare Crisis,” held at the National Assembly on Thursday, participants called for the government to directly invest in the lives of low-income earners via a “Livelihood New Deal.” The prevailing theory here is that the most efficient way to overcome the current economic crisis is to revitalize the lower class. An increase in government support for the social safety net would give people the encouragement they need to spend and could eventually help to rejuvenate domestic consumption.

In an Op-Ed column for The New York Times on November 7, Paul Krugman, a professor of Economics and International Affairs at Princeton University and this year’s winner of the Novel Prize in Economics, said, “Helping the neediest in a time of crisis, through expanded health and unemployment benefits, is the morally right thing to do; it’s also a far more effective form of economic stimulus than cutting the capital gains tax.”

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