hankyoreh

Sungkyunkwan University emeritus professor Kim Tae-dong (left) and Dongguk University visiting professor Lee Dong-geol chat at the Hankyoreh’s offices in Seoul’s Gongdeok neighborhood

“The South Korean economy is similar to the Sewol sinking - and President Park Geun-hye is Captain Lee Jun-seok.”

Sungkyunkwan University emeritus professor Kim Tae-dong and Dongguk University visiting professor Lee Dong-geol sounded a message of warning in an interview on Apr. 11 with the Hankyoreh.

The South Korean economy is suffering from polarization, and the Lee Myung-bak and Park Geun-hye administrations have gone backwards by expanding irregular employment, encouraging real estate speculation, and cutting taxes for the rich, they noted. They pointed out that we could be in for the fourth crisis since the foreign exchange crisis in 1997-98, including the ones in 2003, 2008, and 2010.

Lee and Kim, a leading progressive economist, recently published the book “A Conference on Abnormal Economy,” a collaboration with fellow progressive scholars like former Soongsil University professor Yoon Seok-heon, Sookmyung Women’s University emeritus professor Yoon Won-bae, Kyungpook National University emeritus professor Lee Jung-woo, Inha University emeritus professor Jang Se-jin, Konkuk University professor Choi Jung-pyo, and former Dong-A University professor Huh Sung-kwan.

In it, they diagnose and offer possible solutions to the South Korean economy’s problems in terms of eight topics, including polarization, labor, chaebol, and bureaucratic reforms.

“Relieving polarization requires economic democratization with chaebol reforms and the establishment of a fair market economy,” Kim and Lee observed.

They also tackled attempts by the ruling Saenuri Party (NFP) to blame the opposition for the current economic malaise. “The fact that the Park Geun-hye and Lee Myung-bak administration have blamed the opposition despite being in power for eight years combined shows their own incompetence,” they noted.

Kim and Lee criticized the Saenuri Party‘s recent decision to bring on board former Minister of Strategy and Finance Kang Bong-kyun.

“He [Kang] is a living symbol of bad economic bureaucracy who opposed chaebol reforms and the dismantling of Daewoo during the Kim Dae-jung administration,” they noted.

“[Kang’s] delaying of measures to exclude surety insurance for Daewoo corporate bonds from deposit protections resulted in at least 10 trillion won (US$8.75 billion) in Daewoo debt becoming the country’s debt,” they added.　

Hankyoreh (Hani): How did this book come about?

Kim Tae-dong (Kim): The ruling party went after the Kim Dae-jung and Roh Moo-hyun years (1998-2008) as a “lost decade,” but now that we’ve been through the Lee Myung-bak and Park Geun-hye administrations, that time was better. We were considering ways of contributing to society after the Sewol incident in Apr. 2014, and we agreed we should offer a diagnosis and prescription for the South Korean economy.

Hani: A number of contributors have experience working under the Kim and Roh administrations.

[Kim served as Blue House senior secretary for the economy and policy planning and Yoon Won-bae as deputy chief of the Financial Supervisory Commission under the Kim Dae-jung administration, while Lee Jung-woo served as Blue House policy office chief, Lee Dong-geol as deputy FSC chief, and Huh Sung-kwan as Minister of Oceans and Fisheries and Minister of Government Administration and Home Affairs under the Roh Moo-hyun administration.]

Kim: In the US, scholars become part of the administration and work with the president. In the same way that a doctor can treat patients even on the street, we wanted to find a way of taking what’s abnormal about the South Korean economy and making it normal again.

Hani: Polarization has been the biggest issue in the Apr. 13 general elections.

Kim: The South Korean economy is suffering from serious polarization, which is happening in all sorts of areas: income, classes, large and small businesses, regular and irregular jobs. The reason for that is the abuse of irregular work by chaebols, unfair transaction practices like delivery price cuts, funneling practices, and indiscriminate incursions [by large corporations] into SME areas. Never mind focusing on redistribution policy - the Park administration’s policies have been about redistribution in the other direction, with things like encouraging real estate speculation and tax cuts for the rich.

Hani: So how can polarization be reduced?

Kim: We need to fix this “straw economy” where chaebols suck up profits from all across society, and build a fair market economy instead.

Lee: That’s the core of economic democratization. The exploitive framework between chaebols and SMEs wipes out growth engines for the economy.

Kim: Remedying polarization will require both economic democratization and an increase in social services spending. We need sufficient financial resources to provide a moderate level of social services like those in Germany.

Lee: South Korea’s national tax burden is 23% of gross domestic product (GDP). If we increase property, income, and corporate taxes to put it in line with the OECD average (33%), that would allow for 155 trillion won (US$135.6 billion) a year in additional tax revenues.

Hani: What’s your assessment and prescription for labor?

Kim: Half of South Korea’s workers are in irregular jobs. Yet the “labor reforms” presented by the Park administration were policies that would create more irregular jobs by making it easier to fire workers and increasing the amount of temporary hiring. Kim Moo-sung, leader of the Saenuri Party, blamed workers for us failing to achieve US$30,000 in [per-capita] income, but the ones making the mistakes are the administration, the ruling party, and the managers.

Lee: We’ve reached the limit of the economy dependent on large exporting businesses. We need to foster domestic demand and SMEs, but it doesn’t seem like President Park really understands the situation. The South Korean economy is like the Sewol ferry. The ship was sinking, and Captain Lee Jun -seok told the students there not to move. President Park is no different.

Hani: What are your diagnosis and prescription for chaebols?

Lee: The chaebol chairmen control their group with an average stake of around 2%, and they funnel work [to affiliates] to pave the way for the next generation to take over. We need to separate chaebol ownership and management.

Kim: The heart of economic democratization is about checking the concentration of economic power with the chaebols. Right now, they have unlimited power. They exist above political authority and above the law. We need conglomerate reforms like Israel’s if we’re going to achieve growth and create jobs.

Hani: Do you have any “secret history” with the chaebols?

Lee: I remember working as deputy director of the FSC in the spring of 2004. I was handling accounting irregularities with Samsung Life, and the press, the officials, and even the Blue House started shunning me as an enemy. I ended up having to quit.

[In the book, then-Minister of Government Administration and Home Affairs Huh Sung-kwan recalls Samsung telling a senior Blue House official and former academic that Lee “needed to be axed.”]

Hani: With the elections upon us, the opposition has been calling on voters to judge the Park administration for its economic policy failures, while the ruling party wants the public to judge the opposition for hampering its attempts to rescue the economy.

Kim: The opposition‘s mistake hasn’t been in hampering the ruling party - it‘s been about not doing its job as the opposition. The Park administration has left the economy on the brink of collapse and put the finishing touches on “Hell Joseon.” The voters need to pass their judgment at the polls.

By Kwak Jung-soo, business correspondent

Please direct questions or comments to [english@hani.co.kr]