[Column] Ignoring the problem of inequality won’t solve it

Posted on : 2014-09-24 16:49 KST Modified on : 2014-09-24 16:49 KST
Thomas Piketty’s work and recent data show S. Korea‘s story of wealth distribution is falling apart
Lee Kyung
Lee Kyung

By Lee Kyung, editorial writer

“Piketty provokes our natural feelings of envy for other people’s success and contends that we can resolve this envy by raising taxes on a small number of people. . . If this economic philosophy gains an appeal with the public, the Korean legend of economic growth will end with our generation.”

The words were said during a seminar hosted by the Korea Economic Research Institute (KERI) shortly before Thomas Piketty, professor at the Paris School of Economics, was scheduled to arrive in Korea.

These remarks, which were made by Hyun Jin-kwon, director of the Center for Free Enterprise, accurately represent the hostility that some members of the conservative establishment feel toward Piketty.

I was curious about how the progressives would respond to conservatives’ “provocation,” and Piketty himself had the answer. “I think conservatives should be worried about inequality instead of being worried about my book. I did not create rising inequality. I am not responsible for that. Instead of being in a sort of denial strategy, they should open their eyes and look at the facts,” the scholar said in a meeting with the Hankyoreh. I’d say that Piketty hit the nail on the head.

The reaction provoked by this French economist in his early 40s is tremendous. Various meetings are forming to examine Piketty’s books, his research papers, and the reality of inequality in South Korea. It goes beyond progressives and conservatives, left and right.

In one discussion that I saw a few days ago, a large number of people stayed in their seats for nearly three hours, listening to Piketty’s lecture and a panel discussion and asking questions of their own. It was worth it, even if the members of the panel danced around the main topic. Piketty‘s book is selling like gangbusters as well. Piketty has effectively boosted interest in equality in South Korean society. We should be grateful to him.

There’s also the Piketty effect. A researcher has used Piketty’s methodology to get significant results. I’m talking about Kim Nak-nyeon, professor at Dongguk University. Kim showed that the top 10% of income earners in South Korea account for 44.9% of the total income. This shows that South Korea is close behind the US (48.2%), often cited as an outstanding example of inequality.

The figure, which was only 29.2% in 1995, made a considerable jump during the Asian financial crisis of the late 1990s. These research results were recorded recently in the World Top Incomes Database (WTID), which was set up by Piketty, among others.

South Korea has the fourth greatest inequality among the listed 28 countries, ranking higher than Japan (40.5%, 2010), the UK (39.2%, 2011), and France (32.7%, 2009). The highest was South Africa (54.1%, 2011).

Fortunately, the income of the top 1% was not as severe as the top 10%. In South Korea, they only received 12.2% of income, which was two thirds of the US (19.3%). However, it was still higher than Japan (9.5%).

Kim also confirmed the existence of serious inequality using the Gini coefficient. Combining income tax statistics with household trend figures provided by Statistics Korea, Kim found that the Gini coefficient for market income rose from 0.339 in 2010 to 0.415, while the disposable income coefficient increased from 0.308 to 0.371. In terms of disposable income, South Korea had the fifth greatest inequality in the OECD, after Chile, Mexico, Turkey, and the US.

These are shocking figures. South Korea has received considerable praise from the international community as a “success story” not only for economic growth but also for distribution of wealth. Now that story is falling apart.

 editorial writer
editorial writer

Despite this, there has been no official reaction from Statistics Korea, or from any other government officials - despite the fact that these figures are very likely to be used as standard statistics in the international community, following their addition to the World Top Incomes Database.

Perhaps government officials are afraid that they will have to admit that their policies of wealth redistribution have failed.

The situation is largely the same in the universities and at research institutions. I hope that scholars rigorously examine whether Kim’s research results correspond to the facts. If true, they should be accepted, if false, corrected. Only in so doing can we gain an accurate understanding of inequality and take appropriate countermeasures. Ignoring a problem won’t solve it.

 

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

button that move to original korean article (클릭시 원문으로 이동하는 버튼)

Most viewed articles