hankyoreh

Richard Kozul-Wright, director of the Division of Globalization and Development Strategies (GDS) at the United Nations Conference on Trade and Development (UNCTAD), during his interview with the Hankyoreh in Seoul on Dec. 2. (Kim Jung-hyo, staff photographer)

“The key thing is rational and appropriate fiscal expansion. My understanding is that South Korea has focused on raising the minimum wage, and I feel like perhaps it should be easing anxieties about the future through fiscal expenditures focusing on welfare.”

This was the advice offered on Dec. 2 by Richard Kozul-Wright, director of the Division of Globalization and Development Strategies (GDS) at the United Nations Conference on Trade and Development (UNCTAD), an international organization working to alleviate disparities in the global economy, as a way of upgrading South Korea’s policies for “income-led growth.” Kozul-Wright was visiting South Korea for the first time to develop a keynote speech at a Dec. 3 international conference on “income-led growth in Korea from a global perspective” organized by the Presidential Committee on Income-Led Growth.

A doctor of economics at Cambridge University, Kozul-Wright has studied South Korea’s economic development model alongside Cambridge professor Ha-joon Chang. The Hankyoreh spoke to him a day before the event to hear his assessment of the direction of South Korea’s income-led growth and issues facing the global economy.

Regarding the topic of his presentation, Kozul-Wright noted “four trends that have emerged in the international economy since the global financial crisis of 2009,” namely a decline in the labor income distribution rate, a decrease in public spending amid retrenchment policies, a tendency for companies to avoid productive investment, and an increase in carbon dioxide emissions due to green investment failures.

“I think some of these also apply to South Korea,” he said.

As a root cause behind these phenomena, Kozul-Wright pointed to the basic structure of the international economy, which he described as having been designed to deepen inequality and insecurity. In particular, he shared concerns about the entrenchment of structures that increase debt and inhibit investment as financial markets with immense power create short-term profits through rising stock prices and skyrocketing housing prices.

“I had anticipated this structure would change after the global financial crisis in 2008, but the past 10 years have brought a repeat of the basic patterns of the financial crisis, which have increased inequality,” he said, adding that the increased uncertainty in the global economy was “not tied to any one individual like US President Donald Trump or British Prime Minister Boris Johnson.”

With South Korea facing crisis with its aging population, Kozul-Wright argued that it needs fiscal expansion tailored to areas including pensions and social services.

“My understanding is that South Korea has focused on raising the minimum wage. Rather than adopting income-led growth policies that depend exclusively on a higher minimum wage, I feel like perhaps it should be easing the public’s anxieties about the future through different redistribution measures, and fiscal expenditures focusing on welfare in particular,” he said.

Public investment should be focused especially on the places where it is needed to transition toward a sustainable economy, he stressed. As examples, he pointed to investment in eco-friendly areas such as new and renewable energies and sustainable transportation, as well as investment in the caregiving economy amid the aging society trend.

If higher taxes are not a desirable means of establishing the necessary resources, the government may take advantage of low interest rates to pursue a proactive fiscal policy approach based on increased short-term borrowing, he suggested.

“According to UN Global Policy Model estimates, GDP scale is larger than fiscal expenditures for all countries,” he noted. One possible policy approach would be to increase government spending to achieve a positive feedback loop of economic growth and rising incomes without drastic changes to the current taxation system, he suggested.

Kozul-Wright named Berlin and Copenhagen as good examples of proactive government distribution efforts and eco-friendly investment.

“At the local government level, they’ve been working to increase equity [among income segments] through social rental housing and other means,” he explained.

“I think Seoul can also relate to the housing issue. China has also been using solar energy to achieve development in lagging regions,” he added.

“While there haven’t yet been enough efforts to introduce policies within a market-centered economy framework, there definitely are changes taking place at the level of individual regions and sectors,” he said.

By Lee Kyung-mi, staff reporter

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