[Editorial] Nation’s Economic Policy Veers Toward Growth Centered on Large Corporations and Civil Engineering

On December 17, the government released the "2019 Economic Policy Direction." This is an economic plan for the third year of the Moon Jae-in government. The government claimed that the basic direction was to establish the foundation for an innovative and all-inclusive country, where everyone can live well together. At the same time, the government announced that it would concentrate on the promotion of four items. It will carry out structural reforms, expand its inclusiveness, and invest in the future to stimulate economic activities from all directions, and it will do so by increasing investment and entrepreneurship and by strengthening the nation's competitiveness in exports. The government plans to achieve an economic growth rate of 2.6-2.7% next year, increase the number of employed workers by 150,000 and achieve a current account surplus of US$64 billion. Despite the challenging domestic and international environment, the government presented plans to mobilize all available policy measures to achieve this goal.

The latest policy starts from the judgment that the nation has retreated on creating more jobs and in easing the polarization of income due to the side effects of a hasty income-driven growth policy, lack of investment, and industrial restructuring, and that economic activities have slowed down. This is also why, this day, President Moon Jae-in said, "We will be flexible in operating the minimum wage policy and the 52-hour work week." It is all too obvious that the economy will further deteriorate next year, if things continue as they have. The sharp drop in the president's approval rating also made it inevitable for him to select a new choice.

The government made it clear that it will go all in to boost the economic vitality next year. First and foremost, it announced that the government and the private sector would promote large-scale projects. They plan to invest over 20.6 trillion won in developing ports and building a metropolitan transportation system around large cities. The money will also go to Hyundai Motor Company's global business center and neighborhood-based social overhead capital. The government will concentrate most of the spending in the first half of next year. In addition, the government is mentioning the construction of new urban areas spanning 4-5 large residential complexes near Seoul as well as the connection of a metropolitan railway system. The government even said large public investment projects would be exempt from a preliminary feasibility study. In other words, the government is willing to deviate from principles to some extent.

But the Moon Jae-in government had cut the budget for social overhead capital shortly after it entered office. They learned from the failure of Japan, which had invested in social overhead capital to stimulate the economy during their twenty-year recession only to fail. Instead, the government spent the money on welfare to support the income of low-income earners. The latest measures show a return to the "shovel economy" of the past. The government also mentioned the extension of an all-inclusive economy, presenting various measures to support the self-employed. The measures aim to protect the small business or storeowners struggling with the speedy increase of the minimum wage. Now, the government will also have to come up with long-term measures to help these self-employed businesspeople. The government claims that the nation has too many self-employed storeowners, yet is only concentrating on lowering the credit card processing fees and providing funding. Is the government even considering how long it will be able to continue funding the self-employed? It should know that the problem of the self-employed businesspeople would not be solved unless the government also works to expand the social safety net and provide an exit strategy for these economic actors.

The government mentioned "more good jobs" this day as well, but the ones mentioned were jobs mostly requiring simple skills. Increasing employment subsidies for young people is not sustainable. The situation is the same with jobs for the "new middle-aged," and the elderly. It is difficult to overcome the polarization of income with these measures.

The government probably came up with a growth policy centered on large businesses and civil engineering, such as massive investments, support for exports, and the lifting of regulations, as a last resort. But such a step back can bring about dire consequences. In particular, it is difficult to explain the need to waive the preliminary feasibility study. The latest government policy requires a close review. Income-driven growth seems to have been pushed back as the government cries for economic vitality. No matter how gloomy the economic situation is, the government should not abandon its efforts to increase the people's income and create a society where everyone can live well together.

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