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[Aristides N. Hatzis] From Athens to Seoul

This was my first visit to South Korea and the instant reaction was pure astonishment. From Seoul, the imposing and enchanting metropolis, to Jeju Island, the magnificent tropical paradise, everything seemed so different from Western Europe and North America.

The differences with my country, Greece, were more than obvious: The high-rise buildings and the wide neat avenues circling ancient palaces in Seoul were so different from the identical and extremely ugly 6-story buildings and the streets congested by the numerous illegally-parked vehicles that embarrass the Acropolis.

However, after my first lecture, almost all my new Korean friends emphasized to me several times how many similarities there are between the two countries. Both were examples of rapid growth and economic development, of a rather successful westernization and of a steady alignment with the West during the Cold War. They were both marked by a ferocious civil war after WWII. Both countries have a tumultuous but steady liberal democratic politics achieved after years of autocratic regimes (Greece has more experience in democracy) with two major parties, one conservative and one social democratic, converging on welfare populism and government spending.

The fact that South Korea is one of the richest societies on earth, with steady economic growth, sound economic policies, good economic indicators and great achievements in industry, manufacturing, services, exports and tourism is not enough for them. The phantom of Greece frightens them as the Korean state is expanding and the same goes with their public debt ― which is only 33 percent of GDP now but is clearly on the path to reach higher numbers in the near future.

Well, this seems inevitable. During the week I spent there I talked to many Koreans. From members of the parliament and government officials to journalists, university professors and businessmen but also to many working class people and students. They all agreed that the central debate in Korea right now is the expansion of the welfare state. Many Koreans feel that for the past decades their country gave emphasis to growth and the creation of wealth and now this wealth should be partially redistributed. Many of them believe that South Korea should build a welfare state similar to the one other wealthy countries have e.g. health care and higher education are not free in South Korea as in many European countries.

This month, a referendum on the question of free lunches for school students has divided the citizens of Seoul. The conservative mayor believes that free lunch should only be offered to children from poor families and the left-wing municipal council supports universal free lunches. The vote on this issue should be decisive for the future of the debate so I feel that I should warn my Korean friends. You are stepping into the welfare state with the wrong foot. I don’t see why low income and lower middle class families should pay for the free lunches of the children of richer families.

The welfare state is a very good idea as long as it remains a safety net for people unlucky in the “natural lottery,” unable to survive in a risky globalized world or temporarily out-of-luck. However, it is a truth universally acknowledged that when a government spends money for whatever reason a lot of people get interested. The welfare state is expanding offering coverage to almost every need of almost every citizen. And guess what ― the most successful in ensuring their coverage are the powerful pressure groups, the professional rent-seekers. After a while the safety net becomes a trap net clasping the country and slowly suffocating it.

This is the case of Greece where the government has to fight everyday with powerful and aggressive interest groups.

Korean people are hard workers, successful but also responsible entrepreneurs, with a significant investment in human capital and most of all endowed with achievements which the Korean society and economy should be proud of. They deserve a minimal but also efficient welfare state which will support the poor and give equal opportunities to young Koreans. They don’t deserve to have the fate of Greece.

By Aristides N. Hatzis

Aristides N. Hatzis is an associate professor of law and economics at the University of Athens and an associate fellow at the Center for Free Enterprise in Seoul. ― Ed.
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