Since joining the presidential race as a political novice representing the main opposition People Power Party, Yoon Suk-yeol has emphasized how much damage South Korea endured under the incumbent administration, promising the next five years will be drastically different under his lead.
Partly siding with free-market policies and advocating for happier lives of the people, Yoon is preparing to assign a new role for the central government: assisting businesses and facilitating their growth, rather than leading economic development. Regulatory relief and budget restructuring are part of his vision as well.
Kim So-young, an economics professor at Seoul National University who serves as the main economic adviser to Yoon, believes such changes are essential to help South Korea become a nation where happiness is assured for its people.
In an interview with The Korea Herald last week, Kim said that his vision for economic policies fall perfectly in line with what Yoon has announced as campaign promises. He claims such policies and directions are essential to resolving problems that arose during the five-year rule of the Moon Jae-in administration.
"Many of the policies rolled out during the Moon Jae-in administration were not so great in their impact, and I constantly worried that these policies could inflict lasting damage to the Korean economy, which already was in a malignant state from the start," Kim said.
"I have studied economics for a long time, and thought of this as an unfortunate situation, and later on I came across this opportunity (to serve as the adviser for Yoon Suk-yeol)."
The Moon administration's income-led growth policy has faced criticism as it was followed by increasing economic polarization, rather than the greater equality it promised. Its attempts to control the real estate market have resulted in unprecedented increases in housing prices.
Many of the policies introduced in the past five years lacked flexibility and were made without considering actual market conditions, the adviser argues, thereby undermining their efficiency and failing to produce anticipated outcomes.
To increase efficiency, Kim said he advised Yoon to start his administration with massive restructuring efforts on South Korea’s annual budget. Kim said Yoon’s government can prepare up to 60 trillion won ($50 billion) a year to fulfill his line of promises with careful restructuring of the budget.
"The basis of our vision is refraining from levying more tax burdens and restructuring what’s currently spent in the annual budget," the economics professor said.
"On the bottom line, we will strengthen policies needed by the people and look into restructuring customarily run projects that have continued for at least three years. The administration would also reevaluate demands of public projects and their effectiveness for rescaling if needed."
The key point of such moves is ensuring that people in South Korea grow happier under Yoon’s policies -- beyond sheer numbers of jobs, birthrates and purchased homes.
"The job of evaluating whether a policy is successful should be in the hands of the people, not so-called experts," Kim said. "When talking economic policies, their purpose should be increasing the level of happiness for the people, and that’s our primary goal."
While many believe Yoon advocates a smaller government role in the economy and market-led growth, Kim said the Yoon administration will not remain completely hands-off when it comes to economic growth. The state will be in charge of creating a business-friendly environment while devoting investments for new industries and businesses, he stressed.
"There are two types of roles this government will assume, and I can say for sure that the Yoon administration is not going to be completely backstage," Kim explained.
"His government should be active in providing regulatory relief, fostering innovative talent and laying a foundation for the market economy to innovate to the next level."
Kim added the Yoon administration will not be burdening businesses with taxes or responsibilities, but rather provide investments and a structural basis for them to start new projects and create jobs. His government will be different from Moon’s in that businesses will take the main stage instead of the state in driving innovative economic growth.
"The problem with the Moon government’s New Deal initiatives is that the project overemphasizes the role of the public sector, armed with an enormous budget," Yoon’s adviser said.
"Everything will be under the state’s control, and we’ve seen from past examples that efficiency is undermined with greater involvement of the public sector. Although I agree with the project’s ultimate goals, I want to emphasize market-led growth in approaching them."
Kim emphasized that businesses must be provided with incentives to create jobs while pursuing innovation and expanding to new areas. Support has to be provided where it is needed, and benefits should be made for areas in demand, he stresses, adding that tax relief and loan support measures could be useful.
"The government’s role is inducing people to start new businesses in innovative areas of high demand and better prospects of profits like digital health care, Korean cultural content and digital education," the professor said.
"Providing tax relief for their business moves could be helpful, and for already strong firms to make more commitments, we need to be promising benefits like corporate tax exemptions for a certain amount of time."
Bringing flexibility to current policies like the 52-hour workweek will be pursued in approaching these goals, according to Yoon’s top adviser. Increasing efficiency is central to Yoon’s vision, which Kim believes can be better achieved through small, progressive reforms with opinions from the field.
"I think we have said enough on what our bottom line is: respecting the voice from those in the field," Kim said.
"We need to pursue flexibility in work hours for employees if consensus is reached between employers and employees. If it is a fairly reached agreement, I believe the government should respect that."
The adviser also believes amendments are needed for how the minimum wage is set every year. He claims that the way the minimum wage has changed does not accurately reflect what wage-earning laborers would need to earn to maintain a decent standard of living. Therefore, unrealistic hikes or falls could be dangerous for this vulnerable population.
"The minimum wage law itself is in place to assure the livelihood of the labor force, and you are motivated to work only if you are entitled to be paid at least a certain amount," Kim said.
"But the problem is that the rate has shifted abnormally in recent years. We are not fully decided on this, but the system should be changed in that the rate is determined more reasonably with adherence to objective data, not merely based on the opinions of representatives."
Kim projects Yoon to roll out COVID-19 relief measures for small businesses immediately upon starting the administration, as Yoon promised on multiple occasions throughout his campaign. But Yoon can be expected intervene in other major areas as well within months, he added.
"The real estate issue requires some legislative revisions, so it is better to get on with it as early as possible," the adviser said.
"The problems left behind by the COVID-19 pandemic include unemployment and socioeconomic polarization, and these two also have to be tackled early to achieve noticeable progress within a five-year term."
By Ko Jun-tae (firstname.lastname@example.org