Korea should tighten regulations on chaebol, or family-owned conglomerates, but refrain from breaking them up in its efforts to achieve economic democratization, U.S. economist Jeffrey Sachs said Thursday.

“Regulating them is what is important, not breaking them up,” Sachs said at a conference hosted by Lee Jae-young, member of a Saenuri Party focus group on economic democratization.

The Columbia University professor added that if conglomerates break up, it should be because they are financially unsuccessful, not as a result of government policies. However, he also said that the government should not salvage failing business groups as such measures will burden the economy.

“In this sense, regulation is absolutely necessary. Regulation is core to a functioning democracy and to a functioning economy.”

Economic democratization policies of the three main presidential candidates have become among the most closely followed topics in the run up to the Dec. 19 election.

While all three ― the Saenuri Party’s Park Geun-hye, Democratic United Party’s Moon Jae-in and independent Ahn Cheol-soo -― have spoken at lenght about the issue, they differ in their plans for the conglomerates.

Ahn, Moon and Park appear to be in agreement that regulations on the circular shareholding structure among chaebol affiliates need to be tightened and that the penal system for financial crimes needs to be strengthened. With the exception of Park, the candidates’ policies on tighter requirements for holdings companies, as well as on separation of financial services from other sectors within conglomerates, also overlap.

Ahn has taken the toughest stance on breaking up some parts of conglomerates’ businesses, having said that chaebol groups would be ordered to separate financial companies.

Focusing mainly on widening inequality across the globe, Sachs said that a society should push for sustainable development, and suggested that Korea should now set new targets.

“I believe in the concept of sustainable development, which in my view embodies three ideas for society. The first is sustainable economic development, second is social inclusion, and the third is environmental sustainability,” Sachs said.

“Identify the goals, what do the Korean people want. What does it mean to be successful for Korean society?” he said, adding that Korea’s past goal of becoming economically prosperous has been achieved.

“What are our goals today? For the future, it can’t just be to become the richest country in the world.”

Citing the example of Scandinavian nations that provide effective social support and levy higher taxes, and whose citizens are surveyed as being among the happiest in the world, Sachs said that Korea should increase taxes as well as government spending to provide more equal opportunities.

“Korea’s total tax income is in the order of 23 or 24 percent of the gross national product, and its total government spending is only 20 percent or so of the GNP,” he said.

“It’s the only high-income country that collects less tax than the U.S. Korea will have to have a rise in tax in national income over time.”

By Choi He-suk (cheesuk@heraldcorp.com)