"We are living in a far more complicated world than Karl Marx thought."
In an interview with the Korea IT Times, Jwa Sung-hee, President of the Gyeonggi Research Institute (GRI) said, "Ideologies such as modified capitalism, or neo-capitalism, have made our society shift into reverse. We should create a dynamic and ever-evolving society that encourages promising people to grow into their potential and concedes the inevitability of inequality, economic differences, and social gaps, rather than simply voicing dissent toward them."
Jwa went on to say, "Most of the regulations to deny those facts of life should be eased or scrapped in order to encourage internationally competitive companies to do brisk business on Korean soil and to strengthen Korea's economic dynamism. Policies that have favored SMEs and venture businesses over big corporations are no longer able to create synergies for economic development. In other words, it is desirable for society to apply the idea of survival of the fittest when it comes to corporate competition regardless of the company's size."
Above all, he said he was very concerned about world civilizations. This is because, judging from the global economic development over the twentieth century, a lot of countries - especially advanced ones who set their national policy direction in line with the ideology of social democracy - wind up finding themselves beset by economic turmoil, high unemployment rates, and low growth rates. The G7 nations - including the US, UK, Canada, France, Japan, and Germany - had been on a roll before the 1970's. However, since the 1970's, they have launched an alternative revolution of neo-capitalism aimed at helping mostly the poor over the rich, consequently driving the world economy into today's economic recession.
"Karl Marx thought capitalism was full of contradictions. Marx argued that capitalism, characterized by the capitalist exploitation of laborers and the bourgeoisie reining over the proletariat, was as an arena for class struggle and a social evil that would eventually lead to the demise of society. So, he upheld communism in which a majority of laborers and the underprivileged seize political power by force. Marx's ideology later gave rise to many communist states.
"However, ironically, democracies including a multitude of advanced nations have, wittingly or unwittingly, operated under modified capitalism that co-opts part of Marx's communism for the past 50-60 years. In other words, they concluded that a combination of socialism and democracy would translate into a better world. But this notion is far from truth," concluded Jwa.
He went on to say, "The policy of income redistribution, which is designed to slap heavy taxes on high income classes to redistribute wealth in favor of the poor, spawns a moral hazard. It sends the poor a misleading message that being jobless or working less is not unthinkable, and it strips the rich of their motivation to work harder. From a national point of view, redistribution only plays a part in putting downward pressure on national growth potential."
He explained his opinion on the whole affair by saying, "Advanced nations have adopted social democracy since the 1970's. The US national home ownership strategy, Japan's lifetime employment system, and Germany's pro labor union policies are typical examples of this. Since the 1990's, Korea has also followed in the footsteps of the G7 nations by adhering to policies aimed at balanced regional development, regulation of large corporations, supporting SMEs, and putting restrictions on the development of the Seoul metropolitan areas. What is the outcome At a glance, these policies seem to be good for economic advancement. But once Korean companies break into the top 30, they fall prey to a myriad of regulations, left with no alternative but to relocate overseas. And unconditional support for SMEs for the sake of balanced development has contributed to nothing but a surge in the number of self-employed people and SMEs. The government's policies - which should be focused on providing jobs to lift the poor out of poverty - have been myopically skewed toward handing out checks to the poor. It has created an irrational world where hard-working people are afflicted by all kinds of restrictions, and the poor remain poor.
This reporter asked Dr. Jwa what the country should do to create a dynamic and advanced society. He replied by saying, "We are living in complex systems. In the past 200 years, we have analyzed what we want to know by breaking it down into fine particles. However, today, we can understand the world better only when we have a bird's eye view. When we take a holistic look at the world, we realize that we all are indebted to one another. The moment offspring are born, they are beholden to their parents. Students are beholden to teachers and new employees to their bosses. But, nobody bothers to pay off his debts. In other words, we are all free riders."
He continued to explain, "Shared growth means latecomers model themselves on earlier comers to catch-up. To create a win-win situation, they should pay enough to credit for earlier comers. Unfortunately, social structures and policies have created an environment in which earlier comers are taken advantage of by latecomers, consequently holding back social development. Companies are no exception. Underachieving companies learn a great deal from top performers to come out on top someday. If so, top-rated companies should be guaranteed access to a better playing field for their own development in exchange for their contributions to shared growth. In other words, shared growth is possible only when society can favor those who help themselves. Prosperity for all does not mean everyone should be equal. It means stepped-up respect and support for higher-performing people and more effective companies and means the building of a constantly evolving society that permits inequalities and differences existing in the market while encouraging members of society to give their best shot at what they do. Since we live in complex systems, I believe we should incorporate this notion in policy making so as to evolve into a dynamic and advanced society."
Given that the Korea Development Institute (KDI) predicted the Korean economy would grow 5.5% next year, Dr. Jwa was asked about his take on that. In reply, he said, "Different economic forecasters come up with different growth predictions. Honestly, I would like to say forecasts are no more than forecasts. Korea has seen its economic growth trend - currently, hovering around a disappointing 3% - continue to decelerate in the past 20 years. As I said before, if we fail to put a brake on growth-stifling policies and mindsets - such as balanced regional development and regulations on conglomerates, the economy will continue to slow down. At this point, what merits keen attention is that if the economy grows 3% next year as the institute predicted, it will not be real economic growth, thanks to the low base effect stemming from the global economic recession. Otherwise economic growth will continue to decline. To turn this fake economic growth into true growth, the government and the public should put their heads together to have an in-depth understanding of what I mentioned and come up with a plan for improvement."
The doctor also had some insights on the economies of the US and China. He said, "Most of all, no country knows the maladies of democracy better than China. Having in mind the fact that the economies of advanced democracies have been on the decline since the 1970's, China will maintain its centralism and is expected to grow at a faster clip than any other nation, just like South Korea did in the 1970's. Still, it will take quite a long time for China to unseat the US as the world leader. On the other hand, to the chagrin of the US, it is difficult to give a rosy long-term forecast for the US economy. Yet the its strengths - namely, its autonomous spirit, dynamism, and a huge market - will play a pivotal role in keeping would-be world leaders at bay for many years to come. Unfortunately, the US economy is likely to continue on its downward path."
Reference: Dr. Jwa Sung-hee, President of GRI, introduced his thoughts in his book, Economic Discrimination beyond Evolution, in 2008.