[In-depth Review] The Importance of Innovation and the Korean-style New Deal

"Two cars per household!" This was the slogan of American presidential candidate Herbert Hoover 92 years ago. At that time, the United States was experiencing an unprecedented boom, producing over 3 million cars annually. Skyscrapers were being built in every city, and jazz music overflowed the streets. However, contrary to appearances, since the 1920s, overproduction of agricultural products and an endlessly rising stock market cast the shadow of the Great Depression.

On Thursday, October 24, 1929, the New York Stock Exchange fell by 13%, and the crash continued for a week. President Hoover, who had predicted the situation would be resolved in two months, introduced various policies but was powerless. As a laissez-faire advocate, Hoover clung to the "old deal," which emphasized market functions over direct federal government intervention. As a result, the United States suffered from the Great Depression for four years.

In 1932, Roosevelt was nominated as the Democratic presidential candidate and promised a "new deal for the American people." Judging that the previous president's methods could not resolve the Great Depression, Roosevelt, upon his inauguration on March 4, 1933, announced that "the government will temporarily take strong control of the national economy." He also promised to secure all bank deposits within a week, calming the bank run crisis.

Meanwhile, the Agricultural Adjustment Act compensated farmers to limit the overproduction of wheat, large-scale civil engineering projects like the Tennessee River development were undertaken, and measures such as minimum wage introduction and working hour restrictions to protect workers were implemented. In 1934, the Roosevelt administration increased the government budget from only 3.5% of GDP under the previous administration to 10.7%. The New Deal policy, with active government intervention, was an innovative prescription at the time.

True innovation is to provide new solutions rather than cling to old ones when new problems arise. Germany's policy responses in recent years also demonstrate the importance of innovation. The German government emphasizes that "innovation is the key to competitiveness, jobs, and growth." Germany's innovation can be found in its long-term strategy focusing on technology. In September 2014, the federal government adopted the "High-Tech Strategy 2025," called "Innovation for Germany."

In short, this strategy was created to maintain consistency in innovation policies following the "digitalization of manufacturing" and to sustain economic growth. It focuses not only on linking new technologies to marketable products and services but also on improving the overall environment for technological innovation. The background for Germany's continuous promotion of the High-Tech Strategy lies in the urgency that cost competition alone cannot defeat emerging competitors. The fruit of these efforts appeared as "Industry 4.0."

Furthermore, the COVID-19 pandemic has impacted German companies' "Research, Development, and Innovation (R&D&I)." A survey conducted last April targeting innovative small and medium enterprises yielded interesting results. Among the companies surveyed, 75% planned to postpone or extend their R&D&I projects, but 21% responded that they intended to start new R&D&I projects during the crisis. The important point here is that the government carefully reflects the companies' suggestions.

Recently, our government decided to invest 76 trillion won by 2025 for the "Korean New Deal." The Korean New Deal is based on an employment safety net and focuses on two major pillars: the Digital New Deal and the Green New Deal, aiming to create 550,000 jobs. The U.S. New Deal succeeded by accurately diagnosing economic problems and providing appropriate solutions, and Germany has enhanced the completeness of technological innovation by gathering corporate opinions. We hope that the Korean New Deal will also become a successful innovation policy through accurate economic diagnosis and diverse opinion gathering.

Kim Young-woo, Senior Expert, Win-Win Growth Committee

This content was produced with the assistance of AI translation services.