[Im Cheol-yeong's Cheonggyeongudok] Revisiting the 'Gloomy Discipline' of Economics

An Economics Textbook for the General Public... Covering Historical and Theoretical Backgrounds

[Asia Economy Reporter Lim Cheol-young] The 'Emergency Disaster Relief Fund' policy, which allocated 12 trillion won in fiscal spending to 21.71 million households nationwide, was a decisive measure to mitigate the economic shock caused by the novel coronavirus infection (COVID-19) through redistribution. The government even neutralized the terminology. This was out of concern that the emergency disaster relief fund policy, based on the concept of 'basic income,' might inadvertently escalate into ideological debates and miss the golden time for implementation.

Until recently, the topic of basic income was dismissed as a fringe idea overseas, but it has quietly made its way to the 21st National Assembly. It was expected that it would take much longer to be discussed within the institutional framework, caught in ideological terrain, but discussions seem poised to intensify mainly within the political sphere, regardless of party lines.

The atmosphere has heated up considerably. The minor Basic Income Party has entered the National Assembly. Even the conservative camp, which has argued that the youth dividend implemented by Lee Jae-myung, then mayor of Seongnam (now governor of Gyeonggi Province), in 2016 was a socialist idea that would jeopardize the finances of the state and local governments, has joined the discussion. It is truly a battle of many schools of thought.

Coincidentally, discussions on the introduction of basic income are likely to gain momentum amid the unprecedented crisis of the COVID-19 pandemic. In the United States, often called the 'superpower,' the number of short-term unemployed has surged to around 40 million, and unemployment rates are soaring worldwide. Warnings that disparities between classes will deepen and that market systems could collapse are no longer awkward to hear.

Interest in basic income is also confirmed by public opinion polls. According to a recent survey by Realmeter, a professional polling firm, 48.6% of respondents supported the introduction of a basic income system 'to guarantee at least a minimum livelihood.' Meanwhile, 42.8% opposed it, citing concerns about the burden on national finances and increased taxes. Only 8.6% answered 'don't know.' Although the approval and disapproval rates appear balanced, it is significant that many have begun to consider the latent threats that had been sidelined.

Modern mainstream economics focused on production

Trapped in confrontational views on distribution issues

Voices cautioning against 'blind redistribution'

Enough with the old dichotomies and ideological debates

The book Do You Understand Economics?, written by a university professor with a journalism background, is helpful for non-economists to develop a clearer framework of thought regarding economic shocks caused by COVID-19 and discussions on basic income. It does not contain detailed analyses of the current global economic situation. However, chapters 3 'The Birth of Markets,' 4 'When Do Markets Fail?,' 5 'Government Failures and the Importance of Incentive Design,' 6 'Concerns for Economic Growth,' and 7 'The Ideal and Reality of Distribution' provide starting points for thought.

The historical and theoretical background behind major global countries competitively lowering benchmark interest rates and pouring fiscal resources is covered in chapter 6. It introduces the betrayal of the free market, once believed to be perfect according to Say's Law, and the solution proposed by British economist John Maynard Keynes (1883?1946), who emphasized the multiplier effect of fiscal policy.

At the same time, the author stresses the need to discern deceptive fiscal policies by politicians. Government fiscal policies have dual aspects depending on economic conditions and policy objectives, and deceptive fiscal policies result in repercussions that ultimately fall on the people.

The economic foundation of the basic income discussion can be found in chapter 7. Compared to other parts of the book, the author's views are more clearly expressed here. The author explains why economics has degenerated into a 'bleak science' that blindly trusts cold numbers. Modern mainstream economics has focused solely on the size of the bread (production) and has failed to properly consider how much bread should be distributed to whom (distribution). As a result, distribution issues have been trapped in confrontational perspectives such as large corporations versus small and medium enterprises, manufacturing versus service industries, the haves versus the have-nots, the elderly versus the youth, and employers versus employees.

Particularly noteworthy is the author's concern about the winner-takes-all unequal distribution structure caused by the 'digital divide.' The spread of COVID-19 has made routine non-face-to-face (untact) interactions a kind of virtue. The author argues that this is likely to accelerate the information gap further.

The author evaluates assessment methods such as the Lorenz curve, Gini coefficient, decile ratio, and Atkinson index, which indicate the degree of inequality, and focuses on the concept of 'sustainable welfare.' He then emphasizes that the government must actively intervene both in the pre-market competition stage (equal opportunity) and the post-market stage (support for vulnerable groups).

The author also warns against blind redistribution that opposes growth-focused mainstream economics. "Economics should not be a futile debate between growth and distribution but should provide theoretical frameworks and empirical research to create waste-free and efficient distribution and compensation systems and establish sophisticated monitoring networks to prevent money from leaking to unintended places. This is also how economics can regain its warm human touch." The author's plea applies to everyone choosing and implementing sustainable economic and social systems.

In times of crisis, an important virtue is diligence in the process of finding solutions. We must realize the essence of the crisis with more precise thinking and seriously consider what kind of New Normal era we will live in. There is not enough time to let the old dichotomies of 'distribution versus growth' and 'market versus government,' mixed with armchair theorists' logic, devolve into ideological debates.

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