[Opinion] Universal Cash Welfare Theory, a Resurrection of Athenian Demagoguery?

Discussions about the fourth round of disaster relief payments, frequently raised by the ruling party since the beginning of the year, seem to have been tentatively settled as "selective first, universal later" for this spring. Meanwhile, debates over basic income among the ruling party’s potential leaders are ongoing, but all share a similar eagerness to distribute government funds. There are even talks about strategies for the by-elections and the presidential election.

With the prolonged COVID-19 crisis, the precise design and timely implementation of selective welfare are crucial. However, universal welfare is an entirely different matter. Is our economy in a position to endure the enormous inefficiency of distributing cash to the entire population?

According to Carmen Reinhart, Chief Economist at the World Bank, COVID-19 is a "silent crisis." Although there was no noisy bank run or market collapse, output plummeted due to various lockdown measures, and unemployment, poverty, and inequality worsened. Countries worldwide mobilized all means, including monetary and fiscal expansion as well as lax supervision such as loan repayment deferrals. However, once policies normalize with vaccine distribution soon, "many companies and households will face not liquidity shortages but solvency shortages." Reinhart warns that in such cases, especially where large private debts have accumulated, a financial crisis or sovereign debt crisis could occur.

In this grave situation, there are even plausible-sounding claims that "government debt is debt the nation takes on on behalf of the people." Of course, this is sophistry. If the government borrows today, who ultimately pays it back? The people of today and tomorrow will pay it back for a long time. Moreover, if the Moon administration had properly implemented "economic policies" rather than that pitiful "ideological politics," the people would not have incurred such large debts now, and there would have been no excuse for the government to step in and take on debt on their behalf. If only they had not clung to the absurd political slogan of income-led growth for years, or raised housing prices to the sky with their repeated defeats in real estate politics.

Empirical results already show that universal cash welfare leads to economic contraction and worsening inequality. Yet, a certain politician famous for the "basic" series insists, "Basic income is possible without tax increases," arguing that "politics makes the impossible possible." It seems that before the strange magic wand of politics, economic analysis becomes utterly useless. Meanwhile, people’s character and their will to engage in the economy are helplessly collapsing under the politics of cash handouts.

This pitiful scene in our political arena recalls the democracy of ancient Athens in the late 5th century BCE. According to historical records, after Pericles, a great leader of the time, died in 429 BCE, Athens saw the prominent emergence of demagogues appealing to emotion and prejudice rather than reason for decades. Regardless of the truth, their weapons were rhetoric (sophistry) that captured the public’s heart and divisiveness (populism) that stirred anti-elite sentiments. Could the demagoguery of ancient Athens have been reincarnated in 21st-century Korea?

The political arena is a "marketplace of ideas" where right and wrong thoughts compete. In this marketplace, the sole judge who distinguishes truth from falsehood is the people. John Stuart Mill wrote in On Liberty that "when truth collides with falsehood, people recognize the truth more clearly and feel it more vividly." I hope Mill’s words become a precious seed that protects South Korea’s liberal democracy.

Kim Hong-beom, Professor, Department of Economics, Gyeongsang National University

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