[Interview] "Korean Economy Is Close to the Welfare State Trap"

Lee Geun, Vice Chairman of the National Economic Advisory Council
Presidential Economic Advisory Body under President Moon

Balancing Growth and Welfare During Remaining Term
Strengthening Social Services over Cash Welfare
Time to Consider How to Spend Money

Lee Geun, Vice Chairman of the National Economic Advisory Council, is being interviewed on the 1st at the office of the National Economic Advisory Council in Jongno-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Interview = Asia Economy Choi Il-kwon, Head of Economic Department, Organized by Reporter Kim Eun-byeol] Lee Geun, Vice Chairman of the Presidential Advisory Council on National Economy (Advisory Council), evaluated the Korean economy as being "close to the welfare state trap." He expressed concern that South Korea, having escaped the middle-income trap caused by stagnation after high growth, could also face growth stagnation in its status as an ‘advanced developing country’ rather than a developing country. To avoid falling into this trap, he advised that spending should focus more on strengthening social services rather than cash-based welfare.

Vice Chairman Lee’s remarks were made before the April 7 by-elections, but they have gained attention following the ruling party’s defeat in the elections. The Moon Jae-in administration aimed to apply the Nordic welfare model to Korea from the early days of its term, but actual welfare tended to focus on cash-based benefits. Especially due to the COVID-19 pandemic, expenditures for cash-based welfare increased sharply. This underscores the need to shift economic policy during the remaining term.

In an exclusive interview with Asia Economy on the 1st, Vice Chairman Lee stated, "Europe realized that cash-based welfare led to the ‘welfare state sickness’ and changed direction toward job creation through expanding social services." As a priority task for the current administration with just over a year left, he added, "It is necessary to set the agenda for ‘harmonizing growth and welfare’ and to establish a concept of what form welfare should take." This is Vice Chairman Lee’s first interview with the media since his appointment in January.

Vice Chairman Lee also revealed that the government will focus on creating global value chain (GVC) rules that are not swayed by the United States or China. This reflects a determination to keep political logic out of economic matters. He said, "At the G7 meeting to be held in June, 11 countries (G7 + South Korea, Australia, India, South Africa) will present a proposal report on ‘economic resilience,’" and added, "I will attend the last expert panel meeting before the summit next month as the Korean representative to discuss and finalize the agenda on a ‘rules-based global economic system.’"

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