[Lee Myung-ho's Future Preview] Tasks for Korea's Future

Lowest National Happiness Worldwide... Low Birthrate Deepens Amid Future Anxiety
Aging Population and Income Polarization Also Issues... Need to Focus on Advanced Countries' Approaches
Welfare Is Not Waste... Circulation of Growth and Distribution Needed

How can a nation pioneer its future? The time to contemplate the future of the nation is approaching. The presidential election, held every five years, is an election that determines the fate of the country, myself, and us for at least the next five years. However, the issues highlighted in the election tend to focus more on past and present matters rather than the future, such as the next five years. We believe we are making choices for the future, but our decisions are influenced by past and present issues. As these choices repeat, the magnitude of the problems our country must solve continues to grow.

South Korea has achieved successful growth, but its citizens feel uneasy satisfaction. To summarize the current situation of our country: South Korea is one of the very few countries worldwide that has leapt from a lower-income nation to a higher-income nation over the past 60 years. It has become an advanced country with an income of $30,000. However, the happiness of its people is among the lowest in the world. Anxiety about the future manifests as a low birthrate. The younger generation finds satisfaction in consumption for themselves rather than spending on raising children, due to the burden of child-rearing costs, decreased competitiveness after childbirth, and expenses for future generations. The intensified competition leading to low birthrates results in population decline, making South Korea the fastest disappearing country.

Aging is an even more serious issue. As the baby boom generation begins to retire, aging accelerates. At the same time, the elderly poverty rate in the country is 43%, more than three times the average of the Organisation for Economic Co-operation and Development (OECD). Aging leads to increased dependency and medical costs. With insufficient old-age security measures, real estate has become a means of asset accumulation and old-age security, prompting even the younger generation to invest in real estate, which has intensified real estate price surges and asset polarization. If growth continued, the market pie would expand, but the economic growth rate, which once reached 9% during the high-growth period, has dropped by 1 percentage point every five years and now remains at 2-3%. The growth effect from increased total input of capital and labor has reached its limit, and the growth effect influenced by multiple factors such as innovation, science and technology, research, cooperation, trust, and efficiency does not reach the level of advanced countries. This means we have reached a point where improvements must be made in all areas of society. South Korea has reached a point where it must break through the invisible barriers of the social systems established by advanced countries with national incomes of $40,000 to $50,000.

The Korean success model that made us who we are today has become "it was right then, but not now." Without an industrial base, the government took the lead in acquiring foreign debt and lending it to companies. South Korea was able to rapidly grow its economic scale through export-led growth by importing industrial facilities from abroad, establishing a production base, and securing foreign currency through exports to expand the industrial base. As the economy grew, income and jobs increased, naturally creating a virtuous cycle where welfare levels rose. The industry was advanced from light industry and heavy industry to ICT, and after experiencing the 1998 International Monetary Fund (IMF) foreign exchange crisis, some large companies secured global competitiveness. As large companies expanded overseas markets, the current large-corporation-led growth model was established.

Currently, large companies with global competitiveness entered heavy and chemical industries through government policy funds and low policy interest rates. Thanks to the government's selective support to help expand business scale, they were able to grow into the large companies we see today. They benefited from resource concentration through government market intervention. In this process, small and medium-sized enterprises (SMEs) were relatively excluded from resource allocation, resulting in polarization in scale, technological competitiveness, profits, and wage gaps between large companies and SMEs.

Only 10% of good jobs are in large companies. Although 90% of workers are employed by SMEs, the wage gap between large companies and SMEs exceeds twice, causing excessive competition among youth for scarce jobs. Unsatisfactory jobs are abandoned, and job preparation continues, increasing youth unemployment and anxiety about the future among young people. The gap in jobs and wages leads to income and asset disparities, deepening polarization. As polarization intensifies, the absolute pie grows, but the share of the majority shrinks relatively, making most people anxious and unhappy?this is the success rule of the current Korean growth model. It is also the cause of anxiety and unhappiness for both winners and losers.

How did advanced countries solve these problems? Advanced countries created a virtuous cycle between growth and distribution. In contrast, during the developmental era when Korea achieved high growth, it was trapped in the ideology of "growth is welfare, welfare after growth." Growth led to job expansion in an era without jobs, which resulted in welfare, so it was half correct. However, now growth does not lead to job expansion, and good jobs are relatively decreasing. It is an era where growth and welfare must be pursued simultaneously, but in Korea, growth is still insufficient, so the argument to delay welfare spending expansion for growth continues. Ultimately, we are entering a high-cost, every-man-for-himself society. The lack of childcare and education welfare increases personal burdens through high private education and child-rearing costs, leading to avoidance of marriage and childbirth. More people try to solve old-age welfare through real estate asset investment, causing real estate prices to soar and forcing high housing costs.

Most countries that have become advanced now were different from us. Advanced countries also went through high-growth periods like Korea and adopted policies pursuing growth and welfare simultaneously. They reduced individual cost burdens through welfare and increased women's labor market participation while the state supported childcare. Although taxes increased, there were no personal expenses, and everyone benefited, reducing social disparities. This reduced polarization and social conflict, eliminated political conflicts, and stabilized society. Increasing the productivity of the entire nation through cooperation and trust was the secret of advanced countries that achieved both high income and quality of life. Escaping the ideology that welfare is a cost and waste will guarantee a happier and more prosperous future.

Lee Myung-ho, Vice President of the Future Society.
Photo by Asia Economy DB

Lee Myung-ho, Vice Chairman, Korea Future Society

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