Alternative to Washington Consensus sought

Park Se-il, president of the Hansun Foundation, speaks at the International Symposium on the Seoul Consensus at the Korean Federation of Banks in downtown Seoul, Tuesday. / Courtesy of Hansun Foundation

Professor Park Se-il pushes for ‘communitarian liberalism’ with China, Japan, Korea

By Kwaak Je-yup

The solution to current economic troubles can be drawn from the Korean development model, according to multinational scholars gathered in downtown Seoul Tuesday.

“The International Symposium on the Seoul Consensus,” hosted by the Korean private think tank Hansun Foundation, brought in scholars from Korea, China and Japan, in an effort to seek an alternative development path.

Professor Park Se-il, the foundation president, said in his keynote speech that ways are being sought for an alternative to the neoliberal model known as the Washington Consensus. Park called it “communitarian liberalism.”

“Neo-liberalism is based on an unconditional belief in markets, growth and efficiency. However, communitarian liberalism aims to harmonize the market with government, economic growth with social justice, the people’s spirit needs with the material needs,” he said in the keynote speech. “On one hand, it is based on the liberal ideas that put importance on individual freedom, creativity and choice; while on the other hand it places emphasis on the value of the community-solidarity between social, historic and environmental dimensions.”

The stress on national unity and patriotism as the solution to “regulate excessive democracy” was the key theme of the consensus, which gave a set of two guidelines, an advancement strategy for middle-income economies and a development strategy for the least developed nations.

The term Washington Consensus was first coined in 1989 by the economist John Williamson to prescribe a reform package for crisis-hit developing countries, broadly based on market liberalization, privatization, and deregulation.

The scholars behind it claim spiritual capital is the key to recovery from times of crisis, like the current one.

Lee Hong-kyu, professor in the Department of Management Science at Korea Advanced Institute of Science and Technology (KAIST), said at the symposium that the government needs to foster cooperation and morality among the people instead of blindly stressing excellence and dynamism in the economy. Selfish interests, he said, could not be the sole driver of economic development. Only with social trust could development be meaningful for the greater society, according to Lee.

Seoul Consensus I: an advancement strategy from the middle-income nations

Part one, called the advancement strategy from the middle-income nations, started by stressing the importance of mental and spiritual capital.

“For successful development, an ethic of diligence and honesty, can-do spirit, strong will-to-economize, lifted community morale, patriotism, and visionary and effective leadership are of extreme importance,” said Park.

Global integration should not be rejected, he said, saying adaptation is better than “either reluctant integration or protectionism.” Stability in the finance sector, however, is of utmost priority, over efficiency, and so supervision and regulation becomes more important.

Park also listed the need to “narrow the gap between the globalized and the localized sector” as one of the key objectives for developing nations. He sees the increasing productivity and income gap between the two sectors becoming a serious threat to political and social stability in the country.

Next, human capital investment as well as a knowledge-sharing network across the globe was highlighted. Park said the technological advancement assured that this was easily possible.

The foundation president then focused on balanced growth, harmonized with distribution and welfare, as well as environmental protection. “Robust investment,” he said, was needed.

Along the same lines, Park said job creation should be stressed over GDP growth, calling policymakers to cut ties with the “obsession” of the latter.

His seventh point was decentralization of budget and regulatory power to the regional and local administrations.

Park dedicated a substantial amount of time to the need to overcome populism, which he called one of the most dangerous aspects of democracy.

“Political populism undermines the state capacity to implement the various structural reforms much needed toward advanced nation.”

Korean unification was the subsequent target area, pushing for the country to be a model of peace and prosperity in the Northeast Asia and the whole world, too.

He finished part one saying there should be a “grand national vision” and strategy for the entire country, while respecting the local differences in history and institutions.

Seoul Consensus II: a development strategy for the least developed nations

The second part was dedicated to the least developed nations, which he said could be inspired by the Korean history of development, going from one of the poorest countries in the world to one of the top 20 economies.

First, he urged the countries to globalize themselves, while maintaining a substantial amount of foreign exchange reserves and making sure there is prudent regulation on short term capital movement, citing the “highly unstable” global financial market.

Next, political stability was his focus. “Tough and strong leadership, and competent and effective government officials are prerequisites,” he said. “Less political stability implies less economic growth.”

He then drew education and training to be the keys for investment that directly translates into better economic development.

The fourth area was patriotism. He called it an important driving force, “vital to sow within the people a dream and a sense of confidence for the country’s future.”

Next, he pressed the government to lead economic development planning, setting industrial policies to “upgrade comparative advantage and strategic management” of the entire national economy.

One of the more interesting points was his sixth, saying “the government should help only those who help themselves,” saying the system should apply the right mix of sticks and carrots to all fields such as trade, industry, education and labor.

He gleaned over corruption, saying the will of state leadership “matters most” and saying competition law should be reinforced to reduce economic corruption.

Next, leveraging the population filled with labor was highlighted, saying an export-oriented development strategy based on labor-intensive manufacturing industries is vital.

Setting the right conditions to attract the maximum amount of foreign direct investment (FDI) and long-term foreign loans was also highlighted.

Unlike part one, Park pressed least-developed nations to maximize GDP growth rate, even adopting a “production first and distribution later” approach.

Perhaps the most controversial was the criticism against “democracy fundamentalism.” He said on the course of economic development, market regulation has been the sole area of focus, to ensure social good, while there has been little discussion about how to “regulate” democracy, the premature introduction of which could lead to what Park called “illiberal democracy,” a democracy without liberalism.

Some participants, while welcoming the effort and direction, remained cautious and pressed for more concrete plans.

During the roundtable talk, Jwa Sung-hee, chairman of the board of directors at Gyeonggi Research Institute (GRI) and adjunct professor of economics at Seoul National University (SNU) underlined the importance of looking at the government and politicians as hindrances to economic prosperity. He said the industrial policy of rewarding those who excel in their field was the key to economic development — and not the free market, which he said has existed since civilization was based on agriculture.

Hyungsik Harris Kim, a senior economist at World Bank, urged caution against criticizing democracy for stalling the economy. Instead he stressed that democracy needs to “mature further to catch up with the development of the market economy.”