Election-year politics triggers new class warfare

By Kim Tong-hyung

The intensifying attacks on big businesses and rich individuals as poll days approach are as predictable as they are familiar.

It remains to be seen, however, whether all the chaebol bashing to milk more out of the wealthiest taxpayers will result in tangible changes that stick with the reshaped political landscape after the parliamentary and presidential elections.

What’s clear is that the stakes have never been higher for the political elite and policymakers to produce meaningful methods for social mobility as it appears the country could be facing a perfect storm of civil discontent.

Desperate to massage voters’ egos, political parties have been competing to make promises to clamp down on corporate greed, tackle inequality and create stronger social safety nets.

It’s hard to distinguish between ideas suggested by opposition parties like the Democratic United Party (GUP) and Saenuri Party or New World Party, the rechristened ruling Grand National Party (GNP) when their news releases similarly echo plans to redo tax arrangements for large corporations and rich people.

President Lee Myung-bak punched his tickets to Cheong Wa Dae on lavish economic vows like the “747” — 7 percent annual economic growth, $40,000 in per capita income and Korea’s emergence as a top-seven world economy. These ambitions fell way short.

His successor will likely connect his or her legacy to finding ways to share the fruits of growth more broadly with the general population and the corporate sector.

“We can’t let the excessive greediness of chaebol continue to disrupt the order of the market and threaten the survival of small-and-medium enterprises and self-employed income earners,” said Kwon Young-jin, a lawmaker of the ruling party.

“The democratization of the economy is the most important issue that faces Korea now. While opposition parties emphasize the distribution of wealth, we will concentrate more on protecting small companies and consumers from large business powers and restoring fairness in the markets.”

Ryu Jong-il, who leads the DUP’s committee for “economic democratization,” also pointed a finger at large corporations and accused them of being the creators of the country’s current state of disparity.

“Economic polarization is mainly a result of chaebol and their monopolizing presence in their main markets,” he said.

The party has successfully roped Saenuri into agreeing to an implementation of a Korean version of the “Buffett tax,” named after iconic American investor Warren Buffett who proposed higher taxes for the rich in the U.S.

The plan is to create a whole new tax bracket for the upper-end of income earners, 38 percent on people earning more than 300 million won (about $268,000) in yearly taxable income. The highest income bracket previously was cut off at the 88 million won threshold. The changed rules may fatten state coffers annually by nearly 80 billion won, according to NNP calculations.

The parties are also suggesting a variety of ways to increase taxes paid by large businesses and preventing them from entering businesses traditionally occupied by small companies or the self-employed.

“We will increase taxes paid by the 1 percent, which will allow us to push our welfare agendas without increasing the tax burden on the remaining 99 percent,” Ryu said.

The on-and-off economic downturns in past years have increased the wealth gap to dangerous levels, but growth-first governments led by the late Roh Moo-hyun and current President Lee Myung-bak have failed to seriously reduce it.

Average Koreans continue to see their living standards deteriorate as wages fail to keep up with the rising cost of living. Workers’ share of national income was safely above 60 percent in the early-to-mid 1990s, but fell to 58 percent in 2000 and 59.2 percent in 2010, according to government figures, as the country’s economic policies continue to put exports before consumption.

Household finances have been decaying faster than bad cheese as families sink under a sea of debt, drowning from stagnant wages and unemployment. With the consumer debt mountain scaled at over 1 quadrillion won, Koreans officially owe more money than the economy generates in a year, and an alarmingly large portion of the working-age population remained sidelined from the labor market.

Korea’s pace in GDP continues to falter. At the same time, industrial cartels like Samsung and Hyundai have shattered profit record after record, exploiting the reduced competition at home that has been watered down since the late-1990s financial crisis and leveraging their domestic dominance globally.

While globalization has been kind to the country’s export juggernauts, its other creation has been the widened chasm between the wealthiest and the rest. Companies have been shifting more factories overseas, which allowed their shareholders to make more money, but led to a dearth of quality jobs for school leavers and graduates.

Economic policymakers under the Roh and Lee administrations have repeatedly claimed that the wealth should be tricked down to the lower-end income earners and unemployed as the shareholders go out and spend more. Recent years proved such theories as fantasies.

The state-run Korea Development Institute’s (KDI) quality-of-life survey last year placed Korea 27th among the 39 industrialized nations that make up the Organization for Economic Cooperation and Development (OECD) and Group of 20, based on data for 2008. Even that seems to be a generous ranking when the country has cemented itself as the suicide capital of the world.

There are more than enough reasons to target conglomerates like Samsung, Hyundai, LG and Lotte and the wealthy families behind them ahead of the elections.

The companies are showing signs of succumbing to political pressure, retreating from bakeries and other food-related markets traditionally occupied by small firms as they try to tame accusations that they devour neighborhood businesses.

It could be said that the controversy triggered by chaebol creeping into businesses previously dominated by smaller operators is merely a symptom of a more deadly disease as the country seems at a loss in inspiring entrepreneurship and helping small- to medium-sized enterprises.

This is a glaring weakness for an economy that continues to be a one-trick export pony and struggles to cope with softening activity on the domestic side, as consumers endure stagnant wages, ravaging indebtedness and high unemployment.