Why can't Korea be more like (fill-in-the-blank)?

By Casey Lartigue, Jr.

During the Korean presidential and Assembly campaigns of 2012, many South Koreans extolled the virtues of Sweden’s “welfare paradise.” My Korean debating partners asked me, “Why can’t Korea be like Sweden?”

My short answer: Because Korea is Korea and Sweden is Sweden. My long answer cited Swedes such as the late Johnny Munkhammar, a former member of the Moderate Party in the Parliament of Sweden. He pointed out at a March 2012 policy forum I organized in Seoul that welfare advocates were selectively highlighting the benefits of the Swedish model. Fans of Sweden’s welfare state ignore that the country’s success began in the 1870s when its economy opened up to the world through free trade and economic freedom. The welfare state came six decades later.

Sweden went through hard times starting in the 1970s when the welfare state was expanded and the government increasingly intervened in the economy. It made an economic comeback in the 1990s when state-owned enterprises were sold off, public monopolies in health and education were replaced with competition, financial markets were deregulated, and welfare guarantees were scaled back. I asked my welfare-state dreaming buddies if they want to follow Sweden’s real model: Limited government intervention in the market, then set up a huge welfare state six decades later.

What was their response? Change the question: “Why can’t Korea be like Switzerland?” So I was delighted to host Henrique Schneider, chief economist of the Swiss Federation of Small and Medium Enterprises, at discussions with SME heirs and college professors hosted by Freedom Factory Co. Ltd. last Jan. 20 in Seoul. Schneider mentioned policies that would send progressives into cardiac arrest.

For example, Switzerland doesn’t have a minimum wage law (Sweden doesn’t either). The “thud” sounds you just heard were the heads of Korean progressives hitting the ground after fainting. Schneider said there is no direct inheritance tax in Switzerland. In comparison, the rate is about 60 percent in Korea ― progressives want that raised for rich people and the chaebol.

The Swiss government doesn’t protect local businesses from international competition, uncompetitive businesses are allowed to go bankrupt, and smaller businesses don’t receive preferences. The Korean government’s “shared growth” and “economic democratization” approach pressures large companies to share profits with smaller ones, bans large companies from doing business near mom-and-pop stores, prohibits large companies from entering some sectors, forces large grocery stores to shut down at least twice a month, and, depending on the source, there are between 160 to 220 government programs supporting SMEs. I suspect that many Swedes, upon being informed about Korea’s “economic democratization” push, would ask, “They do that, and they think adding welfare will make them like us?”

Another reason Korea can’t be like Switzerland: Cooperation. As Francis Fukuyama wrote in his 1995 book “Trust,” Korea is a “low-trust” country. If you read the news regularly, then you know this is a polarized country with long lists of mutual enemies, including but not limited to, big business, rich people, politicians, foreigners, history books, Japan and other Koreans (born abroad or in different regions).

There is a high level of trust in Switzerland, according to Schneider. Swiss people rarely protest, politicians are trusted, corruption is rare, and problems get resolved without violent protests, self-mutilation or self-immolation. The Swiss pay high taxes without complaining; in contrast, even welfare state advocates in Korea hit the streets to protest a proposed minor tax increase to pay for the huge welfare state they crave.

One incredible thing about cooperation that Schneider mentioned: Switzerland hasn’t had a strike since 1918. In contrast, Korea is “The Republic of Protest.” KORAIL recently ended its latest major strike in December (to block Swiss-style privatization). On cue, the Korean Medical Association announced that it would be voting on whether to go on strike (also, protesting Swiss-style privatization). In the year 2000, the KMA went on strike for five months. To show they mean business again, one Korean doctor stabbed himself at a protest. I suppose Swedes would say, “That guy is definitely not like us.”

Other shocking policies: Swiss anti-trust laws are weak, with the burden being on their government to prove a cartel harms the market. A license is required to practice law in court, but not to drive a taxi, establish a legal firm or set up an accounting business. On the other hand, Korea is a checklist country of required documents, exams, licenses, regulations, certifications and apostille requirements.

Schneider stressed that Koreans should look to Korea rather than Sweden or Switzerland. I would add that the emphasis should be on increasing individual freedom and economic freedom rather than cherry-picking models from abroad.

I suspect that welfare advocates who read this will respond, “Okay, so Sweden and Switzerland aren’t what we thought they were. Then what about Finland? Or why can’t Korea be more like (fill-in-the-blank)?”

The writer is the director for international relations at Freedom Factory Co. Ltd. in Seoul and a fellow with the Atlas Network in Washington, D.C. He can be reached at cjl@post.harvard.edu.