New double agenda for President Yoon Suk-yeol

National strategy needed to enhance competitiveness of SMEs

By Han Sang-man

A new presidency raises hope for the inauguration of a new era for the Republic of Korea as well, with the bold reformation of faulty policies and the launching of new ones that will allow the country to prosper and people to have a better life.

The key difference for the new administration from many previous ones is that it is the first to lead a country acknowledged by the U.N. Conference on Trade and Development in 2021 to be a developed economy. South Korea started as one of the poorest countries amid the ruins of the Korean War and achieved rapid growth during the following years, joining the world's top 10 economies in 2021.

The new government must approach its mission from this new starting point as a leading powerhouse to properly frame its agenda for the next five years. In order to usher in a new era of economic success and leadership, the most important task of the new administration must be to overcome economic and social polarization while simultaneously promoting dynamic economic growth.

It used to be that whenever the presidential administration changed in Korea, the center of gravity of policies shifted like a pendulum between policies centered on growth through strengthening the market economy and policies centered on welfare to resolve economic and social polarization. Income-led growth promoted by the outgoing Moon Jae-in administration emphasized representative distribution-oriented policies as its basic reigning philosophy.

Han Sang-man

It is expected that the new administration will shift the pendulum of policy from a distribution-oriented direction to one that strengthens a dynamic and free market economy. I think the public consensus on enhancing corporate vitality and creating a more dynamic market economy was clearly demonstrated through the outcome of the last presidential election held on March 9.

But the new Yoon regime must also be keenly aware of the need to balance such market-oriented policies if it wishes to avoid another shifting of the pendulum to correct them in the election of 2027.

It is time to set a new policy goal that will not be an automatic shift of the pendulum if Korea is to establish itself firmly in the league of the most advanced economic countries in the world. It is time for the nation to set out a new path that combines market-friendly policies with considerations for more equitable opportunity for all the stakeholders of the economy.

Rather than reverting simply to another swing of the pendulum, the government must attempt a more complex maneuver that might best be captured by the model of the double helix, whereby energy is directed in both directions, organically recombining economic growth with the more even distribution of resources and opportunities.

In this respect, the costly lesson of Japan's "lost decades" has an important lesson to teach us in Korea. When the bubble burst in 1990, the Japanese economy faced an exceedingly tough economic crisis. The Japanese government mobilized all possible financial and fiscal policies to boost domestic demand, but the Japanese economy did not recover even after ten years of sustained effort.

The result of many studies conducted in Japan show that the "lost decades of Japan" were not just a problem of the decline of domestic demand, but also of the decline of Japan's industrial and corporate competitiveness. In particular, the competitiveness of small and medium-sized enterprises (SMEs) ― which constitute the heart and soul of the Japanese economy ― sharply declined after the bubble burst in 1990, and this decline in turn led to a weakening of the overall competitiveness of the Japanese economy in the long run.

As can be seen from the case of Japan, the demand-side policy of stimulating domestic demand, and the supply-side policy of corporate competitiveness, must work together to generate significant growth.

In addition, in order to increase the competitiveness of industries and companies, a national strategy must be forged to enhance the competitiveness of SMEs to harness the growth of the entire economy. It is only through such a dual-pronged approach that the nation's economy can truly take off and soar, just as a bird needs both wings to fly.

There is a clear consensus that economic growth through market-friendly policies must again be a central concern of the new administration. However, in order to usher in a new era of genuine global leadership, a double-helical initiative must be pursued in which growth through the strengthening of a dynamic market economy is both tempered and abetted by a clear vision of raising up all players to increase the competitiveness of the nation as a whole.

True success can only be achieved when socioeconomic polarization is addressed and overcome not by a swing of the pendulum, but by the interlacing synergy of the double helix.

The writer is the president of the Korea Academic Society of Business Administration.

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