Will Green New Deal Create New Middle Class Here?
By Kim Tae-gyu
Staff Reporter
The nation needs to create a middle class through social policies instead of digging earth under the name of the ``Green New Deal'' if it wants to fight off the lingering financial crisis.
That's the claim from Prof. Lee Joon-koo at Seoul National University, arguably Korea's most authoritative micro-economist.
He made the statement Monday while criticizing the government's Green New Deal, the policy drive that is composed of mega infrastructure development projects.
``New Deal should mean a fresh deal with the middle class, which has substantially shrunk in the aftermath of the Asian financial crisis 10 years ago,'' Lee told The Korea Times in a telephone interview.
``It is the most efficient way of generating a maximum in effective demand. The Green New Deal will not help foster the middle class. Hence, channeling taxpayers' money into the scheme is ill-fated,'' the 58-year-old said.
According to the state-run Korea Development Institute, Korea's middle class is on the decline. It went from 68.5 percent in 1996 to 61.9 percent in 2000 and 58.5 percent in 2006.
Lee said that reversing the trend is important for the country to get over the financial storm, contending that the 50-trillion won Green New Deal will not be able to do this.
His logic: The construction projects under the Green New Deal will end up enriching some local builders, while delivering one-off wages to poor workers, which are sufficient to buy bread ― but not enough to move up the social status ladder.
``Of course we need to grapple with holes in the financial system in the short run to cope with the global financial distress. Over the long haul, however, nurturing the middle class should be the top priority because it will produce greater demand,'' Lee said.
``The question is how to grow the middle class and my answer is to embark on such middle-of-the-road policies as social welfare, education and info-tech programs, rather than the nationwide infrastructure initiatives."
Great Compression vs. Great Depression
Lee said his idea is in line with that of Paul Krugman, who won the Nobel Economics Prize last year, also well known as a bitter critic of the Bush administration.
Through his best-selling book ``The Conscience of a Liberal,'' the economist journalist said that huge increases in taxes on the rich and a period of wage controls to greatly narrow pay differentials are crucial for prosperity.
He dubs such measures as the ``Great Compression,'' which was coined by labor historians in order to echo the ``Great Depression'' in the 1930s.
Krugman said that the New Deal launched by President Franklin Roosevelt in 1933 resulted in the Great Compression, which made possible the long post-war boom and prosperity in the United States.
A professor at a Seoul-based university concurred.
``One of the most common misunderstandings on the New Deal is that the project was about construction of large infrastructures such as the Hoover Dam,'' said the professor who wanted to remain anonymous.
``However, the New Deal was more about reform of business and financial practices as well as the introduction of various social policies. Our bureaucrats need to keep this in mind,'' he said.