Severe economic polarization

By Jay Kim

I think that anyone who has recently visited Seoul would agree that Seoul’s nightlife is truly amazing. The Gangnam district, located on the southern side of Han River, is all ablaze with lights long past midnight, the streets are full of people, and every other building has thriving plastic surgery clinics, restaurants, and learning centers.

Looking at the flashing neon signs, LCD screens with loud music and dancing images, and shining foreign luxury cars riding through the streets, you can see Korea’s amazing economic growth. Gangnam, in fact, is much bigger, more crowded, and more luxurious than the famous Rodeo Drive in Beverly Hills.

When I left Korea in the early 1960s, Gangnam was an undeveloped plain off the beaten track. Its development in just half a century is certainly a miracle, unlike any in the world. It also seems mainly populated by young men and women.

The birthrate of Korea is 1.15, one of the lowest in the world (the OECD average is 1.64), and a census study shows that the elderly population will exceed the youth population in five years. This stems from Korean insecurity over income and employment, as well as the overly high cost of raising and educating a child. However, the grey hair generation won’t be found on the streets of Gangnam.

For the last 13 years, per-capita gross national income (GNI) of Korea has not risen over $20,000, but Korea’s level of luxury has put the U.S., whose GNI per capita is over $40,000, to shame. Since income has stayed the same, doesn’t the increased level of luxury mean that some people have become poorer to the same degree?

I believe this to be the case, and that behind the glittering LCD screens of Gangnam lie the pain of the collapsed middle class. Therefore, the problem confronting Korea is its economic polarization. The ever-increasing income gap between the rich and the poor is certainly a more urgent problem than the division of the South and the North, or any ideological, regional, or generational divisions.

According to news reports, in Korea the upper 20 percent of income earners are enjoying a comfortable life, while the remaining 80 percent have to deal with mounting debts and no commensurate rising income. In a recent survey of 20 OECD countries, the polarization of Korea was the third highest of those countries, a very serious level indeed.

The survey described Korea as a country with “an unstable social safety net,” and pointed out that Korea has the lowest ratio of social welfare spending to GDP (3 percent) among the surveyed countries. On the other hand, the amount of income tax for the top 10 percent last year was 767 times more than the amount for the bottom 10 percent, meaning that the top 10 percent paid 65 percent of Korea’s total income tax.

The administration has made countless announcements that the economy is recovering, but many still complain that nothing has improved for the poor, and it is true that the country’s economy is doing well while the poor still suffer. This kind of polarization is the current reality of Korea, and maybe a bleak future as well.

Democracy is based on a strong middle class, and the collapse of the middle class forms the new poor. Helping small businesses helps restore the middle class. In America, the Small Business Administration runs various programs to help small businesses. President Obama recently signed a Jobs Act to provide for small businesses, and Congress has passed several bills to help small businesses every year.

In contrast, in Seoul some big corporations are allowed to open mini stores with virtually unlimited financial backup and level small businesses to the ground. This makes it very hard for the poor to make a living. The large U.S. corporations, like Lockheed Martin, are not allowed to run small stores, but not from a lack of capital; rather, they are prohibited from doing so by antitrust laws, which Korea should hurry to adopt.

It is the prime responsibility of the Korean government to narrow the gap between the rich and the poor, and they should work to make sure young people have a hopeful future where their songs and dances are not in vain. They should reestablish a strong middle class by strengthening its support for small businesses. Corporations should have to pay taxes for the income they make. It is the government’s role to invest these tax monies into helping small businesses.

Jay Kim is a former U.S. congressman. He serves as chairman of the Washington Korean-American Forum. For more information visit Kim’s website at www.jayckim.com.