By Lee Ho Jun
Kyunghee University
Economic polarization has always been a subject of controversy, and many politicians and governments have shown a tendency to shy away from this thorny issue. Economic disparity has been widening significantly in Korea since the Asian financial crisis of 1997.
After the unforgettable financial damage, the government and corporate institutions had no other option to remedy the economic situation but to accept the neo-capitalist economic system led by the United States and the United Kingdom.
Economists and nations are convinced that greater polarization imposes a burden upon governments and poses a serious obstacle to societies in their pursuit of sustainable growth, and integration between the rich and the poor.
Ironically, when those governments or companies tried to promote growth, economic polarization seemed to become worse under the neo-capitalist system. This is the single biggest disadvantage of this system.
There are many examples relating to this issue such as the widespread income gap between the rich and the poor. Therefore, finding a way to alleviate economic polarization may bring priceless benefits to governments and nations alike as it may provide the answer to how people can coexist in harmony with their neighbors.
There are lots of reasons why the situation has been deteriorating, but it may be divided into three general groups: individuals, businesses, and the government.
The biggest problem for individuals is the worsening earning polarization, which unfortunately builds a vicious circle of poverty. This cycle begins with instability in the labor market.
Data from the National Statistical Office in 2004 showed that 36.6 percent of employees were non-regular workers. Moreover, a high percentage of transient workers earned up to two million won per month through working nine hours a day.
This promoted a dramatic pattern of consumption, which will eventually lead to a huge gap between the rich and the poor. The feeling of relative deprivation will be hard to avoid in the less wealthy group.
In the business world, most companies desire flexibility in the labor market as increasing uncertainty affects their global competitiveness. This also relates to restructuring within the companies, resulting in many employees being laid off.
When such downsizing becomes necessary, workers can no longer maintain their standard of living and thus fall into the low income group. Tragically, this issue is connected with the loss of entrepreneurship in Korean companies.
In the past, they may have been worried about market uncertainty but were not afraid of it. For example, leading conglomerates in Korea such as Samsung, LG, SK and Hyundai overcame numerous crises through aggressive policies, i.e. raising money to invest in facilities and R&D. By doing so, not only were they able to overcome obstacles, but their employees could also enjoy job security.
The government should have adopted realistic policies to decrease the inequality of earnings distribution.
Unfortunately, most policies proved to be only temporary solutions, such as subsidizing the poor or providing short-term employment, which do not help them escape from poverty.
Moreover, the government has not effectively supervised fair competition in the market place. Violations of anti-monopoly regulations have not been sanctioned vigorously beyond nominal fines.
Likewise, new companies can hardly gain a foothold in the market because of the conglomerates that try to hamper rising competitors in spite of their lofty percentage of the market share.
Finding how to eliminate economic polarization is, at the moment in Korea, of utmost importance.
If we want to solve it, individuals, especially those with a high income, should realize that spreading wealth, perhaps through charity donations, would be really helpful to the poor. We call it ``noblesse-oblige.''
Unfortunately, it is an unusual phenomenon in Korea, where many people tend to keep their wealth instead of putting it back into society.
Last June at a Harvard graduation ceremony, Bill Gates, the CEO of Microsoft, insisted that the rich who live in advanced countries should help the impoverished and developing countries by returning some of their wealth in order to give them the opportunity to escape from poverty. He defined it as ``creative-capitalism.''
In a similar vein, Warren Buffett, the world's second richest person after Gates, announced that he would donate $30.7 billion spread over several years through annual contributions to the Bill & Melinda Gates Foundation.
One crucial point is that charity will not be a cure-all, but may be one of the realistic ways by which we can assist our neighbors.
Furthermore, generating employment through corporate leadership would be much more practical than government-led programs.
To do so, companies should increase investment even in times of economic uncertainty. Without the expansion of investment on R&D and other facilities, there will be fewer job opportunities.
As for the companies themselves, they will never grow or become a success in the market without adventurous management.
At the same time, businessmen need to consider active entrepreneurship as a means to produce growth when they fall into difficulties. In addition, profit-returning programs, a critical factor in achieving sustainable growth in the market, should be better organized in every company in Korea.
Despite the fact that a few leading companies are running several such programs, it is not enough to alleviate the social economic imbalance and is still not well-structured in Korea. If the companies run those programs properly, they could not only enhance their own public reputation but also boost their brand recognition.
Reducing inequality in the economy should be the highest priority for the Korean government, whose energetic role is indispensable for any improvement. First, they should support the manufacturing industry, where more than 60 percent are involved in producing cars and shipbuilding, and adopt subsidizing policies to promote their business. Leading companies like Samsung, Hyundai, and Daewoo Shipbuilding, who overcame lots of difficulties through new technologies and constant reinvestment, together hold almost 70 percent of the world market share in 2007.
Their great success brings countless benefits like creating jobs linked to shipbuilding and other heavy-industry areas. Without success and a strong base in the manufacturing industry, economic growth will be just temporary. Other fields like finances, IT and BT are less labor intensive than manufacturing, requiring fewer workers. Moreover, the Korean government should also promote a friendly environment for the companies. To support a growing economy, the government must tackle the unfair competitions between big and small companies, because these are related to the loss of entrepreneurship.
Muhammad Yunus, the chairman of the Grameen Bank, who won the Nobel Peace Prize in 2006, mentioned that poverty is a denial of all human rights and a threat to peace. Poverty originates from disparity of income distribution and inevitably leads to economic polarization. This is the reality, and Korea is no exception.
If we do not implement ways to reduce the economic imbalance, our nation will not be able to stay competitive on global markets. Some people may be doubtful about how useful these alternatives will actually be, yet, it is a shortsighted assumption because our situation is much more desperate than we think. Finding how to reduce this imbalance is not an option, but a duty for all Koreans.