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Staff Reporter
President Lee Myung-bak's economic policies are based on a ``small government, leaving it to the market.''
``We pledged a small government, and the people chose us. They chose small government, deregulation, and effective government, giving us the landslide 5.3 million more votes,'' the Grand National Party of Lee said.
Slimming down of ministries
Lee aims at small and effective government, which minimizes regulations, control and other activities by leaving much to the market.
With the burden of the welfare state weighing on, an increasing number of developed countries have tried to break through by slimming down their governments. The idea was especially promoted in the United Kingdom by Margaret Thatcher with tax cuts and free competition, and in the Reagan administration of the United States, which cut public spending while encouraging business activities and the financial market. Lee's government has also put practicality and growth above everything. Though at a different degree, many other welfare states are pursuing smaller and more effective governments.
``Slimming down of the government is a trend in other developed countries. Our government has seen the number of officials increase by around 96,000 during the last 10 years. We have the biggest number of ministers in the world, which has led to a huge, negligent government,'' Lee had said in a meeting with the transition team.
The new president has aimed at slimming down ministries and merging them into smaller numbers. The Ministry of Knowledge-Based Economy, for example, will be born by merging the current Ministry of Commerce, Industry and Energy with parts of the Ministry of Information and Communication and the Ministry of Science and Technology.
The Ministry of Strategic Planning and Finance was formed through the merger of the Ministry of Planning and Budget with the Ministry of Finance and Economy. The Financial Affairs Commission will take over the functions of the Financial Supervisory Commission, plus the Financial Policy Bureau at the Ministry of Finance and Economy.
Economic team
Lee's lineup of economic team to realize ``MBnomics'' is also composed of economists and officials strongly believing in a small government, and driving for deregulation and tax cuts.
Lee Youn-ho, nominated as the Minister of Knowledge-Based Economy, is an example. Serving as the vice president of the Federation of Korean Industries (FKI), a chaebol mouthpiece, the former government official, who received an economics Ph.D at the University of Wisconsin, is a devotee of deregulation. He is known to have examined around 6,000 regulations one by one while he was leading a deregulation team at the FKI.
The business circle expects him to help them set up smooth relations with the government, on top of pushing for deregulation.
Kang Man-soo, nominated to lead the Ministry of Strategic Planning and Finance, is a strong believer in tax cuts.
Kang has said he will cut corporate taxes to the level of Korea's competitors on top of cutting taxes on oil. He also led a series of tax cuts while serving at the finance ministry over a decade ago. He believes that low tax rates and a simple tax system are crucial to attract foreign businesses to invest here.
The economic policy under Kang would be directing toward deregulation, based on free competition in the market. He believes encouraging corporate investment through deregulation is the only effective way to create jobs and benefit the working class.
Sakong Il, who will be the chair of the council to strengthen national competitiveness as a special adviser to the President, is the icon of market economy supporter. The veteran economist and former finance minister picks promoting investment and enhancing effectiveness as his key mission. He also showed determination to privatize state enterprises.
Not only the economic team but also other ministers in Lee's lineup are believers in the market economy and supporters of small government.
Han Seung-soo was nominated as the first prime minister under Lee. Such a lineup shows that the administration of Lee will stick to market mechanisms and growth above anything else. Deregulation, promotion of investment and thus creating jobs will be Lee's priorities.
Chung Woon-chun, who is to lead the agriculture ministry, is also an advocate of open market policies. He is a famous farming CEO who made a huge success as a marketer in the agricultural field.
Small government but more power to exercise
Some, however, cast doubt on Lee's small government strategies. They point out Lee gave birth to mammoth ministries with enormous power by simply merging old ministries.
The Ministry of Strategic Planning and Finance, for example, which will be led by Kang, was born by giving the Ministry of Finance and Economy the right to control the budget, previously job of the Ministry of Planning and Budget. Kang will be empowered not only to coordinate economic policies but also to exercise influence on other ministries since he will be determining how much budget will be given to whom.
The ministry will be more powerful than it was during the previous administration.
The Ministry of Knowledge-Based Economy, which encompasses the Ministry of Commerce, Industry and Energy with parts of the Ministry of Information and Communication and the Ministry of Science and Technology, is also likely to be a mammoth ministry playing more roles though the size would be smaller than the total of the three.
Critics point out that the gigantic ministries are likely to exercise influence on the market as time goes by since their power hasn't been diminished while simply integrating them.
Dangerous drive
While most economists agree that a small government is what Korea should aim for, not a few of them are showing concern over the possibility of overlooking the principle of ``checks and balance.'' They are concerned over the integration of policymaking and supervising bodies in Lee's administration.
The criticism is especially fiery on the Financial Affairs Commission. The People's Solidarity for Participatory Democracy, the Solidarity for Economic Reform, and the Citizens´ Coalition for Economic Justice ― all leading NGOs ― said the commission, which encompasses the Financial Policy Bureau of the Ministry of Finance and Economy and the Financial Supervisory Commission (FSS), will be playing two contradictory roles of setting up policies and supervision.
A total of 147 professors of finance and economy also announced opposition to the commission, saying the accelerating pedal of setting up financial policies and seeking economic growth through financial markets, and the brake pedal seeking financial market soundness, should not be merged into one.
They also fear that the commission empowered with both swords would turn into a powerful goliath, which goes against small government. They recommend that a private supervising organization should be created instead.
Minimizing the role of the anti-monopoly body is also causing concern. Critics say the government supervision of the market should be strengthened in economies like Korea's where chaebol grip all. The function of the market and free competition could be impaired by monopolies.
chizpizza@koreatimes.co.kr
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