Korea's socialist experiment - not bad but feasible?

Top presidential aide Jang Ha-sung, right, pays respects to the national flag during a workshop for heads of public entities last week. Jang's boss, President Moon Jae-in is seen as well. Yonhap

By Oh Young-jin

Jang Ha-sung, President Moon Jae-in's top adviser, has been going all-out to defend his boss' signature "income-led growth" policy (It is as much Jang's as Moon's, though).

The former anti-chaebol professor's promotional tour was highlighted by his rare on-the-record meeting with Cheong Wa Dae correspondents on Aug. 26. Jang talked as if back in a classroom, explaining the distribution-oriented three-stage program that smells a tad of socialism.

The three stages are bigger incomes, innovative growth and finally a fair economy, a transition enforced by big government.

In his lecture, few assertions sounded more ironic than this: The minimum wage increase amounts to an extremely small portion of the income-led growth policy.

That puts the lie to the ongoing controversy that is threatening to unravel Moon's economic policy. The hourly minimum wage is about 7,530 won, up 16.4 percent from last year.

Although Moon officially gave up his campaign promise of raising it to 10,000 won by 2020, he will pursue it by the end of his term in 2022, meaning additional increases over the next three years.

Now, thousands of small merchants, including convenience store owners, are protesting against the minimum wage rises that they say are driving them out of business. This show of disapproval is giving life to the political opposition that had otherwise been reduced to a lifeless basket case.

Some critical scholars claim that Moon's policy is to blame for the decrease in gross domestic product (GDP) growth in the second quarter to 0.6 percent from the first quarter's 1 percent.

They argue that the onslaught of the bad effects of the wrong policy beat their expectations by several months at least. Of course, it beats me as well how their excuse makes sense, considering the minimum wage is all that has been implemented so far out of Moon's growth playbook, and it has only been in effect for half a year or so.

Moon's playbook has many more chapters to come: fiscal support for the distressed small merchants, on top of administrative incentives such as lower transaction fees; an increase in the basic pension and greater medical coverage for the elderly; the expansion of welfare infrastructure and urban regeneration; and finally a stronger social safety net and welfare system.

There are two things worthy of note. First, this growth policy is a progressive one that is so important to making the Moon government what it should be.

If the government gives in to the detractors' demand for a reset of its economic policy, it would mean losing its entire economic agenda. Once it shows its readiness to click rightward and allow for moderation, it would lose its support base and subject itself to bigger demands.

Second, Moon's policy is no doubt expensive ― so who will pick up the tab? Jang gave his answer, loud and clear.

"Household income dropped from 67.9 percent to 61.3 percent, while corporate income rose from 17.6 percent to 24.5 percent," he told the reporters, comparing the change in respective portions to gross national income (GNI) from 2000 to 2017.

If one doesn't get the clue, here is his giveaway: "Corporations have not increased their investment, with 'corporate savings' amounting to 36 trillion won in 2016."

So one purse for the change would be taken up by conglomerates _ or more precisely chaebol, as Jang said innovative growth stems from small and medium companies because big ones don't invest and are therefore of no help in increasing the nation's growth potential.

The other purse would be big-income individuals, as Jang said of the income imbalance: "The gap between the top 10 percent of the income pyramid and the bottom 10 percent was the third highest among OECD member countries in 2016."

What all this indicates is an emerging struggle, pitting the progressive government against corporations and individuals with means: the first trying to squeeze the second for shakedowns to support the have-nots in the grand game of redistribution. The two sides can't afford to take a step back in a do-or-die duel.

Oddly, it is ― as seen in the merchants' opposition to the higher minimum wage ― small people that are standing in the way of the changes that Jang is pushing for in their interest.

This is only part of the challenge facing what Jang calls a "paradigm-shifting" economic policy. The bigger challenge is the changing economic situation. People who got new jobs in July numbered 5,000, compared with 313,000 a year ago, inducing some to brand it the onset of an employment cliff.

Apartment prices also are skyrocketing, not just in Gangnam, southern Seoul, but in northern areas, in a scenario that makes the rich richer and exasperates the poor for getting poorer.

Jang tried to explain away that the mere year-to-year comparison between the numbers of newly employed could be meaningless. And there was no talk about a big-stick policy to force the speculative fever down.

But if there is more evidence of a worsening economy, or if the popular perception of the bad economy strengthens, nobody would bother to listen to Jang or anybody else.

Now is the time to act before that happens, and in the initial stages of the struggle Jang has to go full throttle. Jang didn't say everything when he presented the minimum wage policy as something minuscule because, if it were so, it would be the quintessential minuscule thing that could make or break Moon's economic policy. He must know it.

Oh Young-jin (foolsdie5@koreatimes.co.kr, foolsdie@gmail.com) is the digital managing editor of The Korea Times.

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