[The Editors' Verdict] There Must Be Principles When Distributing Money

The debate over COVID-19 relief funds between Prime Minister Chung Sye-kyun and Gyeonggi Province Governor Lee Jae-myung draws attention. It is not because they are famous politicians or rivals. Rather, it raises hopes that the rampant populism driven by popularity-seeking, albeit belatedly, might be curbed. Prime Minister Chung flatly rejected Governor Lee’s frequent demand to expand COVID-19 relief funds to cover the entire population. Chung said it is time to move beyond simplistic debates like ‘let’s spend more’ or ‘let’s spend less.’ He also criticized Lee’s usual argument to distribute disaster relief funds as local currency, saying that indiscriminate distribution is unfair and that ‘distributing well’ is what matters. Although Governor Lee stepped back, expressing agreement with the Prime Minister’s point, he might feel unfairly treated. The policies of the Moon administration were no different from Lee’s claims, and the difference is merely a matter of degree, yet only Lee has been portrayed as a populist.

Populism only harms the people. Policies such as income-led growth, fair economy, and peace economy were the exact opposite of their names. Income-led growth resulted in fiscal deficits and worsening employment; fair economy led to increased polarization and inequality; peace economy caused security concerns. When the public began to recognize these problems, COVID-19 struck, and populism intensified. Seizing this moment, Governor Lee sparked a populism competition within the administration. He advocated for basic income, basic housing, and basic loans, packaging them as income-led growth and fair economy. Not to be outdone, the ruling party expanded disaster relief funds to cover the entire population and dismissed criticism as opposition to economic stimulus measures. However, these efforts were ineffective, and the economic downturn prolonged. Thanks to the relief funds, the Moon administration won a landslide victory in the April 2020 general election, but using its parliamentary dominance, it passed the three lease protection laws, which ultimately caused rent and monthly lease prices to soar, plunging low-income, homeless people into deeper hardship.

As COVID-19 policies fell into populism, low growth, high unemployment, and polarization worsened. Economic recovery and employment expansion require increased production. However, the Moon administration focused on punishing businesses, the main agents of production. It passed the three corporate regulation laws disguised as fair economy, the three labor union privilege laws beautified as basic labor rights, and the Serious Accidents Punishment Act, which places all responsibility on business owners. It also pushed through the 52-hour workweek and universal employment insurance during the pandemic, which inevitably reduced income and employment. Despite this, some large corporations actively responded to the accelerated technological and industrial changes caused by COVID-19 and regained growth. But small and medium-sized enterprises, which account for nearly 90% of employment, lost direction and declined. Workers who could work remotely saw their incomes rise, but those who could not lost jobs and fell into poverty. Ultimately, COVID-19 populism deepened polarization in industry and labor in a K-shaped pattern.

Principles are necessary even when distributing money. Before debating ‘let’s spend more’ or ‘let’s spend less,’ or ‘let’s spend recklessly’ versus ‘let’s spend wisely,’ the priority should be ‘let’s not waste.’ The government must first consider whether problems can be solved by other means before spending money. South Korea has the world’s most severe household debt and corporate debt exceeding dangerous levels, and even the government, the last bastion, is increasing debt at the fastest rate. Fiscal waste is debt and taxes that households and businesses must repay. Populism glamorizes fiscal waste and lies that the rich can simply pay more taxes to cover it. Populism reduces the number of wealthy people and increases the poor, eventually depleting public finances and causing an economic crisis. Prime Minister Chung and Governor Lee must understand this fact first.

Kim Tae-gi, Professor of Economics, Dankook University