[Initial Report] The 'Policy Supply Chain' Is Also Facing a Collapse Crisis

The COVID-19 pandemic exposed the vulnerabilities of global companies' supply chains in a stark manner. The title of globalization proved powerless in the face of supply bottlenecks. Voices warning of the end of the era of division of labor also emerged. The Korean economy, which has struggled to break away from a manufacturing-centered industrial structure and a trade structure highly dependent on raw material imports, was utterly helpless in the face of the supply chain shock.

What if we compare a country to a company? It seems that the policy supply chain is also on the verge of collapse. If policies are considered finished products, the most vulnerable link where bottlenecks occur in the entire supply chain is undoubtedly the political sphere. Policies devised by the government lose their essence and become tools for political strife once they reach the National Assembly. This is the bitter reality of the Republic of Korea. The ruling party and the executive branch, which launched under a minority government, are not only numerically inferior but also appear to lack the will to overturn the situation. The major opposition party, burdened with the risk of its party leader, seems to excessively exercise legislative power while shirking responsibility. A former vice minister of an economic department I recently met also cited the politicization of policy as the biggest obstacle preventing Korea from making a further leap forward, which aligns with this perspective.

There are criticisms that the scope and intensity of political intervention in policy have exceeded dangerous levels. Party-government consultations have become procedures for obtaining parliamentary approval rather than mere reporting and discussion. Many agree and lament that while the legislative branch’s power and authority have grown excessively, it lacks the obligation of responsibility. Conversely, the executive branch, left only with responsibility, feels powerless.

Although political discord is not a new phenomenon, the seriousness must be recognized amid the complex crisis engulfing our economy during the COVID-19 experience. In a survey conducted by the Korea Development Institute (KDI) to commemorate the 60th anniversary of the Five-Year Economic Development Plan, 96.3% of the public recognized the current economy as being in crisis, and four out of ten pointed to “realizing cooperative politics beyond factionalism” as a way to overcome medium- to long-term crises.

Next year, there is a prevailing atmosphere that South Korea’s economic growth rate will be in the low 1% range. Not only are overseas institutions such as the Organisation for Economic Co-operation and Development (OECD, 1.8%) and credit rating agency Fitch (1.9%) lowering their expectations, but even the central bank, the Bank of Korea, has lowered its economic growth forecast to 1.7%. The government, which will announce next year’s Economic Policy Direction (Gyeongbang) around late next month, is also highly likely to significantly revise downward its existing forecast (2.5%).

The Yoon Suk-yeol administration has passed half a year since its launch but has produced no cooperative results with the National Assembly in terms of policy. The first budget bill looks likely to miss its processing deadline, and the tax law amendment bill, which centers on reducing comprehensive real estate tax, corporate tax, and income tax, remains stalled, unable to move beyond the opposition party’s “tax cuts for the rich” frame. The legislation of fiscal rules is also dragging on indefinitely.

In the recently popular fantasy drama Jaebeoljip Maknae Adeul (The Youngest Son of a Conglomerate), the chairman of the Sunyang Group shudders at the word “politics” yet inevitably bows before political power. Watching him brings to mind the late Lee Kun-hee, former chairman of Samsung, who once said, “Politics is fourth-rate, administration is third-rate, and business is second-rate.” That was already in 1995. Now, 27 years later, while we have produced first-rate companies, we reflect on what rank politics and administration truly hold. At the same time, we ponder the opposition party leader’s remark that “when authority is given, one must take responsibility proportional to the size of that authority.”