[Inside Chodong]Does Reviving the Grassroots Economy Really Require Local Currencies?

The perception of local governments regarding the Local Currency Act differs from the expectations of the Democratic Party of Korea. Although the state promises to take responsibility for the finances necessary to operate local love gift certificates, concerns about economic side effects remain.

They are aware that the 14 trillion won in disaster relief funds distributed during the COVID-19 period in 2020 did not significantly help the neighborhood economy. The Korea Institute of Public Finance also analyzed that if local currencies are distributed nationwide rather than in specific regions, the effects would be offset.

Nevertheless, the amendment to the Local Currency Act, which mandates national funding support for local currencies, is once again approaching passage in the plenary session. Representative Lee Jae-myung confidently states, "Expanding local currencies can revive the stalled economy." The Democratic Party is prepared to frame this policy, which Lee experimented with during his time as mayor of Seongnam, as a nationwide success story.

While local currencies are not the ultimate solution to reviving local economies, there is some agreement that they can serve as a catalyst. The money distributed will inevitably be spent in some way and may flow into the pockets of small business owners.

The problem lies in the method and timing. After unilaterally passing a budget reduction plan last year, they are now demanding a supplementary budget that involves indiscriminate money distribution to generate local currencies. The tax cost for providing 250,000 won in support to every citizen through local currencies amounts to 13 trillion won. This appears to be an attempt to manipulate the government treasury at will.

Given that this support measure was introduced during the impeachment crisis, it is easily misunderstood. This is why the ruling party criticizes it as "cash handouts aimed at an early presidential election."

With no possibility of bipartisan agreement, local governments are the ones feeling frustrated. They expect more national investment in SOC (social overhead capital) or infrastructure expansion to address regional extinction rather than uniform cash handouts from the central government. Above all, the local currency project should be a matter for each local government to decide individually. Mandating "national funding support" contradicts the principle of local autonomy and decentralization.

To give credit where it is due, attention should be paid to the issues local governments, which bear responsibility for the grassroots economy, have raised since the beginning of the year. Many local governments have chosen "rapid adjustment of local regulations" to enhance their survival capabilities. They view swift regulatory reform as competitiveness itself and as a driving force that can stimulate basic economic sectors such as small business owners and SMEs. This is why every administration, from the Roh Moo-hyun government's "regulatory bundles," Lee Myung-bak government's "regulatory utility poles," Park Geun-hye government's "thorn under the fingernail," Moon Jae-in government's "red flag," to Yoon Suk-yeol government's "sandbags," regardless of conservative or progressive, has made it a national agenda.

Although it may seem like an outdated policy, if accompanied by legislative support from the National Assembly, there is no more effective measure to revitalize the grassroots economy than regulatory reform. Thanks to extending the mandatory two monthly closure days of large supermarkets to weekdays, the weekend consumption evaporation phenomenon has disappeared, and consumer choice has increased. Recently, Seoul City's efforts have also eased regulations on sales activities within urban parks. Now, citizens can comfortably purchase food from food trucks during cultural and artistic events held in parks.

Given this, the current situation in the National Assembly is even more regrettable. Observing the behavior of the major opposition party dreaming of an early presidential election amid the impeachment crisis and the government and ruling party focused solely on defense, "reviving the grassroots economy" appears to be mere rhetoric. From now on, both ruling and opposition parties must select cost-effective policies to revive the grassroots economy. In this impeachment crisis nearing its end, the reckless distribution of cash and populist policies funded by taxpayers' money only makes life harder for struggling citizens.