Presentation at NEAR Foundation Economic Forum
"Aggregate Demand Stimulus Measures Such as Low Interest Rates and Expansionary Fiscal Policy Failed to Prevent Growth Decline"
"National Growth Engine Must Shift from Imitation-Based to Creative Human Capital"
As South Korea's 10-year average long-term growth rate has entered the 0% range, experts have pointed out that, to boost growth, the country should pursue technology-driven growth rather than implementing "aggregate demand stimulus measures" such as increasing liquidity and lowering interest rates.
On June 24, Kim Saejik, Professor Emeritus of Economics at Seoul National University, made these remarks at the forum titled "The Sinking of Korea's Economic Ecosystem: Decline in Growth Potential and Dynamism," hosted by the NEAR Foundation at the Korea Chamber of Commerce and Industry.
Professor Kim diagnosed, "Over the past 30 years, South Korea's 10-year average long-term growth rate has declined by 1 percentage point every five years, and it is estimated to enter the 0% range this year." He further warned, "In an era of 'zero growth,' negative annual growth could occur once every two years, and there is a possibility of a mammoth-scale crisis even greater than the foreign exchange crisis. Many citizens could suffer severe economic hardship, including weakened global technological competitiveness and decreased worker incomes."
Professor Kim emphasized, "The top priority for the new government is to reverse the downward trend in the long-term growth rate," and insisted, "A nationwide effort should be launched with the goal of 'raising the rate by 1 percentage point every five years.'"
He pointed out that, unlike previous administrations, the government should not repeat aggregate demand stimulus measures such as boosting the construction sector, low interest rates, easing loan regulations, and expansionary fiscal policies. Professor Kim said, "For the past 30 years, every administration has excessively and repeatedly implemented aggregate demand stimulus measures as a stopgap, but failed to prevent the decline in growth. We need to adopt genuine growth policies that identify and promote the true drivers of economic growth."
Professor Kim presented "creative human capital," defined as the ability to generate innovative technologies and ideas, as the driving force of economic growth.
He stressed, "The reason the growth rate has dropped by 1 percentage point every five years since the 1990s is the perpetuation of imitation-based education and economic systems. The country must shift its growth engine from imitation-based to creative human capital." He argued that the policy direction should move away from a "small elite" model, in which technology development relies only on a few large corporations or science and engineering specialists, and instead enable all citizens and companies to participate in the production of creative ideas.
Professor Kim stated, "No matter how much money is poured into new growth industries such as artificial intelligence (AI), no new technology can emerge without new ideas. If innovative ideas come not from a few, but from numerous citizens and companies, and if these ideas are commercialized into technology and exported, a Korean version of Apple or Nvidia could emerge and achieving a 4% long-term growth rate in 15 years would be possible."
He proposed that, to realize this, the government should implement an "idea property rights protection policy" that registers the name of the original idea creator in a national idea registry and grants ownership and property rights. For example, when citizens propose ideas such as drive-through screening clinics or colored guidance lines at highway entrances and exits, the government would purchase the ideas and distribute a share of the profits generated from commercialization. He also suggested compensation incentives, such as reducing corporate tax for creative companies and value-added tax for creative products. He recommended reforms to the education system so that all citizens can develop their creativity.
Next, Kim Dongwon, former Visiting Professor of Economics at Korea University, who gave a keynote presentation, stated, "With the current national innovation system, it will be difficult to not only compete globally but also protect the domestic market from China Shock 2.0. The new government must demonstrate that it is a prepared administration. Approaching issues in science, technology, and education in a short-term or myopic manner will inevitably cause problems."
Former Professor Kim further suggested, "The Basic Plan for National Strategic Technology Development should be elevated to a pan-governmental plan. Along with education reform to develop talent, a plan to foster scientists should be established." He also pointed out that the title of AI Chief at the Presidential Office should be changed to Chief of Science and Technology, covering a broader scope.
In his keynote address, Chung Dukgu, Chairman of the NEAR Foundation, also emphasized, "We must seek to restore productivity through another round of creative destruction. A comprehensive movement for creative innovation will entail significant political costs and cannot be completed within five years, but President Lee Jaemyung and the government must make a new start."
Meanwhile, Lee Taekyu, Senior Research Fellow at the Korea Economic Research Institute, and Lee Geun, Distinguished Professor of Economics at Chung-Ang University, also attended the forum as presenters and panelists.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
