Post on 01-Dec-2021
Jong WonLeeEmeritusProfessorofEconomics
Sungkyunkwan University
I. IntroductionII. MajorCausesorOriginsofPolarizationIII. TraditionalEconomicDevelopment
StrategiesandTheirConsequences:CrisisandPolarization
IV. KeyPolarizationIndicatorsV. NewEconomicDevelopmentParadigm:
Macro‐EconomicPerspectivesVI. PolicyAgendaforSharedGrowth:Micro‐
EconomicandInstitutionalPerspectives
1. ShiftofParadigm(SuggestedinPresidentialAddressonIndependenceDay)1) 2009.8.15:GreenGrowth2) 2010.8.15:FairandJustSociety3) 2011.8.15:SharedGrowth
2. Reality:SluggishEconomyandAggravatedPolarization
3. PolicyObjective:MainConcernhasbeenhowtoStrengthenEconomicPotential,toImproveQualityofLife,andtoEstablishaFairSocietythroughSharedandSustainableGrowth
1. Long‐cherishedUnbalancedEconomicGrowthStrategy
2. Neo‐classicalDoctrine:UnboundedGlobalCompetitionintheWTOEra
3. ChallengesfromNewCompetitors(BRICs:Brazil,Russia,India,China)whileEnteringMaturedStageofEconomicDevelopment
4. 1997EastAsianCrisis5. 2008GlobalFinancialCrisis
1. EstablishmentoftheCMES(UniqueKoreanStyleDevelopmentalStateModel)
[Figure1]EconomicDevelopmentStrategyunderCMESysteminKorea
ConcentrationofCapitalOwnershipandManagementbyGovernment
CompleteControlofGovernmentoverFinancialInstitutions,ResourcesAllocations,
andWagesandPrices
Government‐ledEconomicDevelopmentStrategies:Export‐orientedIndustrialization:UnbalancedGrowth:GrowthFirst,DistributionLater
CentralizedManagementEconomicSystem
Theterminology,centralizedmanagementeconomicsystem(CMES),isemployedinthisbooktodescribecharacteristicsoftheKoreaneconomicdevelopmentprocess.Withthisterm,Itrytoemphasizetheroleofthegovernment(orpoliticalpowergroup)anditsbureaucratswhoplayedaleadingroleinestablishingeconomicdevelopmentplansandexecutingpolicyimplementation.Ialso,withthisterm,trytorefuteotherpopularapproachesincludingthedependencymodelapproachatthesametime.Marxistsemphasizedtheroleofownershipofproductionmeans,withwhichtheytriedtoexplainproductivity,productionrelationandconsequentinequality.However,ItrytoemphasizethefactthatmanagerialcontrolpowerofthegovernmentandbureaucratsplayedabiggerroleintheKoreaneconomythantheartificialorlegalownership.Ontheotherhand,Iintroducethisterminologyinordertoplaceemphasisonthe
factthatthefeudalisticbureaucratsystemstemmedfromtheKwa‐keo‐je stillexistsinthemindoftheKoreanpeople,eventhoughtheformalownershipofproductionmeansandfactorsweretransferredtoprivatesectors.Monopolisticpowerofabsolutemonarchyandnationalizationofalltheproductionmeanaregone.However,thepracticeofcentralizedmanagementhas,inKorea,beenatthecenterofthegovernment.
2. MajorStrategies
(1)EmploymentofUnbalancedGrowthStrategy
1)R.Nurkse vs.A.O.Hirschman2)Backward&ForwardLinkageEffect3)SocialOverheadCapital(Electricity,Coal,Railroads,Roads,Ports)andKeyIndustries(Fertilizer,Refinery,Cement,etc.)toeliminateviciouscircleofpovertyandtoestablishaself‐supportingeconomy
(2)EOI(Export‐orientedIndustrialization)Strategy1)NeglectofNon‐tradesectors2)NeglectofAgriculturalsectors
(3)BorrowingForeignCapitalforthePlannedInvestments
(4)Government‐ledEconomicPolicingStructureforEffectiveControlof EconomicPlanningandExecutingProcedures:CMES
3. SelectionofPrinciples
(1)EconomicPlanningvs.LaissezFaire(2)Unbalancedvs. BalancedGrowth(3)EOIvs. ISI(4)Protectivevs.FreeTrade(5)Growthvs. Stability(6)Efficiencyvs. Equity
Kuznets’U‐Hypothesis(seenextpage)
[Figure2]Kuznets’U‐Hypothesis
4. ‘HardState’(G.Mrdal):StrongGovernmentRole
(1)Government‐ledRegulatoryFinancingSystem
1)ReorganizationoftheCentralBankingSystem2)RearrangementofCommercialBankOwnership3)ReorganizationandExpansionofSpecializedBanks4)FoundationofLocalBanksandForeignBankBranchOffices
u
5)Non‐BankFinancialInstitutions
6)ForeignCapitalInducementⅰ)WarReparationFortheJapaneseRule
(600millionUSD)(usedmainlyforhighwaysandPOSCO)
ⅱ)J.F.K.
7)DomesticSavingsInducementⅰ)InterestRateRealizationPolicy(1965;1979)ⅱ)CurrencyReform
8)ReinforcementofPolicyLoansandCreditControl:Freeze ofCurbLoansandRescueofInsolventEnterprises
[Figure3]CharacteristicsofFinancialPolicyinKorea
FinancialManagement
MonetaryControl
FinancialManagement
MaintenanceofGrowthOrientedMoneySupply
NeglectofStability
FundRaising
FundAllocation
FailureofInterestRatePolicy
RetardationofNewFinancialCommodity
Development
NeglectofInvestmentEfficiency
ExcessivePolicyFinancing
(2)ExportPromotionPolicy
[Table1]ComprehensiveExportPromotionPolicy
Means MajorContents
PromotionofExportIndustry
• Constructionofindustrialcomplexes• Specializationofexportindustry• Selectionofandsupportforexport‐goodsproducingcompanies
• Securityofrawmaterialsforexport• Exportrecordslinkingimport‐licensing• Importpromotionofproductionforexportindustry,andfinancingitsneededcapital
FinancialSupport
• Export subsidy• Increasedexportfinancing• Lowerinterestratesforexportfinancing• Maturityextensionofexportfinancing
[Table1]ComprehensiveExportPromotionPolicy‐ continued
Means MajorContents
TaxIncentives
• Special allowanceofdepreciationperiodforexportindustry’sfacilities
• Tariffexemptionandcommoditytaxcutforrawmaterialsofexportindustry
• Substantialreductionofcorporatetaxandincometaxthatarerelatedtoforeignexchangeearnings
• Reductionofcorporatetaxthatisrelatedtoproductionofexportgoodsanditswarmaterials
• Reductionofdomestictaxonexportsanditsintermediateinputs
• Reductionoftariffandindirecttaxfordomesticsuppliersofintermediategoodsforexport
• Allowanceofwearingoutofimportedwarmaterials• Allowanceofaccelerateddepreciationoffixedassetsofmajorexportindustry
Means MajorContents
AdministrativeSupport
• Reformofforeignexchangeandinternationaltradesystemssuchassimplification oftradeadministrationandestablishmentofbanksthatspecializeinforeignexchangedealings
• EstablishmentofKoreaTradeAssociation(KTA)andKOTRAtostrengthenmarketingandinformationgatheringforexports
• Specialfinancialbenefitoflong‐termloanstothosewhoaccomplishedyearlyexporttargets
• Monthlyexportmeetings,inwhichPresidentwasalsopresent,topromoteexportsandtoeliminateexportbottlenecks
• Establishmentofexportpromotionfund• Expansionofdeferred‐paymentexports• Strengtheningofexportinspection• Discountofrailroadfreightfareforminingproducts
[Table1]ComprehensiveExportPromotionPolicy‐ continued
(3)ChangeofLeadingSectorsforEOI
ImportSubstitutionLightIndustryHCIR&D
(4)Development&WaningofCMES(1980s&1990s)
(1)GovernmentRoletoSolveViciousCircleofPovertyandtoEliminateSupplyBottlenecks
(2)UnbalancedGrowthApproach:GovernmentEconomicPolicyPrincipleand6Five‐yearEconomicDevelopmentPlans
(3)Rationale:SupportoftheStrongDevelopmentalStateModel1)ChalmersJohnson(1994)2)RobertWade(1990)3)Amsden (1988)4)WorldBank(1993):TheAsianMiracle
(4)Limitation(Seethenextpage<Box>)
5. RationaleandLimitationoftheStatistModel:FactorsforSuccessandFailureoftheKoreanEconomy
[Figure6] RatiosofLight andHeavy&ChemicalIndustry
59.4%50.3%
41.9%36.3%
29.0%23.4% 21.2%
15.6% 12.7%
40.6%49.7%
58.1%63.7%
71.0%76.6% 78.8%
84.4% 87.3%
1970 1975 1980 1985 1990 1995 2000 2005 2010
LightIndustry Heavy&ChemicalIndustry
[Figure7]RatiosofExportandDomesticSectors
13.2%
26.3%31.2% 32.0% 27.6% 28.5%
38.6% 39.3%
52.3%
86.8%
73.7%68.8% 68.0% 72.4% 71.5%
61.4% 60.7%
47.7%
1970 1975 1980 1985 1990 1995 2000 2005 2010
Export Domestic
2007 2008 2009 2010 2011 2012
Totalworkers(A)
15,731 15,993 16,076 16,617 17,065 17,421
Regular 9,958 10,356 10,702 11,119 11,294 11,612
Non‐regular(B) 5,773 5,638 5,374 5,498 5,771 5,809
Ratio(B/A) 0.367 0.353 0.334 0.331 0.338 0.333
[Table4]NumberofEmployed:RegularandNon‐regularWorkers
0
2,000
4,000
6,000
8,000
10,000
12,000
2007 2008 2009 2010 2011 2012
9,95810,356 10,702
11,119 11,294 11,612
5,773 5,638 5,374 5,498 5,771 5,809
Regularworkers
Non‐regularworkers
[Figure8]NumberofEmployedRegularandNon‐regularWorkers
2007 2008 2009 2010 2011 2012
Totalworkers 172.4 181.1 185.4 194.6 202.6 211.3
Regular(A) 198.5 210.4 216.7 228.9 236.8 245.5
Non‐regular(B) 127.3 127.2 123.2 125.3 135.6 143.2
Ratio(B/A) 0.64 0.60 0.57 0.55 0.57 0.58
[Table5]AverageMonthlyWagesofRegularandNon‐regularWorkers
0
50
100
150
200
250
2007 2008 2009 2010 2011 2012
198.5210.4 216.7
228.9236.8
245.5
127.3 127.2 123.2 125.3135.6
143.2
Regularworkers
Non‐regularworkers
[Figure10]AverageMonthlyWagesofRegularandNon‐regularWorkers
IncomeClassandIndex
1996 2000 2006 2008
Market
Disposable
Nominal
Market
Disposable
Nominal
Market
Disposable
Nominal
Market
Disposable
Nominal
IncomeClass(%)
Low 11.76 11.25 11.19 17.39 15.74 15.48 21.23 17.94 17.40 22.20 18.97 18.48
Middle 68.00 68.45 68.73 58.86 61.88 61.13 53.63 58.48 58.54 50.94 56.42 56.45
High 20.24 20.30 20.08 23.75 22.38 23.39 25.14 23.59 24.06 26.86 24.61 25.06
Source: Korea Bureau of Statistics.
[Table6]MiddleClassSizeinPercent
[Figure11]MiddleClassRatio
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
7.1 6.8 6.5 7.5 7.3 7.7 8.2 8.2 10.9 11.4 9.2 10.1 10.0 10.6 11.4 11.9 11.9 12.6 12.5 13.1 12.5 12.4
75.4 76.2 76.3 75.7 75.8 75.3 74.5 74.1 69.6 68.9 71.7 70.4 70.3 71.8 70.0 69.2 68.3 67.0 66.3 66.9 67.5 67.7
17.5 16.9 17.1 16.8 16.9 16.9 17.2 17.8 19.5 19.6 19.0 19.5 19.8 17.6 18.6 18.9 19.8 20.4 21.2 20.0 20.0 19.9
MiddleclassIncome:morethan150%
MiddleclassIncome:lessthan50%~150%
RelativePovertyRates(MiddleclassIncome:lessthan50%)
[Figure12]Gini CoefficientandRelativePovertyRatio
Source:KoreaBureauofStatistics
Gini CoefficientandRelativePovertyRatio
0.230
0.250
0.270
0.290
0.310
0.330
82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
7
8
9
10
11
12
13
14
15
지니계수
상대빈곤율
Gini Coefficient
RelativePoverty
[Figure13]Bi‐PolarizationIndex(ERindex,Windex)
0.0165
0.0170
0.0175
0.0180
0.0185
0.0190
0.0195
0.0200
0.0205
0.0210
0.0215
0.2300
0.2400
0.2500
0.2600
0.2700
0.2800
0.2900
0.3000
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Bi‐PolarizationIndex(ERindex,Windex)
Windex ERindex
ERw
1. CantheNeo‐ClassicalRemedybeanAppropriateAlternative
(1)MarketPrinciplesareEmphasized
(2)Chowdhury andIslam(2001):WashingtonConsensusandNeo‐ClassicalDoctrineCannotbeaRemedyforLDC’s
(3)Hutson andKearney(2001) WarningagainstIncreasingDegreeofFragilityoftheInternationalFinancialMarket.
ForcesofIMFandU.S.TreasuryDept.
2. TheAdvancedStateModel:ANewAlternative
[Figure14]RolesofGovernmentforEconomicDemocracy
3. EconomicDevelopmentParadigms
[Table7]DevelopmentalStateandAdvancedStateModel
1. MajorSourcesofPolarization
(1)InvoluntaryIntroductionofCapitalismthroughColonization=>WeakBasisforMarketEconomy
(2)ExtremeExploitationbytheJapaneseRule,DevastatingDestructionbytheKoreanWar
=>ViciousCircleofPoverty=>WeakBasisforIndustrialization
Leading‐sectorOrientedUnbalancedGrowthStrategy(i.e.,EOI) Government‐ledEconomicDevelopmentPlan
2. Consequences
(1)DualitybetweenModernandTraditionalSectorsIndustrialandAgriculturalSectorsExportandNon‐exportSectorsLargeandS&MEnterprisesH&CandLightIndustries
(2)DeteriorationofIncomeDistribution
Polarization
3. OtherSourcesofPolarization
(1)Astheeconomyapproachesmaturedstagesofeconomicdevelopment,andasthetechnologicalinnovationisaccelerating,discrepancyinadaptivecapabilitybetweenIndividualsandbusinessfirmsgrowswider.
(2)AsthecompetitionbecomesunboundedlyferventundertheWTOscheme,continuousseparationbetweenwinnersandlosersiscreatedinthegameofsurvivalofthefittest.
4. BehavioralCharacteristicsofPolarization
(1)Largevs.S&MCorporations SharpIncreaseofSubsidiariesofthe10LargestBusinessGroups:237betweenApril,2009andJune,2011.
IntrusionorEncroachmentofCoreBusinessesforS&MEnterprisesbytheBigCorporations(esp.sincetheCoreS&MBusinessRegulationswereliftedin2006)
SecuringorLuringTechniciansfromS&MIndustriesbytheBigCorporations(45.5%ofthenewlyemployedtechniciansbythebigcorporationscamefromtheS&Mindustries)
UnfairTradingPrevailsbyForcingOralContract,UnitDeliveryPriceCut,andTechnologyExtortion.
(2)LargeCorporationsvs.Consumers
EntryBarrier=>Monopolisticprice PriceCollusion=>MonopolisticProfit Quality,PriceandAfter‐serviceDifferentialsbetweenExportandDomesticDeliveries
InsufficientandImplicitDocumentationorInstructions
(3)1997EastAsianForeignExchangeCrisisand2008GlobalFinancialCrisisAggravatethePolarization
(4)Consequences:
AggravationofPolarization
AccelerationofPolarizationduetoWeakTrickle‐downEffect,andDeepeningofDuality
GloomyFutureProspectsduetoWeakenedGrowthPotential,LowEmploymentRate,HighPercentageofNon‐RegularWorkers,DecreasingConsumption,etc.
5. WhatNeedstobeDone:
(1)byBigCorporations
DownsizingorReductionofExcessivelyHighCEOWages ContractionofNon‐RegularWorkers’Size CreationofMoreJobs RestraintofUnfairTradingPracticestowardS&MEnterprises
DeterrenceofPriceCollusionandMonopolyProfits ImprovementofAfter‐servicesorRepairDefects CoordinationofConsumerProtection ExtensiveSupportforthePoor
(2)S&MEnterprises
ProtectTechnologyandTechnicians EradicationofUnfairTradingPractices SettlementoftheS&MFirmSuitableCoreBusiness Nuture(orFoster)theAbilitytoPropagatethroughAdoptionofParticipatoryModelsintermsofOwnership,Management,andPaymentbytheResultSystem(PerformanceBasedPaymentSystem)
UtilizationofProducerAssociations(e.g.,NationalFederationofFisheries,NationalFederationofLivestock,NationalAgriculturalCooperation)
(3)Consumer
UtilizationofConsumerAssociations StrengtheningofConsumerProtectionMovement
(4)Government
SupportforS&MindustriesandConsumers’CountermeasuresagainstBigCorporations’UnfairTradingPractices
FosteringS&MBusCorporations ReconsiderationofChaebol Policies(Forexample,RegulationsPertainingtoTotalEquityInvestmentwhichwasfirstintroducedin1987,andabolishedin2009,mayneedreintroduction)
6. EssentialIssuesforSharedGrowth
EstablishmentofOrderinFairTradingPractices ProtectionofS&MCoreBusiness FosteringS&MIndustry’sAbilitytoPropagate EstablishmentofAdministrativeSupportSystemfor
SharedGrowth PromotionofSocio‐EconomicCommunitythrough
IntroductionofCooperativeEconomicModels,andFosteringofProducers’&Consumers’AssociationsandEncouragingSocialEnterprises.
Thankyouverymuchforyourcarefulattention!