To Avoid Boarding the Express Train to South America

Populist Policy Demands Grow Stronger After the General Election

Worries About Money-Pumping Under the Pretext of Helping People’s Livelihoods

We Must Realize That When Capital Accumulation Declines, the Nation Declines

Watching the process and outcome of the recent general election has made me reflect anew on what politics is. That is because I doubt whether our politics is functioning properly. Politics is the work of carrying out the responsibilities of the state. The state is a social institution people created in order to live together. In the state of nature, it is difficult for individuals to live alone while protecting their lives and property, so they formed a state in solidarity with one another. Therefore, the fundamental duty of the state is to protect individuals’ lives, liberty, and property. The institution responsible for carrying out that function is the government. And those who seek to directly fulfill the state’s responsibilities, centered around that government, are politicians. Accordingly, the basic task politicians should keep in mind and pursue is the protection of each citizen’s life, liberty, and property.

During the recent general election, few people said they would faithfully carry out those responsibilities. Most politicians ignored these duties owed to all citizens and instead pursued only immediate gain. Rather than competing over visions and policies for national development, they engaged in fierce emotional factional conflict and indiscriminately poured out populist pledges of “giving away money for votes.” Meanwhile, many citizens, failing to recognize that such populist promises would ruin our future, cast their votes for those politicians, and those parties became the majority.

Already after the general election, developments are unfolding that make me worried about our future. Even before the new National Assembly has opened, the Democratic Party of Korea, which won a landslide victory in the election, unilaterally pushed through bills such as the Grain Management Act and the amendment to the Agricultural Products Price Stabilization Act, both of which would require trillions of won in spending, and sent them to the plenary session of the National Assembly. Jin Sungjoon, policy committee chair of the Democratic Party of Korea, has loudly demanded the “complete scrapping of anti-livelihood policies,” including maintaining fiscal soundness and rejecting a supplementary budget. Lee Jae-myung has even demanded that the government implement “emergency measures for livelihood recovery,” including a payment of 250,000 won per person to all citizens and a 1 trillion won reduction in interest on small business loans, both of which he had proposed as campaign pledges in the general election.

We live in time. We do not live only for today. To live well later, one must not consume all the income one earns through production. A portion of it must be saved. That savings must then be invested through financial instruments or used to purchase capital goods, increase productivity, expand the production of goods, and thereby earn more income later. Only then can one live well in the future. For a present-oriented person who spends all earned income or consumes on borrowed money, what awaits in the future is a life of destitution.

The same is true of a nation. For a nation to continue developing and prospering, it must economize and accumulate capital. Only then can the economy grow and people’s lives improve. Otherwise, economic growth stops and the nation gradually declines. Populist policies of “giving away money for votes” are equivalent to sacrificing the future in order to live only for today; they obstruct our savings and capital accumulation and darken our future. Historically, there is no shortage of countries that have declined or suffered because of populist policies. Representative examples are South American countries such as Argentina and Venezuela, as well as Greece.

In today’s democratic systems, politicians can govern only if they win elections by securing votes, so politicians and parties tend to focus more on winning office and holding power in the present than on the nation’s future. As a result, the policies that politicians and parties put forward in order to win elections and govern are generally not future-oriented but present-oriented. To secure the support of voters needed for election, they recklessly churn out present-oriented populist policies such as excessive welfare spending and “giving away money for votes” through tax increases, fiscal expansion, and monetary expansion. These are usually carried out under the name of “reviving people’s livelihoods.”

However, one clear fact is that the benefits each individual receives from such policies are, at most, no more than a small welfare payment and are not very substantial. By contrast, these policies reduce capital accumulation, prevent economic growth, cause the nation to decline steadily, and impoverish many people. In the end, populist policies are implemented under the pretext of serving the majority of the people, but instead of achieving their intended effects, they produce the exact opposite result. Our citizens and politicians must recognize this, awaken to it, and avoid falling into the trap of populist policies. Politicians in particular should recognize what true politics is and act accordingly. Otherwise, we may find ourselves aboard an “express train to Latin America.”

Jaiwook Ahn, Emeritus Professor, Department of Economics, Kyung Hee University; Chairman, Center for Free Enterprise (CFE)

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Original title: ‘남미행 급행열차’를 타지 않으려면

Author: Jae-wook Ahn

Date: 2024-05-07

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=26603