President Moon Jae-in Monday talked mostly about the current economic affairs, such as the pains of the self-employed, who are struggling from an increase in minimum wages, during a meeting with his chief aides and staff held at Cheong Wa Dae. “The inclusive growth policy we are implementing is a new growth policy championed by major advanced nations and international organizations which has been established as a measure to fix the holes in the neoliberal growth policy,” President Moon said at the end of the meeting, adding, “Our administration will take a long-term approach and focus on strengthening our fundamentals.”
This is the first time President Moon mentioned the term “inclusive growth” at a Cheong Wa Dae meeting since he took office. This new approach by President Moon is likely to be the result of last month’s reshuffle, where former OECD ambassador Yoon Jong-won replaced Hong Jang-pyo, a leading advocate of income-led growth theory, as the new senior secretary for economic affairs. The OECD defined inclusive growth as “economic growth that is distributed fairly across society and creates opportunities for all.” In order to become a sustainable economy, people should be able to achieve upward mobility in society and there should be less social distrust and struggle between social classes. “Inclusive growth is necessary in countries such as Korea, where income and wealth inequality is increasing and expanding,“ said IMF Managing Director Christine Lagarde when she visited Korea in last September.
Some say income-led growth is part of inclusive growth. But a major difference between the two is that inclusive growth pursues growth without the intervention by the government and focuses on sharing the cost. On the other hand, income-led growth, as can be seen in the recent examples of sharp increase in minimum wage and drastic reduction of working hours, is an economic experiment, where the government actively intervenes in the market to raise income and aims to achieve growth by increasing consumption. “Income-led growth, innovative growth, and fair economy are not a matter of choice. They should be run in parallel,” President Moon said at the meeting. While there has been little success in President Moon’s one-year experiment of the income-led growth policy, his recent focusing on regulatory reform suggests a change in policy.
It is welcoming if the government is reviewing a shift in its growth policy. But inclusive growth should not be just another name for income-led growth as the latter has created employment disaster and triggered protest from the self-employed. Although belated, the government should fix the problematic policy and adjust the speed of implementing it. Furthermore, just like the president stressed Monday, the top priority for our economy in the second half of the year is clearly increasing the growth potential through bold regulatory reform. I hope Moon’s remarks are not just an empty rhetoric.