The bitter end of populism's sweet poison

Populism resembles a cheap but addictive drug. Once dependent, society risks losing its capacity for self-reliance and drifting toward a future sustained only by minimal government handouts.

Cheong Chul-gun

The author is a columnist at the JoongAng Ilbo.

At times, it feels as if Korea has struck oil. That illusion arises from the flood of populist handouts now being rolled out by central and local governments.

Starting in January 2026, the city of Jeongeup in North Jeolla Province plans to distribute 300,000 won ($203) in livelihood support payments to every resident. Mayor Lee Hak-soo said the decision was meant to offer relief to citizens enduring difficult times. While the intention may be laudable, the funding raises concerns. The program requires 31 billion won, but Jeongeup’s fiscal self-reliance ratio stands at just 9.6 percent. Jeongeup is not alone. Suncheon, Boseong and Goheung in South Jeolla Province and Boeun and Goesan in North Chungcheong Province are also handing out cash to all residents in the name of economic recovery.

Use of the first and second rounds of livelihood recovery consumption coupons, issued to stimulate spending and boost domestic demand, ended on Nov. 30. A notice indicating where the subsidies can be used is posted at a shop in Yongsan District, Seoul, on the day. [NEWS1]

For local governments to cover operating costs on their own, their fiscal self-reliance typically needs to reach the high 30 percent range. But even Suncheon, relatively better off thanks to revenue from the Suncheon Bay National Garden, records a ratio of only 19 percent, below the national average for cities, which sits in the low 30s. Boseong, Goheung, Goesan and Boeun rank near the bottom nationwide.

People Power Party lawmaker Park Soo-young has claimed that Korea’s national debt reached 4,632 trillion won, or roughly $3.15 trillion, by the end of 2024, equivalent to 181 percent of the GDP and among the highest levels globally. His figure combines officially reported public debt with unfunded liabilities from the national pension, military pension and civil service pension systems. The estimate may be exaggerated, but the underlying risk is real. If the National Pension Service is repeatedly used for political purposes, such as stabilizing the exchange rate or for housing programs, the country could eventually face a worst-case scenario in which it struggles to meet pension obligations.

Household debt has also reached record highs. Kim Se-jik, a professor emeritus of economics at Seoul National University, estimates that household liabilities, including household credit of 2,248 trillion won and jeonse deposits, or long-term housing rental deposits, totaling 1,002 trillion won, amount to about 3,250 trillion won. Over the past three decades, successive governments pursued demand-boosting policies through low interest rates, relaxed lending regulations and fiscal expansion. The result has not been sustained growth but mounting financial vulnerability, reminiscent of pressures seen ahead of the 1997 Asian financial crisis. As of September, the money supply stood at 4,430 trillion won, up 352 trillion won from a year earlier. Excessive liquidity has been a key factor behind the weakening of the won.

An audit by the audit and inspection board of the New Start Fund revealed widespread moral hazard. Cases included individuals with monthly incomes exceeding 80 million won receiving debt relief worth 200 million won, or others holding 430 million won in virtual assets while having 120 million won forgiven. President Lee Jae Myung criticized what he described as a financial class system in which poorer borrowers face higher interest rates. The result has been distortions in which lower-credit borrowers pay less than those with stronger credit.

Lee has also instructed officials to review expanding national health insurance coverage to include treatments for hair loss and obesity. While beneficiaries may welcome the move, it would inevitably drive up health insurance spending. The increased burden would fall largely on middle- and upper-income households. Even these groups face the risk of financial decline if taxes and social insurance contributions become excessive.

A National Health Insurance Service office in Mapo District, western Seoul [NEWS1]

According to Statistics Korea, the top 1 percent of households hold net assets averaging 3.3 billion won. Excluding real estate, their financial assets amount to roughly 600 million won. After retirement, even wealthy households may face annual costs of tens of millions of won in property taxes and health insurance premiums. Without steady income, they could exhaust their assets over an average retirement period of more than 30 years and fall into the ranks of ordinary households.

A free lunch may feel good at first, but it is followed by a much larger bill. Expanding spending erodes currency value and pushes prices higher. Inflation acts as the harshest tax on low-income households. Wealthier individuals may respond by moving assets overseas, a pattern already observed in countries such as Venezuela and Argentina and even in parts of Europe’s welfare states. Populism resembles a cheap but addictive drug. Once dependent, society risks losing its capacity for self-reliance and drifting toward a future sustained only by minimal government handouts.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.