How to deal with the shaking three pillars?

Media, academic, political and economic communities must engage themselves in deeper discussions in devising our external policy direction for longer-run national interests and unification against fast-changing geopolitics.

Cho Yoon-je

The author is a professor emeritus at Sogang University and a member of the Monetary Policy Board of the Bank of Korea.

This year marks the 78th year since Korea was liberated from Japanese colonization and the 75th year since the South Korean government was founded. In less than a century, South Korea has leapfrogged from the poorest country to the richest group. Those in their later 50s would have been born to a poor country and started to work in a mid-income country and are retiring as a member of a developed society. Koreans would be the sole people in the world who have witnessed the sweeping socio-economic development — industrialization, urbanization, democratization, globalization and digitalization — during their lifetime — what a western country usually experienced across three centuries.

The stress and conflict during the epic progress has been brewing in the Korean society like a boiling pot. It is a historical achievement for the country to have endured the tough process to stand where it is today. But whether it can be as fortunate as in the past from now on is uncertain. Korea has come this far on the guidance of capitalism and democracy, with the help from its alliance with the United States, the orchestrator of liberalism around the world. But the three pillars of the past have become wobbly.

Capitalism has evolved significantly over the last century on monumental upheavals in Western powers. Repeated financial crises, worsening income distributions, and economic depression triggered the spread of communist revolution to eventually formulate the revisionist capitalism from the 1930s of a bigger government role, market regulations and the welfare state institutionalized by U.S. and British leaders Franklin D. Roosevelt and Clement Attlee. From the 1980s, it engaged neoliberalism ushered by Ronald Reagon and Margaret Thatcher. Their policy stance was upheld by liberal leaders like Bill Clinton and Tony Blair.

Over three decades from then on, liberalism, opening, and globalization fueled expansion in global commerce and cross-border investments to create new supply chains. That led to the dramatic rises of China and other emerging economies, but sharply worsened income distribution. Another sharp turn was made under Donald Trump’s administration, which pursued its iconic de-globalization, America-first pivot, containment against China, and trade protectionism. The following Democratic government of Joe Biden has continued along the path of his former political rival, albeit in a more systematic and refined way. The open multinational order is being replaced by neo-protectionism and strategic division led by the United States and China.

Democracy also has undergone substantial changes over the past century. The electoral system of one-person, one-vote was institutionalized in 1928 in Britain and in 1936 in America. But the rise of the internet and digital revolution has brought about drastic changes in communication methods and opinion-making processes to degrade the quality of state policy. Under the new political environment, politicians are no longer the statesmen who shape public opinion, but have turned into populists chasing short-lived public opinions.

China’s rise differs from Japan’s based on its West-pivot policy, as it’s challenging Western hegemony. Despite the recent negative view of China’s future, we cannot predict who will ultimately triumph in the U.S.-China contest. A handful of studies shared during the recent Jackson Hole conference suggest that U.S. containment policy on China has not been working as hoped. The tariff barriers, export curbs and restrictions on investment on China have only raised the import cost due to the complicated supply system, without reducing the U.S. reliance on China. America has been shifting to Mexico, India, and Southeast Asian countries for import, but due to their bigger reliance of these countries on Chinese parts and industries, the United States still remains dependent on Chinese products while pushing its allies’ economy even closer to China. For instance, China’s car exports to Mexico doubled over the last five years.

The changes in the three axes are triggering a seismic change in the global landscape. Korea has weathered conflicts and challenges over the last 78 years. Its future over the next 78 years depends on its response to the changes in the three axes. Despite their flaws, no better systems have been found to replace democracy and capitalism.

But democracy and capitalism could take multi-dimensional form. Korea must supplement the system to better cope with the challenges with regards to the local social environment and its history. Society must be broadened through a revision of the five-year single presidential term and a revamp of governance structures to incorporate demanding reforms.

The social reward system and government institutions also should be overhauled to prop up the rapidly weakening growth potential and keep up stable and balanced growth. Media, academic, political and economic communities must engage themselves in deeper discussions in devising our external policy direction for longer-run national interests and unification against fast-changing geopolitics.

Translation by the Korea JoongAng Daily staff.