Is capitalism in coma?
President Lee Myung-bak seems to be a great fan of Anatole Kaletsky, author of “Capitalism 4.0.” In his Aug. 15 Liberation Day speech, Lee called for developing Korea’s new economic model. Lee used the term “ecosystemic development” to describe the paradigm shift the Korean economy should go through.
He borrowed the idea from The Times of London journalist Kaletsky. Lee says Korea can no longer blindly copy Western capitalism, as the industrialized countries Korea tried to emulate in the past are all mired in the same economic malaise.
Here is the gist of Lee’s proposal;
(1) Ethical capitalism: The market economy needs to evolve from greedy management to ethical management.
(2) Capital: Capital should have responsibility as freedom of capital has jolted the global financial market.
(3) Anti-polarization: The current vicious cycle of the rich becoming richer and the poor getting poorer must end for mutual prosperity. Discrimination against non-regular workers must be minimized.
(4) Politics: Politicians must adopt policies of enriching life away from the current ideological war.
(5) Sustainable growth: National progress should be parallel with individual progress. Economic progress should promote social cohesiveness.
(6) Welfare: Competitive welfare populism will bring about national bankruptcy.
(7) Chaebol: Big corporations must create an environment for commanding public respect. They should pursue a win-win growth strategy with small- and medium-sized companies. They are asked to create jobs proactively and should be responsible for enhancing the quality of life.
(8) Green growth: Economic growth is possible without damaging the environment.
(9) Global governance: The G20 should become a central forum to make coordination, agreement and action possible on a global scale.
Lee’s new model is the revision of the core of his own MBnomics featuring market fundamentalism, tax cuts and chaebol-focused and export-led growth.
There is one thing Lee should have included in his proposal. It is prioritization of manufacturing.
(10) Making things: No country can enjoy economic prosperity without a solid manufacturing base.
Korean capitalism 4.0
Noted economist Suh Sang-mok also borrowed Kaletsky’s idea to describe the evolutionary change of Korea’s economic model or capitalism.
Suh said Korean capitalism should enter its fourth stage of transformation. The economy was upgraded through the previous three phases. Korean capitalism 1.0 had the objective of pulling the people out of poverty in the early 1960s. It failed, although it adopted liberal democracy and a market economy.
The country had achieved “the Miracle of the Han River” under capitalism 2.0 with a government-led and mixed-market economy. In capitalism 3.0, the country successfully accommodated a pro-democracy movement and saw labor strikes in the late 1980s and became a global IT powerhouse and recently hosted a G20 summit.
He foresees anti-polarization will be the key word of Korean capitalism 4.0, as public criticism is rising over conglomerates and the winner-takes-all society.
In capitalism 4.0, the fusion of conservatives’ market democracy with liberals’ social solidarity becomes necessary. In Korean capitalism 2.0, the role of the government was emphasized. Capitalism 4.0 calls for an increasing social role of companies.
In capitalism 4.0, the country needs to chart a winning strategy of a sustainable economy, sustainable management and sustainable welfare, Suh said.
A sustainable economy will become possible through balanced growth between exports and domestic demand. Job creation will be possible through upgraded service and construction sectors. Export-favoring foreign exchange rate policies will stall job creation.
Companies will become sustainable through their active engagement with the society for mutual prosperity. Managerial transparency, a strengthened role for outside directors, market-oriented transfer of corporate ownership and active communication with consumers are necessary.
The welfare program will become sustainable through targeting the needy with a budget tied to tax revenue and reduction of non-regular workers.
In Korean capitalism 4.0, society needs to institutionalize a culture of communication and compromise, love and sharing.
Korea’s new economic model, if successful, will become an exportable item for the poor and developing countries. Now, African and Latin American nations import the nation’s Han River Miracle development programs. Now is the time to rethink the evolution of capitalism in Korea and the rest of the world. When we see the evolutionary change of capitalism, we can see the re-emergence of the prosperous world economy beyond the current woes in the United States and Europe. Capitalism is not in a coma, but it is undergoing evolutionary change.
Lee Chang-sup is the chief editorial writer of The Korea Times. He can be reached at firstname.lastname@example.org.