Economics: Socio-Economic Reform:


Quo Vadis Domine: A Blueprint for



by Professor Yang-Taek Lim, Ph.D.

College of Economics and Finance, Hanyang University

Seoul, Korea


Editor’s Note: While the following paper specifically addresses the case of the Republic of Korea, given the recent and continuing economic turmoil in the United States and the Eurozone – and the resultant ripple-effect of this economic trauma around the globe – the essence of this paper is of interest and pertinence regardless of nationality or location. – JP.


◦ President Fichte’s ‘Reden an die Deutsche Nation’, Shin Chaeho’s ‘The Hope of Daehan’ and Ahn Changho’s ‘The Theory of Korean Reform’


The author has quoted Fichte’s ‘Reden an die Deutsche Nation’ (1807) in his book Overcoming Foreign Exchange Crisis and Challenge to Sustainable Economic Development (1985)[1]. :

  “An ethnic that has lost autonomous independence has also lost the ability to decide the flow of the period freely. If the state continues, the external power will dominate the fate of the ethnic as well as the fate of the times.


President Fichte inspired national determination under the domination of French Army in the late 1807 and encouraged Germany, becoming a spiritual basis of West Germany’s economic prosperity which was called as ‘The Miracle of the Rhine”. Moreover, West Germany absorbed Eastern Germany based on a strong economy and achieved unification peacefully. It overcame the transitional conflict and now acts as the pivot of European integration.


During this time, Germany could not form a politically-unified ethnic nation and it barely entered the Industrial Revolution economically. That is, it failed to clean up feudal disciplines and remained an underdeveloped country. Considering the situation of Germany’s neighboring countries, England already had entered the full stage of Industrial Revolution and led world trade, The Netherlands economically and politically preceded Germany, and the French people destroyed the absolute monarchy via the French Revolution in 1789 and introduced a republican government.


Under such circumstances, England and The Netherlands were invading the German market to sell their national products, and at the same time Napoleon of France was attacking German territory. Germany could not promote national development due to an economic and political invasion of this external force.


However, Fichte’s ‘Reden an die Deutsche Nation’ provoked a new trend of literature of Romanticism in Germans who were suppressed by the external forces. The trend also brought about the era of Romantic Economics of Germany and it again looked to Friedrich List to advocate for German national economics (Volkswirt schaftslehre).


100 years after Fichte’s Reden an die Deutsche Nation’ (1807), there was a bloody scream in Korea (‘Daehan’ at that time) as well. For instance, there are Shin Chae-Ho’s ‘The Hope of Daehan’ (1908), Ahn Chang-Ho’s ‘The Theory of Korean Reform’ (1919), Daehan Jaganghue for autonomous independence (1906), Daehan Association (1909), ShinMinhue (1907-1911), National Debt Compensation Movement that pursued economic independence (1907) and Chosun Product Encouragement Movement (1920s).


Shin Chae-Ho (1880-1936)[2], a journalist in Chosun Dynasty, wrote ‘The Hope of Daehan’ in the monthly report of Daehan Association in April 1908 :

“An ethnic obsessed in the old mind and material will be destroyed by the Western powers with developed civilization and strong power. Dear people of Daehan, focus on creating a New National getting abreast of strong nations in the 20th century.

The force of national competitiveness in the 20th century relies not only on a few people but on every person. When everyone builds a strong national basis and expands the civilization to the world, the nation will stand high within East Asia and flutter the flag of a strong nation on the global stage – oh, people why not try harder?

Ah, what do we have in Daehan today? It is a nation without a sovereignty, people without freedom, currency without the free right of coinage, law without ownership, mine without ownership and railroad without ownership.

Work hard. Motive is created by hope, diligence is created by motive, business is created by diligence and the nation is created by business, so work hard. People of Korea, let’s be hopeful. Our people.”


Shin Chae-Ho was the most righteous and independent pioneer in the history of Korean society. He shouted out loud that people need to be hopeful about their future and live diligently to achieve independence from the Western forces and become a strong nation within East Asia.


Meanwhile, Ahn Chang-Ho, an ethnic teacher, gave a lecture in Shanghai in 1919 :

“Ladies and gentlemen! We need to reform our nation. A nation without happiness! Uncivilized Korea! We must reform it. Our ancestors did a fair job in the reform business. Therefore there was a civilization and happiness. However our modern ancestors and we did not work for a reform business.

  Let bygones be bygones and we should get started to reform our Daehan. It should not be delayed after one or two years but it should be started right now. If we lose time, it will be forever.

  Do you sincerely love the nation? If you and I love Korea, let us reform Korea altogether. That is, let’s create a civilized Korea by reformation.”


100 years after Shin Chae-Ho’s ‘The Hope of Daehan’ (1908), Ahn Chang-Ho’s ‘The Theory of Korean Reform’ (1919), what hope does the Republic of Korea have today and how much reform have we made?


Professor Arnold Toynbee (1889-1975) said there had been a period of self-examination for a developing ethnic before the period of development. Now, in 2012, we need a modest self-examination and a strict self-reform for development. The author suggests the following four points as a national task[3] :


1. How should Korea design a developmental future image of Korea in the 21st century?

2. As a developmental strategy to specify it, how should Korea decide national priority of resource allocation?

3. What should be a rational role of government, business and household to promote the strategy efficiently?

4. How should Korea derive a national consensus on such a developmental strategy, prioritize resource allocation and determine the sharing role of each economic player?


Global Economic Crisis and the Crisis of Korean Peninsula


The world is facing a historical transition. After the 9·11 terrorist attacks in 2001, the global financial crisis began in the second half of 2008. It seems that this crisis is provoking a revolution in the world’s political and military order and economic paradigm.


As a penalty for the terrorism, the United States attacked Iraq (2003) and it is conducting the Afghanistan War (2001-today). On the other hand, global fiscal crisis accompanies the economic recession in the real sector and the ‘tornado’ is blowing hard in Europe. Europe’s fiscal crisis deteriorated the economic indexes of the real economic sector such as market price, employment, production, real estate, etc. Moreover, the possibility of introducing a Euro-zone common bond (Euro bond) is also very low due to a strong opposition in Germany. Thus the domino phenomenon of Europe’s fiscal crisis (from Greece to Italy) is highly possible to become a ‘detonator’ in the global economic crisis.


According to S&P’s report of downward adjusting of the United States’ credit rating (2011-08-05), the economic crisis is sweeping the entire American society like a boomerang. However, Michael Moore’s Capitalism : A Love Story (2009) screams out loud but never comes back with echo. Even if Milton Friedman, the liberalist follower, and James Tobin, the Keynesian leader, meet in the heaven and dispute over the problem with their Nobel Prize medals, they are not suggesting a fair solution. Moreover, Niall Ferguson and Paul Krugman have heated discussions in the media, but most financial institutions are disgorging various financial derivatives. The unemployment rate and the market price are soaring.


In fact, Professor Joseph Stiglitz’ book, under the title of Freefall : Free Markets, and the Sinking of the World Economy (2010), gives the author of this paper a shudder with a low groan. This author misses and fully respects Professor Joan Robinson (1903-1983) who criticized Liberalism and appealed to The 2nd Crisis of Economic Theory (1971).


As the Great Depression (1929-1939) was a contributing factor to World War II (1939-1945), the author truly hopes that the Korean peninsula should not be in the ‘eye of the typhoon’ as the global economic crisis further intensifies the ‘Global Imbalance.’ In world history, the American economy reached the highest times in prosperity during the Korean War (1950-1953) and the Japanese economy was resurrected by becoming a major supplier of military equipments during the wartime.


In a transitional circumstance, ‘Korea’s choice’ for stability and prosperity will be equal to ‘a babe in the woods’ looking up at a small sky without considering the changing trend of the foreign politics. The situation of the Korean peninsula rapidly fell after July 2011. The six-party members of North and South Korea assembled through the ASEAN Security Cooperation Forum held in Bali, Indonesia, the South and North Korean Ministers of Foreign Affairs met unofficially and the First Deputy Premier Minister of North Korean Ministry, Kim Gye-Gwan, visited the United States and met Steven Bosworth, the American envoy. Subsequently during August 20-21, 2011 Kim Jung-Il and Dmitry Medvedev opened a North Korea-Russia summit. Their meeting was held to solve a serious energy problem in North Korea, and to discuss the building of a natural gas pipeline from Russia to the North Korean territory so that Russia can guarantee a bridgehead to enter the Asia-Pacific region and connect the Trans-Korean Railway and the Trans-Siberian Railway.


The Korean peninsula -- surrounded by the big powers of the U.S., Japan and China -- would have been and will be the stage of ‘The Great Game.’ It is prospected that the Korean peninsula will pitch due to the Japanese Invasion of Korea (1592-1598), the Sino-Japanese War (July 1894-April 1895) and the Russia-Japan War (February 1904- September 1905), the Korea territory division (1945.9.8) and the Korean War (June 1950-July 1953) due to the Yalta Conference (February 1945), North Korea armed with nuclear weapons along with growing into a powerful nation in the late 20th century and the early 21st century, China’s resurrected hegemony and monument toward the East motivated by the Chinese Army taking over Najin Port, the potential disturbance of USA-Japan Military Treaty owing to Japan’s returning to Asia from USA, Russia’s attempt to move toward the South, the decline of American economic power and military dilemma in the Afghanistan and Iraq War. Very fortunately, the status-quo of the balance of power is maintained by ROK-U.S SOFA (1953.10.1), U.S-Japan SOFA (November 1978 and April 1979) and U.S Law on Taiwan Relationship (April 1979) on the one hand, and North Korea-China Treaty of Friendship (July 1961) and the North Korea-Russia Treaty of Friendship (February 2000) on the other hand.


However, the ‘tornado’ of Northeast Asian region that makes the Korean peninsula an ‘eye of the typhoon’ can break the power balance of the South and North relationship. With the possibility in consideration, President Lee Myung-Bak developed a ‘Pragmatic Four Power Diplomacy’ in August-September 2008 through the sequential summit with the U.S., Japan, China, and Russia. It formed a 21st century ‘strategic alliance’ with the U.S., ‘mature company’ with Japan and ‘strategic cooperative company’ with China and Russia. Comparing President Lee Myung-Bak’s ‘Four Power Diplomacy’ with Chosun Strategy of Hwang Jun-Heun (黃遵憲), Korea achieved a friendly relationship with China and a connective relationship with the United States and did not ally with Japan. In contrast to Hwang Jun-Won’s ‘preventing relationship with Russia’, Korea is heading to a ‘friendly or connective relationship’ with Russia. (column of Yang-Taek Lim : “Qing’s ‘Chosun Strategy’ and Korea’s ‘Four Power Diplomacy’”, Chosun Ilbo, 2008. 10. 08).


The author considers the year 2012 as the most important time in Korean history and closely observes it because the Korean Peninsula could pitch and roll in 2012. To be specific, 2012 is a time that political power changes in South Korea, the United States, Japan, China and Russia. North Korea is also preparing a total war for opening the door of a ‘strong nation’ as it celebrates the 100th anniversary of late Kim Il-Sung’s birth. Fortunately, the Lee Myung-Bak administration delayed the date of regaining ‘wartime operational control’ from April 17th, 2012 to December 1st, 2015.


The South Korean economy depends highly upon foreign economy (export-dependent on the United States and China and import-dependent on Japan) as it lacks natural resources and has a small-sized domestic market, holds a ‘hot potato’, which is North Korea and is exposed in the hegemonic competition of the U.S., Japan, China and Russia due to its geological importance. Squeezed between the big powers, it is the fate of the Korean people to find a perilous way out for the survival and prosperity of the Korean people.


◦ National Task of South Korea and Its Solution


The crisis of Korean society is getting extreme. The conflict between classes and that between labor and management are intensifying as if ‘the war of all against all of Thomas Hobbes’ (1588-1679) is occurring. Moreover, ‘war-conflict and vague impulse’ indicated by Arthur Schopenahuer (1788-1860) is shocking. The psychopathic murder on unspecific majority for no reason is often reported in the media.


Korea shows the highest suicide rate of 21.5 persons per 100,000 people among of the OECD countries, compared to the average rate of the OECD countries with 11.2 persons per 100,000 people. The motive for suicide in Korea is often caused by business failure or personal poverty. Elderly suicide is also rapidly increasing in Korea. ‘Lonely Death’ of the middle-aged people is also rising.


The current size of household debt (household loan and selling on credit, i.e., the total of credit sale of the card company and installment financial company) in June 2011 is 876 trillion 300 billion won, which is over 1.5 times the disposable income (Bank of Korea, reported in 2011. 08. 22). Korea’s household debt size is higher than that of the developed countries. In 2009, the ratio of household debt to disposable income was 153% (9th rank), which greatly surpassed the average (134%) of the OECD countries. It is even higher than the United States (132%) and Japan (130%).


The astronomical size of the household debt is no different than being a ‘time bomb’ of the Korean society. When the real estate market continues to remain in economic recession and the interest rate is raised for stabilizing the market price, increasing households cannot pay back the debt. The financial companies will weaken and it may lead to financial crisis which is started from Korea[4]. The author is very much concerned about the reoccurrence of the card accidence in 2003.


The astronomical size of the household debt will incapacitate the currency policy because the household cannot cope with the increase of the interest rate. The saving rate of Korean households is rapidly declining. The saving rate in 2010 was 2.8%, only 2/5 of the OECD average and the lowest among the OECD countries. Its declining speed is the fastest among the OECD countries since 1990.When the household saving rate decrease 1% point, economic growth rate slows down 0.15% point. Total fixed investment rate declines 0.36% point and the ratio of private consumption to GDP also decreases 0.25% point. As a result, employment will decrease even more.


Considering the 1.2 million mass unemployed people and 330,000 youth unemployment, the author is very anxious about the possibility that ‘London Riot’ (2012. 08. 06) could also happen in Seoul. The young unemployed and non-regular employees could be integrated as a discontented power and provoke social confusion in opposition to the power of the vested rights.


Notice that the participants of the ‘London Riot’ were the young generation coming from the poor class and revolting against the older generation. In contrast, the youth of Korea were the driving force of the spirit of the age in modern history (i.e. 4.19 Revolution in 1960 and the democratic movement in 1980). However the Korean university students who turn into a ‘delinquent borrower’ and an unemployed person after commencement filled the street, protesting to the Grand National Party and President Lee Myung-Bak to keep their promise of ‘half tuition fee’ during the late May-June 11th 2011. Moreover, the subsequently-revealing corruption of the public employees disheartens them greatly.


The youth are the main character of the next generation and a national pillar as well. However the greatest victims of the financial crisis are the youth. The door to employment actually became a ‘narrow door’. Youth unemployment itself is a big pain for individuals and their families but it is also a waste of human resources and damage to potential growth nationally. The future of a nation can never be bright when the young people, who should be working hard with brilliant ideas and fierce passion, wander around to get a job and resign on their situation. Nevertheless, the universities are annually throwing out the graduate students.


In fact, human’s ‘anxiety and desperation’ rebuked by Soren Aabye Kierkegaard (1813-1855) is further being intensified. The author has spent a whole lifetime at the college podium since 1979 but he is embarrassed to see his students in the recent years. He is sometimes entrapped in the fantasy that a storm gusts from Emily Jane Bronte’s Wuthering Heights (1847). He sometimes imagines the march of 250,000 poor peasants moving to California after having been deprived of land in Oklahoma in The Grapes of Wrath (1969) of John Steinbeck (1902-1968).


To make matters worse, Korea barely overcame the global financial crisis in 2008 but now the global economic crisis is spreading out to the United States and Europe like a ‘tsunami’. The author leafs The Decline of the West (1918) of Oswald Spengler (1880-1936), Professor Francis Fukuyama (1952-present)’s ‘The Fall of America Inc. (Newsweek, 2008. 10. 13), Milton Friedman (1912-2006)’s ‘The Crisis of Liberalism’, Mancur Olson (1932-1999)’s ‘The Rise and Decline of a State’ and Mohandas Karamchand Gandhi (1869-1948)’s ‘Theory of State Collapse.’


Under the aforementioned background, the author (Yang-Taek Lim, 2007) suggested three national goals of Korea : (1) domestically, establishment of a human-capitalism society that pursues ‘the Greatest Happiness of the Greatest Number’ ; (2) externally, joint development of the energy-resource of East-Siberia / Far-East Russia and execution of a leading role in Northeast Asian economy ; and (3) ethnically, unification of the Korean peninsula and prosperity of the Korean community. Achieving ethnic / external national goal is to turn the Republic of Korea into a ‘continental nation’ over ‘island nation’ resulted from the top-blocked by North Korea or ‘peninsula nation’ owing to the block to enter Manchuria and Siberia.


Now, the author attempts to fulfill his duty of the time as an economist and suggests the following solutions for the substantial problems the Korean society is facing, in consideration of “the Greatest Happiness of the Greatest Number” for the survival and the prosperity of Korea. The author (Yang-Teak Lim, 2007, 2011) has pointed out the following ten points as the most urgent tasks of the Korean society. That is, (1) deficit in fiscal balance of governmental revenue and accumulation of national debt, (2) weakening of the functional relationship between the large and small-sized companies, (3) low equipment investment due to economic recession and shrinking of the domestic market due to excessive household debt, (4) mass unemployment, increasing youth unemployment, and an unstable labor market due to mass dismissals of the non-regular employees, (5) unstable current accounts due to chronic deficits in the trade balance with Japan, rapid decrease of surplus of the trade balances with China and the United States, (6) an unstable exchange rate and foreign exchange market, (7) relative immaturity of the domestic financial industry, (8) financial crisis of the social security system (national medical insurance system and national pension system in particular), (9) rising social uneasiness due to severe inequitable income allotment and exacerbating income polarization, and (10) intensive conflict between income classes caused by the concentrated ownership of financial asset-land-housing.


The ten tasks above can be analyzed in the two axes of national development, the first axis being economic growth and the second being social development. The main purpose of the former is improving the nation’s competitiveness for sustainable economic growth whereas that of the latter is reforming the social security system with a sound financing system for a minimum living standard.


Economic and social development is to solve the four-conflict structure consisting of 1. ideological conflict, 2. conflict between classes, 3. conflict between labor and management, and 4. regional conflicts. For this purpose, ‘Job-Creating Growth’ should be maintained to pursue sustainable growth, equitable distribution and stability at the same time. Employment is a basic means of survival and a basic condition to protect human dignity. If a head of household cannot have a job, can he or she adequately and normally educate their children or have even a proper conversation at home?


As written in the Beveridge Report (1948), full employment is the basic condition for a welfare state. Employment creates income, which in turn determines consumption, generates domestic demand available to relieve an exogenous shock of foreign economy. Therefore, we need to first accomplish full employment in order to establish a good welfare society. Radically, a decent job can be considered as ‘the best welfare’ even without an unemployment allowance.


However, full employment is a faraway story in the reality. Excluding the job abdicants, army volunteers, and study-abroad students, the government reports that the number of unemployed people in Korea is 960,000 persons (as of June, 2009). However the ‘actual’ number of the unemployed people (as of February 2009) is 3,295,000 persons (848,000 unemployed persons among an economically-active population of 2,379,000 + an additional 152,000 job seekers below 18 hours + 529,000 preparatory job-seekers + 1,766,000 persons who forfeited job-seeking and had an involuntary break) according to the National Statistical Office data. The ‘real feeling’ number of unemployed persons are 1,170,000 persons in total (as of June 2009). In particular. the number of youth unemployed is 328,000 persons (as of June 2009). Youth unemployment is 8%, low among the OECD nations but youth employment rate is 40.3%, the lowest level among the OECD nations.


Here we can cast a fundamental question : According to the ‘American’ New Liberalism or ‘Liberalism’ called by the American media or even the thought paradigm of ‘Libertarianism’, can we tell the 3.3 million of Korea’s ‘actual’ unemployed that they should admit the ‘natural’ state of unemployment because they lack in a basic capability and have neglected in self-improvement, thereby their specification being inferior. Also can we dare to say that poverty is a just responsibility of an individual, not of the entire society?


If we cannot, then what is a growth mechanism that can create employment for maintaining the livelihood and human dignity of the unemployed? Furthermore, what is the solution to turn 5,370,000 non-regular employees (based on March 2009) into regular employees?


As indicated in John Rawls (1921-2002)’ A Theory of Justice (1971), the core of fairness is the neutralization of fortune. That is, it is necessary to nullify the coincident result to make social-natural condition advantageous for themselves. He asserted that in this case, a ‘fair society’ can be built. Of course, Professor John Rawls’ A Theory of Justice (1971) could be a too-aloof philosophy to root down in the barren climate of Korea’s ‘make a shift way.’ Justice would be difficult to be established not only in Korea but also in the United States, the ‘land of freedom and equality.’


Professor Michael J. Sandel’s (1953-present) Liberalism and the Limits of Justice (1982) criticizes Professor John Rawls’ A Theory of Justice (1971). However the author believes that Michael Sandel’s criticism is only an attempt to reestablish the notion of justice in practice amidst the conflict between justice and general social phenomenon, not any different from Professor John Rawls’ notion of justice.


◦ Economic Analysis for ‘the Greatest Happiness for the Greatest Number’


The ‘Greatest Happiness of the Greatest Number’ that this research pursues is not simply a material happiness by social security wage but a spiritual happiness by freedom-equality (justice) ·philanthropy (social solidarity) at the heart of the French Revolution (1789) and the declaration of independence of the United States (1776).


‘The Greatest Happiness of the Greatest Number’ is different from the Utility of the Utilitarianists like Bentham – J. S. Mill – A. C. Pigou. Utilitarianism assumes that Utility or a subjective satisfaction of individuals can be compared with any substantial measurement. Furthermore their Utilitarianism assumes that it cannot only measure the Utility of a same person but also between two different individuals. That is, a subjective satisfaction enjoyed by A and that of B can altogether be measured by a common measurement. Therefore the index of the social welfare is drawn out by summing up every individual Utility.


However Lionel C. Robbins (1898-1984) said in his An Essay on the Nature and Significance of Economic Science (1932) that the comparability of Bentham – Mill – Pigou so he denies it.


Furthermore, John R. Hicks and P.A. Samuelson suggested a hypothesis that it is not required to assume the measurability to analyze the existence or stability of market balance. In other words, a subjective choice of each individual is made to maximize utility but in this case, utility does not need to be measurable, but only learn the ranking of Preference. That is, we need to ascertain whether or not a certain state (X) is more preferred to another state (Y). The consumer’s behavior can be analyzed with the indiscriminate system so there is no need to learn the utility level itself. The utility measure cannot be derived by how individuals choose or by their behavior in the market but the preference sequence that marks the subjective value standard or the indiscriminate curve can be derived from the individuals’ behavior in the market. As a result, the measurability of utility or comparability was excluded from the neoclassical theory of market balance.


However, the Behavioral Economics recently coming to the fore gives an example of ‘common identity’ influencing economic behavior; for example the Prisoner’s Dilemma Game, Ultimatum, Faith Game, Public Property Game. Behavioral Economics thereby asserts that the game participants cooperate more as they strongly feel ‘a sense of belonging.’ The ‘group identity’ and ‘productivity’ depend on how strong an individual feels as a member of ‘we.’


In contrast, traditional economics ignored or excluded human’s ‘basic instinct’ and developed the theory of market balance under the assumption that humans are ‘selfish’ and ‘rational.’ However humans are an ‘economic animal’ and ‘social animal.’ Thus they constantly interact with a social sign in the group. It would be able to pursue a socially desirable resource allotment by including the Solidarity in the market economy theory.


In the aforementioned economic philosophical theory, this research criticized the market balance instability and social unbalance of neoclassical economic theory under the analyzed model of General Equilibrium. It also mathematically proved that economic efficiency and social equity can exist simultaneously by an efficient resource allotment for the social optimum.


‘Efficiency’ in the analysis model of this research means a neoclassical comparative static efficiency. It is not the Pareto Optimality but a dynamic efficiency of Phelps-Koopmans (1965) and K. J. Arrow and M. Kurz (1970).


Moreover, ‘social equity’ in this research is not simply the neoclassical distribution justice that indicates ‘Euler’s Law’ but Rawlsian Justice based on the macro income distribution theory of N. Kaldor (1955, 1956) which means the income distribution between capital income class and wage income class and ‘minimal maximization principle’ advocated by John Rawls’ (1921-2002) in A Theory of Justice (1971).


‘Social Justice’ involves ‘legislative justice’ as well as ‘economic justice.’ The society operating without the precept that ‘all mighty is the dollar’ is a ‘fair society’. Moreover, a ‘fair society’ is based on ‘equal opportunity.’ With these conditions fulfilled can we finally embody the communal value (not a community as an ‘imaginary group’ remarked by Jeremy Bentham) of Michael J. Sandel (1982, 2005, 2010).


Notice the difference of Utilitarian ‘expected utility maximization’ and John Rawls’ (1971) ‘minimal maximization principle.’ The former ignores the consumption ability before utility maximization or the state or income allotment whereas the latter sets the distribution of justice as the utility standard. According to John Rawls (1971)  A Theory of Justice, ‘Justice’ is an evidence that calculates happiness. In other words, justice is not a result of calculation but a starting point of all calculation that it is assumed before the calculation. According to John Rawls’ (1971) ‘minimal maximization principle’, people with ‘the veil of ignorance’ do not know which position they are placed in. Thus although they acknowledge the inequity among the social members, they will choose inequity where the most disadvantaged person can gain the most profit possible[5].


An economic system that fulfills the ‘justice principle’ of John Rawls is liberal socialism and private property democracy. The two systems secure a basic freedom of fair political freedom and equal opportunity and they can regulate economic-social inequality according to ‘Reciprocality.’ Among the two economic systems (liberal socialism and private property democracy) each can be decided by tradition, system, social power, specific historical conditions of each state.


Editor’s Note: This paper will continue in the upcoming July-August 2012 issue of this Journal.


[1]) Yang-Taek Lim (1985), Overcoming Foreign Exchange Crisis and Challenge to Sustainable Economic Development, Seoul: Hanbat Publisher.

[2]) He was born in Daeduk, Choong-nam and participated in the independence movement and served as a historian, journalist until he passed away in Prison Yusoon under the Japanese Imperialism. He sought asylum in China and established Gwangbokhue, Dongchang School and worked hard in sovereignty restoration movement. He also systemized the modern ethnic history through History of Ancient Chosun and Research on the history of Chosun.


[3]) The author quoted from Lim Yang-Taek (1995), The People Shall Perish Where There Is No Vision, Seoul: The Mail Economic Daily Press.


[4]) The government reported comprehensive countermeasures (2011. 06. 29) for soft-landing household debt are focused on the change of the debt structure. The essence is to pull up the rate of fixed interest rate and non-stationary repayment mortgage, which are 5% of the current bank loans, to 30% by 2016. The government will raise the income deduction limit on loan interest rate of national house size and reduce the deduction limit on floating-rate loan and stationary loan. In other words, it will change the floating-rate loan to fixed-rate loan and stationary-ordinary loan to non-stationary-repayment mortgage loan. It is to prevent the burden of interest repayment increasing caused by low-rate system normalizing and thus raising the interest rate. As a result, a computer network related to financial businesses’ household loan was blocked out. It is important at this point to manage the total household debt so that it will not increase and gradually reduce it. However it pushes common people, who need money, to depend on high rate of interest in the private money market. The author believes that there are no other fundamental solutions for household debt rather than to create a decent job through economic growth and increase disposable household income.

[5] ‘The Principle of Justice’ in John Rawls A Theory of Justice (1971) can be established in the following two principles: The first principle is that every individuals needs to have an equal right on the most broad total system of equal basic freedom that is compatible with a similar freedom system of all people ; the second principle is that social-economic inequality needs to satisfy the two conditions. That is, 1. it should be compatible with the just saving principle and 2. status should be opened to all people under the fair equal opportunity that will be ‘the greatest benefit to the least recipient’ (Rawls, 1999, p266). In other words, equality should be applied in advance but it can be differentiated when necessary. That is, it starts from ‘the equality principle’ (the first principle of justice), and differentiation is applied when it can improve people’s situation (the second principle of justice). Moreover social / economic inequality is allowed when it maximizes the long-term bar of the least recipients or at least it contributes to it.

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