Economics: Economic Reform:

 

Quo Vadis Domine: A Blueprint for Growth·Welfare·Unification – Part II

 

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. Presented below is Part II of three parts, the first of which was presented in the previous May-June 2012 issue of this Journal. – JP.

 

 

◦ Conflict between conservatives (the Right) and progressives (the Left) of the Korean society

 

When the world is disputing over whether the solution to overcoming the global economic crisis is New Liberalism or Keynesian, Korean conservatives and progressives are busy lining their own pockets. In a more decent expression, the conflict between classes-generations-regions-labor and management-ideology is exploding like a volcano. In such a social atmosphere, the sharp conflict between the conservative (the Right) and the progressive (the Left) is intensifying and prevailing.

 

The conservatives earned 63.75% of valid votes (Lee Myungbak 48.67% + Lee Huechang 15.08%) in the past 17^th presidential election and switched the pendulum of authority from the left to the right. The conservatives estimated the past 17^th presidential election as a change of Korean modern history. Even the progressives acknowledged their failure.

 

One year later, the pendulum of ideology seems to have lost its way and stopped. The conservatives overwhelmingly won in the general election in April 2008 but soon lost the leading power in front of the ‘candlelight demonstration’ surrounding the import of American beef. In the second half of the year, they lost a way to economic growth in front of global ‘financial crisis.’ The very close relationship with the U.S. president Bush was short and Korean conservatives soon encountered the Obama administration supporting ‘progressive capitalism.’ Lee Myungbak administration, a New Liberal regime, came to the power but worldly, the crisis of New Liberalism was advent.

 

Let’s compare the confrontation of conservatives and progressives of Korea with the recent election vote results. First, the then Liberty Forward Party representative Lee Huechang participated in the presidential election late in defiance of all criticisms in December 2007, upholding a pretext for ‘conservative reinforcement’ or ‘conservative complement.’ The result of the presidential election was 63.8% for the conservatives with 48.7% to Lee Myungbak and 15.1% to Lee Huechang whereas the progressives only earned 34.9% with 26.1% Jung Dongyung, 5.8% Moon Kukhyun and 3% Kwun Younggil. The conservatives earned the double votes of the progressives.

 

However in the local election in June 2010, the conservatives earned 44.9% with Grand National Party 36.5%, Forward Party 5.3% in contrary to the progressives earning 51.3% with Democratic Party 34.6%, Democratic Labor Party 7.3%, People’s Participation Party 6.3%, New Progressive Party 3.1%. After the presidential election in December 2007, there have been more progressives than conservatives for two years and six months.

 

Now let’s compare the ideological tendency of conservatives and progressives in Korean society. First, the conservatives admit the orthodox and identity of the Republic of Korea and pursue the free market economic system. In contrast, the progressives acknowledge the Republic of Korea and pursue a humane and democratic welfare state in the market economy. However the pro-North Korea leftists derogate the history of ROK as a history of failure, immorality and opportunism.

 

The conservatives and progressives confronted each other on the North Korean policy in the past but now they are confronting each other on the welfare problem as inequity and polarization of income allotment exacerbates. In fact, such conflict was temporary as well. Both the ruling and opposing parties are aiming to maintain or reclaim power just months before the 2012 general election and presidential election.

 

In 2012 China and Russia will change leaders, in the United States President Obama will stand for re-election and Japan is also likely to change its regime; all of these events will have great influence on the near future of the Korean Peninsula. Moreover, we cannot assert whether the North Korean authority has been successfully inherited. Therefore the Korean Peninsula will face an empty authority or a tornado in its neighboring countries. Amidst the confusion, Korean society is missing its central axis.

 

Deng Xiaoping (1904-1997) is well known as a leader who brought economic prosperity to Communist China. He ceased the 10 years of Cultural Revolution (1968-1978) with Pragmatism and liberated the Chinese who fell in the slump of ideology, paved an ideological basis and prepared the opening stage for the age of G2 today.

 

In contrast, Korea, which showed a brilliant economic development before China, is caught in a whirlpool of ideological dispute and is still overwhelmed by it. As a result, the ideological conflict (conservatives and progressives) is deepening and Korea has lost the historical opportunity given with increasing social unease.

 

Let me take this opportunity to indicate the ‘sleep-talking’ and ‘witch-hunt’ of the Korean society in the following two points (at least).

 

First, before the fall of Berlin Wall (1989) and the decline of the Soviet Union (1991), Daniel Bell predicted that the world led by socialism will soon come to an end in his The End of Ideology (1960). Subsequently, Professor Francis Fukuyama previewed the fall of Communism in his book The End of History and the Last men (2006). Nevertheless, the Korean intellects are still deeply involved in the ideological dispute as if they are ‘enjoying’ it. In this land with Confucius’ philosophy of ‘moderation’ over thousands of years, if a person supports to ‘walk the middle way’, he is labeled as a ‘fence sitter’ and is secretly shot down. Afraid of the ‘witch-hunt’, most knowledgeable people (not intellectuals) could survive only when they ‘lined up’ right or left. Or, it is wise as a mature citizen to not reveal one’s intention as ‘I-don’t-know.’

 

Second, it is most deplorable that the so-called knowledgeable people (especially the so-called university professors) irresponsibly babble like the ‘third rate short novelist’ or ‘third rate singer in the street’ without clearly defining what is conservative (right) and progressive (left) and providing a specific alternative for the political-economic-social phenomenon. They seem to be hypocrites.

 

A ‘conservative’ should specifically suggest a vision and strategy how to preserve and develop a value. If a ‘progressive’, one should scientifically analyze the obstacles that hinder historical development and specifically suggest the alternative. They all neglect to make a conscientious effort but only ‘play upon words.’ It is often found in the political leaders. Moreover, at the NGO meeting that needs to pursue a communal value, we can peep that the former ministers come as a guest speaker and give an excuse or beautify their wrongs during their service.

 

In contrast, when the author lectures about the economic growth theory to his university students, he indicates that the ‘mystery’ of all creatures is that they are created to have a structural and functional balance and he also explains the meaning of ‘balanced growth / development.’ Humans clearly show the ‘mystery’ of the creation. A typical example is that our ‘two arms’ are God’s consideration so to maintain our ‘body’ in balance. Thus right and left arms each have a different function but are both simultaneously needed for one body. It is important that the hand of whichever arms should be kept clean to stay healthy. That is, the ideological conflict of the Left versus the Right is a possible phenomenon according to different views on history but their personality and organization should be kept clean so that the body or the people and the society can stay healthy.

 

In the process of historical development, the Right and the Left always coexist and the conservatives and the progressives need to mutually complement ‘dynamically.’ Therefore the crisis of the Korean society today did not derive from an ideological conflict but their confusion or absence in identity. The author wants to emphasize the following. The ‘conservatives’ and the ‘progressives’ should productively dispute over the scope and speed of embodying ‘Social Justice’ in Korean society.

 

Let me give you an example of Korea’s modern political history (although the author graduated from the Department of Political Science and Diplomacy, he is an economics professor not a professor of political science). First, President Lee Seungman, the extreme right·conservative, created liberal democracy and market economy and kept the ‘conservative value’ that hung by a thread. Next, President Park Junghee who switched from extreme left to extreme right strengthened the substructure of economic development in the frame of liberal democratic politics and filled the storeroom. Was President Park a ‘conservative’? No. He was a ‘progressive’ who had an insight to see the future. The ‘conservatives’ (today a Grand National Party) were the very opposing power to his economic development strategy.

 

On the other hand, President Kim Young-sam, an extreme right · conservative, pompously introduced and established the ‘real-name financial system’, which even the progressive power could not dare to imagine. However YS was surrounded by incompetent ‘conservatives’ provoked the IMF economic crisis. Who did ruin the Korean economy? It was not the progressives but the conservatives. The author is an economist so he well perceives the cause and the effect of the IMF economic crisis. Leaving the related research paper aside, the author would like to point out that the IMF economic crisis infinitely destroyed innocent Korean households and small independent businesses. In fact, a person who killed one person is a murderer. Likewise, then political leaders who induced suicide of 1492 people in 1998 and 1157 people in 2003 cannot be called as an ‘indirect mass-suicidal abettors’ but they contributed quite to the population decrease. They still do not feel embarrassment or guilt and stalk about at noonday. The morality and social justice of the Korean society seem to be already dead (Lim Yangtaek, 2007)[1].

 

In contrary, the star-crossed President Roh Muhyun was a progressive but he negotiated the ‘ROK-US FTA’ (2007. 04. 02) that the conservatives could not cope with.[2] Moreover, he committed a lot of political’ mistakes (i.e., he rushed the date of regaining the wartime operational control from the U.S. to 2012 and threatened the ROK-US military alliance) but he reformed the election law and eradicated the possibility of corrupted election. Which ‘conservative’ president could ever achieve such a ‘revolutionary accomplishment’! If the Roh administration did not reform the election law, the author presumes that the nation would have already gone bust into ‘dollar election.’ For reference, the author does not have any connection to President Roh Muhyun.

 

Moreover, the Roh administration in 2007 introduced a ‘Basic Old Age Pension’ that provides pension (average 90,000 won monthly per person; a couple is 144,000 won) up to 70% of elders above age 65. Despite a small amount of money, the Basic Old Age Pension functions as a ‘social safety network.’ Korean society even without the ‘Basic Old Age Pension’ is not worth existing. That is, Korean society should not become a barbarian village that frequently performs a modern version of ‘Goryeojang.’ Korea still ranks the first place in elder suicide rate among the OECD nations even with the Basic Old Age Pension. Everyone has their old parents and everyone grows old. People should be ashamed.

 

President Lee Myung-bak grew up (of course, he has a poor childhood) within the conservatives (Hyundai group) and enjoyed the benefits of a conservative. Especially, he was elected as a president by earning 5.3 million more votes in the December 2007 presidential election. However it is unbelievable that the conservative · the Rights follow the market economy when observing President Lee’s market price, interest rate, exchange rate, oil price and industry policy. Yet, the Lee administration is never the progressives or the Left.

 

For instance, so-called the ‘MB market price index’ was reported (2008. 03. 18). The author has been serving as an economics professor for 33 years but does not understand how this market price index is drafted · written · applied. Another example is the high oil price solution of the then-Minister of the Ministry of Strategy and Finance Kang Man-su. He made a public announcement that he will return taxes totaling 10 trillion 493 billion won to 13.8 million workers and independent businessmen for each 60,000-240,000 won (Chosun Ilbo, 2008. 6. 11). The 13.8 million people are 9.8 million workers, who comprise 78% of the total workers (13 million people) and 4 million independent businessmen who comprise 87% of the total number of independent businessmen (4.6 million people). The 13.8 million people (workers + independent businessmen) are 57.5% of the economically active population (24 million people).

 

In fact, the high oil price solution is an embarrassing populism even for the ‘Leftist distributionist.’[3] Such ‘pork-barreling policy’ is interpreted as to console the angry people about the American beef incident but the waste of national money (10 trillion 500 billion won) is unparalleled even in the socialist countries. How usefully would it be if invested in the depleted National Health Promotion Fund! Perhaps with such wise determination, the welfare populism could have been calmed down. 

 

In any case, Lee Myung-bak’s blueprint of the economic policy to “save the economy” is : “MBnomics is hardening like a fossil in the crossroad of life and death. We have no idea whether it is for-growth or Leftist for-distribution, or to execute market economy or to revive the bureaucracy. Nothing is clear about the ideology of the policy and the philosophy” (Chosun Ilbo, 2008. 6 .14).

 

Of course, ‘Pragmatism’ is mentioned as the following in President Lee Myung-bak’s inauguration lecture (2008. 2. 25). “Pragmatism is a rational principle that penetrates the history of the East and the West and a practical wisdom to strive through the waves of globalization." He declared that "we should move forward to 'the period of pragmatism' beyond 'the period of ideology"(p 3). Moreover he promised to "relieve class conflict and firm struggle based on Pragmatism aimed for cooperation and harmony" (p3) and to "approach the relationship of North and South Korea by a pragmatic yardstick not by an ideological yardstick" (p 13).

 

Then, where did President Lee’s Pragmatism go? ‘Pragmatism’ is a philosophy of ‘the greatest happiness of the greatest number’ not ‘commercialism’ that pursues profit. Now, from nowhere, ‘symbiotic development’ appeared right after ‘dividing the surpass profit’ and ‘accompanied growth’ and recently, ‘balanced finance’ is emphasized over.

 

The Grand National Party, the ruling conservative power, almost unanimously decided to relieve the university tuition fee / reinforce the big companies regulation and abolish additional reductions of corporation tax in the September 10^th 2011 Supreme Council members · policy planning members joint meeting. The main context (reduce corporation tax and relieve the company regulation) of President Lee Myung-bak’s economic policy (MBnomics) has been destroyed by the ruling party. It is not appreciative of the current President. Most of the Grand National Party members were elected in the popular waves of President Lee Myung-bak. However now, the President is discarded as one would toss away an orange after squeezing it dry.

 

On the other hand, the author would like to tell the ‘Left’ (not a ‘pseudo’ leftists but the Left in ‘the true meaning’) about the ancestor of the Left, Marx’s (1818-1883) fundamental error. According to years of research · investigation by the author, Marx’s Capitalism should be reconstructed or abolished when relating his life to the long-term waves of the global capitalist economy. The date of Marx’s death 1883 is the end of the Great Depression (1873-1883) and the starting point of the convalescent. Very unfortunately, he could not witness that the capitalist economy could revive or further prosper through the Second technological innovation of the Industrial revolution (steelmaking process, synthetic fuel, plastic, artificial dye, steam engine, motor, gasoline internal combustion engine) but died before.

 

Of course, Karl Marx well perceived the importance of technological innovation but it itself cannot overcome the internal contradictions of Capitalism. He also supported the end of Capitalistic exploit structure through a struggle of classes. However, ironically, it was socialism that collapsed not Capitalism. The historical fact is supported by the 1989 US-USSR Malta Declaration. Mikhail Gorbachev made a ‘conscientious confession’ by 1989 Malta Declaration on the Cold War that had been continued for over 44 years since the 1945 Yalta Conference.

 

Moreover, Mendel, who is lauded as the Godfather of Marxist, criticized in his Late Capitalism (1972) that most of the Marxists refused the long-term wave theory and they could not predict the Capitalistic prosperity in 1940s and decline in 1970s, which are very important turning points in the history of economics. Thus their refusal was an error that weakened Marxism.

 

On the other hand, the orthodox (conservative or the Right) economic theory is so fixed and complemented from classical economics → Keynesian economics → neoclassical economics → the theory of money → rational expectation theory → public economics → neo-Keynesian economics. Recently, ‘Behavioral economics’ have come to the fore along with the ‘Quasi-Rational Economics Theory’ where psychology is applied in economics[4]. The school challenged the basic assumption of the orthodox economics that the humans are reasonable or rational.

 

The author clarifies his academic position. The author is neither neoclassic nor neo-Keynesian but Schumpeterian and Rawlsian. It is because ‘the Greatest Happiness of the Greatest Number’ is based on the full employment and increased employment in a long-term (the product life span shortened today that it is a temporary phenomenon) creates a ‘decent job’ according to ‘creative destruction’ of ‘new technology → new industry → new market’ along with industrial development. Employment is not possible by a short-term finance expenditure (Keynesian) or expanded currency (money theorist). Moreover, as humans are not a ‘pig’ they not only require ‘income’ but also freedom, equality and solidarity as a ‘social animal’ (not simply an ‘economic animal’). As in the historical development (French Revolution, American Revolution) of the mankind, it is a universal value. In that aspect, the author calls himself a ‘Rawlsian.’ He admits the limit of justice like Michael Sandel[5] that he advocates Neopragmatism that involves freedom (efficiency), equality (justice) and stability.

 

Amidst the unproductive controversy of conservatives and progressives i.e., rightists and leftists, the general people are dejected beyond anger. Their only sin is to have born in the land at this time. The national and ethical energy is being depleted. However as we say ‘the earth rotates’, the author believes that the history will continue to develop over the ‘crossroad.’ He is waiting for a messiah that will practice God’s calling.

 

◦ Neopragmatism Advocacy

 

Korea confronts three crises: ① security crisis, ②economic crisis, ③ social crisis. Now, we need to make a National Choice of the ten socioeconomically confronting tasks in the post-regime dimension. A right choice needs a right value standard.  

 

What would be the most appropriate economic idea (philosophy) or economic theory for the 21^st human society? The answer lays in what is the social-economic value that mankind most pursues in contemporary society. Plainly speaking, the author believes it is solving the conflict of efficient resource allotment and fair or equal income distribution for ‘the Greatest Happiness of the Greatest Number’ and ‘the fair society.’ To build such a society, we need to pursue full employment that satisfies sustainable economic growth and fair income distribution and find a way to supply social security finance to restore the middle class and build a social safety network.

 

New Liberalism only emphasizes Global Standard without considering its problem. It seems to be yelling to a heated up fan until hoarse in Summer that we indicate government failure and trust in ‘invisible hand’ in the context of Neoclassic economic theory, or we indicate market failure and assert the intensification of government regulation in the context of Neo-Keynesian economic theory.

 

Professor Joseph Stiglitz asserts that the ‘invisible hand’ is ‘invisible’ simply because it does not exist. Moreover the author would like to stress that governmental intervention and regulation reinforcement is needed, but a ‘clean hand’ is needed first in order to execute intervention and regulation in a manner which truly benefits society as a whole.

 

As a philosophical basis to establish and achieve a universal value of the community, the author suggested Neopragmatism as an alternative ‘thought paradigm’ to New Liberalism and New Keynesian. The author’s Neopragmatism did not develop the American Pragmatism (C. S. Peirce and W. James) or J. Dewey’s Instrumentalism[6] and Chinese Deng Xiaoping’s (1904-1997) Pragmatism. It is a new philosophical and thought system that the author recently advocates.

 

[Fig. 1] Ideological System of Neopragmatism

 

Source: Yang-Taek Lim (2007), Korea’s Vision and National Management Strategy, Paju: Nanam publisher, December.

Yang-Taek Lim (2008), “ A Study on the Logical Structure of ‘Neopragmatism’ – based on Western and Eastern Philosophy”, Economy Research Vol. 29, No. 2, Hanyang University Economic Institute, November.

Yang-Taek Lim (2010), "Neopragmatic Solutions to the Structural Problems of South Korean Economy, the Korean Peninsula and the East Asian Community," The International Institute for Advanced Studies in Systems Research and Cybernetics, Symposium, August 2-5, Baden-Baden, Germany.

 

This research compares ideological system of Neopragmatism with Western philosophy (Idealism, Renaissance, Illuminism, Positivism, Existentialism, Utilitarianism, Pragmatism etc.) and Eastern philosophy (Confucianism, Exegetics, Chu-tzu doctrine, Wangming doctrine, documental archaeology, Pragmatism, etc.) and sheds a new light on the Silhak idea of the late Chosun dynasty. Moreover the author will arrange Neopragmatism in ①the relationship of religion and human, ②relationship of nature / science and human, ③ morality, ④democracy, ⑤ freedom and equality, ⑥ practice principle and practice method and describe the difference from the original philosophy (especially John Dewey / Deng Xiaoping’s Pragmatism). Moreover, the author presented Neopragmatic ‘freedom and equality’ related to the Greatest Happiness of the Greatest number (Bentham, Mill, Pigou) / Social Justice (especially, John Rawls) of Utilitarianism.

 

The author’s ‘Neopragmatism’ is defined as a thought paradigm (cognitive principle and existential principle) that pursues humanist community, which respects human dignity, autonomy, creativity as basic desires (job, house, transportation, education, medical care, pension) are satisfied for the ‘Greatest Happiness of the Greatest Number’ based on the morality of state government and procedural democracy

 

The author emphasizes that his Neopragmatism is different from Neopragmatism[7] based on winner-takes-all principle or American Pragmatism based of Darwin’s (1809-1882) Evolution Theory or Deng Xiaoping’s (1904-1997) ‘black mouse and white mouse’ and ‘south hill and north hill.’ Let me compare their ‘Pragmatism’ with the author’s ‘Neopragmatism.’

 

First, Peirce and James’ Pragmatism is ‘performance-oriented’ and Deng Xiaoping’s Pragmatism is ‘goal-oriented.’ In contrast, the author’s Neopragmatism pursues ‘process’ and ‘happiness’ rather than ‘goal’ and ‘performance.’ To be specific, the author’s Neopragmatism does not discuss educational philosophy or pursue ‘variable truth’ depending on circumstances but an economic efficiency and social justice for ‘the Greatest Happiness of the Greatest Number.’ Moreover this research is not aimed for the performance of social members in the time but targets their happiness in the process of cooperating to achieve social goal of ‘the Greatest Happiness of the Greatest Number.’

 

Second, the author’s Neopragmatism pursues a higher dimensional truth than John Dewey’s (1859-1952) Instrumentalism. That is, truth is changeable in daily life and utility. The truth is also not universal but is made in the access to the environment. Therefore, respective experience can be different so the truth is also a relative substance. To accomplish as a ‘truth’, it needs to function usefully in real life. The authenticity of judgment, ideal and idea are determined depending on whether the influence on people’s real life is good or bad. However the truth is not proven only by the access to the environment but it needs to follow a desirable process in a scientific method.

 

Third, as John Dewey asserted, ‘truth’ should be investigated by scientific proof and it is self-evident that the process of investigating the truth is establishing a clear faith from the state of tough suspicion. However ‘truth’ and ‘knowledge’ (even if ‘a true knowledge’) are different. In contrast, the ‘truth’ in author’s Neopragmatism is not determined ‘changeably’ according to people’s personal and social experience. The ‘truth’ is a universal value for basic desires that human pursues or freedom, equality (justice), philanthropy (solidarity) in John Locke’s An Essay Concerning Human Understanding (1690), Immanuel Kant’s ‘absolute proposition’ and John Rawls’ ‘Basic position.’

 

The truth investigation by John Dewey’s scientific method is similar to the East’s gaining knowledge by the study of things (gyukmulchijiseol, 格物致知設). Gyukmul(格物) can be translated as ‘the investigation of things.’ Moreover, his emphasis of ‘the true knowledge’ means yangji in Wangming Doctrine advocated by China’s Wangsuin (1472-1528). The Wangming doctrine claimed that yangji or following a ‘true knowledge’ leads to becoming a holy man and it has been passed down for over 500 years as a morality called knowledge-and-behavior-equal.

 

2000 years before the Wangming Doctrine appeared, Confucius rebuked as in the following related to the ‘truth’: “If the truth can be found in the past history, we need to study the past and distinguish the good and the evil of the past. Such distinction is not a simple convey of message but it is possible from a sincere heart to make the ancient thing into our own” (溫故而知新).

 

Now, we should remember the sin of losing our nation in 1910 in Neopragmatic philosophy and overcome the recent global financial crisis by the experience of overcoming the 1997 IMF economic crisis to establish a ‘world’s best nation’ and ‘developed welfare society.” The ultimate purpose of Neopragmatism is, as the past Silhak theorists (Bang Yiji, Wang Buji, Park Sedang, Ahn Won, Yi Yik, Hong Daeyong, Park Jiwon, Park Jega, Kim Junghee, Jeong Yakyong, Choi Hangi) of late Chosun have advocated, to make Korea “the world’s best nation” beyond a simple door-opening. The author would define “the world’s best nation” as “the society members maintaining a high quality life domestically and a nation pursuing a universal value (freedom · equality · philanthropy) of mankind externally.”

 

Editor’s Note: This paper will continue and conclude in the upcoming September-October 2012 issue of this Journal.