By Hyung-A Kim.
This article was originally published by East Asia Forum.
Public support for South Korean President Moon Jae-in has plummeted. Peaking at 83 per cent following his agreement with North Korean leader Kim Jong-un to end the Korean War, his approval rating has crashed to 49 per cent — the lowest since he took office.
The biggest reason for this drop is South Korea’s weakest job growth in nearly nine years: the economy added just 5,000 new jobs over a year earlier, the smallest annual gain since January 2010 amid the global financial crisis. Despite Moon’s pledge to become a ‘jobs president’, he has failed to turn South Korea’s unemployment crisis around while also failing to improve economic growth which is forecast to be just 2.8 per cent this year.
Moon has been trying to clean things up politically. His signature reform of ‘past accumulated evils’ not only augmented the dominance of the Blue House but also led to sweeping changes in his government’s leadership. Moon has replaced those contaminated by the old ‘evils’ with new and proven individuals — predominantly former activists in the pro-democracy movement and civic organisations, especially the influential People’s Solidarity for Participatory Democracy.
In addition to the imprisonment of former president Park Geun-hye, the arrests of former conservative president Lee Myung-bak (February 2008–February 2013) and a string of high-ranking former officials under Park are integral to Moon’s reform program. Although these moves please millions of candlelight protesters, they are ‘calculated to continue unnecessary negative partisan feeling[s]’, as noted by one US columnist.
Unsurprisingly, the ruling and opposition parties are locked in a partisan feud over the sagging economy, the sharp hike in the minimum wage, a shorter 52-hour working week and North Korea’s non-existent denuclearisation agenda. The prospects for concrete action on any of these fronts are not bright because, as pointed out by Justice Party leader Lee Jeong-mi, the Blue House dominates the state affairs without including the role of the National Assembly to the extent of creating ‘the situation of the National Assembly-passing’, a phrase by which the South Koreans refer to the National Assembly’s seeming absence from national and state affairs under Moon.
On the economy, Moon’s people-centred economic policy (known as ‘J-nomics’) in theory aims for job-led growth by creating a virtuous cycle of higher income, increased consumption, more investment and economic recovery. But in practice, Moon’s J-nomics has generated widespread public fury — especially among small and medium enterprises, which account for over 90 per cent of South Korea’s corporate entities. Many are threatening to shut down because they are unable to meet rising labour costs.
Moon’s J-nomics has also overlooked the 6.38 million ‘non-wage-earning’ workers (such as self-employed people), who account for 25 per cent of the total workforce. It represents a fundamental shift in thinking from that of Moon’s predecessors, who argued that jobs were created as a result of growth. Moon, by contrast, has reiterated his longstanding preference for ‘income-led growth’, which he equates in importance to ‘inclusive growth’.
The promised ‘income-led growth’ has not played out. South Korea’s year-on-year increase in jobs hit an eight-year low in June 2018 amid a high jobless rate among its youth. To break this economic conundrum, Moon has called upon financial deregulation to unlock the growth potential of new businesses, especially internet-only banks. This signals a shift in Moon’s economic policy focus from ‘income-led growth’ to ‘inclusive growth’, with Moon pursuing more corporate-friendly policies rather than his former worker-friendly stance.
This shift of focus from wage growth to corporate earnings came about on 8 August when Samsung Electronics, the largest chaebol (family-owned conglomerate), unveiled a 180 trillion won (US$160 billion) investment plan, including the creation of 40,000 new jobs over the next three years. This plan was announced two days after Minister of Strategy and Finance Kim Dong-yeon held a meeting with Vice Chairman of Samsung Lee Jae-yong. The meeting stirred controversy when the Blue House reportedly warned Kim Dong-yeon ‘not to beg’ for investment and hiring during his Samsung visit.
Four other leading chaebols (Hyundai Motor, SK, LG and Shinsegae) have also announced similar investment and hiring plans worth a total of about 130 trillion won (US$117 billion) after hosting Kim Dong-yeon. The meetings between Kim Dong-yeon and these chaebols exposed the obvious disagreement between the Blue House and one of its senior ministers. But they also more seriously raised the question as to whether it was strategically wise for Kim Dong-yeon to meet with chaebols while the Moon government’s chaebol reform has gone nowhere, especially the government’s requests for ‘transparency in management and [correction of] unfair practices’, which Kim Dong-yeon reportedly asked Lee Jae-yong to address.
At the same time, Lee Jae-yong is still on trial for his involvement in the Park Geun-hye scandal, for which he seems so far to have escaped punishment. Given this extremely contradictory situation, the People’s Solidarity for Participatory Democracy, supported by many other civic groups and the radical Justice Party, has publicly criticised Moon’s deregulation announcement, which they argue violates the fundamental principle underpinning the ‘well-being of the financial industry’.
Moon’s saving grace could be his progress with North Korea. His push for North Korea’s denuclearisation and the establishment of a peace treaty in parallel with the restart of regular inter-Korean dialogue on the military has drawn much expectation and hope. Moon’s vision, outlined in the ‘New Korean Peninsula Economic Map’, envisages joint industrial zones and traffic networks along the eastern and western coastal areas, including reopening the Kaesong Industrial Park and Mount Kumgang.
In fact, the two Koreas recently agreed to hold a third summit between Moon and Kim Jong-un in Pyongyang from 18 to 20 September amid growing concerns over the currently stagnant US–North Korean talks for denuclearisation. Moon’s vision for the Peninsula may well be as far off as it ever was, but his persistence may yet surprise by building concrete steps that North Korea might take towards nuclear disarmament.
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