IMF chief’s advice

During her recent visit to Korea, Christine Lagarde, managing director of the International Monetary Fund (IMF), sympathized with President Moon Jae-in, whose policies are based on progressive thinking that narrowing the income gap among economic players helps to boost growth, and raising the minimum wage is the way to do it.

Lagarde said Moon’s income-led growth conforms to the “inclusive growth” the international lending agency of last resort has advocated in recent years. In a news conference before her departure, she added a condition. “You need to be balanced and cautious and move reasonably in accordance with the pace of the economy as well,” she said, emphasizing speed control.

Backers and critics of Moon’s policy claimed victory. But her message is that no single economic theory can be complete, which is why policymakers should find the right policy mix depending on the situation facing their country.

Moon’s political opponents argue that the liberal president is running counter to global trends toward pro-business policies, including deregulation and lower corporate taxes. The advocates of the growth-first theory also maintain profit-seeking is the largest, if not the only, driving force of a capitalist economy. As President Moon and his economic team admit, their economic policy is like “treading an unbeaten path.” What most Koreans have experienced over the past couple of decades, however, shows the other, “well-trodden path” has resulted in polarizing income and a vanishing middle class. No wealth has trickled down in this 90-10 society. Few countries have shown the harm of a business-first policy better than Japan, which many economists say is what Korea will be like in two decades. One of the reasons for Japan’s lost decades was too much saving and too little investment. Most Koreans don’t even have savings, as shown by the snowballing household debt.

When pressed by opposition lawmakers saying the government’s tempo of raising the minimum wage is too fast, Finance Minister Kim Dong-yeon told the National Assembly Wednesday, “We will control the pace if needed.”

The Moon administration should do the same with the overall income-led growth policy to achieve a balance of distribution and growth, so that the two can, and should, go together as Lagarde suggested. Meanwhile, conservatives should give the other side a chance to fix problems using their own methods.