South Korea is at a critical inflection point. Despite winning with a majority, Madam Park Geun-hye, who has been inaugurated as President of the Repubic of Korea today, assumes leadership of a country which remains divided on many key issues.
The creation of a social safety net befitting of a US$ 1 trillion economy and reform of the system of large family-owned conglomerates known as chaebols have become the dominant issues in South Korean politics. Some fear the conglomerate system, responsible for South Korea’s catapult to Asian Tiger status in the 1990s, is now disabling and stifling innovation and entrepreneurship, leading to greater social inequality. The public has called for action and politicians have responded with pledges for “economic democracy” – a catch-all slogan for reform. But what will economic democracy mean in practice?
In general terms, economic democracy seems to mean a restructuring from export-led to domestic, demand-driven growth with greater opportunities for small and medium businesses to flourish. The hopes are that this will create more jobs and stimulate vibrant new sectors, yet many unanswered questions still loom. For example, how far will economic democracy go to curbing the power of conglomerates, and with what implications for economic competitiveness?
The election of Madam Park, a member of the conservative and traditionally pro-business Saenuri Party, could be seen as a vote of confidence in the conglomerate system which Park Chung Hee, Madame Park’s father and former South Korean President, is largely attributed with creating. During her campaign Madame Park pledged to stomp out anti-competitive behaviour and make space for small businesses, but it is uncertain whether or not such policies will succeed in boosting innovation and creating jobs, be halted by vested interests or just plant the seeds for future market inefficiencies.
If economic democracy is to have any impact on Korea’s rising income inequality and slowing growth rates, it will need to be more clearly defined. Choosing the right policy mix should be as much about long-term strategic goals as about meeting short-term political promises, requiring careful thought to the economy and society which South Koreans wish to have in the future. Exploring multiple future scenarios, beyond mere worst and best cases, can help leaders in the private and public sectors better understand the contexts in which they are working, and gain insights into the assumptions and uncertainties shaping their decisions.
Let us hear your views: What should economic democracy entail?
Author: Kristel Van der Elst is Director and Head of Strategic Foresight at the World Economic Forum. With the collaboration of Sushant Palakurthi Rao is Senior Director and Head of Asia at the World Economic Forum.
Image: A security guard walks among empty shares prepared for the inauguration ceremony of South Korea’s new President Park Geun-hye REUTERS/Kim Hong-Ji