Populist policies do more harm than good

As of May 24, Members of the National Anti-Populism Union had collected more than 420,000 signatures, topping the figure required to hold a referendum vote on the free school meal project. Members of the Populism Legislation Watching Civil Union started to receive sworn statements from lawmakers on June 1. Around the same time, some university students demonstrated in a candlelight vigil in front of Gwanghwamun to urge the government to honor its pledge to introduce half-price university tuition. On SNS such as Facebook and Twitter people are arguing for and against the tuition plan. But the Republic of Korea is now suffering terribly all over because of ruinous populist policies.

Given the chance, ruling and opposition parties would give the public free meals, free child care, free health care and half-price university tuition. Politicians' pandering to populism is now at terrorist levels, as they make unreasonable promises without considering where funding will come from, just to gain greater popularity and more votes.

I think a financial support program to reduce the burden of college fees on low-income households is a good idea. As you may know, the government has implemented such a program already. This program is an income-contingent loan or university tuition loan system. This system should ease the tuition burden for students. It loans money to students for university tuition and lets them pay it back after they graduate and find a job. In addition to tuition fees, students can also borrow living costs of up to 1 million won per semester, or 2 million won annually. This program is problematic, however. If the compound interest ¡ª about 5.7 percent ¡ª throughout the loan extension period is added up, the money to be repaid is higher than what was borrowed. There is a risk that the system contains moral hazard as the money is hard to reclaim if the recipients go abroad.

The United Kingdom, United States, Australia and New Zealand have run income-contingent loans for university students. So, many universities have been well run on tuition loan system.

But I am completely against half-price university tuition. Actually, plans need to be made at government level to improve the income-situation for the poor.

I emphasize economic growth and some social welfare for the poor. Otherwise, eventually, people will have to pay too much. Citizens' tax burden could increase a lot. The national debt will increase and the national storeroom will be empty. The government is just eating away at people's tax money with ruinous populist policies. The half-price tuition measure inevitably means higher taxes in the long run. So, wise people should not like the communist nanny state. Politicians should come up with more practical and reasonable pledges.

At the moment, the government is concentrating on distribution rather than growth. This is well summed up in the lyrics of "More Ants than Grasshoppers" by Dr. Kim & the Poets (Kim Chun-ho is the head of the Center for Free Enterprise).

"Squander money, welfare, whose money

That does it, no farther!

At this rate, our debts increase

More ants than grasshoppers"

The traditional functions of government have been starved by the rapacious appetite of the welfare state. The state is still the main provider of welfare. This is quite a serious problem.

I believe that we are now in the transitional stage of transforming into a G10 country. So the government still must promote policies that emphasize growth rather than distribution of wealth.

Populism is a false picture of democracy. I say that the Korean economy is basically a capitalist economy. Also, I am a supporter of the free market economy. Sometimes, people love free stuff as it appears sweet. Then there are those dying to get some free money out of the government. There's no such thing as a free lunch. Taxes will rise eventually because of such sweet measures. People are taken in by politicians' honeyed words. We need to mind that honey.

By Song Eric Deok-jin

The author is planning team manager at the Center for Free Enterprise, a free market think tank. ¡ª Ed.

 

This article originally appeared in the Korea Herald on June 16, 2011.

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