This article examines the origins and characteristics of neoliberalism and analyzes its impact on the Korean economy since the IMF in 1997. In particular, it emphasizes the need to introduce a welfare state to address the polarization caused by neoliberalism, and discusses the importance of political participation through voting at the individual level.
I found that neoliberalism has been a key paradigm driving the Korean economy since the IMF in 1997. In the following, I will examine the origins and characteristics of neoliberalism, the effects of neoliberalism in Korea, and alternatives to neoliberalism. In particular, we will discuss what can be done at the national level and what individuals can do.
First, we need to look at how neoliberalism was born. Before neoliberalism, liberalism began with the French Revolution, which advocated for the freedom of all people from despotic power. In economic terms, liberalism favored deregulation and laissez-faire, resulting in a widening gap between rich and poor, which contributed to the Great Depression of the 1930s. After the Great Depression, two schools of thought emerged: ordered liberalism, which recognized a role for government in the economy, and neoliberalism, which sought to restore laissez-faire by scaling it back. Orderly liberalism contributed to economic growth, but full employment led to excessive union power and excessive wage increases led to inflation, which slowed growth. This led to the rise of neoliberalism in the United States and its adoption in other countries.
Neoliberalism argues that welfare can be improved by maximizing entrepreneurial freedom based on private ownership and individual liberty. The role of the state in neoliberalism is to facilitate economic activity by deregulating, liberalizing trade, investment, and finance, and privatizing public enterprises. Ultimately, supply-driven economics is at the heart of neoliberalism, which holds that if you stimulate economic activity through tax cuts, lower income groups will benefit. However, neoliberalism has led to increased social inequality as economic benefits have been concentrated in the hands of a few capitalists.
Neoliberalism has been unsuccessful in the United States and its allies (such as the United Kingdom, Canada, and Australia), and by the late 1990s it had fallen out of favor as the dominant model of capitalism in most countries except the United States and South Korea. South Korea adopted neoliberalism under the guidance of the IMF after the 1997 IMF crisis, and many problems arose in the process. South Korea’s economy was reorganized around large conglomerates, with small and medium-sized enterprises weakened. In particular, labor market flexibility has weakened the power of unions and significantly reduced workers’ rights. In addition, the introduction of performance-based incentives has widened the income gap between executives and workers, and the development of financial capitalism has rapidly widened the gap between the top income earners and the rest of the population. As a result, neoliberalism has created a structure that takes the concentration of wealth at the top for granted, leaving the lower classes at the mercy of the top.
But in neoliberalism, which is predicated on human self-interest, the winners are unlikely to be benevolent. Rather, they reinforce monopolistic structures and continue to concentrate wealth. This is evident in the polarization of wages in large corporations and in the practice of restructuring during recessions. Lower-level workers are laid off while company executives are retained, and government efforts to secure a social safety net for those laid off are criticized as leftist policies. As a result, it becomes difficult to strengthen the welfare system, and workers become the victims of restructuring.
In Korean society, polarization is intensifying across the economy, industry, labor, and consumption. This pervasive polarization is a major cause of social conflict and hinders sustainable growth. The economic crisis of 1997 and subsequent years led to the shrinking of the middle class and income polarization, which in turn led to consumption polarization. While the upper income groups have expanded their spending power as global consumers, the lower income groups have been unable to escape debt-dependent consumption. Polarization of income and consumption leads to polarization of education, which creates a structure that reproduces polarization. Many studies have shown that parents’ income and social status determine their children’s academic achievement and education levels.
Similarly, the introduction of neoliberalism in South Korea has led to the polarization of the industrial structure and the abuse of contingent labor. Predatory subcontracting practices have concentrated profits in the hands of large corporations while stifling the ability of small and medium-sized businesses to innovate, undermining the long-term growth potential of the Korean economy. Contingent workers suffer from low wages and insecure employment conditions, and these problems reflect a highly distorted form of labor market flexibility. The contingent workforce is a prime example of a polarizing phenomenon, widening income disparities and deepening social inequality. This leads to a shrinking domestic market and a weakening of the potential for sustained growth.
An alternative solution to these problems at the national level is the introduction of a welfare state. This requires a more radical transformation, rather than an incremental change within the neoliberal system. A welfare state is not just a welfare provision, but a growth policy that leads to technological innovation and knowledge labor, which in turn can stimulate economic growth through a virtuous cycle. To do this, it is appropriate to provide welfare benefits first, and then raise taxes to restore fiscal equilibrium. Many people already have a positive perception of the welfare state, and polls show that more than 60% of people favor the European model, where benefits are generous even if they pay more in taxes. This welfare must be expanded to include the middle class to overcome middle-class opposition to tax reform.
At the individual level, there are limited ways for students or ordinary citizens to counter neoliberalism, but as voters, they can make their voices heard by voting rationally. Instead of blindly voting for a particular region or party, you should choose candidates that align with your interests and demand policy change. In a democracy, power is transferred through elections, so even if you lack trust in political parties and politicians, you shouldn’t give up on voting. We should use the democratic process to voice our opinions about the problems of neoliberalism and explore alternatives.
As we have seen, neoliberalism has concentrated wealth at the top of Korean society and increased polarization. This polarization persists across the economy, society, and education, and is likely to be inherited. To solve this problem, it is necessary to build a welfare state at the national level, and active political participation and voting at the individual level play an important role.
