Invest KOREA

Amid worldwide acclaim, the Korean government has cautiously begun to ease tight control of social distancing since early May, as new cases of COVID-19 drastically fell from the hundreds to the single digits in April. While an aroma of cautious optimism spread across the public and the health administration, the officials in charge of economic affairs have to face the reality of negative economic growth and high unemployment. To effectively defend against more calamity, the Korean authorities have recently launched a set of policies epitomized as the Korean New Deal on top of a series of previous emergency measures, mobilizing over KRW 300 trillion, equivalent to USD 250 billion, approximately 20 percent of GDP in 2019. The nation has never witnessed such a grandeur package of policies in the past. Not even the emergency measure in 1997 nor the prescription for the 2008 financial crisis was as big as the COVID-19 measures.

The Korean New Deal project has three major components: the Digital New Deal, the Green New Deal and the Human New Deal. It resembles the 3Rs of FDR’s New Deal, namely Relief, Recovery and Reform. Comparing FDR’s New Deal with the Korean New Deal, there finds an interesting parallelism. Relief programs under the FDR’s new deal, such as the Civilian Conservation Corps (CCC) or the Federal Emergency Relief Administration (FERA), programs could be found in similar traces in the Human New Deal projects, which try to provide emergency safety nets to the working class. The Human New Deal tries to provide jobs for the young population through various programs such as forest management, fire prevention, industrial safety and public data collecting projects as was the case in the CCC under FDR’s New Deal. Also, The Human New Deal encompasses a program guaranteeing unemployment protection to all workers as well as emergency relief funds to self-employed SMEs as was the FERA programs.

If FDR’s New Deal sought after economic recovery by initiating major social infrastructure programs such as the Tennessee Valley Authority (TVA) or the Public Works Program under the National Recovery Administration (NIRA), the Korean authorities attempt to engage in constructing an eco-friendly and carbon free society on a national scale under the headline of the Green New Deal. While FDR’s main concern was to utilize natural resources for the betterment of the then nation’s primary industry of agriculture by constructing hydropower dams across the nation, Korea’s main objective of the Green New Deal is to establish an eco-friendly industrial and social environment. A good policy case for that purpose is to choose 100 leading projects for the Smart Green City Plan, making the selected cities clean and efficient. Also, the Green New Deal is geared towards making an innovative ecosystem in the five leading green industries by choosing 100 leading forerunners in the industries. Another audacious plan is to make zero energy consumption for all public structures like museums, parks and schools.

While FDR’s New Deal Reform program focused mainly on providing constitutional guarantees of workers’ economic and legal rights of unionization and minimum wage, the Korean Digital New Deal finds Reform in digitalization of all facets of economic and social activities for a better future. The digitalization of all industries means, among other things, to provide infrastructure compatible with 5G networks, to supply software programs and to educate fully competent human resources. Production, management, distribution and human resources allocation, as well as financial administration, are put under a digitalized integral system. To facilitate the Digital New Deal, the government plans to supply digital equipment to all secondary schools, daycare centers and 160,000 SMEs to enable them to conduct daily education or business without physical attendance.

Of course, projects in the Green New Deal and the Digital New Deal are not mutually exclusive as was Recovery and Reform in FDR’s New Deal. They are sometimes overlapping and reinforcing. And yet, the two are as distinct in concept as the two sides of one coin. If the Green New Deal is the final goal, then the Digital New Deal is the tool for that purpose. Accepting mutual inter-relatedness and yet the conceptual difference, the Green New Deal and the Digital New Deal pose as an important integral characterization of what this government is trying to achieve amid epochal challenges of COVID-19. Most of the elements in them are not entirely new programs. They are rather included in previous projects. However, they become most important as they are now categorized under the two most important objectives of the government, namely digitalization and achieving a green economy.

The only task left now is how much resources will be appropriated to the Digital New Deal and the Green New Deal. According to the Korean New Deal plan, a total of KRW 30 trillion (USD 25 billion), amounting to about 1.2 percent of national GDP, is to be allocated for three years until 2022. This amount is astonishingly small—just 10 percent of the entire budget for the COVID-19 measures. Under FDR’s New Deal, federal expenditures tripled between 1933 and 1939. Despite the budgetary constraint, audaciously more funds should be allocated for the Korean New Deal to come up with a tangible outcome.

By Professor Se Don Shin
Dean, Sookmyung Women’s University
seshin@sm.ac.kr

The opinions expressed in this article are the author’s own and do not reflect the views of KOTRA