This study reviews the need to strengthen fiscal functions and presents relevant policy directions with a focus on the two challenges of strengthening finance’s function of developing society, and enhancing the functions of regional finance.
Currently, Korea’s national long-term development goals can be summarized thusly: development of a democratic and welfare state. In order to achieve these two goals, the first task in the area of finance is to strengthen finance’s social development function in order to develop a welfare country. Meanwhile, for the establishment of a democratic nation, the country first needs to firmly establish a fiscal democracy based on the principles of congressional budgeting and law-based taxation, then strengthen regional finance so as to have a local self-governing system in place.
Korea’s finance remains sound as compared to other countries, despite its structural problems. In Korea, fiscal spending accounts for a small percentage of the Gross National Product (GNP) and the government’s dependence on state bonds and fiscal deficit is substantially less than that of other countries.
Along with economic development, the public’s demand for balance and equality continues to grow. If there is a prevailing sentiment among the people that the upper class accumulated their wealth through illegitimate means, the public’s demand for balance and equality is expressed as a desire for fairness and justice. The demand for balance and equality varies by country, but the general understanding is that it becomes strongest when a country’s per capita income reaches the level of a semi-developed country. If the public’s demand is excessive, or the government’s efforts are not sufficient enough to meet the demand in a semi-developed country, and such an imbalance remains unresolved, the effort put into achieving economic development has been made in vain.
Currently, Korea is undergoing rapid socio-economic transformations, and establishing a new role for government and finance. Korea’s finance has served a minimal and passive role compared to other countries. However, taking opportunity of improved economic conditions such as the increased national income level and the surplus in international balance of payment, the Korean government should actively addresses imbalances and gaps between social and economic sectors, wealth classes, and regions so that the public’s welfare can be improved. To this end, consistent efforts need to be made to normalize fiscal functions.
한국재정의 주요과제와 정책방향(Major tasks and policy directions for finance of Korea)
|Series Title; No||정책연구시리즈 / 90-13|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||KDI; KDI School|