From Web - Paths Taken by the U.K., Germany, France -- and Korea

The conservative Nicolas Sarkozy has won France’s presidential election pledging to pursue U.S. and British-style market economies and “small government.” The election was a face-off between growth vs. welfare as well as free market vs. state control.

Sarkozy’s election pledge was “work harder, earn more.” He vowed to extend the current 35-hour workweek introduced by the Socialist government and lower corporate, property and inheritance taxes, while lowering government spending, aiming to pursue a “market-centered, growth-first” policy. In contrast, his socialist rival Segolene Royal’s election motto was that a more righteous France meant a stronger France. In order to narrow the gap between the rich and poor, she sought to raise the minimum wage while vowing to increase the government’s role in boosting unemployment benefits and welfare coverage. All were traditional leftwing state-centered, welfare-led policies.

In the race between the two candidates, the people of France sided with Sarkozy. That’s because the French, who until now had used violent protests to counter government-led labor reforms, felt a heightened sense of crisis regarding the future of their country, which has degenerated into the “sick man” of Europe.

Among European nations, France was the most tenacious in hanging on to the old welfare-state model. As a result, its gross national income slid to 19th place from eighth in 1982, suffering from the eponymous “French disease” manifested by a youth unemployment rate of more than 22 percent. Government spending, which accounted for 54 percent of gross domestic product, damaged private sector competitiveness.

Before France, the U.K. and Germany suffered the symptoms of the same disease. The U.K. in the 1970s was a virtual socialist state, with the government maintaining a comprehensive, cradle-to-grave welfare program, raising income taxes by as much as 83 percent, while powerful labor unions held sway. The economy collapsed, businesses either closed down or defected to other countries, and state finances were depleted. The country even turned to the International Monetary Fund for emergency loans in 1976. The U.K. had to wait until prime minister Margaret Thatcher implemented a prescription of lowering taxes, pursuing privatization and decreasing welfare benefits during the 1980s before its economy could grow again.

Due to rising welfare costs that came with the pursuit of a “social market economy,” Germany saw its economic growth rate fall from 2.5 percent from 1970 to 1990 to 1.4 percent in the 1990s and to less than 1 percent since 2000. The unemployment rate soared from 0.4 percent in 1970 to more than 10 percent. Germans became lazy to the point that unemployment was considered an “acceptable” job, while the country’s competitiveness plummeted. Now, the German economy is slowly emerging from the doldrums due to Chancellor Angela Merkel’s reforms involving cuts in pension and unemployment benefits.

Any country that gets lured by the false glory of being a welfare state will inevitably catch the British, German or French disease. And it takes an unimaginable level of pain to cure that disease. During the initial stages of Thatcher’s reforms, unemployment in the U.K. rose from 1.5 million to 3 million. But that was the only way for the country and its economy to regain its vitality. Now Germany and France are following suit. When will Korea, still chasing the false dream of a “European model,” finally open its eyes?