[Column] The era of inequality

Kim Ji-seok, Editorial Writer

Forty percent of Korean households and half of Seoul's citizens don't own their own home. The more housing costs rise, the more they help to define people's class status. A Korean household's assets are defined by the real estate it owns, and in Korea it is apartments that determine the price of real estate. According to a study by a real estate industry group, the total value of apartments across the country rose 21.8 percent, excluding newly constructed apartments, over the past year. Most of the price increase is passed along to renters.

The difference between real estate owners is also serious. One-sixth of apartments in the country are in Seoul, but apartments in Seoul account for 40 percent of their combined national value. Fifteen percent of Seoul's population lives in the three city districts that make up Seoul's Gangnam neighborhood, but apartments there are 40 percent of the total value of apartments in the city as a whole. The Ministry of Government Administration and Home Affairs put together figures based on government-assessed prices as of the end of last year, and it turns out that 50,000 households, or 0.3 percent of the entire population, owns 22 percent of privately held land, or 15.5 percent of the nation's total land value - the equivalent of 196 trillion won (US$205 billion). The richest 3 percent of the population, or 500,000 households, owns 59.3 percent of all private land, or 43.5 percent (549 trillion won) of the value of all private land. That means that by value, the richest 3 percent owns about as much real estate as the remaining 97 percent.

The disparity for the rest of the world is even more serious. The top 1 percent of the world's households holds 39.9 percent of its assets. Five percent owns 70.6 percent, and 10 percent owns 85.1 percent. Ninety percent of the world's population, or 5.94 billion of its total population of 6.6 billion, owns just one-sixth of the amount of wealth held by the richest 660 million. The poorest 50 percent, or 3.3 billion people, own only 1 percent of the world's riches.

It's so bad we almost have to find relief in the fact that according to a study based on 2000 figures by United Nations University's World Institute for Development Economic Research, Korea is among the better off of nations, with comparably high incomes and assets.

Inequality has become more serious over the past 10 to 20 years in individual countries and in the world as a whole. Ohmae Kenichi, once called "Japan's only management guru" by the Financial Times of London, calls Japan an "M-shaped society." If you draw a horizontal line for yearly household income and a vertical line for the number of households, you see the left and right sides of your graph clearly separate from each other at the point where income reaches 6 million yen (US$51,000). The "M" centers around the mid-lower class, with 80 percent of the population lying on the left peak.

The United States is not very different. More than 90 percent of Americans are earning monthly salaries or are paid by the hour to a total of less than US$40,000 dollars yearly. What this means is that the job structure has become an "hourglass," in which there is no such thing as a reasonably paid mid-level job anymore. Another example of the "hourglass" effect can be seen in how during the third quarter of this year in Korea, where people still feel the effects of a recession, the number of urban households earning more than 5 million won a month rose to 14.56 percent, 1.84 percentage points higher than the previous year.

In the middle of the 18th century, Jean-Jacques Rousseau wrote something called the "Discourse on the Origin and Basis of Inequality Among Men." He submitted this paper to a competition on the theme of the origins of inequality and whether or not inequality is justified according to natural law, but the paper was not chosen. It was the era of Enlightenment, so the sponsor of the competition, the Academie de Dijon, naturally enough thought that inequality was something that could be resolved through reason. Rousseau, however, thought that inequality originates in civilization itself, and that no natural law can help us make sense of that fact. He argued that solving inequality required a fundamental restructuring of society. The French Revolution took place a generation later, and the spirit behind it was an extension of this thinking.

The inequality of our point in history is becoming increasingly more serious. It is a problem with civilization itself; or, more narrowly, its causes are to be found in problematic structures and institutions. Structuralized inequality eventually leads to social implosion. Before that happens, we need to find answers to the question of how we can change the system we have today. It should go without saying that the more you believe in the future of the market economy, the more you need to agonize about how to fix its weaknesses.

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