The economic significance of local currency has long been lost. Now, only the political meaning of 'this was a key project of Lee Jae-myung, the representative of the Democratic Party,' remains. Although the Democratic Party knows that there is no economic effect of local currency, it is pushing for local currency legislation to strengthen Representative Lee Jae-myung's 'brand' and has vowed to allocate a budget for local currency by coercion. This shows how severely our politics has gone wrong.
Yoon Hee-suk, who was appointed as the head of the Yeouido Institute, the think tank of the People Power Party, said this in an interview with CHOSUNBIZ at the Yeouido Institute in the Yeongdeungpo District of Seoul on the 17th. A former professor at the Korea Development Institute (KDI), Yoon Hee-suk had a heated debate with Representative Lee Jae-myung (then Governor of Gyeonggi Province) over the economic effects of local currency in September 2020 while serving as a member of the Future Unified Party (now the People Power Party).
Representative Lee Jae-myung proposed a 'public debate' to Yoon Hee-suk, who denied the economic effects at that time. Yoon Hee-suk did not show any particular reaction then. About four years later, Yoon Hee-suk said, 'There is no point in debating.' The point is that it has become clear that the local currency policy does not contribute to economic revitalization or the redistribution effect that Representative Lee claims, making a debate unnecessary.
Yoon Hee-suk emphasized that the economic policy of local currency should be viewed from a political perspective, not an economic one. The rivalry between the Democratic Party, which seeks to further activate local currency to accumulate Representative Lee Jae-myung's achievements, and the People Power Party, which tries to stop this, is difficult to attribute any further significance. To quote Yoon Hee-suk, local currency is merely a tool for political rivalry intertwined with the private interests of Representative Lee Jae-myung.
Yoon Hee-suk stated, 'It is clear who is blindly following Representative Lee Jae-myung, who is blatantly fulfilling his political self-interest through local currency, and such policies must be expelled from politics as soon as possible.'
Local currency is one of the key projects that Representative Lee Jae-myung implemented to revitalize the local economy while serving as the mayor of Seongnam and governor of Gyeonggi Province. The core is providing a discount benefit of 10% to 20% to residents who purchase local currency. If a resident buys 1 million won of local currency, they can use it like cash for 1.1 million to 1.2 million won, with the difference of 100,000 to 200,000 won supported by taxes. It is essentially a way of putting taxes into the residents' wallets. From 2020 to 2022, the amount of national funds supported to local governments that issued local currency amounted to 2.58 trillion won.
When the government completely cut the national funding budget from 2023, the Democratic Party began to push for local currency legislation that mandates national funding support. Although President Yoon Suk-yeol's veto last year led to its collapse, the party has recently restarted the initiative. On the 15th, Representative Lee also started to promote local currency, stating at the launch ceremony of the National Small Business Committee, 'We will certainly prepare a supplementary budget for the issuance of local currency.'
Yoon Hee-suk argued that if the Democratic Party pushes through the local currency law, Acting President Choi Sang-mok should exercise his veto power. The reasoning is that local currency is akin to basic income, which indiscriminately distributes cash to all citizens regardless of income, thus providing sufficient justification to reject it.
Yoon Hee-suk noted, 'People are increasingly realizing that if you distribute money to everyone, you will eventually have to pay it back.' He added, 'The acting president may find it difficult to introduce new policies, but considering public opinion, there will be no political burden.' The following is a Q&A with Yoon Hee-suk.
―About four years ago, you had a nerve-wracking debate with Representative Lee Jae-myung over the validity of a report from the Korea Institute of Taxation and Finance (KIPF) stating that local currency has no economic effect. Do you still believe that local currency has no economic effect?
'Regardless of the objective, indiscriminately distributing money to an unspecified number of individuals is the worst way to use national treasury funds. Local currency is not universal welfare, which should encompass all citizens like healthcare, education, and welfare. The priority should be to help those who are struggling due to financial hardship, rather than distributing cash to everyone. According to the KDI report, the cash distribution method has no economic revitalization effect, and even if it does, it is very weak. It's hard to find meaning in local currency in any research.'
―Isn't local currency a policy emphasizing redistribution? If you use money that could be spent at department stores in neighborhood markets, isn't there a 'sector-specific redistribution effect' as Representative Lee claims?
'What kind of redistribution effect are we talking about? When using local currency, one does not purposely go to places where business is struggling. They may avoid department stores or large supermarkets, but they end up going to relatively tasty and well-serviced establishments to use local currency. By giving out money to everyone, the middle class benefits, and sales rise primarily for well-performing small businesses. Furthermore, much of the local currency is spent at academies and hospitals. This just means substituting local currency for money they would have spent anyway; it's merely a substitution effect.'
―Even if the redistribution effect is not significant, wouldn't it be acceptable to provide some help to small businesses, at least because some level of inefficiency occurs?
'Many people say that. Isn't there a possibility that it has even a little effect? Of course, there is 'some effect.' However, we could use money for local currency in a more efficient and effective way elsewhere. We should use taxes to help those in difficulty directly and stimulate consumption in vulnerable groups. The approach of distributing money to all citizens inherently has limitations. It does not provide an economic revitalization effect, and in terms of redistribution, it ultimately goes against the intended objectives.'
―You have repeatedly stated that local currency effectively distributes cash to all citizens, but in what way does this occur?
'Regardless of income, if you purchase local currency, you receive a tax subsidy of 10% to 15%. So if you buy 1 million won of local currency for 850,000 won, effectively, 150,000 won comes into your wallet. In the end, that 150,000 won is covered by taxes. This has a philosophy similar to basic income, which distributes cash to all citizens. However, the local currency obscures this and makes it feel like a discount benefit, preventing people from perceiving it as basic income. Even the 'MZ generation,' which has shown negative reactions to basic income, fails to realize the implications of local currency. That's why local currency is referred to as 'a scam.'
―All local governments across the nation are currently issuing local currency. There is a trend of increasing issuance this year as well.
'When implementing policies, there can be value conflicts and occasional trial and error. The debate on which values to prioritize at this moment is a healthy one. However, I believe there is no meaning in debating local currency. It is an issue that is entirely related to the private interests of Representative Lee Jae-myung. This should be expelled from politics quickly, and for that to happen, the ruling party must perform well.'
―What does it mean to say that local currency is a policy for Representative Lee Jae-myung's self-interest?
'Local currency was implemented very experimentally under the pretext of helping small businesses. However, Representative Lee Jae-myung branded it as a special policy for himself, causing it to grow in this manner. Had it not been for Representative Lee's policy, the Democratic Party would never have emphasized local currency. To act in such a way solely for one person based on purely political logic is deeply wrong. Even while knowing there is no economic logic, marketing it to the public and forcibly allocating budgets is a terrible political stunt. It is an enormous waste at the national level.'
―The Democratic Party is recently re-pushing for local currency legislation that would enforce a mandatory national treasury support when issuing local currency. Do you really believe they are doing this because they think it has economic effects?
'There is no reason to create local currency legislation in a situation where the public is confused and anxious. The reason for pushing this law is obvious. They intend to incorporate their own name (Lee Jae-myung) for use in nationwide election campaigns. This clearly shows who is blatantly pursuing self-interest and which political forces are blindly following. Local currency is an economic issue with nothing new, yet it has acquired a politically new meaning, becoming a polarized issue. This illustrates just how wrong our politics has become.'
―The ruling party is opposing the local currency law. However, it seems they lack the power to block it due to the state of martial law and impeachment, and also due to a lack of seats. As the head of the People Power Party's think tank, how should the ruling party respond?
'I do not think we are deflated. Local currency is an issue that the People Power Party and other conservative parties should never shy away from. We must persuade that policies involving distributing money are not good for everyone. We need to keep conveying that this money should be used more efficiently. The public is aware that local currency is an issue intertwined with Representative Lee Jae-myung's 'personal interests.' If the Democratic Party pushes through the local currency law, we should exercise our veto power. This is a bill that has already had a veto exercised against it once. Although Acting President Choi Sang-mok (Deputy Prime Minister for Economic Affairs) may have difficulty introducing new policies, considering public opinion, there will likely be less political burden in using the veto.
―Setting aside political intentions, the Democratic Party seems to be pushing local currency as a means to aid small businesses. On the other hand, it is unclear what the People Power Party plans to do for the economy.
'It is strange to frame the question as, 'What would you do if not local currency?' There are countless programs in this country aimed at helping those in difficulty. These programs have developed intricately over the past several decades. What matters is whether the money is being effectively used for those in need. Are we not allocating considerable funds to various support policies for small businesses? The People Power Party's stance, although somewhat bland, remains consistent: we aim to directly support those in need. There are rules and criteria when providing aid to the poor. We should not simply hand out cash indiscriminately because someone is in trouble.'
―You are currently concurrently serving as the head of the Yeouido Institute and the Chairperson of the Special Committee for Economic Vitality and Livelihood of the People Power Party. What policies do you plan to suggest for the livelihood economy?
'Now is the time to focus on small businesses and micro-enterprises. When they are struggling, temporary and daily workers for young people will be reduced. I plan to gradually reveal specifics in the special committee, but the basic direction is clear: the first step is to actively identify the darkest parts of our society, and the second is to directly assist those individuals.'