Lee Jae-woong, chief executive of car-sharing service SoCar, resigned as co-head of a government organization formed by the Ministry of Economy and Finance for the growth of the national economy through innovation.
He said he offered to resign because the “sharing economy has made no progress” and because “reasonable measures for those likely to suffer from innovation-driven growth failed to take a single step forward.”
He joined the body probably because he agreed to the need to find a new growth engine of Korea. It is pitiful for the first-generation Korean venture businessman to have failed to break the barriers of reality and stepped down. His resignation reflects his frustration at the incompetence and irresponsibility of government officials and politicians in pushing innovation-based growth and at their hesitation over the introduction of a sharing economy.
On Thursday, when Lee offered to resign, tens of thousands of taxi drivers went on a 24-hour strike, marching through Seoul in protest against the launch of carpooling services by Kakao Mobility.
Ride-sharing, or carpooling, is the first high-profile case showing conflicts that have flared up between old and new industries in the process of pursuing growth through innovation. Ride-sharing made a soft landing in the US, Europe, China and Southeast Asia, but it faces strong headwinds in Korea.
The government lost time while dragging its feet with dialogue with the taxi industry. With taxi drivers’ protests escalating, it proposed the introduction of a monthly salary system, a move likely to require subsidizing their salaries with taxes.
The ruling party created a task force to settle conflicts, but effectively tossed the ball into the court of a multilateral panel created to negotiate over social and labor issues.
Growth through innovation is one of three axes of President Moon Jae-in’s economic policy, along with income-led growth and a fair economy. He has emphasized innovation whenever he has had the chance since he was inaugurated. During the 2019 policy briefing by the Ministry of National Defense last week, he asked the ministry to try to use as much of its budget as possible toward contributing to innovation-driven growth.
However, the “fourth industrial revolution” in Korea has been stalled by resistance from interest groups and government regulations. As a consequence, little progress has been made in carpooling, telemedicine or home sharing. Whenever conflicts have arisen over deregulation, partisanship and an ideological yardstick have taken priority within the ruling camp, and decisions have been put off.
Car-sharing services have been regarded as a touchstone of Korea’s fourth industrial revolution. But the government has hesitated over the advent of the new industry for more than a year, and eventually failed to persuade the taxi industry to adjust to it. As a result, Kakao postponed the official launch of its carpooling services indefinitely.
What is more worrisome is the looming era of autonomous vehicles. If taxi drivers oppose self-driving taxis when the era arrives, will the government still try to buy time?
Two months ago, the government decided to deregulate home sharing, but later backed off as the lodging industry opposed it. A bill to allow telemedicine has only been gathering dust in the National Assembly since it ran into resistance from doctors and hospitals.
The advent of new industries will entail resistance from existing old industries. It is a job of the government to persuade interested parties, mediate their disputes and settle them by proposing steps acceptable to them.
If it succumbs to vested interests or labor groups, suggestions for innovation-driven growth will go up in smoke.
Innovation requires the breakup of outdated systems and the introduction of a new order. Innovation is impossible to attain without firm commitment to settle inevitable conflicts between old and new industries.
An environment conducive to innovation must be fostered, but the social safety net and retraining programs must be established as well to minimize negative impact on the victims of transition to the fourth industrial revolution.
If the government wants to secure a future growth engine, it must not hesitate before the unavoidable wave of new industries. The government must shed a passive attitude to the changes of the times and prepare actively for a smooth transition to new industries. It is time to take a long view rather than try to seek immediate gains.