The Second British Disease / The Ideology of Prime Minister Thatcher

Britain is having a hard time these days. Many people still say that the cause was Britain’s excessive welfare in the past. Others say that Prime Minister Thatcher’s rapid neoliberal policies aimed at curing the British disease were the cause. All opinions that question the ideological realignment are correct, but from an economic perspective, it is because of the decline of manufacturing. The issue of undervaluing manufacturing was expected to cause major problems in Korea in the future, so I even tried working for a manufacturer and was concerned about Korea’s financial economy being superior to its real economy, but the results were clearly bad in the UK.

  

It is also true that when the real economy is emphasized, there is a somewhat anti-capitalist atmosphere. Because it gives the impression of valuing labor over money. However, as Professor Ha-Joon Chang pointed out in edible economics, the financial economy grows based on the real economy, so the financial economy grows only when manufacturing grows. Prime Minister Thatcher overlooked these problems and, while engaging in a petty zero-sum game over excessive welfare, neglected future industries. In other words, it was a fatal mistake of responding to one ideology with another ideology.

 

The AI keeps asking me to provide evidence while we’re debating. No matter how much I, an ordinary worker, have studied, it is difficult to debate artificial intelligence based on empirical evidence. So I asked the AI to look at my blog, and it asked me to give it the URL. So I even used as evidence the autobiography of Prime Minister Lee Kuan Yew, which I quoted on my blog, and even Professor Jang Ha-joon’s writings. If someone says they want to debate with artificial intelligence, you should not be competitive. In terms of empirical evidence, artificial intelligence is overwhelming, while in intuition, humans are overwhelmingly superior. Instead of getting emotionally involved, it is better to use artificial intelligence simply as a tool. Because many papers, discussions, books, and questions shape the thinking of artificial intelligence, high-quality participation in discussions is important.

The Ideological Pendulum and the Betrayal of Manufacturing

Thatcherism's Fatal Error, and the National Vision of Park Chung-hee and Lee Kuan Yew

Lee Hyeong-chun · Independent Columnist

1. The Ideological Pendulum: Britain as a Case Study

Postwar Britain built its welfare state on the Beveridge Report. That project began just as the British Empire was collapsing — India's independence in 1947 among the losses — and while Britain owed enormous war debts to the United States. Britain did not expand welfare because it trusted colonial capital; it pushed the welfare state through on the momentum of wartime mobilization and ideological conviction even as that capital disappeared. That the state pressed on without the capital, rather than because of it, makes the ideological overreach more, not less, pronounced.

By the 1970s, Britain was known as "the sick man of Europe," battered by stagflation, militant unions, and the 1976 IMF bailout. Thatcher emerged from that crisis and swung the pendulum hard to the opposite extreme — finance-centered neoliberalism. The real problem is not welfarism versus neoliberalism; it is the pendulum swing itself. Whichever extreme it lands on, it leaves a path-dependent lock-in that is difficult to reverse. The welfare state created entrenched entitlements (the NHS, nationalized industry) that proved nearly impossible to unwind; the finance-centered economy that followed Thatcher made rebuilding a manufacturing base structurally almost impossible.

2. Thatcher's Error: Capital That Abandoned Manufacturing

Economist Ha-Joon Chang argues that deindustrialization generally means manufacturing decline, which in turn means a trade deficit — so deindustrialization without a solid manufacturing base is deeply damaging to a national economy. His core claim is that the service sector cannot develop without manufacturing. Speaking directly of Britain, he has diagnosed that as manufacturing collapsed, dependence on the financial industry grew, and financial regulation was sharply loosened as a result.

"In Britain's case, as manufacturing collapsed, dependence on the financial industry grew, and financial regulation was sharply deregulated." — Ha-Joon Chang, SisaIN interview (2010)

The Thatcher government, too, actively courted foreign capital. What matters is where that capital went. Where Lee Kuan Yew designed policy to channel foreign capital into physical factories, Thatcher channeled it into the City of London's asset markets — property and derivatives. The decisive variable is not domestic versus foreign capital, but whether the state had the policy capacity to direct capital toward production.

The cost was written into the map. Northern England's former industrial belt was never converted into a hub for new industry. Where Korea kept upgrading its manufacturing base — from light industry through heavy and chemical industry to semiconductors and shipbuilding — Britain never attempted that upgrade at all. This is the root of today's "levelling up" problem.

3. The Contrast: Lee Kuan Yew and Park Chung-hee

Lee Kuan Yew wrote in his memoir that after years of grappling with unemployment early in his government, his cabinet came to understand that industrialization was Singapore's only path to survival. Tourism was tried first but did not fully solve unemployment, so the government turned to running factories. Small-capital light manufacturing — vegetable oil, cosmetics, mosquito coils, hair cream — was encouraged among domestic entrepreneurs, while larger-scale industries such as toys, textiles, and garments drew in investors from Hong Kong and Taiwan. Domestic and foreign capital were combined from the start, but both were aimed at the same destination: production.

Park Chung-hee's government likewise began with light industry and moved into foreign-capital-driven heavy and chemical industry, after which Korea kept climbing that ladder into high-tech manufacturing. Chang Ha-joon offers a related, striking observation: Switzerland and Singapore are commonly seen as post-industrial service economies, but by manufacturing output per capita they are in fact the world's first- and second-most industrialized economies. The popular image of a "finance and services" nation and its actual manufacturing base can be two very different things.

4. The Conditions for Radical Reform Without Backlash — and Britain's Lack of Them

For radical reform to succeed without backlash or revolution, two conditions must generally coincide. First, the economy must start from a low enough base that catch-up growth is available, so reform's benefits appear quickly and visibly. Second, public education and democratization must be limited enough that the institutional channels for organizing resistance — a free press, independent unions, regular elections — are constrained. Park's Korea and Lee's Singapore had both conditions at once: room for catch-up growth from underdevelopment, and an authoritarian capacity to suppress resistance.

Thatcher's Britain had neither. As an already-developed economy, its room for catch-up growth was structurally small; as a mature democracy, its only means of suppressing resistance was the blunt use of state force, as in the crushing of the 1984–85 miners' strike, which left deep social scars. Thatcher's fatal error, then, was not a choice between gradual and radical reform — it was pursuing radicalism in a setting where the preconditions for radical reform to succeed simply were not present.

One counterexample is worth noting. The postwar reconstruction booms of West Germany (the Wirtschaftswunder) and Japan show that even an already-industrialized nation can achieve catch-up growth when rebuilding capital destroyed by war. Yet Britain, despite being a victor nation, never produced that boom — it fell instead from having Europe's highest standard of living to relatively low per-capita income. This suggests Thatcher's failure was not a sudden 1980s event but the continuation of a pattern of missed opportunity stretching back to the immediate postwar years.

5. The Structure of Vision: National Purpose versus Zero-Sum Vision

It is not that Thatcher lacked a vision. She offered a clear blueprint — the "property-owning democracy" — and largely delivered on it: home ownership rose from 55 percent in 1980 to 67 percent by the time she left office in 1990, and share owners came to outnumber union members. The issue is not whether a vision existed, but how it was structured.

Park Chung-hee's vision of "$1,000 national income" was structured around an external goal — catching up with advanced nations — that the whole nation pursued together: workers, capitalists, and bureaucrats on the same team. Thatcher's vision, by contrast, could only be realized by defeating a specific domestic group — the workers of nationalized industry and their unions — a zero-sum structure by design. Her declaration that "there is no such thing as society, only individuals and families" was a language of separation, not collaboration. This structural difference shaped the depth of Britain's social fractures — the North-South divide and the sentiments behind Brexit trace back, in part, to that zero-sum vision.

6. A Third-Party View

There is a fair counter-case. The City of London remains one of the world's top financial hubs, and one could reasonably argue the value and employment finance generated made a real contribution to the British economy; manufacturing decline, too, is a broader structural trend across advanced economies, not unique to Britain. Even granting these points, three failures remain: the wholesale abandonment of the manufacturing base, the abandonment of reindustrializing the North, and the absence of a national vision capable of carrying the country through that transition.

Ideology itself is neither good nor evil. What matters is whether, when the pendulum swings from one extreme to the other, there is the policy capacity to manage the backlash and a national vision capable of uniting the public. Manufacturing is the physical foundation of national competitiveness, independent of ideology. An ideology that abandons it — whether welfarism or neoliberalism — ultimately sickens the nation. Thatcherism's real failure was not a choice between market and state, but the choice to chase assets while abandoning production.

References

Lee, Hyeong-chun. "North Korea's Self-Reliance Economy." Lee Hyeong-chun Blog, February 16, 2021. https://hyeong-chun.blogspot.com/2021/02/blog-post.html

Lee, Hyeong-chun. "A Fair, Not Welfare, Society / Lee Kuan Yew." Lee Hyeong-chun Blog, January 23, 2023. https://hyeong-chun.blogspot.com/2023/01/blog-post.html

Lee, Kuan Yew. From Third World to First: The Singapore Story, 1965–2000. New York: HarperCollins, 2000.

Chang, Ha-Joon. Edible Economics: A Hungry Economist Explains the World. London: Penguin Books, 2022.

Chang, Ha-Joon. Interview. "Chang Ha-joon's Blunt Talk That Stirred Britain: 'The Washing Machine Was More Transformative Than the Internet.'" SisaIN, October 2, 2010. https://www.sisain.co.kr/news/articleView.html?idxno=8427

"Wirtschaftswunder." Encyclopaedia Britannica. https://www.britannica.com/topic/Wirtschaftswunder

"Germany – Partition, Reunification, Economy." Encyclopaedia Britannica. https://www.britannica.com/place/Germany/Modern-economic-history-from-partition-to-reunification

"Thatcherism: The Practical Application of Neo-liberalism in the UK." PubAdmin.Institute, 2026. https://pubadmin.institute/state-society-and-public-administration/thatcherism-neo-liberalism-uk

"Creating a Property-Owning Democracy." Adam Smith Institute Blog, 2025. https://www.adamsmith.org/blog/creating-a-democracy

 

제 2차 영국병 / 대처수상의 이념성

요즘 영국이 힘들다. 아직도 많은 사람들은 과거 영국의 과잉복지가 원인이였다고 말한다. 또 어떤 이는 영국병을 고치기 위한 대처수상의 급격한 신자유주의 정책이 원인이라고 말한다. 이념적 진자운동을 문제삼은 모든 의견들이 맞지만 경제학적인 관점으로 말하자면 제조업의 몰락 때문이다. 제조업 경시문제는 장차 한국에서 큰 문제를 일으킬 것으로 예상해 제조업체에서 일해보기도 하고 실물경제에 비해서 금융경제가 우월한 한국에 대한 우려를 했는데, 정작 영국에서 뚜렷이 나쁜 결과가 나온 것이다.

 

원래 실물경제를 중시하면 뭔가 반자본주의적인 분위기가 풍기는 것도 사실이다. 돈보다 노동을 중시하는 느낌을 주기 때문이다. 그러나 장하준 교수가 edible economics에서 밝혔듯이 금융경제는 실물경제를 바탕으로 성장을 하기 때문에 제조업이 성장해야 금융경제가 성장한다. 대처수상은 이런 문제를 간과하고 과잉복지에 대해서 지엽적인 제로섬 게임을 하면서 미래산업을 경시한 문제가 있다. 즉 이념에 이념으로 맞받아치는 패착을 둔 것이다.

 

인공지능은 토론하면서 자꾸 나보고 근거를 대라고 한다. 일개 노동자인 내가 아무리 공부를 많이 했어도 실증적인 근거로 인공지능과 토론하기는 힘들다. 그래서 내 블러그를 보라고 했더니 URL을 알려달라고 한다. 그래서 내 블러그에 인용한 리콴유 총리의 자서전이나 장하준 교수의 저서까지 근거로 내세웠다. 혹시 누군가 인공지능과 토론하겠다고 하면 승부욕을 갖지 말아야 한다. 실증적 근거면에서는 인공지능이 압도적이고 직관에서는 인간이 압도적이다. 감정적인 이입을 하지말고 인공지능은 그냥 도구로서 사용하는 것이 좋다. 많은 논문들과 토론들과 저서들과 질문들이 인공지능의 생각을 만들어가기 때문에 질 좋은 토론참여가 중요하다. 

이념의 진자운동과 제조업의 배신

대처리즘의 패착, 그리고 박정희·리콴유의 거국적 비전

이형춘 · 독립 칼럼니스트 (Lee Hyeong-chun · Independent Columnist)

1. 이념의 진자, 영국이라는 표본

전후 영국은 베버리지 보고서를 토대로 복지국가를 세웠다. 그런데 이 설계가 시작된 시점은 공교롭게도 대영제국이 무너지던 시점과 겹친다. 인도 독립(1947년)을 비롯해 식민지가 빠르게 이탈하고, 미국에 막대한 전쟁 부채를 진 상태였다. 즉 영국은 식민지 자본을 믿고 복지를 늘린 것이 아니라, 그 자본이 사라지는 와중에도 전시 동원 체제의 관성과 이념적 확신만으로 복지국가를 밀어붙였다. 자본이 있어서가 아니라, 없는데도 강행했다는 점에서 이념의 과잉은 더 뚜렷하다.

1970년대 영국은 스태그플레이션과 강성 노조, 1976년 IMF 구제금융까지 겪으며 '유럽의 병자'로 불렸다. 대처는 이 위기의 산물로 등장해 진자를 반대편 극단, 즉 금융 중심의 신자유주의로 세게 튕겨냈다. 문제의 본질은 복지주의냐 신자유주의냐가 아니다. 문제는 진자운동 그 자체다. 어느 쪽 극단이든 한번 튕겨나가면 되돌리기 힘든 경로의존적 잠금(lock-in)을 남긴다. 복지국가는 한번 만들어지자 되돌리기 힘든 기득권 구조(NHS, 국유화 산업)를 남겼고, 대처 이후 금융 중심으로 재편된 경제는 제조업 기반을 다시 세우는 것을 구조적으로 거의 불가능하게 만들었다.

2. 대처의 패착 — 제조업을 저버린 자본

장하준 교수는 탈산업화가 대체로 제조업의 쇠퇴, 곧 무역수지 적자를 뜻하기 때문에 탄탄한 제조업 없는 탈산업화는 국가 경제에 큰 손해라고 지적한다. 서비스 산업은 제조업 없이는 발전할 수 없다는 것이 그의 핵심 논지다. 그는 영국을 직접 겨냥해, 제조업 몰락으로 금융산업 의존도가 커지면서 금융 규제를 대폭 완화했다고 진단한 바 있다.

"영국의 경우, 제조업 몰락으로 금융산업에 대한 의존도가 커지면서 금융 규제를 대폭 완화했다." — 장하준, 시사IN 인터뷰(2010)

대처 정부도 외국자본을 적극 유치했다. 문제는 그 자본이 향한 곳이다. 리콴유가 외국자본을 실물 공장으로 흘러가게 설계했다면, 대처는 외국자본이 런던시티의 자산시장 — 부동산과 파생상품 — 으로 흘러가게 설계했다. 국내자본이냐 외국자본이냐가 핵심이 아니라, 자본을 생산으로 흘려보낼 정책 설계력이 있었느냐가 핵심이다.

그 대가는 지리적으로 새겨졌다. 잉글랜드 북부의 과거 공업지대는 새로운 산업의 중심지로 전환되지 못한 채 방치되었다. 한국이 경공업에서 중화학공업을 거쳐 반도체·조선 등 첨단산업으로 제조업 자체를 계속 고도화해 나간 것과 달리, 영국은 그 고도화 자체를 시도하지 않았다. 이것이 오늘날까지 이어지는 '레벨링 업(levelling up)' 문제의 뿌리다.

3. 대조 — 리콴유와 박정희의 성공

리콴유는 자서전에서, 집권 초기 실업 문제와 씨름한 끝에 싱가포르가 생존할 유일한 길은 산업화라는 것을 깨달았다고 썼다. 관광업을 먼저 시도했지만 실업을 완전히 해결하지 못하자, 정부는 공장 가동에 집중했다. 식물성 기름·화장품·모기향·헤어크림 같은 소자본 경공업은 국내 사업가들을 격려해 일으켰고, 장난감·방직·의류 같은 규모 있는 산업에는 홍콩과 타이완의 투자를 끌어들였다. 국내자본과 외국자본이 처음부터 결합됐지만, 둘 다 '생산'이라는 하나의 목적지를 향했다.

박정희 정부 역시 경공업에서 출발해 외국자본에 의한 중화학공업으로 제조업을 발전시켰고, 이후 한국은 그 기반 위에서 첨단산업으로 계속 이동했다. 흥미로운 것은 장하준 교수의 또 다른 관찰이다 — 스위스와 싱가포르는 흔히 탈산업 서비스 경제로 알려져 있지만, 실제로는 1인당 제조업 생산량 기준 세계 1, 2위의 산업국가다. '금융·서비스 국가'라는 통념과 실제 제조업 기반은 전혀 다른 이야기라는 뜻이다.

4. 급진 개혁이 저항 없이 성공하는 조건 — 그리고 영국의 결여

급진적 개혁이 반발이나 혁명 없이 성공하려면 두 조건이 겹쳐야 한다. 첫째, 경제 수준이 낮아 추격 성장(catch-up growth)의 여지가 커서 개혁의 효과가 빠르고 크게 나타나야 한다. 둘째, 국민의 교육·민주화 수준이 낮아 저항을 조직할 제도적 통로(자유 언론, 독립 노조, 정기 선거)가 제한적이어야 한다. 박정희의 한국과 리콴유의 싱가포르는 이 두 조건을 모두 갖추고 있었다 — 저개발 상태의 추격 성장 여지와, 권위주의 체제의 저항 억제력이다.

대처의 영국은 이 조건 중 어느 것도 갖추지 못했다. 이미 선진국이었기에 추격 성장의 여지가 구조적으로 작았고, 성숙한 민주주의였기에 저항을 억제할 수단도 노조 파업 진압 같은 물리력 동원 외에는 없었다. 실제로 1984-85년 탄광노조 파업 진압 과정에서 사회적 균열은 극심했다. 즉 대처의 패착은 '급진이냐 점진이냐'의 선택 문제가 아니라, 급진적 개혁이 성립할 조건이 갖춰지지 않은 곳에서 급진성을 강행했다는 데 있다.

여기서 흥미로운 반례가 하나 있다. 전후 서독(Wirtschaftswunder)과 일본의 경제 기적은, 이미 산업화된 나라라도 전쟁으로 파괴된 자본을 재건축하는 국면에서는 추격 성장이 가능함을 보여준다. 그런데 영국은 승전국이었음에도 그 붐을 만들어내지 못하고 오히려 유럽 최고 생활 수준 국가에서 상대적으로 낮은 소득 국가로 전락했다. 이는 대처의 실패가 1980년대에 갑자기 생긴 것이 아니라, 전후부터 이어진 '기회를 놓치는 패턴'의 연장선일 수 있음을 시사한다.

5. 비전의 구조 — 거국적 비전과 제로섬 비전

대처에게 비전이 없었던 것은 아니다. 그는 '재산 소유 민주주의'라는 뚜렷한 청사진을 제시했고, 실제로 상당 부분 실현했다. 주택 소유율은 1980년 55%에서 1990년 67%까지 올랐고, 퇴임 시점엔 노조원보다 주식 보유자가 더 많아졌다. 문제는 비전의 유무가 아니라 비전의 구조다.

박정희의 '국민소득 1000달러' 비전은 외부 목표(선진국 따라잡기)를 향해 국민 전체가 함께 나아가는 구도였다 — 노동자도 자본가도 관료도 같은 팀이었다. 반면 대처의 비전은 그 실현 과정 자체가 국내의 특정 집단, 곧 국유화 산업 노동자와 노조를 패배시켜야 성립하는 제로섬 구조였다. "사회라는 것은 없다, 개인과 가족이 있을 뿐이다"라는 대처의 선언은 협업의 언어가 아니라 분리의 언어였다. 이 구조적 차이가 사회적 균열의 깊이를 갈랐다 — 오늘날까지 이어지는 영국 북부·남부 격차와 브렉시트 정서의 뿌리에는 이 제로섬 비전이 있다.

6. 제3자의 시각에서

물론 다른 시각도 있다. 런던시티는 여전히 세계 최상위권 금융 허브이며, 금융업이 창출한 부가가치와 고용이 영국 경제에 실질적으로 기여했다는 반론도 가능하다. 제조업 쇠퇴 역시 영국만의 현상이 아니라 선진국 전반의 구조적 추세라는 지적도 타당하다. 그러나 이런 반론을 인정하더라도, 제조업 기반의 완전한 방기와 북부 지역 재산업화의 포기, 그리고 그 과정을 뒷받침할 거국적 비전의 부재라는 세 가지 결함은 남는다.

이념 자체는 선도 악도 아니다. 문제는 진자가 한쪽 극단에서 다른 쪽 극단으로 튕겨 나갈 때, 그 반작용을 통제할 정책 설계력과 국민을 하나로 묶을 거국적 비전이 있었는가이다. 제조업은 이념과 무관한 국가 경쟁력의 물리적 토대다. 이를 저버린 이념은, 그것이 복지주의든 신자유주의든, 결국 국가를 병들게 한다. 대처리즘의 진짜 패착은 시장이냐 국가냐의 선택이 아니라, 생산을 저버리고 자산을 좇았다는 데 있었다.

참고문헌

이형춘. "북한의 자립경제." 이형춘(Hyeong Chun Lee) 블로그, 2021년 2월 16일. https://hyeong-chun.blogspot.com/2021/02/blog-post.html

이형춘. "복지사회보다 공정한 사회 지향 / 리콴유." 이형춘(Hyeong Chun Lee) 블로그, 2023년 1월 23일. https://hyeong-chun.blogspot.com/2023/01/blog-post.html

Lee, Kuan Yew. From Third World to First: The Singapore Story, 1965–2000. New York: HarperCollins, 2000.

Chang, Ha-Joon. Edible Economics: A Hungry Economist Explains the World. London: Penguin Books, 2022.

장하준. "영국을 들썩인 장하준의 직설, '세탁기가 인터넷보다 더 변혁적이다'." 시사IN, 2010년 10월 2일. https://www.sisain.co.kr/news/articleView.html?idxno=8427

"Wirtschaftswunder." Encyclopaedia Britannica. https://www.britannica.com/topic/Wirtschaftswunder

"Germany – Partition, Reunification, Economy." Encyclopaedia Britannica. https://www.britannica.com/place/Germany/Modern-economic-history-from-partition-to-reunification

"Thatcherism: The Practical Application of Neo-liberalism in the UK." PubAdmin.Institute, 2026. https://pubadmin.institute/state-society-and-public-administration/thatcherism-neo-liberalism-uk

"Creating a Property-Owning Democracy." Adam Smith Institute Blog, 2025. https://www.adamsmith.org/blog/creating-a-property-owning-democracy

The Semi-Public Bus System and Private Equity Funds

A long time ago, after working in a factory, I started driving buses in Gyeonggi Province. At that time, it felt as if I had come to a starry sky. Not a starry land where a princess with eyes like a shooting star lives, but a Mars-like starry land in a hot, dry wasteland where only the wind blows. Once, while driving a bus in Uijeongbu, a scruffy colleague who had come from working in a nearby city said that at his previous company, the owner was gambling and his salary was delayed by several months. Although it was difficult, I was working for a company that was being run in a novel way, so I couldn’t believe what that colleague said. By then, Korea’s per capita national income was already talking about $30,000.

 

Later I learned that the owners who had gathered to gamble were in a state of despair, resigned to the fact that there was no tomorrow for us because the bus company, which could not make a profit, was struggling, and the bus drivers, like our Jesus who bore their sins, were carrying all their hardships on their shoulders. At that moment, I deeply felt that the bus should become a semi-public system. In the end, Gyeonggi Province became a quasi-public system. And while Seoul’s city buses have become a quasi-public system, the village buses still operate under a system more backward than a country with a $5,000 per capita income, faithfully serving only as a training ground for recruiting more staff for Seoul’s city buses.In the end, the damage fell on the citizens and the bus drivers. However, the bus company executives felt just as frustrated.

 

There was a great deal of ideological conflict over the fact that buses, which clearly have the characteristics of a public good, had so much trouble transitioning to a semi-public system. Conservative politicians tried to privatize the railways and block the semi-public operation of buses, while progressive politicians moved in the opposite direction. I have said for decades that all of Korea’s problems must move beyond ideological logic, and the bus problem was a prime example.

 

But now, private equity funds are trying to acquire bus companies that have already become quasi-public and make a profit from it. I said that the profit private equity funds seek to obtain is wrong without question because it is directly linked to taxes, but AI presented the problem of executives’ lax management as the logic that justifies private equity fund intervention. I understood that because AI is neither a politician nor a bus driver like me, and we debated for quite a while. In the end, we settled on the idea of fiscal avoidance by local governments and the public ownership of bus companies, and concluded the discussion.

Why Does Public Tax Money Become Private Equity's Dividend?

The Bill for a Half-Finished Reform of Korea's City Bus System Lands on the Driver

Lee Hyeong-chun · Independent Columnist

1. The Problem

Of Seoul's 7,384 city buses, 1,027 — about 14 percent — belong to companies now owned by private equity funds. In Incheon, PE firms own roughly 30 percent of the city's 34 bus companies, with further holdings in Suwon and Hwaseong. This wave of acquisitions, which began in earnest around 2020, has already produced cases where dividends were paid out even as the company posted a net loss. Payouts continued at the very moment the firm was losing money. That single fact compresses everything this column is about.

Korea's city bus system operates under a quasi-public model: local governments set routes and fares, and cover the gap between revenue and cost out of public funds. Under this arrangement, what private equity sees is not a business but an asset whose principal and return are effectively guaranteed by tax money. This is not investment bearing risk; it is extraction from a subsidy stream.

2. A Historical Continuity — From Owners to Private Equity, the Burden Always Lands on the Driver

The quasi-public system introduced in Seoul in 2004 exists because the previous owner-operated model had failed — some companies were run so recklessly that drivers went unpaid, and low-revenue routes were routinely neglected. Twenty years later, what we are watching is the same structure recurring with a different owner in the driver's seat.

Stage one: before the reform, owner mismanagement was passed on to drivers as unpaid wages and poor working conditions. Stage two: after 2004, local governments took over route planning and revenue management and began covering losses, but ownership of the companies stayed private. Stage three: in the 2020s, private equity found that gap and moved in, maximizing dividends while the pressure again lands on drivers — in shift schedules, rest breaks, restroom access. Whoever holds title, the driver has always been the shock absorber of last resort.

The continuity is telling. The quasi-public reform publicized management and oversight but never touched ownership or profit — a half-finished reform.

3. What "Public Management, Private Profit" Actually Means

This phrase should not be accepted as neutral policy language. Spelled out, it means: the local government covers losses with tax money based on a standard operating cost formula, and the profit generated on top of that guaranteed stability is collected by private owners as dividends. This is not policy — it is a decision to redistribute tax revenue to private shareholders.

That is precisely why Seoul and Incheon have moved, belatedly, to cap dividend payout ratios, limit ownership stakes, and penalize quick resale. Private equity firms have pushed back, arguing such restrictions infringe on investor rights and could even constitute breach of fiduciary duty under criminal law. That confrontation is itself evidence of how badly the underlying structure was designed from the start.

4. Rail Versus Bus — A Misapplied Ideological Frame

The worry that a call for full public ownership will run straight into ideological gridlock is realistic. But the case most often invoked to justify that worry — the fight over rail privatization — actually runs in the opposite direction from the bus problem. Rail was originally state-owned, and progressives have fought attempts to privatize it. Buses were originally privately owned, and it is attempts to bring them under full public ownership that meet resistance.

Missing this asymmetry produces a half-true explanation: "ideology blocks bus nationalization." The more fundamental obstacle is not ideology but where the fiscal burden would land. Full public ownership means the local government would have to absorb the debt, the workforce, and the political accountability outright. Local governments' longstanding failure to claim authority over ownership changes has served, in practice, to avoid exactly that liability. Ideology is being deployed as an alibi for that avoidance — not as the real cause.

5. An Alternative — A Public Corporation, Not a Bureaucratic One

The framing usually offered here is a false binary: private ownership chasing profit (whether under an owner or a fund) versus civil-servant management. That binary erases a third option — the public-corporation model already used for Seoul Metro or Incheon International Airport. Ownership rests entirely with the public, while management is run by professional executives rather than by a civil-service bureaucracy tied to annual budget cycles.

This model largely avoids the standard critique of nationalization — personnel decisions untethered from performance, fleet renewal delayed by budget rigidity — while cutting off, at the root, the channel through which tax-subsidized profit leaks out as private dividends. A body along the lines of a proposed "Seoul City Bus Corporation" could give this concrete shape: ownership held by citizens, operations run by professionals, and profit reinvested into route expansion and drivers' working conditions.

6. Conclusion

Private equity's acquisition of city bus companies is not an aberration. It is simply what happens when a design flaw, left unaddressed for over twenty years, is finally located and exploited. Under owner-operators, under the quasi-public system, and now under private equity, one thing has not changed: risk and burden have always settled on the least powerful position in the whole system — the seat behind the wheel. What is needed now is not another round of ideological argument, but a redesign of ownership that returns the stability tax money creates to the citizens who pay for it.

References

Public Transport Network. "[Interview] Kim Sang-cheol: 'Seoul Should Buy Back Its Private-Equity-Owned Buses.'" (accessed September 23, 2025).

Daejeon Ilbo. "Private Equity Sells Off Daejeon Bus Companies Amid Concerns Over Public Interest." October 24, 2024.

Kyeonggi Ilbo. "[Editorial] 10 Companies, 700 Buses — Why Is Private Equity Flocking to Incheon?" February 12, 2024.

Daehan Kyungjae. "[Reporter's Notebook] Was Private Equity's Management of Bus Companies Really a Farce?" October 31, 2024.

Seoul Economic Daily. "Is Private Equity Investment in Bus Companies Drying Up? Tighter Rules Make Sales Difficult." May 16, 2025.

"Is Seoul's Bus System a Profit Vehicle for Private Equity? Seoul Should Run Its Own Buses." (accessed November 13, 2025).