Korea has to establish market economy while revising it at the same time.The two tasks have many complementary dimensions. The government shouldfirst check the interests of the more powerful forces of the society and theninduce weaker parries to join the reform efforts. Korea needs to pursueexpansionary fiscal policy to repair the infrastructure, create more governmentjobs, and increase welfare expenditure. In the longer run, the country shouldcontain rent-seeking activities, restructure the national innovation system andreform the dualism in industrial organization. The current Korean government’sefforts to create government jobs must be combined with the reform of thepublic sector. Minimum wage should be raised in combination with EITC. Thereduction of working hours and non-regular workers should be carried out byconcluding social pact. Labor supply should be more differentiated than thecurrent simple stratification based on schooling. To reduce income inequality,the bargaining power of subcontractors should be raised and fair trade regulationshould be strengthened. The coverage ratio of the national health insuranceshould be raised and the dead angle of the employment insurance and nationalpension service should be narrowed. The increase of taxation should beaccompanied by the reform of the public sector.