The economy is in crisis

Chang Ha-joon, a celebrated economist at the University of Cambridge, said the Korean economy was in a state of “emergency.” He said the Moon Jae-in administration’s income-led growth and hikes in the minimum wage failed to work because the moves were not accompanied by more lasting measures to strengthen fundamentals. The economy is losing competitiveness and potential for growth, and public policies are lagging behind, he warned.

Chang is the cousin of Jang Ha-sung, President Moon’s policy chief who recently resigned. The two represent Korea’s progressive economic front. Economist Chang reiterated his longstanding arguments on the need for sustainable increases in welfare benefits and discretion in deregulations as demanded by conservatives. Yet his insights are valuable to an economy in need of a breakthrough.

Chang said Korea Inc. is losing steam because it has failed to develop competitive products like the automobiles, vessels and semiconductors in the 1970s and ‘80s, and smartphones in the 2000s. In the meantime, China has quickly risen. Jobs cannot be expected to be created when corporate investment and innovation remain sluggish. Attention should be paid to why companies have turned hesitant in bold investments and development, he stressed.

He advised the government and legislature to allow special voting rights to preferred stocks and other mechanisms enabling a better protection of management rights so as to encourage companies to return to aggressive investment and hiring. But the liberal administration is stubborn to press ahead with tougher rules on voting rights of stocks and requirements for a holding company, which can further challenge management rights. Hong Nam-ki, the nominee for deputy prime minister and finance minister, would soon launch the second economic team under the Moon Jae-in administration. He should pay heed to Chang’s advice to the government to closely communicate with the business community.

JoongAng Ilbo, Dec. 10, Page 34