What crisis?

Yi Jung-jae
The author is a columnist of JoongAng Ilbo.

A year-end ritual in Korea is the annual physical: we are relieved if test results hover in the normal range, but if any signs of abnormality show, we immediately get the necessary treatment. If there are alarming signs in our health, other issues — like money or career — fade into the background. No sane doctor would try to comfort a patient diagnosed with cancer by saying, “At least your brain is functioning well” or “Your fundamentals are strong.” It does not take a medical expert to know that if one organ is severely damaged, the entire body can become ill.

The same rule applies to the economy. All the numbers — stock market performance, exchange rate, interest rate, inflation, private and public debt, as well as employment, joblessness and the growth rate — should be solid for an economy to be judged to be functioning well. If stocks or the currency plunge or employment and growth deteriorate sharply, authorities must focus entirely on the economy to prevent the spread of illness. A sane doctor would not stay idle when thousands of self-employed individuals are going under and workers across the board lose jobs. No leader should dare to claim “90 percent positive effects” from hikes in the minimum wage. Our economic performance this year was proof that a sharp increase in the minimum wage could wreck an economy when it is weak. We need not refer to Venezuela or Argentina.

Being crisis-conscious can best prevent crisis. It is like the doctor warning a patient of the risk of getting liver cancer from a small increase in the steatosis index to make him stop drinking. But the government vehemently rejects the possibility of an economic crisis. Kim Hyun-chul, an economic adviser to President Moon Jae-in, accused companies of unnecessarily whining when the economy was running at a pace of 3.1 percent. Lee Hae-chan, chairman of the ruling Democratic Party, snapped that there was not a time in Korea when the economy was not in crisis.

They all claimed that any talk of crisis is a conspiracy by the opposition. They disregard warnings from economists. Kim Kwang-doo, vice chair of the National Economic Advisory Council, criticized the government for leisurely debating the possibility of a crisis when “the economy was really shaking from the roots.” Chang Ha-joon, an economist at the University of Cambridge, said the Korean economy was in an “emergency state.”

President Moon Jae-in makes a speech before convening a 2018 National Economic Advisory Council meeting at the Blue House on Wednesday. [JOINT PRESS CORPS]

A leader must take his stand. Moon chose to the listen to his aides. On Dec. 11, he said the macroeconomic numbers were still solid. In an address to the National Assembly last month, he claimed that the world applauds Korea’s economic achievement. He commanded the government to “row harder during a high tide.” He is like a doctor telling patients with liver cancer that they should take comfort in the fact that at least their lungs are healthy. Ignoring harsh economic realities has become the way of this administration. The government announced a revision in the minimum wage act that would increase labor costs even for large companies that pay at least 50 million won ($44,424) a year to employees. The government claims there will be no extra burden on employers. But our business sector shakes at the naivety of this government.

Meanwhile, a crisis is building. The United States is showing ominous signs. The Dow Jones index plunged by 16 percent this month. On Christmas Eve, it lost 2.91 percent. Oil prices plummeted by more than 6 percent on the same day. Alan Greenspan who chaired the U.S. central bank from 1987 through 2006 declared, “We are moving toward stagflation” and warned everyone listening to “run for cover.” Sitting Fed Chairman Jerome Powell also sensed “a mood of angst about growth going forward.” Yet, out government is putting pedal to the metal on the minimum wage. They are ignoring reality. The result can be a fatal crash.

JoongAng Ilbo, Dec. 27, Page 34