Why DJ-Nomics Failed

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Why DJ-Nomics Failed

President-elect Kim Dae-jung gave highly eloquent answers during the first press conference he held upon being elected--save for one dubious answer.
There may have been problems with the interpretation, but the president-elect answered vaguely when a foreign reporter asked how he planned to resolve unemployment problems and pursue restructuring at the same time. Regardless of the interpretation, it would have been extremely difficult to give a specific answer to the question because it was essentially asking if he had a plan for coping with unemployment, which was certain to rise in the process of pursuing reforms.
The new administration then went on to astonish the entire world, however. It accelerated reforms, but the economy made a brilliant recovery and, defying all expectations, the unemployment rate kept shrinking.
President Kim opted for a vastly different course from former British Prime Minister Thatcher, who did not hesitate to launch a full-out war against labor unions. Thatcher believed that "unemployment was beneficial to restructuring." President Kim also believed reforms were important, but neither did he overlook massive unemployment, and continued to pursue the two conflicting goals of attaining reforms and stabilizing employment. This is also the most important aspect of so-called DJ-nomics.
At every opportunity, President Kim tried to whip businesses into shape, while professing a tender affection for the workers. He also vowed to the general public that he would take every possible measure to help make "the cold winter" as brief as possible. The perception spread that businesses were the offenders who had devastated the Korean economy and workers were the victims.
On the other hand, Thatcher pursued extremely heartless and relentless policies compared to President Kim. She sided with businesses and painted labor unions as the key culprit in the British malady.
Thatcher's economic policy was an unmerciful one. She believed that the British people had to suffer from extreme cold in order for them to come to their senses, which would also eradicate the pests that had given rise to the British malady. She believed that it was only natural for a winter to be cold and that the cold had to be endured in order to greet a warm spring. She also remained on strict guard against making political compromises.
DJ-nomics, however, has focused on making a fast escape from winter and on spending that winter as warmly as possible. The administration has used the over-the-counter KOSDAQ market as kindling to fire up a venture boom and unhesitatingly resorted to political solutions when unemployment problems plagued the nation. The president's tactic for escaping from winter enjoyed huge success in the short term and became the administration's main accomplishment. In a nutshell, it succeeded in catching two rabbits in one trap.
It turned out to be an illusion, however, and the recent economic situation is providing a stark illustration of just how great an illusion it was. Hardly any reforms have taken place and the economy is sinking, seemingly into a bottomless abyss.
The government's main error lay in being overly ambitious. It should have admitted that the impossible was impossible rather than so confidently pledging success. The government should have established proper principles; on the contrary, it took measures that violate principles.
The current economic situation was more than foreseeable. It is the natural result of having relied on stopgap measures grounded on political compromises as the key to coping with extremely painful reforms. The government overlooked the fact that populism and restructuring are opposites. But then, DJ-nomics was a political commitment with roots in populism in the first place.

by Lee Jang-kyu

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