[EDITORIALS]Debt Woes Deserve Countermeasures

It does no good if a company or an individual is saddled with a huge debt. If the 1997 financial crisis taught us anything it was that you cannot worry too much about being in debt.

Thus, it is a very worrisome to learn that individual debts of Korean people have surpassed individual incomes, and that debts are rapidly increasing. According to the analysis by the Bank of Korea, for 20 years since 1980 national per capita income has increased by 14 times while individual debt has ballooned by 40 times. The fast increase of debts certainly resulted in a heavier debt burden. The percentage that interest payment takes up in the individual disposable incomes has exceeded 10 percent, which is about 3.5 times higher than those of American or Japanese citizens. The figure shows a situation that is nothing better than that of corporations, which have been pointed out for attracting excessive debts to do business.

The increasing debt of an individual is not always bad. In the process of economic development and the improvement of quality of life the consumption of an individual inevitably goes up. It is true that boosted individual consumption and investments have propped up the sluggish economy this year. Financial institutions encouraging individuals to spend money are also relying too much on extending loans to households, instead of lending money to corporations.

The important thing is whether the debtor can manage the volume of debt. The central Bank of Korea said that since the beginning of the year, debts per household increased by 23.7 percent, while the average monthly income of urban workers rose 9.7 percent.

Considering the seriousness of individual debt, households and the government must hurry to come up with countermeasures. Most of all, individuals should try to manage their money reasonably. They should examine in detail their spending habits and how much they can afford. Financial institutions must rethink their practices of excessively relying on retail banking only because it involves smaller risks. The government must step up its efforts to provide an environment where corporations can increase their investments so that money can flow into a more productive area. Only when these efforts are made can Korea avoid the trap where increasing expenditures by the government become useless because of insurmountable debts.