[EDITORIALS]Wanted: Economic LeadershipThe economy is worsening faster than predicted. Economic indices of industrial production, investment and consumption are declining steadily, and stock markets at home and abroad are plunging.
It was only last week that the Blue House celebrated Korea's graduation from the borrowing program of the International Monetary Fund and held a congratulatory music concert. But the new economic indices show that the current condition of Korean economy is the worst since it was hit by the aftershocks of the foreign exchange crisis in 1998.
The National Statistical Office's July report on trends in industrial activities clearly shows the sagging economy. Industrial production contracted 5.9 percent, the worst performance since 1998. Manufacturers used only 71 percent of their capacity, the lowest in the past 29 months. Facility investment shrank 10.3 percent, a ninth month of decline. Indices of consumption and exports are also plummeting.
Danger signals are everywhere, including financial markets and overseas economies. The U.S. economy, the main driving force of the world economy, is also stagnant; it barely avoided negative growth in the second quarter. The Dow Jones Industrial Average dropped below the10,000-point level and the Nasdaq Composite Index fell below 1,800. The German and Japanese economies, which might have made up for a slowdown in the United States, are showing negative growth this year.
Economists are concerned. Kang Bong-kyun, President of the Korea Development Institute, said Thursday, "Economic suffering in East Asian countries could be worse than during the foreign exchange crisis." He said during the 1998 crisis the U.S. dot-com boom provided a stepping-stone for Asian economies to escape their woes. But the circumstances are different now because this is the first synchronized global recession since the first oil shock in the 1970s.
Mr. Kang's view is widely shared. Some economists speculated that our growth rate could drop to the 1-percent level in the third quarter. The government's argument that the economy will recover in the fourth quarter has become less and less convincing; more economists now forecast that the economy will hit bottom in the first half of 2002.
The crisis has sneaked up on us. Even doubters now feel the prickling on their skin. The problem is that we have not reacted properly. The government and politicians, who are supposed to lead the country through the crisis, are running around in confusion. We learned a lesson in the foreign exchange crisis in 1997, that political leadership capable of uniting all members of our economy was essential to overcome the hardships we confronted then. Despite that lesson, politicians squabble and economic problems have been shoved aside.
Government offices also lost confidence and have not resolved piled-up pending issues. Four years ago, we wasted precious dollars and time over Kia Motors Corp. without knowing what to do. Today, a cash crunch at Hynix Semiconductor, the sale of Daewoo Motor to a foreign buyer and attracting foreign investment for Hyundai Investment Trust & Securities are problems just as serious as Kia Motors was then. If the current conditions continue, we might end up in a harsh economic crisis, more harsh than the foreign exchange crisis.
Before it is too late, political leadership must be restored so we can concentrate all our energy on overcoming the current hardships.