[INSIGHT]Don't Let Money Markets Destroy Us"Lenin was right. There is no shrewder nor more intricate method to destroy the basis of an existing society than by having the currency drop." I do not know where Lenin did such a thing, I know where Keynes said this. It is found in "Economic Conse-quences of the Peace," written in 1919. Whether it was banter or the truth I am surprised to learn that Keynes referred to Lenin. What is astounding is that they agreed in their understanding that wrong management of money can destroy a society.
Because everyone accepts money, one can buy most things with it. The primary function of currency lies in its exchange for goods. And if this mechanism fails, then the economic order falls apart. Although this may sound like a half-cooked economic principle, I believe that diversion from this principle is one of the most serious problems the world economy faces. Money must be earned through the production and exchange of goods, because earning money directly from money is not good. Bank interest and making money on the stock market are all ways of earning money. There is a tacit consent that money flowing into the money market in turn flows into the production process and thus contributes to the augmentation of real goods. When this premise breaks apart, or when the world of currency becomes divorced from the world of goods, we risk the danger of having money retaliate against us － that is, a montary crisis.
But money circulates by itself, and goods are being exchanged separately from money these days. Transnational financial capital has demolished the walls that separated speculation and investment, such that the difference between making money from money and making money by producing goods has disappeared. For persons making money and by their calculations, neither method poses a problem. But the situation of those who enable others to make money is very different. Only income is lost when the national economy becomes subject to speculation. But when it is an investment, at least some valuable goods and earnings will result.
Relying only our economic capabilities, it is in effect impossible to run counter to the global trend of speculative investment. If opposing liberalization is not an option, then at least cautious liberalization, not outright liberalization, should be agreed upon.
But if we turn our eyes to the domestic economy, we would find the situation is different. From the point of view of an "old intellectual" such as myself, it is more important to have an increase of one ton of steel or rice than to have a one-point increase on the Korean Composite Stock Index.
But society's interest and the government's efforts are opposite. How stock are rising or dropping is broadcast live and the government leaders immediately show interest in it, but the government does not exert much effort on the production of rice and steel. I am very dissatisfied with this discrimination toward real goods as opposed to money. This adversely affects the national economy. There are all kinds of financial products pouring into the market everyday that I, an economics columnist, find difficult to understand. When it comes to money and to people with money, our society tries to cater to them. But when it comes to people producing goods, a completely different approach is taken, with all kinds of regulations and orders.
Money is like blood, which must circulate well for the economy to get strong. However, I do not find the argument that finance is the blood of industry convincing. In actuality, under such a situation as the huge short-term movement of capital amounting to 60 percent of the nation's Gross Domestic Product, or 310 trillion won ($240 billion), whether it goes to the bank, the stock market or real estate market, it is not convincing to explain the role of money in traditional theory. We cannot forcibly draw on the underground economy as we did in our dictatorial economic development stage with certain orders or measures, but we should neither just curry favor with black money. When the calculation is being made that the government will offer more carrots, black money stays in the closets because of future expectations. But when it is known that the decision has been made against giving out carrots, money will pour out automatically. Along the same line, isn't this why people are not borrowing any money from banks even when the interest rate is close to zero?
I believe that the statement made by Winston Churchill in 1925, "I wished the Ministry of Finance were less arrogant and the Ministry of Industry more capable" still applies to today's reality. Just as houses are needed for a real estate agency to exist, money must succumb to production. We should not be dragged around by money but find the wisdom to bring money to industry.
The writer is an editorial writer of the JoongAng Ilbo.
by Joseph W. Chung