[NOTEBOOK] Bright Forecasts and the Herd Instinct

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[NOTEBOOK] Bright Forecasts and the Herd Instinct

'Groupthink' Is a New Danger in Our Economy

On January 28, 1986, the U.S. space shuttle Challenger lifted off from the Kennedy Space Center and exploded. Later, the cause of the accident was found to be a faulty O-ring, a small component 0.28-inches in diameter.

Although the design defect of the O-ring was pointed out many times, it was buried under arguments that people who landed on the moon could not fail. NASA pushed the launch, insisting that its reputation would be greatly damaged if the launch were delayed due to a defect in a minor part.

In April 1961, U.S. President John F. Kennedy decided to carry out an invasion of Cuba, attacking at the Bay of Pigs to kill the Cuban leader, Fidel Castro. Graduates of Harvard University led the White House National Security Council and, ignoring counterarguments protesting the invasion, insisted that the president must be supported unanimously. The invasion failed, and the United States made a fool of itself internationally.

The two episodes show the danger of "groupthink," in which people believe that they will never fail, causing enormous tragedies. In his book, "Victims of Groupthink," Irving Janis, professor of political psychology at Yale University, pointed out that such phenomena often occur in organizations which have strong cohesion and emphasize closeness and faithfulness.

In Korea there are many cases in which people fall into the trap of groupthink. Whether it is a company or the government, those who are strongly bound by school ties, hometown affiliates and liege relationships reject sound and healthy criticism, arguing that they will never fail.

During the Kim Young-sam administration, government economic officials insisted that our country was not facing a risk until the foreign exchange crisis hit; they were unable to escape from the swamp of groupthink. Many economic institutions published reports warning of a crisis, but the groupthinkers refused to listen and were unprepared when it happened.

There are many signs of groupthink in various parts of our society. Economic indices are flooded with red ink and research institutes repeatedly revise their forecasts downward. The condition of economy that we feel in real life is even more serious. Businessmen predicted that this year would be more difficult than last year. Department stores became worried because the recent decrease in sales is not something ordinary. Many experts believe that is only the beginning of shrinking consumption.

But high-ranking officials at the Blue House and the ruling Millennium Democratic Party seem to believe that the economy has already hit bottom by seeing the recent phenomenon in which the tight money market has relaxed a bit. Government officials in charge of the economy say, "Our economy has some difficulties, but it is definitely not a crisis."

Officials of economic bureaus including the Ministry of Finance and Economy laid out an optimistic view of the economy during the second half of last year. They said that the economy would bottom out during the winter. Although they have stepped back from that forecast, they still do not try to hide their optimism.

The Ministry of Finance and Economy distributed data on recent economic trends on Monday. In this report, the ministry originally included a part that our economy will hit the trough during the first quarter and begin to recover during the second quarter. However, they deleted that analysis before publication.

There is a slim possibility that the economy will take an upward turn as economic officials hope. However, even people who are not economic experts worry about our economy in their everyday conversations. Those economic officials should examine whether they have fallen into groupthink. If they are intoxicated by the confidence that Korea has overcome the hardships of foreign exchange crisis, we should be cautious about believing them.

The writer is a deputy industrial news editor of the JoongAng Ilbo.

by Lee Jong-tae

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