[OUTLOOK]A Leaky Boat in the Economic Ocean

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[OUTLOOK]A Leaky Boat in the Economic Ocean

Is the life of a person and a generation similar to crossing by ship from one end of the ocean to the other? In this crossing, the hardware role of the passenger liner is taken by the economy. In Marxist philosophy, therefore, the economy is called the basis. Listening to gayageum tunes, planning the missile defense shield that the U.S. President George W. Bush is pursuing, or disputing over Japan's history textbooks are all secondary activities of the passengers on deck.

There are three inherent dangers to the Korean economy. They are the dollar insecurity that rocks a newly opening economy, widening disparities arising from globalization and low productivity.

Dollar insecurity is prevalent throughout the world, due to the large balance of dollars amassed outside the United States as a result of the U.S. economy's accumulated payments deficit. The dollar is an ocean in which world econ-omies navigate, and dollar insecurity is the churning of the ocean that challenges the navigator. The entire world benefits from the ocean but also sometimes incurs dreadful damage from it.

Because of the dollar newly opening economies run always on pins and needles, highly exposed and sensitive to the dangers of bankruptcy and fluctuating ex-change rates, the ebb and flow of dollar capital. Just like a rugby ball, the exchange rate's direction cannot be predicted nor the consequences forestalled. In times of ebb tide, not only short-term ad-vances, but also long-term bonds and stocks flee instantly. If the dollar goes up, domestic demand is hit hard. If it drops, then export is hit hard. Unlike developed econ-omies or developing economies, newly opening economies are ships that cross the dollar ocean whose wind, waves and tides are capricious. The ocean for them is more eccentric and salty.

The other two dangers could be said to be holes pierced by fate in the ship called the Korean economy. We have no other choice than to navigate through the ocean plugging the holes, until our ship is replaced by a new one or is refurbished sometime in the future.

Of the two dangers, disparities produced by globalization are widening as the globalized part of the economy that holds the future destroys the not yet globalized present. For example, until the financial crisis hit in 1997, the Korean won had in effect been pegged too high and the Korean economy had adhered to a double exchange rate. The double rate was disguised by import taxation, preferential treatment in domestic taxation for exports and preferential interest rates for export finance. Thus, export products could be sold cheaply abroad but at higher prices in the domestic market.

The World Trade Organiza-tion made the double exchange rate no longer viable. The low productivity and dollar insecurity that afflict a newly opening economy made things worse. A large balance-of-payments deficit was generated and the domestic foreign currency market was swept by an ebb tide. This is how the financial crisis of 1997 happened. Global-ization does not permit a double exchange rate. Globalization entails unifying all world econ-omies under the same free market regulations. Economic reforms must lead to the conformity of domestic regulations to global standards. Various reactions to this trend are also globalizing. The reaction in Korea is distinctive. Medical reform, education reform, financial reform and media reform are flowing against the current of the market, partly due to bureaucratic drift and partly for a socialist demonstration effect. From a global point of view, the reforms we pursue in Korea are actually anti-reform measures that widen the discrepancies resulting from globalization. The differences between reforms and anti-reforms cannot be discerned except in the light of ideology. In that sense, the dispute over ideological color is now imperative.

Low productivity weakens a company's competitiveness. The cause of low productivity lies in the inefficiency of production elements and their combination. The most important production elements in the era of globalization and the information age are knowledge, systems and other infrastructure. Instead of strengthening these elements, educational institutions and the government in Korea are implementing reforms that widen the gaps in knowledge and infrastructure rather than overcome them. Further, leaders of labor unions act as if they were not responsible for productivity improvement, when actually they are as responsible as corporate managements are.

"Do you know what equality means?" the half-smart master asked the boatman.

"I do not know," replied the boatman.

"Thirty percent of your life has been lost. Then, do you know what reform is?"

"I do not know," again replied the boatman.

"Then 60 percent of your life has been lost."

The boatman hastily responded. "Master, water is leaking into the boat. Why did you touch the hole, and why are you making it bigger? Do you know how to swim?"


The writer is an editor of the monthly magazine Emerge New Millennium.

by Kang Wee-seuk

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