[OUTLOOK]Are Things Really as Bad as They Seem?

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[OUTLOOK]Are Things Really as Bad as They Seem?

I feel like it is already winter although it is only autumn. I can feel no spring-like warmth no matter how much I look around because all the recent headline news is gloomy. The political situation is in chaos; unemployment gets worse as the economic slowdown continues. The College Scholastic Ability Test turned out to be much too difficult for high school seniors. Parents and students are frustrated and confused over how to handle their scores when they apply for admission to the college of their choice. It is hard to find any bright news in the newspaper. So people who hate to read papers are said to be on the rise. How can we look forward to a warm spring day in this cold ambience, although winter is supposed to be just a prelude to spring?

The situation of the real economy is not promising. Exports have dwindled for several months in a row as the international climate worsens. Domestic investment is still at a low ebb and private consumption is dispirited. External circumstances are not likely to change for the better any time soon because of the war in Afghanistan. The United States, Japan and the EU still cannot find a clue as to how to recover from the economic downturn. China is emerging as a big threat and a challenge to us after the rapidly developing nation joined the World Trade Organization. How can we see any bright side in our economy in this dismal situation? We are now facing up to more menaces inside and out even before we unload all the leftover burdens of the financial crisis which swept Korea in 1997. "Exuberant pessimism" blankets us today.

The more people are pessimistic, the more the economy will slow down. Though it is natural to worry about the dreary economy, exaggerated pessimism and self-reproach can bring on another cold wave. In fact, bright colors often hide themselves behind dark clouds. The economy contains dualism and irony. As the business cycle turns, crisis often turns in the opposite direction. Even though now it is dark and chilly, spring days wait behind the cold wave. Our economy has many bright spots.

Stepping back, we see we have actually overcome the financial crisis. Recall when we begged for bailout money to pay back short-term debt. We have recorded continuous economic growth in the midst of the confusion of the restructuring program. Few nations, including Japan, Singapore, Taiwan and the European countries, have grown in recent years. No matter how much we underestimate the results of the restructuring program, we are gradually being liberated from nightmares that conglomerates like Daewoo, Kia and Hanbo brought when they collapsed. Financial institutions that had suffered from nonperforming loans are now making profits. More businessmen are accepting the new climate in which noncompetitive companies should be forced out of the market. Semiconductor prices smack of an upturn. Foreign investors are moving to buy Korean stocks before domestic investors step forward. Despite our depression, we have enough tax money for economic stimulus. Financial experts say we do not need another interest rate cut. While it looks like the rough tide is producing a backtow, the tide itself is going in the right direction.

The world economy doesn't look so gloomy. Historical experience teaches us that the aftermath of localized warfare won't last long. The aftereffects of the Gulf War did not continue more than three months, and were a stimulus to spur U.S. economic growth for a long time. Stock markets around the world have already gotten back to normal. Only investors who were astonished at the temporary shock suffered a loss. The investment environment has greatly improved due to high liquidity and low interest rates. There are few factors to stimulate inflation because oil prices are stable or declining. International cooperation and crisis management ability is a lot better than it was 70 years ago when the Great Depression swept the world. The U.S. economy doesn't look so dark. Though some denounce the Federal Reserve because its interest rate cuts are not working, it takes at least nine months for those measures to take effect. Others worry that an unsustainable economic boom might come in the second half of next year because of the 10 U.S. interest rate cuts and the expansion of federal government spending.

So we can enjoy the spring indications here and there, even though we are bogged down in a swamp. The economy moves unlike the universe. Spring days won't come to those who are just waiting. We have to call in the spring sunshine by improving institutions and revamping the corporate environment.

The biggest enemy that hampers the economic recovery resides in us.


The writer is a professor of economics at Yonsei University.

by Jeong Kap-young

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