[FOUNTAIN]Voting your pocketbook

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[FOUNTAIN]Voting your pocketbook

A political science professor at State University of New York at Stony Brook, Helmut Norpoth, likened voters and government to Siamese twins linked at the economy. He showed from a study of 38 countries, including the United States and Great Britain, that a 1-percentage-point increase in the real growth rate translates to a 1.5-percentage-point increase in votes for the incumbent's party. That is an intuitive concept as well.

There is a theory that the economic cycle moves closely with election cycles. A Yale University economics professor, William Nordhaus, has a theory of the political business cycle that says governments operate the economy so as to make it peak during election campaigns. A colleague of Mr. Nordhaus at Yale, Ray Fair, studied U.S. presidential elections in the 20th century and found that a 1-percentage-point increase in the growth rate in the year preceding an election will give the incumbent a 1.2-percentage-point increase in votes. A 1-percentage-point increase in unemployment cuts votes by 2.3 percentage points.

Former President Kim Young-sam was either unlucky or inept in managing the politics of economics; the Korean economy turned down just before the end of his term and the result was an opposition victory by Kim Dae-jung.

Of course the economy is not the only influence on an election. In our experience with democracy, there are still many noneconomic issues such as alumni relationships and regional loyalties that play crucial roles in swaying voters.

Niall Ferguson, an Oxford University economic historian, remarked that voters are stingy with praise for good economic managers but cruel to those who mismanage the economy.

The touchy reaction by this administration to criticism of its economic management may be explained in that light. The top economic official, Deputy Prime Minister Jeon Yun-churl, has stressed that there are no grounds for pessimism in either exports or domestic consumption. He is reportedly angry about criticism from private economists and the media. Over the weekend, the Finance Ministry excluded private-sector specialists from an event to explain how well the economy is doing.

But third-quarter sales (down 1.6 percent) and profits (down 32.5 percent) reported last Monday for listed firms do not support this optimism. What do voters think? Judgment day is not far away.

The writer is the head of Forbes Korea.

by Sohn Byoung-soo

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