[FORUM]Wrong medicine for the economyHey, interest rates! You should know by now that you cannot go any lower no matter how hard you try.
Do you want to boost the slumping economy by falling even more? What good did the two 0.25 percentage point cuts in the call rate in May and July do for the economy? Did they encourage companies to invest more? Did they make consumers spend more money? You only depressed those living off the interest from their small retirement funds even more. The authorities said spending was the only way out of the economic slump and issued credit cards to virtually everyone. Now, do they expect consumer spending to grow when even interest income is halved?
Do you think companies are averse to investment, shops are empty and taxis are idle because of high interest rates? Do you think lump sums of money will innocently flow into the stock market if interest rates are low?
Did you decide to spend an additional 4.5 trillion won ($3.8 billion) of taxpayers’ money to boost the economy? Since when has the economy become sluggish because there isn’t enough money around? Who said the market is slow because the government budget is insufficient?
Ostensibly, the additional 4.5 trillion won is allocated to social overhead capital investment, but the biggest chunk will go to road construction. What practical gains do we expect from 0.5 percent additional growth, at the most, from construction projects? Do you think the economy is so bad because we don’t have enough roads and there aren’t enough road construction jobs?
The government can’t afford the 4.5 trillion won now and so wants to scrape up the sum from next year’s budget. Well, why not call it an advance budget, not a supplementary budget? Tell me how they will plan next year’s budget.
They can always cut interest rates and increase the budget if the economy is really bad.
The strategy would have worked in the past when the interest rate hovered around 10 percent and the government was experimenting with an austerity budget.
But what do you really think is troubling the Korean economy these days? Why do Korean and foreign companies alike avoid making investments in the country and seek opportunities abroad? Why do we bring in foreign laborers when our own youngsters are suffering from rising unemployment?
Korea’s biggest concern is, after all, the nuclear threat posed by Pyeongyang. Korea has illegally paid a large sum of money to Pyeongyang in exchange for a summit. A major businessman has committed suicide in the middle of the scandal. The outlawed student dissident group Hanchongryun is still on the front lines of anti-American protests. Even a videotape exposing a presidential secretary drinking with a criminal suspect has tainted politics. Unions are making excessive demands, and the wage level is higher than in rival countries.
Isn’t it the business of politics and state administrations to correct these problems? At this point, the results of the union-management negotiations at Hyundai Motor can affect the economy more than interest rates or the national budget. Hanchongryun’s violence can threaten the security of the peninsula more than Pyeong-yang’s hard-line declaration. After all, a recent visitor to Washington said the two words he heard most about Korea there were “distrust” and “unreliable.”
Oh, dear, can we at least keep our principal? Can we let noneconomic issues nibble away at the economy and bolster it with interest rate cuts and a supplementary budget? Now that I think about it, interest rates and the supplementary budget are not to be blamed. You must really be upset about losing the principal.
Are you talking about $20,000 per-capita national income? We might not be able to defend the current $10,000 level.
* The writer is a deputy managing editor of the JoongAng Ilbo.
by Kim Su-gil