[FORUM]Economy’s future appears cloudy“Will business be any better next year?” As the year draws to a close, this is one of the most frequently heard questions. I would be happy to have a clear answer at hand, but unfortunately I do not. As of now, I am concerned about not only next year’s business but that of the following years.
Some say the economy will turn around because next year’s growth rate will be higher, thanks to an increase in exports. Others observe that the economy has already passed its trough. But these remarks overlook a crucial fact, that the business paradigm has already changed.
To predict the economy’s progress in the coming years, we should face the following fact squarely: There is no knowing if booming exports will lead to an increase in investment and spending. Exports may boost the growth rate but they can hardly decrease the unemployment rate. When employment does not expand, domestic spending will never improve either.
By making exports the centerpiece of economic growth, the gap between good business and slow business will widen. The gap between asset income and employment income will not be narrowed. Such polarization deepens among industries, among businesses, among occupations, and among individuals. Eventually, distribution worsens.
Why is that? It is true that as the world economy improves, exports have been increasing. This year, demand for semi-conductors, mobile phones and liquid crystal displays have been so high that an export quota had to be assigned to each country. But industries with good records in exports do not usually employ many people. When an industry earns money, it invests it in enhancing productivity rather than employing more people. Some industries may even employ fewer people as they grow.
Also, much of the machinery that industries invest in is made in foreign countries. On the other hand, industries that employ comparatively many people have already moved to China or plan to do so. Therefore, exports, investment, domestic spending and employment are separate issues, and we should no longer be happy to see that the growth rate has risen because of strong exports.
When there is no increase in employment, distribution cannot be improved. Raising property taxes may be on the right track, to achieve justice in taxation, but it is not a fundamental remedy for the problem of distribution. We are lucky that exports are doing well. But as long as the current business pattern continues, it is obvious that polarization will deepen, social unrest will remain unsettled, and distribution will be aggravated.
What is the alternative? As there is nothing new under the sun, all alternatives already have been discussed so many times. Suggestions such as: “Let’s achieve peace between labor and management. Let’s deregulate. Let’s meet up to global standards. Regardless of foreign or domestic people, let’s encourage them to invest. Let’s create jobs. Let’s be the business hub of Northeast Asia” are just some examples.
But it is a tragedy that we are still repeating what was proposed 10 years ago. As I said earlier, the business paradigm has already changed over the years. An aging population and low birth rate are looming as serious problems for our society while the chance to be the hub of Northeast Asia is vanishing. It is difficult to create a business environment comparable to that of China, Japan and Singapore, but without building a better business environment, it will be hard for Korea to survive.
As the end of the year approaches, there are more questions that I often hear: How is it going with the vote of confidence? How far will the investigation into political funds go?
These are important questions but we don’t know the answers to them. It is uncertain whether politicians are engaged in political reform or political struggle. With so many factors at work, we cannot see clearly what will happen next. All are busy seeing how the wind blows.
With luck, transparency will be enhanced in the business sector. It could be a great achievement alone, but I am worried that we may lose all opportunities and end up holding up the cause of transparency only.
* The writer is a deputy managing editor of the JoongAng Ilbo.
by Kim Su-gil