[EDITORIALS]This is no time for reform talkThe Korean economy is in an endless freefall. It has been quite some time since it began to show signs of a downturn, but as the situation gets worse day by day, a sense of crisis is spreading among the people. Is it going to collapse? Is there a way to save it?
The stock market shook violently at the after-effects of the China shock and the forecast that the United States will raise interest rates. Yesterday alone, the benchmark Korea Composite Stock Price Index plummeted below 800, losing 48 points. The exchange rate of the U.S. dollar to the won has skyrocketed and the price of bonds has fallen. Since the shock from China hit the market, the composite stock price index has lost more than 100 points. Shareholders worry about whether foreigners are on a “sell Korea” spree. As investment and consumption languish, unease has increased in the financial market and conditions in the export market have deteriorated. If things continue this way, fears that growth potential might completely dry up will climb.
Why have things gone like this? Why is only the Korean economy in such big trouble? It is true that overseas factors, like China’s economic policy, the U.S. interest rate and rising oil prices, delivered their shocks. But the more serious problem was at home. The anxiety over the political platform of the ruling party, its naive perception of economic realities and the opaqueness of government policies made people, as well as the business community, uneasy. Consequently, investment and consumption shrank further. With such vulnerabilities, even a minor outside stimulation can be felt as a shock.
Yesterday, Kim Keun-tae, floor leader of Our Open Party, and Chung Sye-kyun, its chief policymaker, visited Lee Hun-jai, deputy prime minister for finance and economy, and emphasized the importance of “continuous reform.” With the stock market collapsing and the economy driven to crisis, the highest leaders of the ruling party were preaching reform. Glancing over a report on the Blue House’s reform plan, we find no sign of agonizing over the economy. The report only gives the impression that the presidential office is focusing its attention on inspection and reform. The business community expected investment and consumption to revive once the elections were over. Among the reasons why voters gave a majority to the ruling party was a hidden hope for economic recovery. But the reality is in the opposite direction. On the ruling party’s side, voices for reform and distribution are raised high, and though it talks about the people’s livelihood, it acts differently.
Although various economic indices indicate a downturn, the Ministry of Finance and Economy reiterates a theory that the economy will revive in the second quarter. Meanwhile, the Fair Trade Commission studies how to discourage business by reviving its right to trace accounts, and by further restricting corporate investment in other companies and the voting rights of financial companies under big business groups. The Democratic Labor Party’s advance into the legislature also makes businessmen feel uneasy, and opaque labor policy deepens the concern.
When businessmen make investments and rich people spend money, consumption will recover and the economy will revive. If people feel uneasy about an economic policy that can change at any time, and over an atmosphere in which businessmen are treated like criminals and rich people are considered evil, who will dare to make investments and spend their money? Nowadays, it is said that people who run small and medium-sized businesses think only about closing them. And the well-off only think about diverting their money overseas and sending their children to study abroad. As a result, overseas remittance of household accounts has increased sharply, as has the price of housing in places like Los Angeles, where many Koreans live.
The Blue House and the ruling party must understand the reality clearly. They must consider whether this is the time to speak out for reform and distribution of wealth. Reform and redistribution are necessary. But they are possible only if the nation survives. When the economy is hurt and collapsing, how can we call for reform? We have witnessed what happened to South American countries that emphasized redistribution without seeing growth.
Those in the ruling camp must pull themselves together. They must concentrate on how to make businessmen feel at ease and make investments, how to revive consumption. The Roh Moo-hyun government has already lost one and half years of its term. If it wanders around again now, it may slip into an unescapable mire. In fact, it could already be halfway into it.