[OUTLOOK]A new economic logic is needed

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[OUTLOOK]A new economic logic is needed

Last Tuesday, President Roh Moo-hyun held an informal meeting with the owners of big businesses to exchange opinions on measures to produce an economic recovery. The business leaders expressed their intention to increase investment and employment.
The president, meanwhile, emphasized technological innovation and educational reform, and asked the conglomerates to foster harmonious relations between large and small businesses, and between management and labor unions. Overall, it was a meeting that reaffirmed the determination of the president and business leaders to start anew.
However, there were several issues that raised concern. As in the speech he gave right after he was reinstated in office, the president again asserted that he found talk about an economic crisis groundless. The business leaders did not have any particular response to that assertion.
To summarize what the president said: The media and certain economic groups that talk about a crisis are missing the point. There should be no attempts to make people nervous by exaggerating and talking about a crisis with the intention of obstructing reform and turning policies in a more favorable direction for themselves.
The president presumably insisted on making this statement again to point out the difficulties of running a country and to emphasize reconciliation and coexistence. But the president’s statement was neither appropriate nor necessary. In his book “Imagined Communities,” Benedict Anderson calls newspapers “the day’s bestseller.” This is an apt expression, pointing out the media’s characteristic of drawing the public’s attention with their news and headlines.
For a long time, the business world has used this media characteristic to its advantage. If the economy is bad, businesses gently persuade the media of their concerns about the “collapse of the potential for growth” and the “government’s insufficient grasp of the economic situation.”
The media then run on at a fevered pitch about the government’s incompetence in times of dire economic hardship. The political community joins in, and before long the government is easing its regulatory policies and promoting pump-priming policies.
From early on, I have stated that this pattern of collusion among politics, the economy and the media is the main culprit in making our economy unpredictable. Economic experts have continuously stressed the need to shed our conglomerate-reliant, growth-first policies since the 1970s and pursue a more balanced development. Considering that this is the opinion of the experts, it is not surprising that the Roh government, which is calling for market reform and balanced development, remains wary of the media, which have always taken the side of business.
Nevertheless, the restructuring measures since the financial crisis in 1997 and the fast-changing international environment are making many experts change their opinion. Restructuring had always been talked about, even before the financial crisis, but was never implemented to the extent it was after 1997.
But the inflexible labor market, excessive regulation, and the public contempt for written laws are holding our national competitiveness in chains. That is why foreign direct investment is shrinking each year and the manufacturing industry is dying out, giving rise to fears that Korea might face an even gloomier recession than Japan’s “lost decade.” The Chinese economy has grown impressively and promises to grown even bigger in the coming years. This is a serious situation that makes us feel a sense of crisis about our economy.
If the government insists on the 1980s logic of balanced development in the name of reform, it will only lead to sub-standardization. A far better logic is to invest in what we do best and use the surplus that results from that to support the socially weak.
The president’s words are worthy because they come from a passionate heart but they go against the logic of the new era. To emphasize a balance among social forces and to insist on discussion and compromise where there can be none will only lead to a mockery of the law.
The times are changing and the status of the media has also shifted. It is the president’s duty to take the lead in rectifying the inflexibility of the labor market and the inefficiency of the public sector, the public contempt for the law and the anti-business sentiment in order to pursue a practical program of reform.
If the president continues to ignore these urgent tasks and addresses secondary issues with the anti-establishment logic of the past, it will only make our economy look weak both at home and abroad.

* The writer is a professor of economics at Chung-Ang University. Translation by the JoongAng Daily staff.


by Ahn Kook-shin
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