[EDITORIALS]Reality of the economic ‘crisis’President Roh Moo-hyun reserved a large part of his congratulatory speech, on the first day of the 17th National Assembly, to economic issues, and his remarks illustrate the great divide on opinions about the economy.
His speech can be summarized in two points:
The first is that although the economy is going through difficulties now, things are not so bad that the situation should be called a crisis. Mr. Roh predicted that the economy will reach 5 percent growth this year and will grow at the rate of more than 6 percent annually during his administration.
The other is that some people are being irresponsible in exaggerating the so-called economic crisis for political reasons. Mr. Roh said that if people keep worrying about the economy, it can cause the market to shrink, resulting in a genuine emergency. He emphasized the way to handle the economic “crisis” is to stop calling it that.
When economic experts explain the importance of economic psychology, they often make a distinction between a forecast and an economic prediction.
Even if there’s a forecast of rain, there may be no rain. But when the economic players believe that things will go bad, they often will. Their beliefs become a self-fulfilling prophecy.
For this reason, it is important to make an accurate diagnosis and prediction about the economy. In this sense, Mr. Roh’s worries about prematurely sounding the alarm are justified.
But it makes us anxious that Mr. Roh still clings to a confrontational and conspiratorial attitude in believing that the crisis theory is exaggerated only so that the current administration can be criticized. We admit that there are some parts that can lead the government to think that the crisis theory has exaggerated the reality to an extent beyond an acceptable level. In that case, the concerned ministry, as a government branch in charge, could produce persuasive evidence against it.
It seems clear that it is time to contemplate the situation where the growth potential of the Korean economy is weakened due to shrunken investment. Most business people say that investment psychology gets frozen because of uneasiness over the future of Korean society.
As confrontations between social strata, generations and regions get more and more acute, people worry over the possibility of political and social confusion.
Therefore, what the president and the government should do is not launch an attack on the economic crisis theory, but dissolve the anxiety of business people. Also, before they deny the crisis theory by citing such economic indicators as the growth rate, trade balance and foreign currency reserves, they should study the elements that have caused the growth potential to shrink and prescribe a remedy.
This is the way to suppress the crisis theory.