[VIEWPOINT]Heading down a blind alley

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[VIEWPOINT]Heading down a blind alley

In the April 15 legislative elections, our people gave a majority of seats to the governing party for the stable operation of state affairs. But by now when a third of the “participatory” administration’s term has passed, state affairs are still in confusion over moving the capital, troop deployment to Iraq, apartment building cost disclosures, allocation of heads of standing committees at the National Assembly, labor unions’ summer strikes and conflict between the Blue House and the governing party.
The public’s livelihood has worsened, and except for exports, there are no signs of recovery in the economic indicators. More worrisome is that economic prospects for the second half are not bright as even exports, the last stronghold of our economy, will become shaky due to high oil prices, China’s tight fiscal policy, and the United States’ higher interest rates. For the past year and a half, the government has taken every measure to boost the economy, but investment and spending are not recovering and no more policy means seem available now. The president invited heads of conglomerates to the Blue House to encourage investment, but the effort reminds us of similar ones under development dictatorship era and seem just desperate measures.
All economic experts agree that the cause for the present economic difficulty is the failure of the export boom to stimulate investment and spending. Investment is the key, which the government also admits. But there is more. Why is investment not recovering?
Foreign investment, which creates jobs for other countries, continues to increase. I concluded from discussions with our businessmen and foreign business executives in Korea that there is uneasiness about the present administration and uncertainty about its policies. The government may not want to believe this diagnosis, but this is the reality and this difficulty cannot be overcome without settling this fundamental anxiety.
First, the uncertainty comes from the wrong direction of national policy. Businesses expected the Roh administration to be economy-centered and to stress coexistence and negotiations, only to be disappointed by the militancy and arrogance of the Blue House and the governing party after Mr. Roh’s impeachment was set aside. They are worried about its priority of staking its fate on moving the capital and balanced regional development while disregarding budgetary limitations and attention to economic recovery, job creation, and promotion of national competitiveness. This attitude tacitly reveals that its governing philosophy remains unchanged from the one it argued at the beginning of its term: that forces with vested interests and those without vested interests should be balanced. Seeing the president’s determination to chan-ge the existing order during his term, businessmen do not want to work hard and take risks to invest.
Second, the senior appointment choices of the government seem to be a problem. To run the economy properly, the administration should know market principles. In our society, advocates for market principles are criticized as conservatives, but market principles are not a matter of right or wrong. The principles work where there are markets, whether in capitalist or socialist countries. But not many core policymakers in the administration understand market principles well.
Some competent bureaucrats know the principles well, but they are more concerned with keeping their jobs. Most aides close to the president distrust the market. In this situation, there can be no consistent economic policies faithful to market principles. Improvisation and discord are inevitable, which makes businessmen uneasy. Economic recovery will be impossible without discarding narrow “code”-centered personnel policies and appointing competent and reform-minded experts whom the market can trust.
If the Roh administration intends to break down the establishment and achieve balanced development between regions and classes, it is a matter of values and the choice is free. But sticking to the idea of achieving everything during his tenure would lead to the sacrifice of our economy and finally, the administration’s failure.

* The writer is a professor of economics at Hanyang University and the president of the Korean Association of Public Finance and Economics. Translation by the JoongAng Daily staff.


by Na Seong-Lin
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