[OUTLOOK]Let in the economic breeze

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[OUTLOOK]Let in the economic breeze

The economy is getting into a very difficult situation. The economic team seems to be completely exhausted and the economy is bound to suffer in the long term if things continue to go this way. Now we can only hope for a miracle.
There were a few times in the past when the economy was in a difficult situation as it is now, but in the past when the economy was in the doldrums, it then began to move more freely with the blow of one good breeze from overseas markets. The special economic demand from Middle Eastern countries after the first oil shock in the 1970s and the “three lows” ― low oil prices, low interest rates and a weak U.S. dollar in the 1980s ― are examples.
First of all, a big wind has to blow in from overseas. It is not enough for the world economy to simply get better, but we need a wind that will get us special economic demand for commodities. The best wind would be the smooth resolution of the North Korean nuclear problem through the six-way talks. Whether the problem is solved along the lines of the Libyan model or by a similar method, solving the North Korean nuclear problem would be a great blessing for the economy of this country.
The United States has promised North Korea “surprising gifts” in return for a settlement of the nuclear problem. The gifts could be a guarantee of the safety of the North Korean regime and a considerable amount of economic aid. Economic aid would include direct aid from the United States, and joint international support would also be possible. In the 1960s, when South Korea started its economic development, the United States and international organizations played a leading role in establishing an international economic consultation organization for Korea, and used this organization to bring in resources and technology. The fund from Japan under Korea’s property claim against Japan in compensation for the Japanese occupation played a big role at the time. Therefore, we can anticipate a normalization of diplomatic relations between North Korea and Japan, and the inflow of large amounts of Japanese funds in compensation for the Japanese occupation of North Korea. If this happens, North Korea will be able to practice a socialist market economy like China. Such events could lead to a wind of special demands for the Korean economy.
Easing the tension on the Korean Peninsula would have a big economic effect. The inflow of foreign capital would be facilitated and such an atmosphere would also help solve the problems of consumption and investment slumps. In addition, since there are many who say we should love our own people, there probably would be a movement to help the North Korean economy by working four more hours in addition to the normal 40 hours per week. This would greatly help boost the working atmosphere. Signs of settlement of the North Korean nuclear problem would indeed bring a cool breeze to the economy.
In the past, the preparations and response of the Korean economy to the good winds blowing from outside was excellent and timely. When the winds of the Middle East boom blew, the entire country supported the policy of holding onto the boom without disruption. If a company got a construction order from a Middle East country, the banks gave payment guarantees and other help without conditions. This practice brought about some bad side effects later on, but it made a crucial contribution to getting construction orders for the first time and starting the Middle East boom. The entrepreneurial spirit was strong back then, and the whole country supported it.
We were well prepared when the winds of the “three-lows” effect blew, too. We controlled inflation through a strict stability policy and reformed the economy to make it stronger over a few years before the phenomenon ended. That is why when international oil prices and interest rates fell and the Japanese yen grew strong, we used the situation to lead our economy to prosperity.
Even now, if we want the outside wind to be an invigorating breeze for us, we have to make ourselves ready. We have to put emphasis on people’s livelihoods and implement utilitarian policies to achieve the goal. The trials and errors we made in the past can be good for us. We have already experienced the results of concentrating more on economic equity than growth and straying away from the logic of the market economy. Making the whole economy better is definitely the way to help those in need and lift the quality of life for everyone. In order to do that, we need to have faith in practicing a market system. Our goal is to make the economy better, like Deng Xiaoping of China did. That is what reform is. Utilitarian specialist groups need to come to the front and realistic goals and action plans should be followed, rather than having discussions of dreams. This will naturally smother ideological or historical debates. There must be more people who work with their hands and heads than people who talk.
Such a change is by no means easy. However, economic revival is difficult without the change. We still don’t know whether the hope of having good winds blowing outside and leading to economic revival will end up as a midsummer night’s dream, or if such a dream will come true as it has in the past. It all depends on the luck of our nation. The ray of hope that gives us comfort is that we have had good luck up to now.

* The writer is the vice chairman of the Samsung Economic Research Institute. Translation by the JoongAng Daily staff.

by Choi Woo-suk
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