[FORUM]Problems lurk in the numbersThe economic growth rate in the United States dropped from 4.5 percent in the first quarter to 3 percent in the second quarter, which the Bush administration asserts should be seen as the continuation of the recovery. But the Democratic presidential candidate John Kerry charges that the economy, ruined by Mr. Bush, seemed to show a sign of recovery for a short while but then sank again.
In fact, a 3-percent growth rate in the United States is considerable. The annual average growth rate during the eight-year tenure of former President Bill Clinton, who received high marks particularly for his administration’s economic management, was 3.7 percent. But unlike in the past, a 3 percent growth rate cannot lead to the expansion of employment. Most economists expected that about 240,000 new jobs would be created in July, but the increase was only 32,000.
Because further solid growth was expected, the Federal Reserve raised the federal funds rate by a quarter of a percentage point again, implicitly agreeing with the opinion of the Bush administration. But as the presidential election draws near, controversy over the growth rate is likely to continue to be heated.
In Korea, there was controversy over a 5 percent growth rate. The Blue House argued that annual growth of 5 percent in a country with a $10,000-per-capita national income and the 12th largest economy in the world was, in fact, high growth.
And what was the talk, some officials asked, about a crisis when the growth rate has increased to around 5 percent this year? The economic deputy prime minister also forecast that growth of around 5 percent would be possible next year. Some people criticized the press for creating a crisis.
But many experts suggested that these arguments did not take account of the economic reality and the people’s predicament. A private economic research institute predicted that next year’s growth rate would drop to about 3 percent. It is hard to deny that regardless of the press coverage, many people say they have economic difficulties and worries and have no hope for the future.
Why are these pessimistic opinions widespread when 5 percent growth is actually the maximum level at which our economy can grow without inflation? Aside from the issue of uncertainty, we need to note that a 5 percent growth rate now has a different meaning than it would have last year or in an average year.
First, statistical figures can be higher than how the people feel about the economy because of a rallying effect. Economic conditions were terrible last year, so even a slight improvement this year could raise the growth rate quite a bit. This was the same thing that happened in the United States. Next, when prices of imported goods, including crude oil, increase rapidly, the growth rate of gross domestic product tends to outpace the increase in national income. In this case, a substantial part of national income flows out of the country, but this is not properly reflected in the rate of increase.
The last and most important cause is that the economic and industrial structure of the Korean economy has changed so much from the conditions of the past that even good performance in exports is far less effective in promoting domestic demand and employment than before.
Given these facts, the current growth rate at 5 percent should be considered to be at around the 2 percent level of the past. No wonder the people cry in distress. The government should not rationalize the present economic performance as “high growth” but put more energy into expanding domestic demand. I think we need a growth rate of at least 8 percent this year in order to relieve the majority of the people from a bit of their economic difficulties.
* The writer is an editorial writer of the JoongAng Ilbo.
by Ro Sung-tae