[OUTLOOK]Restoring economic vitality

The public reportedly feels the economy is worse than it was during the financial crisis in 1997. A recent survey showed that 70 percent of the people live without hope. Econo-mists are worried that Korea is going into a “Japanese-style” long-term recession. In the past, rising exports and factory operating rates meant increased investment and jobs. Nowadays, no matter how much money is released, consumption and investment keep declining. Has the Korean economy fallen into a chronic illness without a cure?
Even the most advanced countries sometimes experience economic difficulties. Japan went through a “lost decade” during the 1990s and Britain was a “sick European state” 25 years ago. Germany suffers from a low growth rate doubled with high unemployment rates. All these countries could be said to have experienced an adjustment period to release the tensions of economic growth after entering the level of advanced countries.
There are 6 billion people in the world today. Out of these, 800 million people living in the 18 countries that have an average income of over $25,000 can be said to live in an advanced country. However, the 340 million people who live in middle-range countries with an average income of around $10,000 suffer volatile economies that could fall back anytime, and they could join the population of 5 billion who live in developing countries. Argentina, which had been in the ranks of middle-range countries until 2000 with an average income of $9,000, has now fallen to the level of developing countries after the crash of the peso caused by continuous policy failures, which produced a financial crisis.
Right now, the difficulties in the Korean economy are not the transitional symptoms experienced by advanced countries such as Japan, Britain and Germany. They are the symptoms of a systematic and fundamental collapse of the economy such as that experienced by middle-range countries like Argentina.
In order to accurately diagnose the Korean economic disease, we need to scrutinize just how our economy grew to become this big. Behind the economic growth that went from an average income of $100 in 1964 to an average income of $10,000 in 1995 was the serious security threat that our people felt from experiencing the Korean War and the Cold War. There was a consensus that the only way we could survive was to increase our strength through economic progress, and this consensus enabled us to overcome many difficulties to achieve the “miracle on the Han River.”
The modernization of the Japanese economy came from the spirit of the Meiji Restoration that was determined to protect the country from the military threat of Western influences, symbolized by the “black ships” entering their harbors. The leap of the Taiwanese and Hong Kong economies came from the survival instincts of refugees who had to flee empty-handed before the advance of the Chinese Communist Party and the People’s Army half a century ago. Singapore’s economic miracle was achieved by poor and uneducated Chinese and Indian immigrants who set up a new country because they felt threatened by the Muslim majority in Indonesia and Malaysia.
However, Japan, Singapore, Hong Kong and Taiwan have already joined the ranks of advanced countries with an average income over $20,000. Korea popped open its champagne too soon, mistaking itself for an advanced country when it reached an average income of $10,000. Here it soon ran out of steam.
The historical folly of the Kim Dae-jung administration’s “sunshine policy” is not that it gave too much to North Korea but that it brainwashed young South Koreans who had not experienced the Korean War with a rosy vision of a premature reunification.
Behind all the conditions that have bruised our economy, such as hard-line labor unions, belligerent civic groups and anti-corporate sentiments, lies the loss of a “sense of crisis” among the public. Until we find this lost sense of crisis again, the future of our economy has no hope.
The problem of our economy has become far too big for the responsibility to fall solely on the shoulders of our economic bureaucrats. The president must step forward to concentrate the people’s efforts in reviving the economy.

* The writer is a professor of international finance at George Washington University. Translation by the JoongAng Daily staff.

by Park Yoon-shik