[OUTLOOK]Why numbers aren’t everything“Whether in terms of prices or foreign exchange, whether the economic growth rate or the unemployment rate, the Korean economy has completely recovered in every respect,” President Roh Moo-hyun declared during his recent visit to Turkey.
Thus Mr. Roh expressed his confidence that Korea has entirely overcome the aftereffects of the foreign exchange crisis of 1997 that have held our economy back since the inauguration of his “participatory government.”
But it is doubtful that the president’s judgment reflects the Korean economy as it really is. Many people have been perplexed or displeased by these remarks. Even the people in charge of the government’s economic policy seem to find it difficult to interpret the president’s assessment of the economic situation.
Predicting short-term economic change is no easy job. Despite the export boom of the past two years, spending and investment have not come out of their slump. Though the president says the economy is recovering, ordinary people do not feel it.
Economic indicators suggest that a revival in domestic spending is very likely. There have been recent upturns in various psychological indicators, such as the consumer expectation and the business survey indices.
But it still remains unclear whether this will lead to an actual turnaround in the economy. External variables affecting the Korean economy, including high oil prices, fluctuations in the foreign exchange rate and the North Korean nuclear problem, could prove the president’s optimistic outlook completely off-track.
At best, an economic prediction is just a prediction. It is nothing but a point of reference, because indicators do not control the actual economy. Considering this, it is premature to declare that the economy is improving based on an economic forecast.
Indeed, the government’s attempt to encourage people with these numbers may actually make things worse. The rosy predictions boisterously made by the government might instill confidence in the economic players in the short term, but it could bring about an intractable situation if reality falls short of these expectations. If that happens, trust in the government’s economic policy is bound to collapse.
This isn’t the time to be jubilant ― or depressed, for that matter ― about the growth rate. Rather, now is the time to examine the quality of that growth.
The March employment figures released by the National Statistical Office shows the grim economic reality as it is. Taking seasonal factors into account, the unemployment rate was unchanged from the previous month (3.5 percent), and unemployment among young people was still high (8.5 percent). This means that the uncertainty about jobs remains unchanged.
The real issue is not the growth rate, but concern about how people are going to earn a living from now on. Substantial growth is not about the game of growth rate figures. Effective means to enhance the quality of people’s lives should become a more important policy goal than the growth rate itself.
In the 1960s, light industry supported the Korean economy ― fields like sewing and wig making. In the 1970s, it was heavy and chemical industries, including steel and shipbuilding. In the 1990s, the economic driver was high-tech, particularly information technology.
What’s next? The answer will not be found in short-term changes in numbers. A blueprint for the future is what is needed. This is not an age in which the state leads economic development, but it is still the government’s role to think strategically and suggest directions for national development.
But the government’s policy should not depend on the kind of economic foresight that can be changed by a few macroeconomic indicators. It would be far more realistic to be thinking about what Koreans are going to do for a living.
Much of the discussion about the Korean economy last year focused on the crisis theory that a country experiences when its per capita income is stuck at $10,000. It seemed as though Korea was stuck in a situation in which its economy had little chance of escaping the $10,000 trap.
But all of a sudden, thanks to the exchange rate, per capita income passed $10,000, and the “crisis theory” disappeared. That is the trap of playing the numbers game. The economy does not actually recover because the president, based on some figures, declares that it has. Vision and long-term strategy are more important than numbers right now.
* The writer is a professor of economics at Dongguk University. Translation by the JoongAng Daily staff.
by Kim Jong-il