[OUTLOOK]Is economic recovery just a mirage?

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[OUTLOOK]Is economic recovery just a mirage?

In the wake of the financial crisis that overtook Asia in 1997, Korean President Kim Dae-jung and Malaysian Prime Minister Mahathir Mohamad took starkly contrasting policies. President Kim followed the International Monetary Fund’s prescribed market liberalization and deregulation, while the Malaysian leader chose to tighten market regulations, especially by controlling short-term foreign capital flow. At the time, the IMF and the western media praised Korea for being the model student and warned Malaysia that it would pay dearly for the folly of its prime minister. Despite the warnings and criticism, Mr. Mahathir persisted in going his own way. Consequently, Korea successfully overcame the financial crisis while Malaysia came to grips with the currency fluctuation and prevented a massive capital outflow. Mr. Mahathir had the backing of the other Islamic countries and possessed exceptional leadership skills. Most of all, the prime minister had the overwhelming trust of the Malaysian people. The cases of Korea and Malaysia show that there is more than one way to manage a country’s economy and that different conditions are required for the success of different economic policies.
Prime Minister Junichiro Koizumi also used an unconventional method to induce Japan’s economic recovery. Despite what many Koreans might think of Mr. Koizumi and his visits to the Yasukuni shrine, the Japanese prime minister has done well with the economy. That in great part was his key to keeping power for five years and five months. Unconventional in his words and deeds, Mr. Koizumi is not a typical Japanese politician. The fact that he became prime minister is surprising in itself. In some ways, he is similar to President Roh Moo-hyun. Perhaps it was the similarly unconventional character of the two leaders that made the Korea-Japan relations fluctuate so wildly in the past few years. When Mr. Koizumi became prime minister, he approached Japan’s economic recession from a direction different from his predecessors. Instead of using public financial funds to jump-start the economy, he focused on structural reforms. He thought the way to save the economy was to reinforce Japan’s economic foundation itself based on the private sector.
First he injected public finance to salvage insolvent financial institutes and agencies. This led to a breakthrough in the credit crunch that was becoming one of the biggest obstacles to Japan’s economic revival. Mr. Koizumi cut back public spending and downsized the government staff and transferred public businesses to the private sector. Mr. Koizumi might be something of an eccentric loner, but concerning his economic reforms, he had the backing of many experts. Armed with a resolute vision and an elaborate implementation plan prepared by efficient staffers, Mr. Koizumi’s role was to win the parliament’s approval and persuade the Japanese public. Mr. Koizumi’s explanations were always easy and down-to-earth. The ‘Koizumi-style’ reforms initially saw negative side effects, including skydiving stock prices, but his reforms started to pay dividends in about two years, and now Japan seems to well on its way to economic recovery. Perhaps it was the eccentricity of Messrs. Mahathir and Koizumi that led to their unconventional reforms, and then it was the patience of the Malaysian and Japanese public that led them to their long-awaited reward.
President Roh Moo-hyun is second to no world leader when it comes to voicing and sticking to his convictions, regardless of others’ opinions. That is why he also has a liking for newfangled policies. His policies are unconventional in their scale of destructiveness. He prefers the government to the imperfect market and emphasizes social equality and wealth redistribution. He is not shy about introducing higher taxes and a bigger government. In short, he is not afraid of going in the opposite direction from the rest of the world. Such economic experiments worked for Mr. Mahathir and Prime Minister Koizumi. Faint as it was, we had our hopes up at one time. However, there are still no signs of the economic experiment working in Korea.
The risks are high when it comes to unconventional policies. Just because something is done differently than before doesn’t mean that it is being done right.
In fact, it could lead to unprecedented disaster. For a venture to succeed, it must be backed by wisdom, precision, passion and commitment.
Unfortunately, none of these elements can be felt in this administration. This is a tragedy for the ‘participatory government’ and for the Korean public.
Now, the government has come up with something called the ‘Vision 2030,’ a flimsy over-optimistic economic blueprint for the year 2030. Are we to wait again from a mirage that will never materialize?

* The writer is a columnist for the JoongAng Ilbo. Translation by the JoongAng Daily staff.


by Choi Woo-seok
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