[Outlook]A poet falls on hard timesA few days ago my old friend sent me a book of his poems by courier. It is his second book since quitting a somber city life and moving back to his secluded hometown in the mountains. The poet, with whom I spent my boyhood, sounded shy in a phone call we made after a long period of not seeing each other. He said he was doing his best but nevertheless life feels lonely and not very exciting.
On the day I read his poems, the Korean stock market soared over the 1,900 mark. The Financial and Monetary Committee of the Bank of Korea raised the interest rate that day, but the supposed sworn enemy of the stock market did not do a good job taking down the Kospi run.
Kospi and Kosdaq, which represent the Korean stock market, have both risen more than 30 percent this year. As the age of the 2,000 stock mark nears, both capital and men are flooding the stock market. Regardless of my penurious poet friend, the stock index is ever exciting. It’s not just the stock market, either. Exports are also on a rapid run, continuously breaking old records due to the boom in shipbuilding and steel. Early this week the government projected the total amount of exports will reach $367 billion by the end of this year, increasing by 12.8 percent from last year. This came about after the won became strong, which is supposedly a sworn enemy of exports. Some people even claim that the economics textbooks should change their basic theory that explains the relationship between the stock market and interest rates and the relationship between exports and foreign exchange rates.
The Korean economy should be overly excited by now, since the stock market mirrors the economy and exports open an economic boulevard. According to past experiences, companies should be busy building factories and hiring more people by now. Graduates should be busy choosing workplaces with prime conditions, and shopping malls should be filled from wall to wall with customers with fat wallets. The government and the press should bandy the pros and cons of the economic expansion and inflation.
But look at the reality. Companies and consumers are as optimistic as those in the stock market. The index of enterprise performance and many other consumer confidence indexes do not at all reflect the recovery of the market. Employment, particularly of young people, which gauges consumer confidence in the economy, does not change regardless of the increase in gross economic performances. The youth unemployment rate between age 15 and 29, which includes high school and university graduates, still hovers over 7 percent, and one out of three employed graduates works as a part-timer.
The same gloom applies to the companies as well. Although it varies among the different kinds of business, companies are overall hesitant in investment. They look for stock or real estate investments instead of facility investment although they have stacks of money inside. Last year domestic manufacturers increased only 6.4 percent for facility investment whereas they poured three times more money into the stock market and other areas, which increased in total by 18.9 percent, according to the research of the Bank of Korea. This situation has continued since the start of the Roh administration.
They say the world has changed, but the structure of the economy that produces a virtuous circle has not changed that much. Especially in recent times, when both the stock market and exports are strong. If companies invest their money procured from exports and the stock market and individuals deposit and consume the increased income due to increased employment, it will in turn assist the stock market and exports. However, now that investment and consumption, the two main keys that form the virtuous economic circle, are not working well, our economy does not run as well as the stock market. Since this is a problem that has continued for the last four years, it is not likely to change anytime soon. In the end, the change will come only after the presidential election at the end of this year and when the new government clearly appears.
We expect new leadership that encourages dormant investment and consumption and restores the virtuous economic circle. I hope my dear poet friend can, as a result, write poems that are a bit happier and a bit less lonely.
*The writer is a senior business editor of the JoongAng Ilbo.
by Sohn Byoung-soo