An economy hero

A financial crisis is looming, but the government doesn’t appear able to resolve it. Financial markets both inside and outside the country are tumbling. There are signs the trouble is spreading to the real economy, but there are no reliable firemen in the Lee administration who can put out the financial fire.

The chaos, marked by soaring foreign exchange rates and plummeting stock prices, can mostly be traced back to the United States.

But the fact that the market is losing trust in the administration is also an important reason our economy, which had been deemed to be healthy, is facing a crisis. When the market doesn’t trust the government, the government’s measures don’t work. Instead they only make the crisis worse. When the market doesn’t believe what the government says, its measures can’t be effective.

While the foreign reserves remain in decent shape, concern is rising and people are hoarding dollars. This proves that the market doesn’t trust the government’s ability to handle the crisis. In this sense, the soaring exchange rate and free-falling stock market clearly demonstrate that we have to pay a big price for a lack of trust.

Meanwhile, President Lee Myung-bak plans to deliver a speech over the radio early next week to address the economic trouble. Reportedly, he will ask for the people’s cooperation, just as former President Franklin Roosevelt of the United States had “fireside chats” via the radio during the Great Depression in the 1930s.

There is nothing wrong with the president wanting to step up and encourage people during a crisis.

However, he is seriously mistaken if he believes that fancy words intended to calming people down will resolve the crisis. It will be even less effective if the president intends to use the crisis to rally the public around him. If he accepts that this is truly a crisis, he should present concrete measures to resolve it instead of only talking. When a lack of trust in government is the problem, the most urgent task is to find concrete measures to restore trust. When a fire breaks out in a market, the fire should be put out immediately. There’s not time to explain to people in what way the fire will be put out. We don’t need a promotional event to restore the image of a president who is supposedly good at economics. What we need is to revive the troubled economy.

The government has lost the market’s trust in part because the economic team has so far presented confusing measures. But the fact that there is no leader on the economic team has also played a role. As there is no control tower inside the administration, it can’t carry out swift and consistent measures in the face of a crisis.

As different government agencies release conflicting statements and no one takes responsibility, it is hard to trust the government. In the case of an emergency, trustworthy leadership is an absolute necessity. It allows people and market participants to trust the government’s words, and measures then become effective.

The current economic team must be reformed. An economic leader who handles economic policies and measures must be found, whether by creating a post of deputy prime minister of the economy or by giving a certain person such rights.

If the economic leader takes responsibility for resolving the crisis and the president encourages the resolution of the crisis, measures will be more effective and leaders will have more power to persuade the people.