[Viewpoint]Saved by humilAt this time last year, presidential candidate Lee Myung-bak might have been fatigued and had a sore throat, but he must have also felt exhilarated. He had managed to overcome some major events that threatened to distract voters’ attention, such as the hostage crisis in Afghanistan.
He must have been sure of his victory in two months’ time and been hopeful that he would be able to realize his dream of becoming an economy-savvy president. And he must have visualized an impressive ground-breaking ceremony for a grand canal. It would take place somewhere on the Namhan River just when the fall foliage began to get colorful. Of course, he must have had no idea the Korean economy would collapse during his first year in office.
When President Lee Myung-bak was serving as mayor of Seoul, he condemned the Roh Moo-hyun administration’s economic policies. He said, “The economy might seem intact to the eyes of President Roh, but to the citizens, the Korean economy is on the verge of expiration.
“Incompetent leaders gather and toot their own horns to celebrate the most vibrant economy since the Park Chung Hee administration, but the praise does not change the struggling lives of the citizens or people’s view of the administration,” he said.
When Lee criticized the economy in June 2007, the Kospi was at 1,800 points and the exchange rate was 930 won per dollar. Today, the Kospi has dropped to 1,200 and the won has has plunged to 1,400 per dollar. This occurred during the watch of a president who claimed to know the economy by heart.
Of course, the government is not solely responsible for the economic crash. Actually, the market’s failure is the main culprit. The sudden hike in the exchange rate stems from the market’s failure to predict supply and demand for the U.S. dollar. The financial crisis originated in the United States, after the collapse of the real estate market.
However, the current administration is not entirely free from responsibility since it failed to properly respond to the financial crisis spreading from the United States, which amplified the crisis. If the government had acted quickly, the stock index wouldn’t have plummeted so badly and the exchange rate wouldn’t have surged so extremely. Not only has the market failed but also the government’s intervention.
Why is the Lee administration’s economic policy so ineffective? In short, the market does not trust the government. When citizens are expecting realistic, tangible policies, the administration suddenly announces new towns, growth engines or top 100 priority tasks. It is as if the government is offering a grand feast to be served a few months later to people who are starving today. When the government should be comforting and encouraging economic entities shocked by the high exchange rate and stock market crash, it is a pity that it instead wants to quickly deal out discipline for bad habits.
For example, the government blames speculators for the exchange rate hike, but how many speculators are there and how much are they speculating? Is it always bad for companies and individuals to hold onto their dollars? They could make an instant profit from the exchange rate hike by selling dollars, but they hold onto them because of uncertainty. If they release dollars now, it might have an instant effect, but it won’t be a permanent solution.
The president surely wants to prove himself and show his capacity through construction projects. He restored the Cheonggye Stream and made his 747 promise. The construction-driven president needs a growth engine. However, a construction-oriented mind cannot properly take care of the economy. It seems that Lee is going against the market. If he wants to be remembered as a president who revived the economy, he has to read up on the psychology of economic entities and soothe them. If necessary, he has to ask for the opposition’s help. Only then can he calm the market’s violent motions.
We experienced an economic crisis during the Kim Young-sam administration, and the period from the beginning of the crisis to the end of his term was considered to be his best time in office. President Kim maintained close cooperation with president-elect Kim Dae-jung, making all kinds of concessions, and the country overcame the financial crisis in a timely manner.
It is scary to even imagine what would have happened if he was stubborn. He might have felt frustrated when the Kim Dae-jung administration claimed that he was the one who caused the economic problems while Kim Dae-jung was the one who enabled the country to graduate from the rescue program early. History will view Kim Young-sam’s conduct with high regard. Perhaps this modesty is the virtue President Lee needs today.
*The writer is a professor of journalism at Sungkyunkwan University. Translation by the JoongAng Daily staff.
by Kim Jeong-tak
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