[Viewpoint]Time to operate on economyPresident Lee Myung-bak is not a lucky man. His conservative administration was launched after ten years of hard struggles against left-leaning liberal governments, but his government was unlucky enough to be swamped by the issue of U.S. beef imports just as it was about to start getting down to work.
He had no choice but to ditch his lifelong dream of a grand Korean Peninsula canal and put it back in his back pocket. Then, just as he had barely managed to calm public opinion against the government caused by the candlelight vigils, a fire broke out next door, in the United States. Lee thought the United States could put out its own fire because it boasted the latest and grandest sprinklers and fire extinguishers, but the fire spread to the entire neighborhood.
Now that the financial fire has spread to Korea, it looks like Lee is going to be busy extinguishing the flames, not igniting his 747 Plan, to accomplish a 7 percent annual growth rate, attain a gross national income of $40,000 and become the seventh strongest economy in the world.
President Lee probably had no idea that the first task he would have to tackle after taking office would be putting out a fire. After all, there are not many experts on firefighting in the current economic team of the administration.
The Ministry of Strategy and Finance had a hard time because it tried to raise the foreign exchange rate but failed to do so in the beginning of the year. It did not anticipate that the won-dollar exchange rates would skyrocket soon thereafter.
When a dollar shortage started, the government bragged that it would sell $1 billion worth of bonds in the overseas market, but it abandoned the idea when the market situation changed a little, saying interest rates were too high. Now, it is almost impossible to buy dollars even at a higher price. But the government feels uncomfortable to dip into the government’s foreign currency reserves. Therefore, it is now pushing export companies to sell their dollar reserves.
When foreign exchange rates soared, small- to medium-sized export companies which bought financial derivatives called KIKO [knock in, knock out] went bankrupt en masse. However, the Financial Services Commission sat back and watched as if it was watching a fire across the river, only repeating its irresponsible explanation that KIKO was a private contract between a bank and another company. It only started to find a solution when the number of bankruptcies from KIKO increased in geometrical progression, but by then it was too late.
The Bank of Korea, which should play the role of big brother for Korean banks, was busy going about its own business. Even though banks were shouting out in pain that they were suffering a serious shortage of dollars, it ignored them and recited the Buddhist mantra: “Mountains are mountains, and water is water.” For the governor of the Bank of Korea, keeping the price increase rate under control was more urgent than the financial crisis at hand. It only lowered its interest rate after other countries lowered theirs. Nevertheless, the Bank of Korea still pretends that there were no SOS calls from Korean banks.
Various opinions and commentary on this situation have surfaced. Some say it is a complete disaster because the fire has spread to the master bedroom but firefighters are running around in all directions. Since there is no control tower that controls the flow of traffic, people are hinting at revival of a deputy prime minister for economy and finance. It would be fortunate if the problem could be solved just by the appointment of such a person, but it’s not that simple.
It is easy to operate on a patient who has come to the hospital with a burst appendix. Nobody would oppose cutting the patient’s stomach open immediately - leaving the situation as it is would put the patient’s life at risk. However, it is a different story for a patient who has no obvious symptoms, or even a stomach ache. Even if the patient’s life is at risk, it would not be easy to persuade the patient or the patient’s family that an operation was necessary. There are conflicting opinions even among doctors, afraid that the patient would blame them if they open the patient’s stomach and discover the problem is not appendicitis.
This was the situation in the United States. The House of Representatives voted down a $700 billion financial rescue bill although the fire was rapidly spreading. Even the ruling party congressmen voted against it, because they were afraid that voters would say, “They wasted taxpayers’ precious money for rich Wall Street investment banks” at the November elections. In the end, the patient was rushed to the hospital with appendicitis and had to be operated on. As a result, it has now become difficult to recover stability of the market even if 20 countries have come together to find a solution.
Operating on a patient who looks okay is burdensome. That is why the president has to step up. He is the only person who can mediate the opinions of doctors and persuade the patient. There is not much time left. It will be too late if the fire is not put out in the early stage.
It is no use saying in regret that we should have taken off the roof tiles of Namdaemun from the beginning to douse the fire after it had already burned down.
*The writer is a deputy business news editor of the JoongAng Ilbo.
by Jung Kyung-min