[Viewpoint]The president’s Band-Aid

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[Viewpoint]The president’s Band-Aid

Finance Minister Kang Man-soo was near the end of his rope. He performed poorly all season, making huge mistakes in his exchange rate policies. The economic team was in low spirits. The whole country was seething, insisting that Kang should step down. But President Lee Myung-bak stood firmly by him.

Then an incredible incident arose. Kang hit a grand slam to save the game. He became the team hero in a minute, and thanks to him, President Lee recovered his popularity.

People were thrilled to hear the news of the Korea?United States currency swap deal last Thursday, as if they were watching a baseball team come from behind.

The financial market responded dramatically. Stock indices soared to unprecedented levels and the won rose in value against the dollar by the most in 11 years. Wall Street also sent Korea a congratulatory message, saying, “There is no possibility that Korea faces a nationwide financial meltdown.”

The whole scenario can be compared to when Korean baseball star Lee Seung-yup hit the home run that defeated Japan in the semifinal game of the 2008 Beijing Olympics.

However, it is premature to fire a salute lighting up the sky. We would be more delighted if this home run had come in the bottom of the ninth inning.

However, we know that the game has just begun. There are obviously a lot of innings left and there are a lot of hard outs to get.

In addition, the opposing team’s coming lineup consists of dreadful hitters, such as failing builders and savings banks. The opponent is ready for the game in full force.

Six months from now, we may be facing a hurdle like we have never seen before.

Korea is highly dependent on exports. As of 2007, combined imports and exports accounted for 94.2 percent of the national income. Boosting exports is essential to invigorating Korea’s economy.

Whenever a crisis had arisen in the past, it has created a new market.

Both the appearance of a new supporter called the United States and the Vietnam War are largely credited with Korea’s revitalization from the tragic Korean War. The Middle East construction boom made Korea wealthy during the oil shock of the 1970s. Japan helped Korea resolve a crisis caused by failed investments in the heavy chemical industry in the 1980s. The newly opened markets of China, Russia and Eastern Europe provided new outlets for the nation’s export-oriented industries. Korea successfully recovered from the Asian financial crisis in the late 1990s due to market booms in developed nations.

Despite the recent oil price spike, Korea continued to overcome difficulties thanks to Middle East markets and BRIC markets - the fast growing economies of Brazil, Russia, India and China.

However, Korea is now lost between the devil and the deep blue sea.

It is hard to find healthy markets because the financial turmoil that hit America has disseminated throughout the world. Our export markets are devastated in both developed nations and emerging economies.

In addition, many governments have changed their economic policies in the face of the financial crisis.

There are big possibilities that the crisis will lead to a de facto rollback in free trade.

For instance, the U.S. Democratic candidate Barack Obama, who supports securing the American market for the American producer, is pulling comfortably ahead of John McCain in the U.S. presidential elections.

The historic lesson that protectionist trade led to the Great Depression of the 1930s can be understood only by armchair pundits. Tens of thousands of laid-off workers from American automobile enterprises don’t appreciate this.

At this juncture, how many brave American politicians will be able to insist on opening the market to Korean and Japanese car makers? Naturally, we will likely face more hurdles than ever in finding a way to grow in export-led sectors.

Under these circumstances, the government is expected to unveil comprehensive measures this week to boost personal consumption.

But we cannot stop the incoming tsunami, using such precautions.

The global recession is too big a disaster to overcome with very simple means of boosting domestic demand. In fact, a clumsy measure might extend the pain.

No matter how difficult the situation we are in at the moment, we should take appropriate steps to reduce the excessive production and consumption that was encouraged by the bubble in the global economy.

In the long-term, this might be the quickest way to restore Korea.

The global recession is too big a disaster to overcome with very simple means of boosting domestic demand. In fact, a clumsy measure might extend the pain.

The writer is a deputy business news editor of the JoongAng Ilbo.

by Jung Kyung-min

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