[Viewpoint]Clarifying creative pragmatism
The Lee Myung-bak administration has often emphasized “creative pragmatism,” but I am still unclear what the term really means. But, from the perspective of the global market, I have two suggestions for the government.
First, in order to enhance the efficacy of our diplomatic moves and overseas economic activities, we must understand how Korea’s major partner nations perceive problems and react to them. The Americans and the Chinese form the axis of the global economy, but they have different mechanisms for recognizing issues. The United States is capitalism’s representative nation, while China is the poster country for communism, so it is important to keep in mind that leaders are educated and trained in drastically different manners in each country.
In America, the president and many congressmen are lawyers or have undergone legal training. Many of the Chinese leaders, meanwhile, are trained to be engineers. Chinese President Hu Jintao, premier Wen Jiabao and many other important politicians studied engineering.
Engineers tend to seek something better, while lawyers or legal students tend to prepare for the worst possible situation. For engineers, the outcome is more important than the means, but for lawyers, the same outcome has a different meaning depending on how it was achieved.
In order to use creative pragmatism in Korea’s diplomatic and economic activities, we should be countering the United States with a “lawyer attitude” and China with an “engineer attitude.”
After Barack Obama’s presidential victory, many talked about how changes in the United States will affect Korea. Many said the U.S.-Korea free trade agreement will not be ratified in the U.S. Congress because of the imbalance in the auto industries of the two countries. Some said Korea should ratify the FTA first.
I lived for a long time in the state of Illinois, which Obama represented as a senator. Based on my observations, he will not ignore the FTA for a small amount of gain. He took the touchy stance toward the deal as a part of his election strategy.
Obama knows better than anyone that the Korean market is not the decisive factor in rescuing the U.S. auto industry. He knows the American industry’s crisis did not come from the trade imbalance with other car manufacturing countries such as Japan and Korea, but because even Americans do not buy U.S.-built cars.
Not only Obama, but also many congressmen who have law backgrounds, are aware that the industry’s crisis is its own fault.
My second suggestion is that we must realize that increasing Korea’s sovereign credit rating is a precondition to practicing creative pragmatism.
I have often heard the complaints that they cannot understand why the Financial Times, international credit rating companies and foreign investors underestimate Korea’s credit rating, while exaggerating the country’s risks.
Government officials and experts from advanced nations do not give unconditional praise to a country just because its economy is bigger than it used to be, not without looking into the process of the growth. Unstable labor issues, regulations with no principles, and flip-flopping real estate policies are just some of the factors that trigger foreign investor doubts in the Korean economy.
But no matter what the barriers are, investors make investments when they see profitability. The Bank of Korea’s president’s rate policy is coldly received by the market. When the finance minister makes a long report about the economic situation, no one believes in it. Now, Koreans do not even bother to pay attention when the president says something. How can outsiders trust Korea, when not even Koreans do?
Twenty years ago, shortly after the 1988 Seoul Olympics, Korea’s benchmark stock index surpassed the 1,000 point mark. The gross domestic product of the country in 2007 was about seven times what it was in 1987, but the index was still about the same. There is no need to use any economic theory to prove that the Korean market was undervalued.
No matter how loudly Korean leaders cry out that the market is undervalued and the future is bright, foreigners do not believe it because trust has bottomed out. Increasing the credit rating of Korea is the real first step for creative pragmatism.
*The writer is the dean of the College of Business Administration at Ewha Womans University. Translation by the JoongAng Daily staff.
by Park Hun-young