[Viewpoint] Mixed signals aboundThe Lee Myung-bak administration probably feels that the situation is extremely unfair.
The administration had a grandiose dream that the nation would fly like a 747 jumbo jet, but the unexpected financial crisis originating from the United States has obstructed the vision as Lee’s term entered its second year.
Lee’s famous “747” platform - which vowed to deliver a 7 percent GDP rise per year, raise the per capita annual income to $40,000 within a decade and make Korea the world’s seventh-largest economy - is falling flat. Korea is actually busy trying to avoid negative growth.
Let’s face it. Korea cannot overcome the economic recession by itself. That will come only after the United States restores its economy.
Until then, the once proudly promoted slogans of economic growth will have to be reworded into slogans promoting the government’s efforts to protect the economy and endure the recession.
No matter how hard the government tries to make things right by allocating huge supplementary budgets and raising public funds, there is actually not much room to maneuver.
No wonder that the Lee administration feels it’s been dealt a bum hand.
The Korean economy would not have faced today’s situation if there had been no financial crisis in the United States. Banks would not have suffered from the sudden shortage of foreign currencies, and companies would have not faced the risk of bankruptcy. The job crisis would have not been this serious and small business owners would have not shut down one after another.
Reform of state-run firms would have seen more progress and the budget deficit would not have snowballed.
Indeed, the pains of today’s Korea are all rooted in the failed financial markets of the United States. Until that financial crisis emerged, the Korean economy was actually doing well.
Korea’s banks are healthy, and it is inappropriate to compare them to the insolvent financial companies in the United States.
Most Korean companies, except for some construction, shipbuilding and maritime shipping firms, actually had stable financial structures.
But the mess in the United States added pressure on the Korean banks and companies to restructure.
Furthermore, foreign press and credit rating companies are openly talking about the possibility of insolvency of Korean banks and companies, although they are not to be blamed.
That said, the Lee administration’s measures are puzzling. The government said insolvent companies must be shut down as soon as possible to resolve the credit crunch, but at the same time, it says that all companies should be saved by extending corporate loans en masse.
The administration said the Korean financial companies are healthy, but turned around and warned them to receive bailout funds in preparation for possible insolvency.
It’s unclear whether the administration wants to kill them or save them.
No wonder the economy seems confused.
Such contradictory signals from the government do nothing but further muddy the picture for banks and companies desperately seeking to see more clearly. They are not yet bankrupt and they still have some assets, so they do their best to find a way to survive at all costs.
Not only the healthy companies but also zombie firms with empty pockets are trying to keep as low a profile as possible in order to avoid the blunt edge of corporate restructuring.
Furthermore, the administration is about to provide enormous financial aid to create more jobs, so no company or bank will voluntarily submit to the government-driven restructuring.
The government’s mixed signals and confusing measures show how much it feels victimized and cheated by the current situation.
The administration seems to think that it should not be blamed for the current crisis and that it may be able to achieve remarkable growth by using the current situation as an opportunity.
The craven protectionist attitudes of the advanced industrial nations, including the United States, are also adding fuel to the Lee administration’s hurt feelings.
The countries are coming up with stop-gap measures, delaying the pain of restructuring as much as possible while increasing government spending by leaps and bounds to ease the economic suffering.
The Lee administration probably wonders why Korea cannot do the same while all advanced economies are employing such measures.
Such emotional, self-centered thinking, however, hinders economic recovery.
Lukewarm measures are not enough to end such a crisis. The advanced economies are aware that they can not overcome the crisis in such a manner.
Criticism has already grown in the United States against the Obama administration for its lukewarm crisis countermeasures.
It’s time for a cold, hard look at reality, time to take decisive measures, not cling to groundless expectations.
The writer is an editorial writer of the JoongAng Ilbo.
by Kim Jong-soo