[Viewpoint] Lee s left turn is worrisomeMBnomics, the Lee Myung-bak administration s economic policy, has lost its direction, like a golfer trying to hit a fairway but finding only the rough. Lee sometimes looks like a golfer who aims to the right, only to have the ball hook left. And sometimes, it seems he s aiming left from the start. In any case, one might wonder if there is really a government pursuing MBnomics.
The two axes of MBnomics were to be tax cuts and relaxed regulations. Lower taxes would boost consumption, while relaxed regulations would encourage investment, resulting in an improved economy. MBnomics was considered business friendly in that it supposedly gave priority to the interests of companies. However, it s hard today to hear voices advocating a business-friendly environment in the government and the ruling party. Instead, the slogan of people-friendly holds sway. It is the Grand National Party that is leading the charge. The ruling party has been holding meetings in cities and provinces since June 29 to present the state of affairs. The keywords of the meetings are common people. The party executives use every opportunity to emphasize common people and welfare. Party chairman Park Hee-tae said that the major challenge of the party and the government is to save those common people. GNP Secretary General Jang Gwang-geun said that the philosophy of the Lee Myung-bak administration is to keep common people secure.
The chairman of the Party Policy Coordinating Committee stressed that this year s welfare budget is 74.7 trillion won, the biggest in history. Ruling party floor leader Ahn Sang-su even said the GNP was originally a party for the common people, but it has been branded as a party for the rich because of a few wealthy lawmakers.
The government is not resisting the trend. Instead, it is following the ruling party s initiative. When real estate price in the Gangnam region showed signs of rising, the government tightened regulations on housing mortgage loans. It is no longer advocating that market forces should determine housing prices. Instead, it s switched to promote government regulations. The government is acting as if we never had a discussion about abolishing the comprehensive real estate tax. Moreover, the Lee Myung-bak administration decided not to pass a bill to cut inheritance and gift taxes this year. Last year, it ambitiously pushed for the bill, arguing that the legislation would make the country more business friendly. Instead, tax cuts and exemptions for common people and small business owners would remain the same, but benefits and tax cuts for high income earners and large corporations would be reduced.
The government has been pressured by the attacks by opposition parties for giving tax cuts to the rich. Looking at these policy decisions, you could be excused if you think they emanate from Roh, not Lee.
Common people and welfare were Roh s trademarks. Lee came into power criticizing Roh s policies as appeasing the people by beating the rich and the corporations and pouring on welfare, arguing that those approaches didn t work. If Lee now wants to steer in a new direction, he needs to explain how these policies are different from Roh s. The administration must convince citizens that policies it once criticized will work now. The citizens will not easily believe that the party that had been the well-being party and party of the rich is now advocating for the populace.
The civil servants who are responsible for carrying out policies are struggling as well. A civil servant in the central government said, We have been emphasizing business-friendly policies, but now they ve suddenly shifted to the direction of the people. I am truly confused. He admits that he had to refer to the polices of the Roh administration for assistance for small businesses and countermeasures against high-interest private loans.
Of course, a people-friendly direction itself is desirable. It is not impossible to pursue it simultaneously with business-friendly positions. However, the government s shift is too drastic and unpredictable. The GNP s five main plans for the common people include bills to save small businesses, cut credit card fees, reduce communication charges, prevent funeral service fraud and deal with loan sharks. These measures do not seem much different from the policies of beating the corporations to pour benefits onto the people. Resources are limited. The government must prioritize its policies.
The top priority is to overcome the current economic crisis. It takes time for the effects of the tax cuts to be translated into more investment and a better economy. The business-friendly policies are in their initial stages. The misguided policies from the previous administrations haven t yet been undone. However, we have not yet seen full-fledged tax cuts and relaxed regulations. It is another kind of populism a move to go back to the Roh era to spend on welfare because it can temporarily raise approval ratings. In pursuing both ends, Lee might lose the support from both businesses and the public.
*The writer is the economic news editor of the JoongAng Sunday.
by Yi Jung-jae