[Viewpoint] Ignore the Cassandras - trust hard workFor a while now, all eyes have been focused on the phrase “exit strategy.” Meanwhile, some economists fear a “double-dip” recession, or a slump followed by a short-lived recovery, followed by another downturn. A “W-shaped” recession is another term used by economists to describe the shape of the “double dip.”
Watching the world economy rebound more quickly than expected over the summer, many economists and political leaders have agreed that it is probable the global crisis will end earlier than expected. These feelings are distinct from the opinion that too much fuss was made over the worst recession in 100 years.
In the meantime, people have begun voicing their concerns over the rising risk of a double dip recession since last month, after witnessing signs of worsening economic circumstances, such as the American unemployment rate - the worst since the Great Depression.
The most sober pessimists - Nouriel Roubini and the 2008 recipient of the Nobel Prize for economics, Paul Krugman - have both warned of a possible double dip, and in the aftermath of their comments financial analysts have competed to predict the advent of a W-shaped recession.
Once pessimism becomes the general current of thought, people rushing to be the first prophet of doom to get it right, and those optimists looking forward to a V-shaped early recovery begin to disappear.
It even seems people have became preoccupied by the idea that they are not entitled to comment on the economy without mentioning a “double-dip” contraction. This ultimately led to a pitiful sight - a former finance minister describing a double dip for the Korean economy as “inevitable” regardless of existing strategies, even while the incumbent finance minister says the odds of the Korean economy going into a double dip are low. We feel embarrassed at their heated discussions about the recession. Why should we make a big fuss over a double dip that is, as of now, merely a possibility?
In fact, the predictions made about the nation’s economic downturn by economists have mostly proven wrong. Most forecasts for the economy since the financial crisis began have followed a few major trends.
There was controlled panic in the face of the onset of the financial crisis, as if the economy was really falling off a cliff. But economists shifted their vocabularies subtly when they realized that the world was already through the worst. They peppered their analyses with such words as “correction” or “adjustment,” but in fact they were simply correcting their own facts after events had proven them wrong.
Those who predicted the present economic crisis aren’t any different from the others in that they also failed to prevent the crisis from occurring in reality. They were not confident enough to change market trends or insist on their own views to the exclusion of all others.
It is useless to persistently say, “I predicted the Korean economic crisis” even after the outbreak has begun. They may have predicted the outbreak of the crisis, but there is no guarantee that they are right going forward. If someone continues to shout himself hoarse until a crisis hits, it is likely that some might see that as his prophecy coming true. It would truly be an amazing prediction, except that the economist had to shout about a crash for years before one actually took place!
The economy will never go as one expects. The economy is not a number calculated by computer simulations or a vengeful god whose actions are predicted by prophecies. Its path can be changed by many determined people. If no one had acted to stop this financial meltdown, an even more serious crisis than the Great Depression might have taken place. However, each country in the world took timely steps to head off a crisis. Even now, they are struggling to push up the date for recovery through further collaboration in the G-20. How humanity will respond to a crisis likewise cannot be predicted. This is why economists’ predictions are always wrong.
A double dip recession may arise in the future. However, this will be mainly due to our failure to recover from the economic downturn, rather than our expectations.
Another widely heard justification of pessimism about Korea’s economy is that its potential growth rate has drifted down. The idea is that though the crisis has already passed in Korea, it will inevitably have a low growth rate. However, this is also nothing but a mechanical prediction that disregards the people’s efforts to raise the potential growth rate. A double dip recession and a decreasing potential growth rate are concepts that will not dissuade people from working hard. The fact is, we are still hungry for growth.
*The writer is an editorial writer of the JoongAng Ilbo.
by Kim Jong-soo