[Viewpoint] On guard against economic threats

What a cruel April this has been. Winter lingered on, spreading icy snow in mid-April on vulnerable buds. Rain and gray skies overshadowed the arrival of spring normally known for its colors and warmth. An Icelandic volcano wrecked havoc on European air travel, trapping thousands of people in airports. An earthquake took many lives in China.

But here at home, we are grappling with an experience thousands of times more traumatic. And we cannot be sure when we will get over the pain and angst of the loss of the Cheonan. We have yet to solve the mystery of the sinking of the 1,200-ton naval corvette in waters near the maritime border with North Korea. But one thing is irreversible. The Cheonan and 46 young lives are among us no more.

The sinking of the Cheonan revived awareness about our national and economic security. National security is a military concept, referring to the protection of the Korean land and people. Economic security refers to the defense of the Korean market. The top priority of national security is deterrence against outside enemies, and that of economic security is to protect against external financial shocks.

The Korean economy is surrounded by minefields of explosive outside dangers. Today’s global economy is a tightly interwoven network. A breakdown of the financial system of one country can in hours send shock waves to other financial markets around the world. A country’s economic crisis can spread rapidly to neighboring vulnerable economies. A war in a resources-rich region can deal a heavy blow to Korea, which depends entirely on imports to power its industry and economy.

If foreign investors suddenly turn doubtful about the prospects of the Korean economy, it could shake society. Just as a virus attacks the weakest part of the body, dangers from outside can hit the most vulnerable part of our economy the hardest. At times our vulnerabilities attract contagions from outside. Strengthening our most vulnerable points is an urgent priority in economic security.

Our weaknesses include the finance industry, especially banking with its poor competitiveness; the bloated public sector mired with inefficient management; and the labor market with ample problems due to its rigidity. Yet the biggest concern would be the rapid worsening of fiscal health. Government debt exceeded 70 trillion won ($63.1 billion) over the last two years as the government pumped in funds to protect the economy against the global financial crisis and proposed projects like cleaning up the four major rivers. Fiscal health is the best defense in a small economy like ours, especially when the population is aging rapidly.

The tragedy of the Cheonan sinking reminds us of the importance of fiscal responsibility. To safeguard peace in a country still technically in a state of war requires immense defense spending. Running a unified country would also demand huge sums. If we do not keep the fiscal account healthy, our economic future will be at stake as well as our national security.

Keeping up the morale and unity of combat troops is as integral to national security as building new weaponry. The same goes for the economy. To strengthen economic security, we need public unity and collaboration. Public unity is not achieved through campaigns and a few government policies. It is a natural outcome of the confident belief that the country’s economic development will benefit individuals as well. It is spurred on by the hope that small companies will prosper equally if their conglomerate partners perform well. It grows on the hope that if one studies hard, despite poverty, one will get into a good college, and that if one works hard, one will get promoted and move up the ladder of success. The raising of such hopes will unify public resources to run the economic engine.

As in military defense, it is crucial for economic security to prepare rules for risk management. The Cheonan tragedy proves that in the absence of such rules, a crisis can be exacerbated.

Authorities must map out a strict system to recognize risks based on both domestic and global perspectives and immediately address dangers and minimize the damage when a crisis occurs.

This is a difficult time. But we cannot keep our heads down forever. We must learn whatever we can from the Cheonan tragedy. It is the only proper way to repay the young people who lost their lives at sea with the Cheonan, and the best way to keep their memory alive.

*The writer is a professor of economics at Sungshin Women’s University.
Translation by the JoongAng Daily staff.

by Kang Suk-hoon