[Viewpoint] Keeping the miracle going

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[Viewpoint] Keeping the miracle going

The last decade was truly a time of turmoil. The new millennium began in 2000 with elaborate fireworks, but a dark shadow was soon cast over the global economy. In the middle of the global economic crisis, the worst in 100 years, belief in the market’s rationality collapsed, and the power of the dollar that drives the U.S. economy began diminishing.

Europe is also facing the fear of a contagious fiscal crisis. Korea is not an exception in this regard. Although it was praised for coming out of the crisis earlier than other countries, it is still suffering from the problems of a worsening wealth gap and growth that doesn’t create new jobs. The economy is also afflicted with growing state and household debt.

We are now entering the second decade of the 21st century. It is a time for new hopes, but we are heavyhearted because another decade of turmoil appears to be awaiting us. In addition to the North Korea factor, the unpredictable global economy, the rapid aging of our society and 800 trillion won ($692.5 billion) in household debts are all uncertainties that make it hard to foresee the future.

Everything has its moment of truth, like the decisive moment for a bullfighter. You cannot be too late or too fast. When the timing changes, the context will also be altered. And when the context is different, a decision will lead to a different result.

According to the Chinese Confucian classic “Zhong Yong” (“The Center of Harmony”), such a moment is called shizhong, which means “to seize the right time and attain due measure and degree.”

When there are more and greater uncertainties, the government must have more policy makers with shizhong. What will allow us to get there?

First, there should be no greed. Carried away by its spectacular growth, Toyota failed to find the right moment to pay attention to quality. The Korean government is forecasting 5 percent growth next year. Some worry that skyrocketing prices and unstable export markets have reduced the potential growth rate to below 4 percent and that a 5 percent growth forecast is too high. The government needs to remember that it is easy to miss the right time to adopt retrenchment policies when its growth expectations are too high.

Second, we must not depend on events happening as they usually do. Greater uncertainties mean that a hard-to-predict “black swan” event can occur. In such circumstances, it is wrong to expect everything to be normal. Sometimes overshooting measures are necessary.

Issues associated with household debts and corporate restructuring are no exception. Although things may appear stable at the moment, we must prepare for the worst-possible scenario. A delayed corporate restructuring is capable of killing otherwise healthy companies, and jobs will eventually disappear. We have already seen that during the 1997 Asian financial crisis.

That’s precisely why the restructuring of the construction and financial industries must speed up.

Third, there must be appropriate communication. We tend to seek evidence for what we want to believe, and we’re rarely willing to change our opinions. In his book “Wealth of Nations,” Adam Smith gave an example of a merchant who went bankrupt by trying to sell sculptures that he believed were beautiful.

It’s the same for policy making. Instead of policies that are good for the government, policies that are backed by the public and are good in the long term - not short term - must be made. That’s why communication is important for policy making. When social trust is weak, extremists gain power in Korea. The government, therefore, must seriously contemplate how to better communicate with the public.

Fourth, leaders of the society must know how to keep their calm. The best achievements are made by quietly performing your tasks. When leaders work calmly, their aides will have an investment in the projects they’re working on and keep their leaders informed in a timely way.

Furthermore, Korean society is extremely forgetful. Therefore, reform is not easy, and we often miss the right time. That’s why society’s leaders must remain calm and consistent.

Last month, the Wall Street Journal published an article on the Korean economy called “The Miracle Is Over. Now What?”

In fact, we need the miracle to continue for the next decade. But the motive behind the miracle will inevitably be different. While the miracle of the past 60 years was the people’s determination to live prosperously, what we need now is a discerning set of leaders to help us get through an uncertain future.

*The writer is a professor of management science at Korea Advanced Institute of Science and Technology.


By Lee Hong-kyu
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