[Viewpoint] Time to be two-facedShifting the focus from exports and manufacturing to domestic consumption and the service industry was the key point of a report published by the Ministry of Strategy and Finance on July 17. At first glance, it may seem like just one of countless government publications, but this one contains a very significant message. In short, the report proposes to change the engine of the Korean economy altogether. This is completely different from mere repair, maintenance or remodeling.
The Korean economy has been running ceaselessly for the last 60 years. What made the war-torn economy attain such drastic growth was exports and overseas contracts. However, the old growth model is no longer valid now that Korea has been transformed. At this stage, we need more than just a tough work ethic and the diligence to pull all-nighters. We should enhance productivity and work smartly to make a leap to the next level of development. And the report points in the direction of domestic consumption and service industries.
In the past, when exports thrived, domestic consumption was boosted. However, the effect is insignificant today. The impact from an increase in exports on employment has fallen. So the Korean economy is stuck with “growth without growing employment.” In other words, it is growth that does not bring welfare.
As a result, export-oriented large corporations are thriving while small and midsized businesses - and the workforce in general - are struggling. Korea has earned nicknames like “Samsung Republic” and “Hyundai Republic,” because the economy is so dependent on exports and large conglomerates. At this rate, the economic polarization will become more extreme. Young Koreans who have a hard time finding meaningful employment will struggle to make ends meet in their maturity, and when they grow old they will suffer even more.
The government has been contemplating how to improve the structure of the economy for a long time. Seven of the 17 new economic growth engines that the government has chosen are service industries. The government also has a plan to overhaul the medical and educational sectors, which have great potential to create professional jobs in the service sector. However, the remodeling attempt has not progressed far because of the conflicting interests of ministries.
Of course, the equations “manufacturing = exports” and “service industries = domestic consumption” don’t always hold true. When foreigners consume Korean services, it will be an export of services. When service industries catering to foreigners are promoted, it will make our dependence on foreign customers even higher.
Nevertheless, the government is emphasizing the service sector because of the obvious limits of boosting domestic consumption with a population of 50 million. When the foundation of the service sector is weak, stimulating domestic consumption could risk repeating the credit card crisis. In order to avoid another crisis, we need to attract the buying power of foreigners. Korea should open up to foreigners. That means we need to develop and nurture our service sector so it is attractive enough to foreigners. Therefore, it is a secondary question as to whether exports or domestic consumption should be bigger. The important factors are economic growth and job creation.
The government is not simply emphasizing expansion of the service industry. We need to reinvent the spirit of service evolved from the golden era of manufacturing. We need more than stubborn and honest master craftsmanship. Service professions are about direct contact with consumers, so the work often involves emotional labor. Promoting services requires more serious efforts and devotion. We can say Korea’s service industry has become competitive when a masseuse can afford to drive a fancy foreign sedan by giving foot massages to Chinese tourists. To become so successful, we need to offer aggressive and full-fledged services.
Job creation through services and domestic demand cannot be achieved by merely adopting an industrial policy in a government report. Service-driven domestic consumption will not change our economic destiny if a lot of young Koreans open up coffee shops. A revolution of our mind-set should come first.
However, it takes time for everyone to learn a flexible service spirit. In the nick of time, a test has presented itself. Japan has raised the sensitive issue of who owns Dokdo. In response, we should hide our true feelings and pursue friendly business relationships with the Japanese. The attention of the Japanese is focused on their nuclear crisis, not the Dokdo dispute. There is no reason for us to be provoked by Japanese politicians trying to divert domestic public opinion. To make lies more convincing, you need to appear sincere. What we need to pursue are our actual interests. You can’t play the two-face game? Go ahead and be sincerely stubborn - and enjoy an indigent future.
*The writer is a senior business writer of the JoongAng Ilbo.
By Nahm Yoon-ho