[Viewpoint] When to keep your mouth shutThese are angering times. There is talk about a currency crisis. Just like in 1997, foreign investors are leaving the Korean market en masse. The exchange rate skyrockets, and stocks plummet. The government, as usual, bangs on about the strong fundamentals of the Korean economy. What’s more upsetting this time around is that Korea has to suffer even when Korea is not really at fault. In 1997, we had made big mistakes over decades that caused our financial crisis, so we swallowed the pain.
But this time, it’s Europe that has messed up the global economy, and the crisis three years ago originated in the United States. It’s only fair that they have to pay the price for outlandish spending, but why does Korea have to suffer? In fact, the shock is pretty bearable so far. But it has a great psychological impact, and Koreans become frightened whenever the government defensively starts waving the flag with “fundamentals” written on it.
What is most frustrating is the different treatment Korea and Europe receive. At the time of the foreign currency crisis in 1997, Korea was treated like an economy run by barbarians. Western intellectuals and the media argued that our economy failed because of our inferior business practices and a loopy system of development.
The Western world was arrogant and insisted that Korea had to learn from Western business practices. Crony capitalism Korean style was named the cause of our crisis. They lectured us that Korean society, like many other Asian societies, was controlled by personal networks, which precluded reasonable decisions and led to chronic corruption. In the course of our economic recovery, Korea was forced to slow down its growth and open its capital markets completely. Also, Korea was bullied into selling off profitable assets to raise cash.
If that was the essence of our crisis and the only solution, the same yardsticks should be applied to Europe. Greece, Italy and France should be recognized as barbaric. They should learn Asian business practices. Money going into their economies should be tightened if they do not follow the rules.
But the international community is responding completely differently, and everyone is eager to help. You don’t hear the tough talk we were subjected to.
The president of the International Monetary Fund descended on us as the grim reaper, but Europe sees only a guardian angel. The IMF even urged Korea to help Europe, saying it would benefit Korea’s economy in the long run.
And look at the different popular reactions to the crises. Koreans donated their treasured gold jewelery to boost our economy. The Greeks go out in the street to protest. Greece’s woes are likely to continue, regardless of the assistance provided by Germany.
Economic ministers around the world know the trauma and anger of common people in times of crisis. And they are well aware of what to do in response to a possible currency crisis. As citizens become sensitive, they have to act and speak very prudently.
But for some reason, our financial authorities, namely Minister of Strategy and Finance Bahk Jae-wan and Financial Services Commission Chairman Kim Seok-dong, are speaking up all of a sudden. We are all watching the moves of European banks closely - waiting to see whether they will sell Korean stocks and bonds and leave the market. If the value of the won falls a bit more, they are likely to depart. We still have vivid memories of the exchange rate moving to 1,600 won to the dollar three years ago. The financial markets know the whole situation is touch and go.
But two of our ministers pulled the trigger. They said that Greece would declare default, European banks would cash out from Korea and the Korean market would be affected. They even said that the impact would be harsher than the 2008 financial crisis, and this time, it will last longer.
They are not entirely wrong, and actually I agree with their views. The problem is how they are using their authority. They are not commentators or analysts. They are some of Korea’s top economic policy makers.
They are the ones who have to handle the crisis, execute policies and appease sensitive markets. When they make such careless comments, markets respond violently. When Bahk discussed such grim possibilities on Sept. 19, the interest rate soared the won’s value fell.
They may want a double impact. If a crisis comes as they predicted, they can save face and claim they gave a warning in advance. If Korea avoids the crisis, they could praise their own insights. They may have thought of how Kang Kyung-shik, deputy prime minister at the time of the financial crisis in 1997, was harshly criticized for having caused the currency crisis. One of his faults was reporting the problem to the president too late.
Now, they can avoid such criticism. But how could ministers act so selfishly to save face? They should behave like ministers.
*The writer is an editorial writer of the JoongAng Ilbo.
By Kim Young-ook