Opinion split on success of ‘MB-nomics,’ 747 plan

When Lee Myung-bak won the presidential election in late 2007, expectations were high that his ambitious pledges would place Korea in the top tier of the global economy.

Four years on, opinions are divided as to whether he has successfully followed through with his promise to serve the country as its so-called “economic president.”

Lee, who picked up the moniker “The Bulldozer” for his aggressive stewardship as the former CEO of one of the country’s largest construction companies, marked the fourth anniversary of his inauguration on Saturday, sparking a wave of assessments of his performance.

The bright side of the Lee administration’s economic policy - often referred as “MB-nomics” - is that Korea has overcome two major global crises faster than other countries.

But the dark side of his competition-driven policy to facilitate growth through deregulation and tax cuts highlights the grim reality of increasing social polarization in the country, caused by the widening wealth gap.

In his inauguration speech, Lee made clear that his priority would be the economy. He dubbed his key election pledge the “747 plan,” after the eponymous Boeing jumbo jet. Drawing attention to his fearless, gung-ho approach to steering the economy to new heights, it targeted annual economic growth of 7 percent, gross national income (GNI) of $40,000 within a decade - double the former rate - and making Korea the world’s seventh-largest economy.

Shortly before Lee started his term, Korea was the world’s 13th-largest economy, with 5.1 percent yearly economy growth and $21,695 GDP per capita.

Since then, the country has seen its economy grow by an average rate of 3.1 percent a year, while the GNI for last year was estimated at between $22,500 and $23,000. Having increased its GDP to $1.554 trillion in 2011, Korea jumped one place to become the 12th-largest economy.

The Blue House stressed that Korea managed to overcome the 2008 global credit crunch and 2010 European sovereign debt crisis faster than other OECD economies. The economic growth rates posted by Korea over the past four years were far higher than the median rates of other OECD member countries.

In 2008, Korea showed 2.3 percent growth, compared to the OECD average of 0.1 percent. The following year, Korea saw growth slow to just 0.3 percent, but this still compared very favorably with the OECD average of minus 3.8 percent. In 2010, Korea rebounded with 6.2 percent growth, and the OECD average stood at exactly half of this, or 3.1 percent.

“During the 2008 financial crisis, the United States, Europe and Japan were all shaken, but the Lee administration managed to handle it fairly well,” said Park Myung-rim, a professor of political science at Yonsei University, expressing sentiments that are widely held by experts.

Yoon Chang-hyun, a professor of business administration at the University of Seoul, said the Lee government reacted to the global crises with a number of prudent moves.

Currency swap deals with the United States in 2008 and the speedy expansionary fiscal policy in 2009 were praised by Yoon.

It also “maintained Korea’s fiscal soundness, and that eventually helped us to cope with the European sovereign debt crisis,” he added.

This is indicated by Korea’s debt-to-GDP ratio, which only edged up slightly despite the two crises. The average growth rate of the ratio under Lee is 2.6 percentage points, lower than the 12.1 percentage points posted on average by the former Roh Moo-hyun administration, and considerably healthier than the 6.7 percentage points racked up under the government of Roh’s predecessor, Kim Dae-jung.

The Blue House also agreed with the widely shared opinion that Lee’s move to expand Korea’s free trade network stands as an important achievement. Under Lee, Seoul has signed FTAs with the U.S., European Union, India and the Association of Southeast Asian Nations.

However, Lee has also taken flak for his missteps, with critics pointing to the burgeoning wealth gap and crying out that, while the public gets poorer, the nation’s leading conglomerates have continued to line their pockets.

“People around the world are angry about slow rates of economic growth and worsening polarization [in their respective countries],” said Yoon. “Although our situation may not be the worst, the current government is certainly not free of blame.”

The Hyundai Research Institute also issued a report in which it assessed the four years of Lee’s economic policy. It concluded that his administration failed to manage the distribution of wealth successfully.

“The growth rate for national income is slower than under past governments,” the think tank said in the report, which was published on Feb. 19. “The distribution of wealth has, in fact, worsened in comparison to past governments.”

According to the Bank of Korea and Statistics Korea, the average growth rate of GNI over the past four years stood at 2.2 percent. It fared substantially better under Roh, when it grew by an average annual rate of 3.4 percent, and was stronger still under the administrations of Kim Dae-jung (3.9 percent) and Kim Young-sam (6.5 percent).

However, the Gini coefficient serves as a more reliable indicator of the widening wealth gap, according to Lee Bu-hyung, a researcher at the Hyundai Research Institute. A Gini coefficient of zero represents perfect equality in terms of how a nation’s wealth is distributed, while a reading of one indicates absolute inequality.

The average reading under Lee was 0.293, compared to 0.281 under Roh, 0.279 under Kim Dae-jung and 0.253 under Kim Young-sam, the institute noted, showing how inequality has consistently worsened over time.

“When it hits 0.4, inequality will have reached a serious point,” said Lee. “We’re not there yet, but what is concerning is the upward trajectory. If this continues, it will reach 0.4.”

Meanwhile, the latest data released by Statistics Korea on Feb. 24 shows that the country’s lower class - defined as those earning below 50 percent of the median household income - grew to account for 15.2 percent of the total population last year, up from 14.9 percent in 2010.

The middle class, in contrast, shrank from 64.2 percent of the total population in 2010 to 64 percent.

Other concerns were also raised.

While the unemployment rate has averaged 3.2 percent under the incumbent government, the number of young people able to find jobs has dropped alarmingly.

“About 350,000 people over the age of 40 have found new jobs [since Lee came to power], but there are 80,000 fewer positions available for young people now,” the Hyundai Research Institute report pointed out.

Lee of the institute said that the quality, not just quantity, of the jobs being created would also prove crucial to the future health of the economy, with higher-income positions more desirable and beneficial.

“The government said that 250,000 new jobs were created in the public sector, but we really have to think about whether they actually benefit the livelihood of the working class,” he said. “They are minimum wage jobs. When you talk about distribution, income is a key factor. And the minimum wage jobs do not help improve the wealth distribution structure.”

“Let me put it more bluntly,” Lee said. “Stop-gap measures cannot resolve the issue of polarized wealth. It’s like giving painkillers to a terminally patient. It won’t save his life. What we need is a long-term vision to deal with the deepening divide between Korea’s wealthy and poor.”

“The government must pay more attention to macroeconomic policy,” he said, adding that stabilizing prices and the housing market were also key.

By Ser Myo-ja [myoja@joongang.co.kr]