[Viewpoint] Overturning the OECD’s dreary outlookA mathematician, an accountant, and an economist applied for the same job. The interviewer called in the mathematician and asked, “What do two plus two equal?” The mathematician replied, “Four exactly.” Then the interviewer called in the accountant and asked the same question. The accountant answered, “On average, four - give or take ten percent, but on average, four.” The economist was called in finally and posed the same question. The economist got up, locked the door and sat down next to the interviewer and whispered into his ear, “What do you want it to equal?”
There are countless jokes about economists. There is one claiming economists are busy twice a year - at the beginning of the year to make a forecast and at the year-end to correct why he was wrong.
Economics is a science of theory. The result comes out differently according to the theory. Estimates and forecasts can vary depending what variants affecting economic phenomenon are taken account and employed. President Harry Truman reportedly said he wanted an economist who was one-handed because his economic advisors would typically give him economic advice starting, “On the one hand ... And on the other...”
The Organization of Economic Cooperation and Development in its recent long-term scenario predicted South Korea would become the weakest economy among 34 member countries only after Luxemburg with potential to grow a mere 1 percent by 2031. We should be grateful for the harbinger on fundamental weaknesses of the economy, but the OECD 20 years later would have to come up with a good explanation on how it messed up its forecast.
The OECD economists first of all missed one important variant - North Korea - in predicting the economic outlook on Korea. No one can tell what can play out on the Korean Peninsula over the next two decades. The current status quo may continue, but there may more likely be a dramatic change down the road.
Reunification may be imminent, or already have taken place. It has left a lot to be desired in its outlook by counting out the North Korean factor. A reunion could be either boon or disaster, but nevertheless it would play as decisive factor in shaping the future Korean economy. It is up to political willpower and capabilities to turn the North Korean factor as positive force.
North Korea has so far played as discounting and uncertain factor for the economy. But several are voicing entirely different view. Rushir Sharma, head of emerging market equities at Morgan Stanley Investment Management, is one. In his recently published book “Breakout Nations” claims South Korea could be “Germany of Asia” and likely manage a successful unification with the North in view of the country’s knack of turning adversity to advantage.
If it does not make the same mistake West Germany in integrating poorer East by unifying the monetary on equal value, Korea could emerge as a consumer and industrial powerhouse backed by diligent population of 75 million.
Hong Soon-jick, senior fellow of Hyundai Research Institute, is more upbeat and claims unification could bring about more returns than losses. He estimates South Korea would have to spend around $157 billion for 10 years to pull per capita income of North Korean residents to $3,000 after unification.
But the two Koreas can save a lot more in defense cost and benefit from rise in sovereign credit rating, utilization of cheap North Korean labor force, rich natural resources, and tourism revenue. One Korea could earn $220 billion in a decade, which translates into a net profit of $63 million from unification.
Goldman Sachs’ economist Kwon Goo-hoon agrees. A reunification can cost Korea as much as $700 billion for 10 years, but at the same time create newfound business opportunities, investment, and resources worth $1 trillion.
An aspiring presidential candidate should present a vision and plan to end the division and unify the land. Shortsighted policies like ever-tolerant and ever-giving engagement or impatience to precipitate the nuclear problem in one shot cannot be visionary.
A vision can be possible with largeness in resolution and imagination by considering the inter-Korean business cooperation and tourism projects as means to fetch the pump and pave a course to both sides. Who can show such vision? I wish to hear visions among presidential candidates that can overturn the OECD’s dreary outlook on the Korean economy.
*The author is an editorial writer of the JoongAng Ilbo.
By Bae Myong-bok