[Viewpoint] No time to play the superheroDear President Lee,
It has come to my attention that you will be focusing on economic challenges and your plans to alleviate them during your annual Liberation Day address on Aug. 15. It has been a trying year, no doubt, and one that has seen the government trim its growth forecasts for the domestic economy three times. You have been nagging ministers to come up with ideas to stimulate domestic demand, even though there is no magic solution to this problem.
As such, I beg you to get rid of all those tried-and-tested cliches in your forthcoming speech. Talk of reviving or salvaging the economy will only draw yawns and cold responses. It is hardly a time to be overanxious or enterprising, and being overzealous will likely cause negative side effects that could disrupt the economy. The slowdown we face will probably persist for a long time, and no matter how inventive or hard working we may be, the economy cannot pick itself back up unless the stalled global economy also gets back on track.
We may be forced to endure a protracted period of hardship, and sometimes a president’s role is primarily to console the people, give them hope and encourage them to ride out the storm. In hard times, a leader should not plant illusions and false hopes. But that does not mean you should sit back and wait until the storm clouds subside. You must not fall under the spell of inertia that has engulfed economic ministers, who stumble along regurgitating dry textbook talk. You still have work to do.
First, you must carry out radical restructuring. Consumer debt has reached a dangerous level and may require massive relief. With many companies feeling the strain and crying out for help, bailouts are a viable option. But you must not become soft. You are not a superhero who can save everyone; rather, you must prioritize who is the most deserving, and when.
The same guidelines apply to corporate debt, and you would be well-advised to take notes from the 1997 Asian financial crisis. Back then, if Kia Motors had been restructured in a timely manner, the country may not have ended up seeking an international bailout. But then-President Kim Young-sam decided the company was too big to fail and ordered financial lenders and authorities to prevent its collapse. The repercussions cost Korea untold amounts in terms of international credibility.
Today’s economic slowdown is no different. You performed admirably in sticking to stimulus measures to protect the economy from the global financial crisis in 2008. But you should have cracked down even harder and accelerated restructuring. Ailing companies and mutual savings banks should have been cleaned up, and consumer debt more closely scrutinized. Your failure to see this through to the end has backfired, resulting in a weaker economy mired in a slowdown.
In the world of business and economy, everything comes with a price. The half-baked economic stimulus measures implemented during the former Kim Dae-jung administration led to a major credit card crisis during the subsequent Roh Moo-hyun government. It may be hard to carry out restructuring with the presidential election approaching in December, but it is crucial for the country’s future.
You must not be constrained by the budget trap. When I suggested the government abandon its obsession with a balanced budget, many asked if that was the same as calling for supplementary budgeting. But I am not suggesting an immediate increase in the budget. If the economy muddles along without any meaningful growth for a sustained period, various social problems are bound to surface. Delayed payments of public health insurance fees are already on the rise. When restructuring is executed, jobs will be lost and financial institutions will become weaker. Under these conditions, public finance should be revved up. The government should shoulder the burden in terms of overdue health insurance fees, unemployment subsidies and bailout funds. But it cannot deliver the kind of help needed if it remains obsessed with staving off a budget deficit. New jobs may require a budget increase. What I suggest is the elimination of exorbitant state projects, like renovating city rivers and building new airports.
A long-term fiscal policy is needed to reinvigorate the economy’s growth potential. Manpower must be nurtured, more clinics built and schools upgraded to the standards of advanced countries. Such moves must start now to reap the results in a few years’ time.
*The author is an editorial writer of the JoongAng Ilbo.
By Kim Yeong-ook