[Viewpoint] It really is the economy, stupid

The buzzwords on the campaign trail leading up to the December presidential election have been economic justice and social welfare. But all the fuss over “big ideas” about building a social welfare state may end up as no more than political rambling. While politicians are busy playing with the noble concept of institutionalizing economic equality, an economic slowdown - even possibly a recession - has crept up on our doorsteps.

They may soon be yanked down from their high horses adorned with banners of “empathy and harmony” by an angry crowd yelling out “It’s the economy, stupid!” All the lengthy talk and debate about economic and social justice through enhanced welfare infrastructure may go to waste with the familiar election trope “The economy, stupid” dominating the remainder of the campaign trail. It may all come down to who can best save and rejuvenate the economy.

The economic risks and dangers we face this year are different from those of the past. They are more precarious and unpredictable. When crisis loomed in the past, alarm bells rang out from the financial sector. Foreign investors cashed in and packed up, wreaking havoc on stock prices, exchange rates and bond yields. Economic players were warned and armed to face the battle. The government opened up its coffers and pumped out public funds to keep the liquidity flowing while companies tightened their belts and aggressively sought out export markets. Consumers were also in better financial shape.

But the looming danger is sneaking up like an underwater torpedo. It is undetectable and unprecedented, skipping the usual first target of the financial sector and moving to hit and then sink the real economy. Stock prices, foreign exchange rates and interest rates remain intact and give no ominous signs. Without time for proper vigilance, production, sales, consumption and exports are quickly sagging. Exports in July plunged 8.8 percent from the same month a year earlier and the gross domestic product in the third quarter is expected to generate no growth. Economic casualties are starting to show, and the toll will likely grow.

There seems to be no easy way out. The overseas front provides no relief with the European and U.S. economy in a slump and the Chinese market also struggling with its soft landing. The government, walking a debt tightrope, can hardly afford to be aggressive with its fiscal spending. Wary of darkening economic prospects, companies have become less enterprising, sending capital investment into minus territory since last spring. Consumer spending is also in a downward spiral. There is no discernible answer with sluggish overseas and domestic demand tethered to restrained fiscal spending. We may just have to hang in there until the global economy picks up.

What is most worrisome is the toll on heavily debt-ridden households. Families are squeezed under debt and plunging home prices. The government has come up with pre-workout and debt refinancing programs, stopgap measures that will only protract the problem. Debtors are forced to pay up with more debt and live on the edge until creditors pull the plug. All may be well if the economy turns for the better and income as well as housing prices improve. But if the economy dips further pushing house values further down, households could be hit with a bombshell. The country could face catastrophic disaster if the economy does not pull out of the recession. The talk of economic justice and welfare plans could evaporate as wishful thinking.

Presidential candidates will have to revise their platforms and campaign strategy fast. Voters desperate to make ends meet will want realistic plans and guidance. The grandiose slogans that read “People Come First” would have to be rephrased to “Economy Comes First” and “Country Where Our Dreams Come True” to “Country Where The Economy Will Be Saved.” It could be an embarrassing turnaround for politicians, but in times of crisis, loss of face and compromise may be inevitable.

Words like house poor, zombie neighborhood and debt-caused deflation that were once foreign to our ears now appear in newspapers. They suggest many live with or are under threat of such realities. Presidential candidates and parties still have their heads in the clouds with little sense of what is going on in the real world.

In a recent poll asking the public what they expect most of all from the incoming government, 36 percent of the respondents said stable prices and 32.3 percent said more jobs. Those picking economic justice totaled 12.8 percent, and better welfare benefits 6.7 percent. The gap is wide between everyday problems of ordinary people and the ideas of presidential candidates. I hope they realize that they are barking up the wrong tree before it is too late.

*The author is an editorial writer of the JoongAng Ilbo.
By Lee Chul-ho