The risk of accepting stagnation

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The risk of accepting stagnation

How much does economic performance weigh on presidential elections? The answer is pretty simple in the United States, which has a two-term presidency. The incumbent obviously prays for better economic data, which would improve his chance of re-election. He would employ stimulus plans to accelerate growth and lower the unemployment rate to sell his competence in economic governance on the campaign trail.

His rival obviously wishes for the opposite. A late-term economic downturn is easy ammunition for attacking the president and leads to a slogan that proclaims he can do a better job of restoring the economy. He would underscore and exaggerate the ongoing economic plight and government impotence.

At the same time, he would vehemently oppose any new policies to aid the economy. He may fear he would have to assume the risks and consequences of stimulus measures if he gets elected, but most of all he does not want the president getting credit for any economic improvement. The more his predecessor messes up, the better the new president will look to the public. It is easier to improve a poor economy than maintain a strong one. In a cyclical curve, there is a greater chance of the economy bottoming out than heading further north.

But the equation is not so simple in a single-term presidency system like ours. The current president would not want to retire with the economy in the dumps, but he is not as desperate as one who has a second chance in office. He would attempt to revive the economy, but wouldn’t necessarily go all out.

That puts the presidential candidate of the ruling party in a tricky spot. She - in the case of this election - would want to keep a good relationship with the outgoing president and needs positive late-term economic numbers to get off to a strong start. She can argue for continuity in policy and persuade voters not to shift to the opposition. If the incumbent president is extremely unpopular and does not get along well with the candidate, she will be tempted to keep her distance and promise a full makeover. In the latter case, how poorly the government has done with the economy won’t matter that much.

The opposition candidate is in a situation similar to his American counterpart. He needs the incumbent to fare poorly on the economic front. That would make negative campaigning against the government as well as his rival from the ruling party easier. The president’s unpopularity would be a windfall. Campaign strategists can just recycle the old catchphrase “Change vs. More of the Same.”

The way the economy trudges along, the wind blows in favor of the opposition. The economy, which grew less than 3 percent in the first half of the year, is expected to do worse in the second half. Most believe it will fail to meet this year’s growth target of 3.3 percent.

President Lee Myung-bak, who restored the conservative party to power with promises to deliver a strong economy, is on course to leave office with the economy in a worse state than his predecessor, Roh Moo-hyun, whom he attacked as impotent in economic management. The opposition could not be happier. It only needs to pound on the government for failing to restore the economy and urge voters to give the opposition a chance.

But strangely, we hear none of it. The opposition is criticizing every flaw and mistake the government made over the past five years except how the economy has slowed and generated few meaningful jobs. Neither the frontrunner from the Democratic United Party, Moon Jae-in, nor potential dark horse Ahn Cheol-soo speaks convincingly on economic challenges. It is unclear whether they believe a slowdown is inevitable or are unsure if they can do any better.

The president and his government is not entirely to blame for the growth plateau. The demographic factors - an aging population and low birthrate - have begun to whittle away at economic vitality. The worldwide recession sparked by the fiscal and liquidity crisis in Europe also pushed the economy and policy actions into gridlock. Reduced income from debt burdens and the real estate slump dampened spending, while depressed countries demanded fewer exports. The structural economic downturn cannot be fixed easily.

But the bleak picture should not scare off aspiring leaders. The country’s future will be at risk if they settle for an economy moving at a snail’s pace. An economy generating growth of less than 3 percent cannot offer decent jobs for young people. All the grand ideas of the social welfare system will go down the drain. If they deem the current slowdown will be protracted, presidential candidates should reexamine their economic platforms.

They must envision what kind of economy they want to lead when they take power. They must think hard on what they can or cannot do in a sluggish economy. A welfare-rich society may not be the best choice.

It’s time they look hard at the economy and come up with a realistic action plan.

* The author is an editorial writer of the JoongAng Ilbo.

by Kim Jong-soo
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