Heads out of the clouds, pleaseThe camps of the three presidential candidates are finally turning their attention to economic growth. Increasing social welfare benefits and ramping up economic equality is important, but they are not viable options unless supported and financed by stable growth. Until now, the candidates have been preoccupied with programs to boost the public welfare system and “economic democratization,” while neglecting key ways of spurring growth and creating jobs. However, this has led to irresponsible welfare pledges and much chaebol bashing.
The domestic economy is seen as heading for a period of stagnation in the 2 percent region amid a strengthening Korean won and sluggish overseas demand for exports. Meanwhile, the country’s largest shipbuilder, Hyundai Heavy Industries, announced it is receiving applications for voluntary early retirement for the first time as it seeks to trim its workforce by 10 percent, indicating the dire state of the industry.
Japan serves as a good example of how poorly planned campaign promises can have disastrous outcomes. The Democratic Party of Japan pledged in 2009 to slash pork-barrel spending while increasing pensions and offering free medical services and child care allowances, among other populist changes. But its grand ambitions fell apart at the seams because the government had no means to finance these and faced much resistance to a proposed sales tax hike. Japan’s credit rating was cut and now stands on par with Korea’s due to its reduced tax revenue and ballooning government debt. It only took two years for the Democratic Party to realize that austerity in public spending is only a partial solution. It cancelled the social benefits it promised during its campaign and apologized to the public. It is now in danger of losing power in the upcoming election.
Presidential candidates must read Korea’s economic reality correctly. Welfare programs and economic justice can only be delivered when the economy is in good shape. The economic climate next year is not looking favorable amid ominous signs in major markets such as the U.S., Europe and China. Excluding Samsung Electronics and Hyundai Motor, most large companies are grinding along in need of cost-saving measures to stay afloat. As such, the first task the incoming president must address is finding ways to fight the slump. While the candidates are busy touring street markets and rally sites of laid-off workers - in other words, tending to the weak and neglected - they also need to see what’s happening at industrial work sites and come up with realistic targets based on stable growth.