We need to grow to surviveOut of the 30 largest Korean business conglomerates, only six plan to increase capital investment next year, adding to more bad news for a local economy facing challenges at home and abroad. Instead, eight groups will cut back investment next year while 16 others plan to invest no more than this year. As many as 22 have no new business investment plans, which could further dent and restrict the incoming government in policy maneuvering to prevent the economy from sagging further.
Sluggish corporate investment reduces jobs and income, dampening consumer spending which again leads to more scaled-down investment and grinds the economy in a vicious cycle. Worse, corporate spending may not pick up any time soon. Kang Bong-gyun, who served as finance minister under President Kim Dae-jung and ruling party legislator during the last government under President Roh Moo-hyun, recently predicted economic growth could stay slow at about 3 percent throughout the next five years under the new government. He warned the economy could fall into a trap of meager growth and criticized presidential hopefuls for paying little heed to this danger.
Instead, he said, they are vying to dampen corporate investment in the name of economic democratization and concentrating budgetary spending to enhance social welfare security. He urged the incoming government to prioritize economic policy that would spur growth.
Nothing he has said differs from our repeated call. Some have said the country needs to veer away from pro-growth policy that has no trickle-down effect on broader society. It is true that the majority of the population has missed out on the old trickle-down theory and deepening polarization needs to be fixed.
But there will be nothing to trickle down and no wealth to share if there is no growth. Without growth, there is no way to ease income, wealth and social disparities. Growth can help rationalize the appropriation of wealth, but fair distribution cannot serve to stimulate growth. What is crucial is strengthening the underlying potential for the economy to grow further. Former finance minister Kang also advised that the government must redress economic policy framework primarily to foster underlying growth rather than stimulate the economy for immediate effect.
The government has its tasks and direction all laid out. It must increase our economic potential. The economy cannot pull itself out of the sluggish pit by running at its current pace. The new president should take note of this advice.
with the Korea JoongAng Daily
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