A presidential blind spotFormer South Korean President Chun Doo Hwan, who served from 1980 to 1988, urgently summoned his senior secretary on economic affairs one day. Park Yung-chul, now a professor at Korea University, was confronted with a question about the Bank of Korea and its demand for independence. Park explained calmly that the central bank should in principle be authorized to have sovereignty over monetary policy. Chun listened intently and finally nodded in understanding.
During a vice-ministerial meeting, Chun pointed to the vice minister for the economy. He asked him whether it was better to raise or lower interest rates. Confounded by the sudden question, the vice minister hesitated and then said it was better to lower them. The president smiled and answered proudly, “No, it’s better to leave them up to the market.”
The economy was in boom times while Chun was in charge. He inherited the fruits of the industrialization drive of Park Chung Hee and the economy enjoyed the three lucky lows: A low U.S. dollar, low oil prices and low interest rates. On the economic front, no other president was as lucky as Chun. But we cannot entirely call it fortuitous luck. Although the general-turned-president had no real knowledge of economic affairs, he sought out and recruited competent bureaucrats and scholars to assist him and he tended to respect their opinions.
Last month, President Park Geun-hye made her first official visit to the United States. She stopped in New York and enjoyed a huge gathering of Korean-Americans living there. But her itinerary did not include the usual ritual of visiting the world’s financial capital. She didn’t stop by the New York Stock Exchange to ring the opening bell and meet with heavy-weight financiers on Wall Street (as President Roh Moo-hyun did in 2003, shown in the photo above). One former economy minister pointed out the mistake of missing that stop. Coincidentally, Shin Je-yoon, chairman of the Financial Services Commission and an expert on international finance, was not a member of her entourage on the U.S. trip.
In April, Ho Ching, chief executive officer of Temasek Holdings, Singapore’s state investment agency with revenues of $12.7 billion on a $198 billion portfolio, made a visit to Korea. She is also the wife of Singapore’s Prime Minister Lee Hsien Loong.
Her husband’s father, Lee Kuan Yew, is referred to as the Father of Singapore and he governed the city-state for three decades, turning a small colonial outpost with no natural resources into one of Asia’s largest economies.
The first lady, who oversees a country’s sovereign wealth fund, hoped to meet with Park. But the Korean president was too preoccupied with the North Korean crisis and could not make the time. Many financiers were disappointed that she didn’t meet with Ho, who brought all of the senior executives of Temasek to Seoul. She wanted to gather 500 global financiers in Seoul. She had been that interested in investing in Korea. She met with several institutional players. “No matter how busy the president may have been, she should have made time to meet with Ho,” one former senior economy-related government official said.
If the economy is the body, finance is its heart. It pumps blood through the body. In economics, money is the bloodline. The money must flow smoothly in order to make the economy run. The heart must not be too big or small. Most importantly, it must never stop pumping. If there is a problem in circulation, the body shows signs of paralysis. If the bloodline is disrupted and blocked, the economy debilitates and eventually comes to a stop.
We have experienced such breakdowns before: During the Asian financial crisis in 1998, the credit card bubble popping in 2003, and the global financial meltdown in 2008. Such financial emergencies can jeopardize any nation at any time, especially with the globalization of finance and the rapid flows of so-called hot money. A country can be at risk if its president is not interested in finance. Japanese Prime Minister Shinzo Abe even called finance a top priority in his government’s policy.
The president needs not be an expert on finance. But she must meet experts and listen to their opinions. She should not exclude anyone just because they served in previous governments. Sakong Il, chairman of the Institute for Global Economics who served as finance minister under Chun, also was active in the governments of Kim Dae-jung and Roh Moo-hyun. He played a big role in bringing the G-20 global summit conference to Seoul. In finance, experienced veterans are more than helpful: They’re a necessity.
*The author is business news editor of the JoongAng Ilbo.
By Chung Sun-gu