Choi Kyung-hwan, deputy prime minister for the economy, is in a Catch-22, or a hopelessly no-win situation. He promised to chart a new route to revive the economy. But a recovery is nowhere to be seen and he is being attacked by all sides. Moon Hee-sang, head of the main opposition New Politics Alliance for Democracy, declared in an address to the National Assembly that so-called “Choi-nomics” is a complete failure.
His accusation is not entirely wrong. The economy has not gotten better and shows no signs of turning the corner anytime soon. Hopes were high when Choi, an economics-savvy politician who is close to President Park Geun-hye, was given full authority to jump-start the economy out of its stall. But stock gains were short lived and the economy is hardly moving. Corporate investment and consumer spending remain sluggish.
Exports too have slowed amid a super-strong U.S. dollar and weak Japanese yen. Our big brands of products like smartphones are facing fierce competition from Chinese competitors and losing competitiveness in the global market. The real estate market that briefly showed vitality amid a series of stimuli measures returned to its comatose state. Sales are scant and rental prices are sky-high. The economy is hit by a double whammy both domestically and externally. Prospects for next year are equally gloomy. It is not easy to be at the economic helm at times like these.
Has Choi-nomics failed? It is too early to say. Just four months have passed since Choi took office. Few things could have delivered results in such a short period. The stimuli and deregulation measures Choi has come up with are still pending at the National Assembly, which itself was almost shut down due to wrangling over the Sewol probe law. Choi’s policies have not been really given a chance. He may have cause to feel the criticism is unjust.
But the government cannot blame everything on delayed legislation. The economy could not have been fully turned around even with the new laws. Not much could have been done to improve external conditions. But the success rate of the prescriptions to improve conditions at home is also doubtful.
Choi-nomics can be defined by the economic policy direction announced in July: revival of domestic demand, stability of the real economy, and innovative retooling of the economy. In short, the primary concentration has been on domestic demand. For that goal, the government would maintain an expansionary posture in fiscal and financial policies, promote a benign cycle of spending in households and corporations and remove red tape in the real estate market. The first and third are typical short-term stimuli actions. The second is psychological treatment. The tone of eagerness in the stimuli measures was enough to boost sentiment in the stock and real estate markets. The problem was the confidence didn’t last. Lack of legislative support was but one factor. The stimuli measures themselves were not that realistic in the first place.
Under an expansionary slogan, the government said it would introduce spending of 12 trillion won ($11.1 billion) from its budget and 26 trillion won via financial assistance. A supplementary budget did not seem feasible. Economic plans were pushed back due to a shortage of tax revenue. Financial assistance also was not possible due to a lack of funding. The Bank of Korea lowered the key interest rate, but the effect so far hasn’t been much.
Choi-nomics helped to boost sentiments but could not fundamentally aid the economy. The short-term stimuli actions were not incorporated into a long-term restructuring and reorienting of the economy through reforms and deregulation. Without mid-and long-term strategies, short-term stimuli measures can’t do the trick. The government should have presented a long-term vision first. Because it lacked a long-term strategy, its short-term policies and actions failed to work with any unity or consistency.
Choi-nomics is not based on a radical economic theory or concept. There is no real need to evaluate the policies. Results are what matter at the end of the day. Economic conditions have changed. Policies also should be adjusted. Next year’s economic plans need more fine-tuning. It is time Choi shows what stimuli is really about. JoongAng Ilbo, Nov. 5, Page 28
*The author is an editorial writer of the JoongAng Ilbo.