The vision thing
The year’s end just didn’t feel normal. People didn’t feel like spending money while the economy was doing so badly. To be honest, they didn’t have the money to spend. Few received special year-end bonuses. Even the luckier ones only got a paltry sum. Most were just thankful they survived the year amid concerns about restructurings and cutbacks. Both large and small companies cried for help while self-employed people just barely survived. The new year has dawned amid such gloom.
The year 2015 doesn’t come with a huge amount of hope. Perhaps that’s why the year’s end felt so miserable. The government usually announces rosy and upbeat economic plans for the new year at the year’s end. But this time around it did the opposite. The government said it was hopeful that the coming year would be better and then revised downward the 2015 growth outlook to 3.8 percent. Maybe it thought it would be better to be realistic about how things stand. Instead of pledging economic recovery by bolstering domestic demand, it directed economic policy toward structural reforms.
It is true there is little the government can do to drive up domestic demand immediately and structural reforms are necessary for the economy’s sustainability. But it is wrong to give up on domestic demand and move onto reforms before the government does everything it can. The government need not choose between recovery and reform. One does not come at the expense of the other. In fact they must be driven as two wheels to make Korea Inc. run smoothly. They should be pursued as a single agenda, not separately.
Reforms should not be delayed because of the need for immediate stimuli. The economy cannot be saved if reforms are carried out while it is fragile and ailing. President Park Geun-hye stressed the need for reforms, saying surgical operations are often necessary to heal the sick. “Reforms are always opposed. But if ills are left unattended, the economy cannot be saved and will be a huge burden to the future generations,” she said. She is not wrong but she did miss a point. A patient cannot go into a surgery if he or she is not strong enough. A doctor does not immediately operate on a patient who is too weak and fragile to withstand a complicated operation. The patient must be fed with necessary nutrients and treated to be strong enough to survive a large loss of blood during an operation. The economy is no different. It needs to build resilience before it goes into the surgery room to remove the source of illness. Both actions are necessary to revive the economy.
Structural problems of the Korean economy have already been diagnosed. The biggest need is a new economic paradigm to replace the outdated growth model of running on exports made by large manufacturing companies. Domestic demand and smaller enterprises must be made to contribute more to the economy. A shift in the growth paradigm can not only overhaul the entire economic framework but also help to stimulate demand. That is why Choi Kyung-hwan, the deputy prime minister and finance minister, has been championing the vitalization of domestic demand in order to incite recovery. Exports won’t be hurt if more attention goes to domestic demand. Large companies will not be victimized in order to aid smaller enterprises. Exports must be kept strong and large companies should do well overseas to maintain Korean trade and brand power. Focus should be given to domestic demand because it has been neglected and smaller enterprises should receive more encouragement to give traction to the economy.
The government targets balanced growth based on exports and domestic demand. But it lays out no new or specific actions to promote exports or domestic demand. It aims to bolster the services sector to generate demand and jobs but does not offer any new ideas on how to do that. It merely repeats what has been said over and over in the past.
Policies are of no use if they fail to see the bigger picture and the place of our economy in the world. Because the focus is unclear, the effect becomes questionable. The government must set goals clearly and design and direct policies in order and with resolution. And the aim should be one: reviving the economy.
JoongAng Ilbo, Dec. 31, Page 24
*The author is an editorial writer of the JoongAng Ilbo.
by Kim Jong-soo