Stock prices have doubled and the local currency has depreciated more than 50 percent against the U.S. dollar over the last two years. Corporate profitability and exports have all surged. Jobs increased sharply. This is the scene across the sea in Japan.
So-called Abenomics, based on °∞three arrows°± of fiscal stimulus, monetary easing and structural reforms led by Prime Minister Shinzo Abe to shake Japan out of the deflation and ennui that has crippled the economy for more than two decades, has been given a shot for the last two years. The prescriptions, which were pared back with a sales tax that was imposed in April, may be gaining new traction after the landslide victory by the ruling coalition party in a snap election in December.
Skeptics are still doubtful and warn of a fiscal crisis from reckless money-pumping and overblown government debt. But the economic drive by Abe, which has produced a policy moniker as recognizable as the Reaganomics of U.S. President Ronald Reagan and Thatcherism of British Prime Minister Margaret Thatcher, has gradually generated support from the Japanese people and nods from experts around the world. Nobel laureate Paul Krugman last year wrote a column arguing that the West needs to learn lessons from Japan and its aggressive way of dealing with its problems.
South Korean authorities also have implemented strong doses of stimulus actions over the last two years under President Park Geun-hye. Yet they have not scored well with companies, consumers or experts. The biggest reason is that it isn°Øt clear what °∞Geun-hyenomics°± is.
At the early stage, the administration pledged to revive the economy through innovation, democratization and a stronger domestic economy based on 42 °∞action plans.°± Last year it laid out a three-year road map toward that goal. Charismatic politician Choi Kyung-hwan was made deputy prime minister to spearhead economic policy. He promised deregulations and reforms in labor, education and the public sector to steer the economy into new waters. Amid the array of promises and policies, it is hard to know what was supposed to come first - immediate recovery or long-term structural reform. The °∞creative economy°± agenda does not clarify the role of the government and private sector. What part the Ministry of Strategy and Finance and the Ministry of Science, ICT and Future Planning have and how they will work on the agenda was also blurry.
The government should revisit and redesign its economy policy under a big picture framework of the °∞creative economy.°± The creative economy should not be narrowed to government promotion and incubation of new sectors bringing together culture, arts, science, technology and industry.
Proponents of the new growth theory since the 1980s argue that sustainable growth is now possible through innovative ideas and intelligence advances instead of large corporate investments and emulation of mainstream technologies. Attention not only should be given to promotion of research and development of new areas in computing, the Internet, robots, renewable energy and 3-D printing, but also in recreating management systems to improve corporate ownership, intellectual property protection and the financial sector. The system should first of all ensure all economic players receive fair and equal opportunities. The growth model should incorporate a sustainable social welfare system where the majority feels secure and happy.
Most importantly, talent and innovative minds must be nurtured. Through reforms in the education system, more people should be encouraged to venture into business and smaller businesses should be able to grow bigger. Speaking at the Asean-Korea CEO Summit held in Busan in December, New York University economics Prof. Paul Romer advised Korea to rethink whether the industrial structure centered on large chaebol was not hampering the growth of new entrepreneurship and an education system obsessed with grades was not undermining creativity in students.
A country in which math and science talents all want to go to medical school and become plastic surgeons cannot produce innovative entrepreneurs like Bill Gates. More students should aspire to study industrial and computer applications and become engineers and entrepreneurs instead of wanting to become physicians. Romber joked that the highly competitive Koreans would come out on top if they had a test on creativity.
The Korean economy is the 13th largest in the world with the eighth largest amount of trade. Yet the country does not have core technologies or creative ideas it can be proud of. According to the World Economic Forum°Øs global competitiveness scale, South Korea ranked 26th and Japan sixth. In availability of scientists and engineers, it was 42nd compared with Japan, which was third. Our creative economy should be fostering talents.
In ancient Greece, Sophocles wrote, °∞One must wait until the evening to see how splendid the day has been.°± The Park administration must get more focused if it wants the finish the day well and prepare for a good evening.
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, Jan. 9, Page 31
*The author is an economics professor at Korea University.
by Lee Jong-hwa