The forest and the trees
It’s not difficult to pick out a politician at a wake. A politician doesn’t look straight into the eyes of the person whom he or she is greeting. A politician is too busy scanning the room to see who else is there. That way, he or she can make eye contact with more people. If a person moves onto another conversation before you have finished shaking hands, you can bet he is a politician.
I bring this up to talk about Deputy Prime Minister for the Economy Choi Kyung-hwan. A retired, veteran journalist who has known Choi since he was a junior official at the Finance Ministry described him as a politician to the bone when the former ruling party floor leader was named deputy prime minister and finance minister last June. Even in his days as a bureaucrat, he was more interested in politics than economic policies.
The journalist thought Choi finally found a career that fit him when he entered politics. As soon as he was named economic czar, he approached economic affairs from a politician’s perspective. Many advised Choi that he should forget he was once a politician once he assumed his new role. Those were wasted words. Choi can’t help but choose words that will be pleasing to the ears of the public.
The first thing Choi said after he was appointed was that the real estate market needed to be revived. He suggested easing restrictions on borrowers of mortgages. He believed that if it became easier to borrow, more people would buy homes. He ignored the side effects, namely a snowballing of the nation’s total household debt. The mortgage regulations were eased and by the end of December, household debt hit 1,089 trillion won ($962.9 billion). In just three months, there was a surge of nearly 30 trillion won - the fastest gain ever. Choi admitted that household debt increased but we shouldn’t worry because those new borrowers were reliable when it comes to paying off their loans. Financial experts, however, were far less sanguine and raised warnings about the fast rise. They advise a reversal of the easing of mortgage requirements.
Choi also spoke of a strong won. He said if the value of the local currency went up, consumers would spend more. Investors reacted fast to the finance minister nominee’s words. The won jumped and an assistant finance minister had to make a verbal intervention. Choi caused ripples even before he actually started his job.
About eight months have passed since Choi took office. His policies are incoherent to the point of randomness. It is difficult to tell where they lead. It’s as if he’s looking at you while shaking someone else’s hand. The government said it will spend 10 trillion won left in last year’s budget entirely in the first half of this year. Last week, Choi spoke of the need to boost wages in order to bolster domestic demand. A few days ago he suddenly floated the idea of creating a local version of Franklin Roosevelt’s New Deal to vitalize domestic demand and the construction sector. He was revisiting economic policies used and discarded by governments of the past.
Choi was controversial from the beginning. Soon after he took office, he embarked on a fiscal expansion and asked the Bank of Korea to follow suit with monetary easing or an interest rate cut. His argument was that Korea must be prevented from falling into Japan-like stagnation. The Korean economy suffered a phobia about falling into the Japan pin throughout last year. Consumer sentiment cooled off. Few dare to spend when the top government official declared the economy is looking at a long slump.
Choi focused on real estate to revive the economy in general. But then he lost interest in that. Early this year he declared the government would put top priority on the reform agenda. He proclaimed that the economy cannot be restored unless the labor sector is totally reformed.
Choi has sown fistfuls of seed in various fields but hasn’t seen many sprouts. Even if you admit that the Korean economy is troubled on multiple fronts and there is no simple cure, the doctor’s prescriptions are too varied and way experimental to the point of wackiness. Choi was handpicked by the president to save the economy. He promised to live up to the president’s expectations and grandiosely announced he would embark on his expedition into uncharted territory without a map. But what he ended up doing was playing Whac-a-Mole.
When making economic policies, it’s important to see the forest as well as the trees. The details must build to a bigger picture. It’s hard to tell what Choi’s picture is. Choi should be forced into a chair to draw the big picture.
JoongAng Ilbo, Mar. 12, Page 34
*The author is an editorial writer of the JoongAng Ilbo.
by Yi Jung-jae