Hitting all the wrong buttonsElection season must be coming judging from all the hustle and bustle on the political stage. Rival factions in both the ruling and main opposition parties are venting various emotions following the surprise announcement during the holiday break by the leaders of the two parties. Kim Moo-sung and Moon Jae-in, heads of the ruling Saenuri Party and main opposition New Politics Alliance for Democracy respectively, agreed to revise the election law to include the general public in primaries to select candidates for the April general election. In politics, there is neither permanent foe nor friend. For mainstream politicians, this can be a win-win deal. Lawmakers stake everything on parliamentary elections. Now I begin to understand the meaning of a comment by Deputy Prime Minister Choi Kyung-hwan during a ruling party dinner party last August.
Choi, who used to be the floor leader for the Saenuri before he was handpicked by President Park Geun-hye to spearhead economic policy last year, pledged in the meeting that he would do his utmost to save the economy to help the party win the general election. His comment - together with a toast by Minister of Interior Chong Jong-sup to the party’s victory in the next election - produced an uproar. The opposition demanded an apology, which Choi flatly denied. He said there was nothing wrong about voicing his intention to revive the economy. Chong received a warning from the National Election Commission, but Choi walked away without even a yellow card. If you ask me, I think what Choi has said was worse.
Choi is the deputy prime minister in charge of economic affairs. If the navigator of economic policy is swept up in a political tide, economic policy can be twisted in unwise ways. This is how populist policies are born. The equation of economic revival and electoral victory can only come from a politician’s head. No bureaucrat can safely express confidence in economic recovery. Only after they stepped out down from their posts did deputy prime ministers Cho Soon and Lee Hun-jai remark that the economy was all about politics. But their observations were meant more as a warning to keep the temptation of populist policies at bay.
There were worries when Choi took up his post in June 2014. I was skeptical and anxious when he announced he’s lift mortgage regulations to stimulate the real estate market as a means to accelerate a recovery in the economy. I was worried that the measures would end up increasing household debt without actually aiding the real economy. Home sales improved but the rent crisis only worsened. The overall housing market became more depressed. Household debt snowballed by 110 trillion won ($93.5 billion) to reach 1,130 trillion won, a dangerous level for the Korean economy.
I am beginning to seriously wonder where the finance minister’s goals lay and whether all his talk about saving the economy comes down to winning the general election. Choi has been championing the need for reforms. But nothing has been done. It was the same under the Lee Myung-bak administration. There were warnings about ailing companies like STX, Dongbu and Tongyang Group. But the administration put off any serious corporate restructuring. Those companies blew up under the current government.
The Korea Development Institute, a state-run think tank, has advised that zombie companies that survive on loans must be cleared out for the sake of a sounder corporate environment. The capital adequacy ratio of the Export-Import Bank of Korea, for instance, has fallen below 10 percent after it bailed out struggling shipbuilders. The soundness of a state bank has deteriorated to the level of a consumer loan company. The state-invested Korea Development Bank is incurring losses because it must nurture over 100 ailing companies.
While leaving urgent restructuring behind, the government is focusing on stimuli actions that can produce immediate improvements. Choi recently demanded economic offices to come up with any measures that can help the economy. The latest gimmick was Korea Black Friday, two-week stretch of sales across the nation following a similar event called Korea Grand Sales over the summer. The government has arranged something that retailers themselves should think of. It can hardly be considered a policy that can aid the economy in the longer run. Critics are calling it a steroid-like policy intended to help with elections. Anabolic steroids have immediate effects, but when taken repeatedly can ruin the muscles.
It is no wonder people are getting suspicious. A good doctor is discreet with medicine. He focuses on strengthening basic health. A bad one has his eye on making fast money through strong doses. Chung’s comment was senseless, but harmless. Choi’s prescription can inflict lasting damage on the economy.
JoongAng Ilbo, Oct.1 , Page 30
*The author is an editorial writer of the JoongAng Ilbo.
by Yi Jung-jae