Park’s economic scorecardPresident Park Geun-hye has already used up two-thirds of her five-year term. There are many factors considered to evaluate a president’s performance, but the economic front is one that people feel closest to their hearts.
Park’s government receives poor marks in economics. In no other government has the economy been restricted to growth of under an average of 3 percent a year. So is it fair to say her government fared poorest in economic performance?
It’s not easy to make an immediate evaluation of a government’s economic performance. One criterion is the misery index, an indicator calculated by adding the seasonally adjusted unemployment rate to the annual inflation rate. Since it reflects a direct impact on everyday lives, a high misery index would translate to a bad evaluation of the way the government has run the economy.
Some organizations exclude year-on-year changes in GDP in gauging the misery index. People feel less miserable at a time when their incomes grow despite a spike in unemployment and inflation. Other factors such health, income distribution, leisure and environment can determine living standards, but it is not easy to gauge and compare them in indices.
Yet economic indicators like the misery index alone cannot form an objective judgment of the economic performance of a government.
For one thing, public policy results usually come out after a president’s five-year term ends. After the economy was swept up in the Asian currency crisis in late 1997, which led to an international bailout, the Korean economy underwent a stringent restructuring and austerity program. The economy contracted 5.5 percent while unemployment hit 7 percent in 1998, but the performance cannot be entirely blamed on a government under a president who took office in February 1998. A doctor in the operation room of a critical patient cannot be found accountable for his state without knowing how he ended up there.
Second, each government holds power in a different international context. The economy under President Roh Moo-hyun grew at an average 4.5 percent between 2003 and 2007 — a relatively high figure — because the global economy enjoyed a boom from technology advances and innovations as well as the staggering growth of China. Growth slowed to 3.2 percent under the government of President Lee Myung-bak in the wake of the 2007-08 financial meltdown. Korea’s economic performance hinges on global economic performance as it is driven mostly by exports.
Third, there are variants in the economic structure and policy environment. In the early development stage, the labor force grows fast, investment returns are high and productivity advances quickly through the emulation of technologies by advanced countries.
When the economy reaches a mature stage, however, demographics and investment return growth slows, and it is not easy to stay ahead in technology. Economic growth inevitably loses steam. In authoritarian governments, economic policies can easily be pushed forward regardless of other costs. But public policies are now scrutinized by a democratic legislature. It is therefore not entirely fair to blame a poor economy on the president or government.
Still, we can make judgments through comparison of past governments. In the misery scale that includes GDP growth, the economy under current and former conservative governments has been most hard. But in the international context, they would get a different evaluation.
When comparing Korea’s misery index against an average of 39 developed countries, the government under Roh scored poorer than that of Lee.
Harvard University economist Greg Mankiw advises making a judgment of a president’s economic performance based on what kind of important polices were implemented during his or her tenure, instead of the outcome. A president’s economic performance should be rated positively if he or she carried out landmark policies like the real-name financial transaction system and bilateral free trade agreements with China and the United States. Yet, an evaluation of what public policies end up being helpful to the country in the longer run is not that easy.
A president’s economic appraisal will therefore take into account both the endeavors and results. He or she should be judged based on how hard they tried to make the economy better and how people’s lives changed for the better as a result.
It is still too early to judge President Park on her achievements with the economy. She also has enough time to make amends. But so far, she has stopped short of demonstrating any will or leadership to ease the pains of the people or address challenges in corporate and labor reforms, our aging society, and a lag in innovations. She could be tempted to resort to populist policies during the latter part of her term. Confronting tough challenges ahead, the president must concentrate on the fundamentals if she really wants to leave meaningful footprints on the economic front.
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, Jun. 6, Page 23
*The author is an economics professor at Korea University.