Overcoming the BrexitFour days after the bombshell news from the United Kingdom, the world is reeling from a plethora of uncertainties. But one thing is clear:
the UK’s exit from the European Union heralds the advent of protectionism and new isolationism in the global economic, political and social frontiers. The spread of anti-globalism will pose daunting challenges to our economy based on exports. As the retrogressive drive could wreak havoc on our economy, we must find national strategies to deal with it.
It all begins with understanding of how Brexit started. Different from previous global financial crises, it did not originate with financial bubbles or a crisis of the real economy. Instead, it was caused primarily by political reasons. We must take a different approach this time to tackle it.
Policy coordination among developed economies will be tested first. The equity markets in emerging economies like Southeast Asia — most susceptible to outside financial crises in the past — were rather resilient to the shockwaves this time. If the United States, Europe and Japan can coordinate effectively, it could avert diffusion of the crisis. Otherwise, it would have a bigger impact on our economy.
We must prepare for the prolongation of the crisis. If France and the Netherlands decide to follow in the footsteps of Britain for politically-motivated reasons, it could provide fertile ground to financial crisis. With even “cyclic departures” of EU member nations in mind, our government must foment our economic fundamentals. It must quickly wrap up the corporate restructuring and reforms on the labor and public sectors. It also must strengthen its shield of foreign reserves and resume a currency swap with the United States. Despite the strength of our economy and foreign reserves, it failed to withstand the shockwaves from overseas financial markets at the time. We must remember that our financial markets could rapidly regain stability after concluding a swap deal with Uncle Sam.
The government must come up with short-term strategies as well given our markets sensitive reactions to small shocks from the outside. 24 hours-a-day and 7 days-a week monitoring of fluctuations on the global stock and currency markets are also needed. If necessary, the government must resort to unconventional methods, including fiscal and interest rate policies, to overcome the shockwaves. Domestic consumption also needs to be increased to brace for decreased exports.
A national crisis calls for strong leadership among political circles. Their concerted action will give hope to the people. They must use Brexit as a litmus test for co-governance. Koreans have an excellent gene sto get over national crises. It is time to reactivate it.
JoongAng Ilbo, Jun. 27, Page 30