Some naive assumptionsAs expected, the government has come up with economic policies for 2017 in a defensive mode mostly based on boosting the economy through fiscal and financial tools and a repetition of previous measures to address troubles with our growth rate, employment, consumption and exports. Given the serious political crisis brought about by President Park Geun-hye’s impeachment, the government could hardly have devised a special formula.
But we wonder if such recipes can be effective. In the face of the worst-ever environment for our economy at home and abroad, we must overcome political instability before the next presidential election in 2017 and confront trade protectionism under the presidency of Donald J. Trump in the U.S. and trade disputes between America and China.
Nevertheless, our government seems happy with an overly passive position. It has set next year’s growth target at 2.6 percent — the first time since 1999, shortly after the 1997-98 financial crisis, that the target has been below 3 percent. The government says that’s the price we must pay to be on the threshold of becoming an advanced economy. The price: low growth.
Governmental economic policies are about building confidence in the economy. However, setting a growth target at a level that’s very low can translate into a lack of confidence. A country’s potential growth rate refers to the maximum growth rate a country can achieve without inflation. A real growth rate hovering below a potential growth rate means policy mistakes by a government. The International Monetary Fund estimates next year’s world economy to grow by 3.4 percent and emerging economies by 4.6 percent. Our government must explain why Korea has to take a step back.
We also see naivety in the government’s complacent policies to stabilize ordinary people’s livelihoods and restructure our industries. Fortunately, it took the right direction by announcing a plan to set up an inter-governmental strategy committee to cope with the challenge.
But a fourth industrial revolution must simultaneously occur in two directions: industry and employment. If the government focuses on one, it could seriously neglect the other. For instance, an industrialization of artificial intelligence can easily lead to massive layoffs.
IBM’s cognitive system Watson has been learning the Korean language over the last seven months to be used in local insurance businesses. That may cause hundreds of financial consultants to lose their jobs. If our government ignores such a reality, it can never devise a wise strategy for the future.
JoongAng Ilbo, Dec. 30, Page 30