Retool our economic structureSouth Korea last year again failed to break the bottleneck of $30,000 per capital income by registering gross national income (GNI) of $27,561 per head. Its climb has been stalled for 11 years in further evidence that the country may be mired in the middle-income trap. According to the World Bank, there were 26 countries with per capita GNI of over $30,000 as of 2015.
The scoreboard is hardly surprising given sluggish capital investment and consumption on top of sagging exports. Except for 2014, the economy grew less than 3 percent from 2011 to 2016. This year would be no better. While it took Germany and Japan five years to break the threshold, Korea failed to do so over a decade. Some institutes predict Korea could earn $30,000 or more next year, but that cannot be assured. There are many negative factors weighing down the economy. The fundamentals have weakened due to structural problems, and the economy is also up against protectionist actions from the two largest economies of the U.S. and China.
We cannot compare ourselves to Japan that suffered a recession for more than two decades. Japan has stacked up enough savings and resources abroad to endure lengthy stagnation. Its income disparities and poverty levels of senior citizens had been unmatched with ours. It also has been eager to combat its structural problems, creating a cabinet to sustain a population of 100 million and fighting low births. Compared with ambitious policy endeavors dubbed as the Abenomics, our efforts from the political level have been pitiful. Companies have lost timing and appetite for investment due to uncertainties from impeachment trial, investigation on bribery, leadership vacuum, and early presidential election.
Former conservative governments have failed to stimulate the economy. President Lee Myung-bak tried to prop up growth through pork-barrel projects and Park Geun-hye through real estate market. But they had short-lasting effect.
Instead of immediate stimuli actions through monetary and fiscal expansions, the next government must focus on structural reforms even if they are painful and time-consuming. It must come up with long-term strategy to balance growth in exports and domestic demand, reform the labor market, filter out and remove weak companies and industries, and foster hardware and software armies for the fourth industrial revolution. Instead of clinging to the slogans like symbiotic and fair growth, presidential candidates must draw up a detailed blueprint to retool the economic structure and build lasting strength.
JoongAng Ilbo, March 29, Page 30