The trap of self-conviction
The author is the Tokyo bureau chief at the JoongAng Ilbo.
This year’s summer has been especially hot in Korea, but it’s been worse in Japan. As heat stroke warnings are issued every day, it’s not easy to stay outside. But the streets are still filled with tourists. Popular restaurants are dominated by tourists. One needs to stand in line under the blazing sun if you don’t have a reservation. Japan is hoping for 40 million tourists a year by 2020. The economy feels good in terms of youth employment, too. Some articles try to help young people by explaining how to politely turn down jobs offers.
Not all indicators are great, of course. In the first quarter, economic growth was negative. Many people are unsure whether the economy was improving in a sustainable way.
At this juncture, a book with bold predictions is getting a lot of attention. It is “The Third Golden Cycle,” by Yuji Shimanaka of Mitsubishi UFJ Morgan Stanley Securities. The book review section of the evening edition of the Nikkei called it “a must-read for businessmen” and gave it five stars. Shimanaka argues that Japan’s short-term, midterm, long-term and ultra long-term economic cycles are all on the rise. The economy may slow down for a while shortly after the Tokyo Olympics but will rise again from 2024, he predicted. As the four cycles rise at the same time, he claims that Japan can expect to see its third historic rise, after the post-Russo-Japanese War boom from 1904 to 1916 and post-war growth from 1961 to 1968. He forecast that large-scale construction projects, investment in infrastructure and improved productivity from the tourism boom would lead the growth. It’s quite a bold prediction for Japan, where conservative views generally prevail.
Of course, Japan’s economy is not growing rapidly. That can hardly be expected from a developed country. What’s important is that the Japanese economy has broken out of its long frozen state and maintains a steady speed.
This is not because Japanese Prime Minister Shinzo Abe is an economics expert. He has simply set a clear direction to defeat deflation. The direction became a national will based on national support, combined with working-level policy.
The Korean government’s economic policy also has a clear direction, but in the wrong direction. Korean bureaucrats work hard. They are busy coming up with solutions to side effects of the Moon Jae-in administration’s income-led growth policy. The captain of the ship is busy plugging leaks rather than focusing on navigation. Causes of problems are neglected. This is how Korean bureaucrats work.
A few days ago, former Finance Minister Yoon Jeung-hyun said in an interview with the Chosun Ilbo that it was dangerous to navigate without adjusting current policies. It is doubtful that the government listened to him.
Why is the policy direction not changing? It cannot be explained by incompetence. The first theory is groupthink. People in the Blue House share similar views and an echo chamber tells them they are right. The illusion of invulnerability is a trap that competent people are more likely to fall into.
The second is rigid fundamentalism. This is stubbornly maintaining political convictions even when a certain sets of ideas are not accepted very well. I almost feel their combativeness of their mentality: If they yield, they lose (despite a spectacularly high approval rating). This is regrettable because flexible pragmatism is favorable in economic issues.
The third is the magnetism of power. People change when they join the power circle, just as a compass doesn’t work near the North Pole. A former economic secretary who was a professor started a controversy by claiming the income-led growth policy was 90 percent successful. An economics professor would give an F to such a statement, but the Moon camp just doesn’t care.
Fourth, the government may have grown accustomed to passionate supporters. The administration responds to the opinions of certain groups with grand names. It almost seems to me that its power has been hijacked. Are they not very confident? Are they in it together or indebted?
Or it may be a mix of all these things. This is not an illness of a liberal administration. Depending on the competency and vision of the powers-that-be, it can contract the disease or not. Unfortunately, it seems that the disease is serious.
At this point, the Korean economy seems riskier than Japan’s economy. Good-for-nothings are meddling rather than working hard and creating jobs. This is not the atmosphere for economic entities to focus on their jobs. The argument that a high 2 percent growth rate is not worse than under the former administration is not convincing. These economic entities are more sensitive about the flow. As a ship goes in the wrong direction, it tips. Japan’s growth rate is lower than Korea’s, but the flow is positive. They claim that the economy will improve. While Japan is celebrating, should Korea remain relaxed?
JoongAng Ilbo, July 27, Page 31