Waiting for Plan B
The author is an editorial writer at the JoongAng Ilbo.
The former top economic planner and finance minister, Lee Hun-jai, used to say a good policymaker always should have a Plan B ready. “Plan A does not always work. Out of 100 plans, half of them do not work out. There is no such thing as a perfect policy. Even after thorough preparation, the flaws are exposed when the policy hits the market. A policymaker must find another way when coming upon a stumbling block. Having backup Plans B and C is essential,” he said.
For the Moon Jae-in administration, there is no contingency or backup plan. There is only one righteous, ideology-backed Plan A. Ideology should not be questioned. The administration’s devotion to its income-led growth policy is absolute. Any change would be a betrayal to its ideological beliefs.
Since there is only one way, the government presses on regardless of the fallout. In a TV interview, Jang Ha-sung, the president’s policy chief, said he, too, had been surprised by the 16.4 percent hike in the minimum wage set for this year as he had expected a rise of 14 percent at best. If he really was that bothered, he should have challenged the increase for this year and the next. He did not, and the minimum wage will go up by double digits again next year. When self-employed businesses threatened to disobey, the government rolled out various compensations, offering to finance hiring of staff by up to 6 million won ($5,300) per month. That’s called throwing government money at a problem. It is a far cry from a solution.
Real estate policy also has been equally ideology-driven. Land, Transport and Infrastructure Minister Kim Hyun-mee vowed to combat speculators from her first day in office. She battled the so-called speculators for a year. But housing prices in hot zones have stayed sky high. Her clampdown only dried up supplies and fueled housing prices. The mix of ideology and politics has destabilized the market. On Sept. 13, the government for the first time announced supply measures. She admitted that the policy favoring public rentals only encouraged landlords to buy more homes. If the government had a Plan B, the result would have been different.
Having alternatives or backup plan raises the success rate of a policy. Paul Nutt, a professor of public policy at Ohio State University, studied decisions by senior executives in insurance companies, government offices, hospitals and consulting companies in the United States and Canada. Of them, 29 percent had Plan Bs at the ready. More than half of the decisions made with a single Plan A option failed. Two out of three decisions backed by Plans B and C succeeded. Nutt discovered correlation in the number of options and the policy success rate.
I asked Lee how an alternative plan should be made. He said a policy must be studied from various angles.
“You need to put all policy options on the table. For instance, the real estate measures, nuclear phase-out plan, minimum wage hike and others should be studied to see if they could work in the framework of the income-led growth policy. A government office must not draw up a policy with eyes merely on its jurisdiction. The financial regulator must take account of the policy impact on real estate, and the industry minister must consider the impact of an industry policy on the financial sector as to minimize side effects and generate a a workable Plan B. Policy must not be pure. Otherwise it can be tainted by politics and ideology,” he said.
Plan B does not exist in politics. In politics, there is just friend or foe. But the economy is different. An economic policy must be wide, flexible and responsive to address an ever-changing economy.
JoongAng Ilbo, Oct. 5, Page 30