Heads in the sand

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Heads in the sand

A patient is lucky to come across an apt doctor who locates the exact cause of an illness and prescribes them the best possible treatment. An unlucky patient can become even sicker or even fall prey to a medical accident. The economy is no different: an accurate diagnosis can make an effective policy action. Therefore, it is important for authorities to be very objective and precise in determining the state of the economy. The Moon Jae-in administration, however, remains deluded and self-serving about the economy.

President Moon Jae-in noted that automaking has picked up and Korean shipbuilders are accepting new orders. He urged the administration to make most of the positive momentum by saying that it is time to pull the oars because the tide is rising. The Blue House explained that the president’s upbeat comment is based on auto output from August-October, which increased 6.6 percent on year, and that Korean shipbuilders are taking up 44 percent of global vessel orders to rank first in October. The president may have wanted to highlight some positive news amid sinking sentiment on the economy.

But the sight of one sparrow does not signal the arrival of spring. The reality is entirely the opposite. The Korean automobile and shipbuilding sector still faces serious challenges. Korea slipped behind India in global shipments and is expected to fall behind Mexico to rank seven this year. Hyundai Motor’s operating profit in the third quarter plunged by a whopping 76 percent on year. The supply chain has been wrecked. Despite recent improvements, ship orders for Korean shipyards are less than 20 percent of their peak in 2007. The tech sector is equally unsafe. Smartphones and semiconductors are being rapidly chased by Chinese competitors. The entire manufacturing industry is grappling with the volatile trade environment due to the clash between the United States and China.

The Blue House is making a serious mistake if it is feeding misleading information to the president. In May, the president claimed a “90 percent” positive effect from the hike in the minimum wage after he was briefed with data that left out the impact on self-employed. The misguidance has led to a stubborn drive with income-led growth policy despite the worsening ramifications on jobs. His former policy chief called the ongoing troubles “passing pains.” The Blue House clearly has its head in the sand.

Previous governments have fed into the crisis because they denied the state of our economy. The Kim Young-sam administration stated that the fundamentals were strong even as the economy was stumbling towards a near-default crisis in the late 1990s. An international bailout could have been avoided if aides told the truth about the economy. Our economy is muddling along with a growth in the 2 percent range. Household debt has exceeded 1,500 trillion won ($1.33 trillion) in the third quarter even as interest rates go up. The economy can pass the critical point only when the captain behind the wheel has his eyes focused on the challenge.

JoongAng Ilbo, Nov. 22, Page 34
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