Learning from the U.S.The Korean economy was once a subject of study. Many wondered what was behind its dramatic rags-to-riches transformation. That has changed. The United States has surpassed Korea in terms of economic growth. While Korea had 2.7 percent growth last year, the United States saw its economy grow by 2.9 percent. International ratings agencies expect the same phenomenon repeated this year too. Korea has reached a moment in which it has to worry about a long-term recession. All of that provoked the Bank of Korea (BOK) to look into the causes of the American economy’s remarkable performance.
The central bank cited strengthened fundamentals of the U.S. economy as a major reason for its stunning growth. In other words, its phenomenal growth is not accidental. The bank singled out three factors as the reason for the remarkable rise in the growth potential of the U.S. economy: reinforced corporate investments, an improved labor market and enhanced productivity. Washington stimulated U.S. companies’s “animal spirits” through a drastic slashing of the corporate tax. The resulting investment led to more jobs. As a result, U.S. joblessness fell to its lowest level in five decades. On top of that, the growth of the high value-added information and communication technology (ICT) sector in the U.S. economy lifted its productivity.
The BOK forecast that the U.S. economy will continue to show solid growth thanks to its sound growth potential — unless a negative external impact hits it. We envy the U.S. economy’s amazing performance, but at the same time are depressed to see the opposite in Korea. Our companies’ investments in facilities dropped by 19.5 percent in the first quarter compared to a year earlier in the face of a plethora of pressures and regulations from the government and labor unions.
Under such circumstances, our companies’ flight to foreign countries continues. While youth unemployment is at a record level, jobs for workers in their 30s and 40s — the backbone of our economy — are sharply declining. Though our labor productivity per hour is the lowest among OECD member countries, our wages are soaring. Nonetheless, our ICT industry cannot move forward due to countless layers of regulations.
The Moon Jae-in administration said that the decline of our growth is unavoidable. But the performance of the U.S. economy shows otherwise. It found the answer in encouraging the corporate sector to invest and raise productivity through deregulation. How long will our government adhere to its ludicrous income-led growth policy?
JoongAng Ilbo, June 4, Page 34