Look at the big picture

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Look at the big picture

The Korean economy appears to be headed toward a cliff. Its poor performance in the first quarter — a negative 0.4 percent growth — was the lowest among OECD members. Following a paltry 2.67 percent growth it recorded last year compared to the 2.86 percent of the United States, the Korean economy is also expected to perform worse than that of the United States this year.

Korea’s unemployment rate reached 3.83 percent last year, the worst in nine years. The situation is also unlikely to improve this year given the expectations that Korea’s jobless rate will be higher than that of the United States, which stood at 3.9 percent last year. Other variables, such as investment, are no different. That means there has been a simultaneous reversal of the economic growth and unemployment rates between the two economies in just 20 years.

The United States — with a population six times larger than that of Korea and an economy 12 times larger — has served as a role model for developing economies since World War II. Korea and other countries around the world have used the U.S. economy as a development model. Yet given the reversed trend of growth and joblessness, this chasing strategies of ours will certainly not work any longer.

Many factors are involved in the dramatic reversal. As seen in the ongoing Sino-U.S. trade war, the United States cannot afford economic policies that would benefit its trading partners in the face of economic challenges from emerging economies like Korea and China.

The United States has already put pressure on Korea with weapons like tariffs and revisions of the free trade agreement since the 2000s. That threatens the global free trade system championed by U.S. President Ronald Reagan and British Prime Minister Margaret Thatcher in the ’80s. As a result, Korea’s previous economic achievements based on its once-cherished mantra — that it is enough for an economy as small and open as Korea’s to produce cheaper quality goods than those of the United States — can hardly prove effective now.

Major factors that contributed to the noticeable economic decline of Korea are the world’s lowest birthrate, the fastest aging society, and the failure to swiftly adapt to the fourth industrial revolution. Relative advantages from once-excellent manpower — a key factor in sustaining the competitiveness of the Korean economy — no longer work miracles under the gigantic paradigm shift of the 21st-century economy.

That cannot be solved by the government’s export promotion campaign or nurturing of simply new industries alone — not to mention by raising the minimum wage — because all the problems came to the surface due to the government’s confusion over the direction of Korea Inc. The responsibility to fix the problem falls first on the government. It must offer economic players some useful navigational tools to brace for the unseen challenges from the new industrial revolution. We hope it comes up with a big blueprint to put the economy back on track.

JoongAng Ilbo, June 17, Page 30
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