Colossal delusion

Kim Dong-ho
The author is an editorial writer at the JoongAng Ilbo.

The Moon Jae-in administration once compared our employment crisis to “pains caused by efforts to overhaul the system.” When the economy grew gloomier, it claimed that the general public was not being appropriately informed about the government’s economic achievements. More recently, it asserted that our economy is “going in the right direction” when statistics indicated employment growth in August.

But if Moon looks into the reality of our economy, he would realize that it is not the time to relay such rosy assessments. As he nears the mid-point of his five-year term, his administration must sincerely review its policy and reflect on its errors. As he shuns it, the media is left to write a letter of apology to the public on his behalf.

First, the government must reflect on its employment policy. The Moon administration claimed to have made a positive impact on employment through its effective policies. Last month, Statistics Korea announced that the number of employed increased by 452,000 compared to the same month last year. Of that figure, 391,000 jobs, or 86.5 percent, were created for those aged 60 and above. That means this year’s significant rise was actually due in large part to short-term — and part-time — jobs for the elderly. So-called base effect also played a part in the surprising increase in employment. As Korea is rapidly becoming an aged society, jobs for senior citizens cannot be overlooked. Yet state-funded part-time jobs for them cannot save the Korean economy from a crisis.

To claim that the government’s employment policy is working despite shrinking jobs numbers for those in their 30s and 40s — the backbone of our economy — is just burying our heads in the sand. To claim that the government actually mitigated the fallout from a universal reduction of work hours to 52 per week — even though the earnings of the low-income bracket decreased for six consecutive quarters — is a deception.

In short, the government’s economic policies based on so-called income-led growth are bogged down in a quagmire. The policy has devitalized the Korean economy, its “fair trade” policy is sabotaging conglomerates and its innovative growth policy is going nowhere.
Damage caused by the income-led growth policy is especially serious. The government poured 77 trillion won ($64 billion) over the past three years into creating jobs, but only jobs for older people have increased, not for the younger generation. The minimum wage hike has completely devastated small-business entrepreneurs and dragged the share of our middle class below 60 percent. As a result, those in the lowest 20 percent income group are going through a “distributive shock” and living day to day with their hopes dashed.

Yet top government officials who drafted such policies are insisting on pushing through their agenda. They promise to bridge the income gap by improving redistribution. But that is just political rhetoric. How can the government prepare the needed budget when our annual growth rate has been under the 3 percent mark over the past three years and when Korea’s manufacturing sector is losing its competitive edge amid stifling regulations. On top of that, our exports are noticeably declining amid trade protectionism around the world.

The past administrations managed to maintain the size of government debt under 40 percent of our GDP. But that is starting to change. During a meeting last May, Deputy Prime Minister for the Economy and Finance Minister Hong Nam-ki said he would maintain the 40 percent line.

In response, Moon asked what his “reasoning” behind that limit was. Hong replied that government debt could reach 45 percent of the GDP in 2022, hinting at a possible increase of government spending in the future. Unlike Japan and the United States, Korea is not a country that can print out money as it wishes. Blindly resorting to expansive fiscal policy at a time when our society is rapidly aging can be compared to driving a bulldozer into state coffers. If the government chooses this path, it will be just a matter of time before the economy collapses.

And what about the embarrassing real estate policy? The government’s decision to control prices of real estate has blocked the most ordinary forms of trade. Its decision to put strict caps on prices of new apartment offerings led to decreased supply, which caused home prices to soar. With fewer people moving in and out of places, small companies that used to help them move furniture, paint homes and repair any damage have all been struggling. Moon’s Blue House aides who were at the forefront of these policy experiments grew rich as they purchased real estate in redevelopment areas and bought houses whose prices soared within a year. For the public, it’s like rubbing salt in their wounds.

On behalf of the Moon administration, I also apologize for the nuclear phase-out policy. With fewer nuclear reactors, Korea’s fine dust issue has only grown worse and fewer foreign countries are showing interest in importing our nuclear reactors, destabilizing our solid nuclear power ecosystem. Energy companies are in the red. The Moon administration assured the public not to worry about their electricity bills, but it seems a steep increase is unavoidable, for which I also apologize. Park Yong-maan, chairman of the Korea Chamber of Commerce and Industry, recently said that he feels our economy is “like a child who’s been forgotten and abandoned.” If that’s really the case, we would all have to live on our own without having anyone backing us up — the government changes its policies. It is depressing for the public to have to stand on their feet in an increasingly dangerous world.

JoongAng Ilbo, Sept. 25, Page 30