The author is a columnist of the JoongAng Ilbo.
Rep. Lee In-young, floor leader of the ruling Democratic Party (DP), claims that the biggest challenge to the Korean economy is “the risk from the opposition.” Economic experts at home and abroad are unlikely to agree. They point to President Moon Jae-in as the biggest risk to the economy. Since former Justice Minister Cho Kuk defined himself as a “socialist,” overseas media have framed the Moon administration as leftist. Bloomberg News said what’s “troubling” to investors is Moon himself and leftist policies that have “sapped” corporate animal spirits.
As gloomy indicators showed in October, hopes have been dashed for the economy achieving 2.0 percent growth this year. In the third quarter, the economy recorded a pitiful 0.4 percent growth compared to the previous quarter. The country only experienced growth under 2.0 percent during periods of crisis. The oil shock of the 1970s, the currency crisis of the 1990s and the global financial meltdown of 2008 were the last times growth skidded to such low levels. In those periods, the enemy was from without. This time, the culprits are within — our own policy failures.
An apartment price in Seoul last week broke above the psychologically-important threshold of 100 million won ($85,558) per 3.3 square meters (35.5 square feet). An 84-square-meter apartment in Banpo in southern Seoul was sold for a whopping 3.4 billion won. Liquidity backed by record-low interest rates has poured into new apartments before a government-imposed price cap goes into effect.
A recent poll showed President Moon’s approval rating sank below 40 percent — his lowest. The biggest complaint was economic affairs (25 percent) — not his appointments fiasco (17 percent) — which suggests the fall in his approval ratings stems more from worsening economic conditions. The last time Moon’s approval rating fell sharply — from 71 percent to 53 percent — was in July and August last year when jobs and incomes took a heavy toll from rapid spikes in the minimum wage and when real estate prices in Seoul shot up.
The excuses the government has come up with were pitiful. Over the last two and a half years, none of the rosy promises from Moon and his policy chief Jang Ha-sung have been delivered. Lee Ho-seung, senior presidential secretary for economic affairs, recently brushed off the idea of a crisis and claimed the economy was doing well. If the government was so confident about the economy, why has it packaged a supersized budget bill for next year, which includes issuance of new debt worth 60 trillion won? Deputy Prime Minister for the Economy Hong Nam-ki was more honest in his plea for legislative approval of the budget bill. He admitted the economy faces a situation as grave as during the 2008-2009 global financial meltdown.
A sensible government would have reversed policies before they wrecked the economy. But the Moon administration paid more heed to its base. The militant Korean Confederation of Trade Unions warned of a general strike in November to protest any moderation of the minimum wage increase and the introduction of flextime in offices. The People’s Solidarity for Participatory Democracy criticizes the government for its stalled reform of the chaebol. Moon and his aides have little room to change course as they don’t want to upset their liberal base.
Shortly before his election in May 2017, Moon declared emergency actions were needed in the face of our youth unemployment rate hovering at 9.8 percent. The youth unemployment rate went up to 10.5 percent last year, but the only idea the government came up with was a handout of 3 million won per person looking for jobs. It is easier said than done in economic affairs. The Blue House has become fretful about the economy’s impact on next year’s general election. But the government has been running out of fiscal ammunition, as it already poured out nearly 77 percent of its budget in the first half alone.
As the government is too busy fighting with immediate dangers, it cannot think of tending to our waning growth potential. The United States has pulled up its growth potential to over 2 percent this year from 1 percent in 2010. Over the decade, the United States has concentrated on raising productivity, honing international competitiveness, and reinforcing high-tech industry. The Moon administration avoids even the mention of productivity and competitiveness. It prays for a miracle from heavy fiscal spending.
Korea is the world’s 12th largest economy. Yet it has become subject to untested socialist experiments. The government still regards companies as greedy predators and competition as a cause of inequality. To achieve more equality, the government collects more taxes and social contributions from the corporate sector — which only hurts their desire to invest.
The internet brims with complaints about the leftist government wrecking the economy and sending housing prices up. Even Pyongyang sneers at Seoul for making idealistic speeches when it has no solution for a faltering economy. Prime Minister Lee Nak-yon said public officials have a duty to explain what’s going on in the government besides their formal obligations. The government must explain why the economy is in such a mess. Otherwise, it will face revenge in the general election in April.
JoongAng Ilbo, Oct. 30, Page 35