The same tune on repeat

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The same tune on repeat

The Korean economy is facing a crisis at home and abroad. While it suffers external shocks from the new coronavirus outbreak, the economy shakes from the government’s anti-market and anti-business policy based on its artificial boosting of the economy through rapid wage hikes. Due to far-reaching shocks from the outbreak in China — which accounts for 25 percent of our exports — and because of the misleading government policy, operating profit of major listed companies is projected to dive by more than 10 percentage points, according to Infomax, a financial market research firm. The two percent growth our economy barely achieved last year could plunge below 1 percent this year.

If the novel coronavirus is just a severe type of influenza, the Moon Jae-in administration’s income-led growth policy is a malignant tumor. Simply put, that’s a policy that puts the cart before the horse. The policy focused on income redistribution only helped our economy fall further by dampening corporate investments. Despite the government’s hefty spending, the economy is nose-diving instead of turning around.

The reason is clear. When other countries slimmed down corporate tax, the administration raised it to target conglomerates, which led to decreased investments — and to reduced income tax revenues. The government also beefed up pressure on managerial rights of companies through the National Pension Service which has a major stake in a number of local companies. On top of that, drastic hikes in the minimum wage forced the poor to lose their jobs, while its uniform enforcement of a 52-hour workweek helped lower the productivity of our companies.

Four economy-related ministries’ reports to President Moon on Monday attracted much of our attention as we anticipated a turnaround by the government. But Deputy Prime Minister for Economic Affairs Hong Nam-ki’s briefing to the president sounded just like the same tune being played over and over. Despite a glitzy slogan — “A leaping economy, a better future!” — no substance could be found.

Moon only reiterated his encouragement for economic ministries to “take a path toward an inclusive economy without any interruption.” He once again declared to stick with the controversial income-led growth policy regardless of the urgent need to draw up market-friendly policies ardently desired by business leaders and merchants across the country.

Economic ministers and aides to Moon must tell the truth about what’s behind the alarming under performance of our economy. But they failed to deliver a plethora of complaints from the market to the president. Instead, they were all busy patting each other on the backs for the government’s “successful reaction” to Japan’s export restrictions in retaliation to our courts’ rulings on wartime forced labor.

Self-praise cannot lead to a breakthrough for the economy. The virus’ threat to the economy will subside in the near future. But if the government does not change course, the economy will continue falling.

JoongAng Ilbo, Feb. 18, Page 30
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