The upside of a lockdown

Kim Chang-gyu
The author is an economic news editor at the JoongAng Ilbo.

I recently had a chance to meet with the CEO of a conglomerate. Our conversation naturally flowed to the new coronavirus outbreak and how the pandemic was affecting the business sector.

I asked him how things were going at his company. “It’s tough,” he replied. “Really tough. Our sales have plummeted.” After a pause, the CEO said, “But we have bought some time now. So, after this predicament passes, an opportunity will come our way. There is always an opportunity after a crisis.”

What did he mean by “buying time"? He explained that his company had grown technologically advanced enough to compete in the global market when China saw the same industry as a promising field for the future and began investing generously in its domestic companies. Backed by the Chinese government’s massive support, the companies soared to the top rank in no time, the CEO said. “It was really hard for us to compete with Chinese companies because more and more kept swarming in. It was like a human wave attack during the Korean War.” The CEO meant his company has finally found some time to save energy to prepare for an uphill battle in the future as the world economy remains paralyzed due to the coronavirus.

Some economic pundits compare the situation for Korean companies to a “climbathon.” During the race, participants have to navigate all different kinds of trails: flat fields, muddy paths, narrow lanes and gravel roads. Before the coronavirus outbreak, Korean companies were in a rush to catch up with developed economies like the United States and did not spare a single moment to look back. Soon enough, the Korean companies paced fast enough to catch a glimpse of the frontrunners, but by then, they were out of strength to carry on and the course was getting tougher than before.

China, which had been right behind Korea in the climbathon, suddenly began to overtake Korea in the race. Armed with all kinds of “special equipment,” including government support, China was able to widen the gap with Korea. Korea had no way to catch up. Then came the novel coronavirus, which can be compared to a hurricane. A large stream suddenly formed in a section of the climbathon course after the hurricane, and the competition was put on hold temporarily. Now everyone has to wait until the hurricane passes by. Korea can finally recharge after an arduous march toward an advanced economy.

The Korean economy has gone through many dramatic turns since it gained liberation from Imperial Japan in 1945. In the 1940s and ‘50s, Korea built its foundations for economic development by land reform and government support for private companies. In the ‘60s and ‘70s, it exponentially grew with government at the helm, followed by another growth period of the ‘80s and ‘90s led by the private sector. Then in the 2000s, growth slowed. Korea managed to overcome the 1998 foreign exchange crisis, but its economic growth rate markedly dropped since, from 9.1 percent in 2000 to just 2 percent last year. This year, we may see a negative figure. Faced with slow growth and unequal distribution, the Moon Jae-in administration has tried to reinforce regulations on companies through various policies, including the 52-hour workweek and minimum wage hike. Implementing such measures on companies was like giving an extra bag to an exhausted climbathoner. What was even more disheartening to the companies was how the Moon administration shaped a social atmosphere equating the state of being pro-corporate as anti-labor. As a result, companies invested less. As Korean companies lagged farther behind in the global race, their competitiveness became weaker, which led to fewer jobs. Alarmed by the unemployment rate, the administration poured massive amounts of money into creating jobs, but quality jobs kept decreasing.

In such circumstances, the new coronavirus has spread around the world. Domestic distributors have started massive restructuring and 80 percent of airline workers are off duty today. The Federation of Korean Industries and the Korean Enterprises Federation are begging for an easing of regulations, yet the government is refusing to budge and has made no changes to its corporate regulations.

The coronavirus has wrecked serious havoc on all of us. If the government eases regulations on companies, Korea will have another chance to run the climbathon — a chance that may not come again in the current administration. The government should find a practical — not ideological — solution. There’s no need to devise a new plan from scratch.

It can just get rid of a bunch of regulations right now.