Strange silenceCHO HYUN-SOOK
The author is a deputy economic policy team editor at the JoongAng Ilbo.
On Nov. 11, 1988, 300 Bank of Korea (BOK) employees rushed to the headquarters of the ruling party in downtown Seoul to oppose the revision of the BOK Act. That signaled the beginning of the war between the Finance Ministry and the BOK over the central bank’s independence.
Among major economic ministries, only the Finance Ministry did not have a research institute at the time. When it needed to research taxation and finance, the ministry used the research department at the central bank instead. As the discord continued in 1988 and 1989, the Finance Ministry could no longer use the BOK’s research department for its own research. Since then, voices grew in the Finance Ministry to establish its own research institute.
In 1991, the Korea Tax Research Institute — the predecessor of the current Korea Institute of Public Finance (KIPF) — was created. If there hadn’t been discord between the Finance Ministry and the BOK, the KIPF would not have been set up, or would have been created much later.
Lately, the KIPF is at the center of controversies after it published a report on the problems of local currencies. Gyeonggi Gov. Lee Jae-myung was the first to attack it on Sept. 16. He elevated the criticism by denouncing the KIPF for producing “absurd research results.” Other ruling and opposition lawmakers shared Lee’s position. They mostly argue that local currencies are good. For politicians, local currency is a great means to appeal to their voters.
In currency and fiscal policy, local currency is no longer a “storm in a teacup.” The Covid-19 outbreak fanned the issuance of local currencies. A total of 9 trillion won ($7.7 billion) worth of local currencies have been issued this year. Ruling Democratic Party (DP) floor leader Kim Tae-nyeon said it will be increased to 15 trillion won next year. As the latest controversy revealed, local currencies have ambiguous legal grounds and uncertain effects. There hasn’t been a proper study on the issue until now.
While the controversy is heated, the Finance Ministry and the BOK remain silent. The two agencies that have been waging a long war over jurisdiction and authorities share the same position on this issue, advocating the efficacy of local currencies.
After all, the KIFP was created amid discord between the fiscal and monetary authorities. While the institute is being attacked by politicians, there wouldn’t be any problem if the report was a product of scholarly conscience.
If the debate is over gains or losses to the national economy, silence and neglect are even worse than discord.