Innocence or arrogance
The author is the chief editor of the JoongAng Ilbo.
President Moon Jae-in described a “structural disparity” in which people with high credit scores can get cheap loans whereas economically hard-up people with low credit scores must borrow at higher rates as the government lowered the maximum interest rate to 20 percent per annum from 24 percent. Moon was speaking with compassion for the economically vulnerable. But his remarks drew sneers about his ignorance of market principles. A presidential spokeswoman had to explain that the president was not describing the financial habitat as being incongruous.
The real world does not work as hoped by the president. The Financial Services Commission (FSC) projected the cut in maximum interest rate could save 483 billion won a year for 2.08 million people, while admitting that 39,000 could become “financial refugees” and be forced to resort to shark loans. Financial experts expect about 6,000 in the third-tier lending industry to face business troubles and about 600,000 to go bankrupt.
Alfred Marshall, the founder of microeconomics, once spoke of the need for “cool heads but warm hearts” in making economic policy in his first lecture as economics professor at the University of Cambridge in 1885. The British economist had witnessed poverty in the world’s richest country at the time. He tailored mathematical content like graphs to explain the correlation between supply/demand and prices and developed the marginal utility theory.
Marshall would have approved of Moon’s “warm heart.” But a policy brings about desired effect only when it is backed by precise understanding and analysis of reality. The Moon administration has failed to diagnose our economic reality. The best example is its real estate policy. Its bombardment of the property market with 24 sets of regulatory measures ended up mass-producing thousands of house-poor. Yet the government took pride in “restricting housing prices to an 11 percent jump last year” as defined by the former land minister. It was incompetent and arrogant. The inside information scandal involving Korea Land and Housing Corp. (LH) employees added corruption to the government’s list of its follies. The public has entirely lost confidence in public policy.
The Blue House has an inspection division to watch for corruption in the governing force. It was institutionalized during the regime of Park Chung Hee. Lee Kun-gye, the police chief of Seoul, proposed the idea after watching dissident-turned-presidential candidate Kim Dae-jung’s campaign. After Kim lambasted the corruption of the Park regime, Lee proposed to set up an office to oversee people around the president. Park Chung Hee accepted the idea. Lee recalled that the Blue House’s anticorruption function could be established thanks to the country’s best orator Kim Dae-jung.
President Park told the inspection team in the Blue House to regularly advise him on the government’s mistakes and report wrongdoings by the people around him as he merely heard compliments from others. But the president faced his doom because his chief security officer Cha Ji-chul kept him in the dark by keeping information hidden from the president despite the seriousness of protests in the southern region.
His daughter, president Park Geun-hye, appointed a special inspection officer to keep watch over her family and key aides. But the office was dismantled after special inspector Lee Seok-soo launched investigations into her sister’s fraud scheme and a scandal involving her presidential secretary for civil affairs Woo Byung-woo. Park’s fall started at that point. But Moon did not bother to renew the office.
Various follies have spilled over in the final year of Moon’s term. Real estate prices are sky-high and the vaccination program for Covid-19 is among the world’s slowest. The government should be entirely committed to reining in real estate prices and the virus. But the ruling front was engrossed in chipping away at the power of the prosecution, which led to the resignation of Prosecutor General Yoon Seok-youl. Political heavyweights in the ruling Democratic Party (DP) are preoccupied with restoring the reputation of former prime minister Han Myeong-sook, who was convicted of bribery by the Supreme Court.
DP lawmakers even motioned a bill to honor democracy movement activists with national merits and give privileges to their children, but faced a backlash. Moon purchased farmland by lying about his farming experience. Moon’s former policy chief Kim Sang-jo and other bigwigs who pushed for rent control raising rents before the new law went into effect.
Moral hazards have been breached. At this rate, Moon could follow the unhappy path of his predecessors. On the campaign trail, Park Young-sun, a DP lawmaker and Seoul mayoral candidate in Wednesday’s by-election, said she was happy to live in a country led by a president like Moon. But she drew a line by saying that does not mean her full endorsement of the government’ real estate policy.
Under the liberal government, the livelihoods of the underprivileged class have deteriorated. The president must reflect on the arrogance of the liberal camp to achieve the equilibrium with “cool heads but warm hearts” if he really wants to be remembered as a leader who governed for the people’s sake.