The 'hotel economy' debate and the limits of economic metaphors

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The 'hotel economy' debate and the limits of economic metaphors

Published: 23 May. 2025, 00:03

Audio report: written by reporters, read by AI

Kim Won-bae

The author is an editorial writer at the JoongAng Ilbo.

In a 2011 essay published in the International Journal of Community Currency Research, British local currency scheme advocate David Boyle begins with a thought-provoking story: A traveler arrives at a quiet village motel and places a $100 bill on the counter, saying he wants to inspect a room before deciding to stay. While he’s upstairs, the motel owner uses the $100 to pay off a debt to the butcher. The butcher then pays the pig farmer, who pays the co-op employee, who in turn settles a debt with a local sex worker — who finally uses the money to repay her own tab at the motel. The traveler, deciding not to stay, takes his $100 back and leaves. “No one produced anything, and no one earned anything,” Boyle writes, “but the village is now out of debt and sees the future more optimistically.”

Lee Jae-myung, the presidential candidate of the liberal Democratic Party, speaks at a campaign event in North Jeolla on May 16. [NEWS1]

This anecdote reappeared in Korea in 2014, published on a progressive think tank’s website. In the Korean version, the $100 becomes 100,000 won, the motel becomes a hotel, and the sex worker is replaced with an anonymous local resident. According to OhmyNews, the parable inspired a 2017 campaign illustration promoting Democratic Party candidate Lee Jae-myung during the presidential primary. At the time, Lee was the mayor of Seongnam. The graphic resurfaced recently when Lee referenced it during a stump speech in Gunsan on May 16, prompting criticism from Lee Jun-seok, the presidential candidate of the Reform Party, during a televised debate.

Versions of the tale have circulated since the Great Depression and again after the 2008 global financial crisis. Some iterations even describe the $100 as counterfeit. Boyle himself clarified that the point of the story was not to justify stimulus spending, but to illustrate the potential of cash inflow. In his version, the traveler’s $100 helps clear a web of debts — loosening frozen credit and restoring trust in local economic circulation.

But Lee’s “hotel economy” metaphor stretches the story beyond its original form. In his version, the money not only circulates to clear debts, but also stimulates consumption. The hotel, furniture shop, fried chicken restaurant and stationery store all place orders with each other, concluding with the stationery store repaying its debt to the hotel. The text accompanying the illustration reads: “Though no new money entered the village, the circulation revitalized the local economy. This is what basic income can do.”

The problem, critics argue, is that the link between the metaphor and basic income remains unclear. With references to a cash stimulus and consumption orders, the debate quickly expanded to include John Maynard Keynes’s multiplier effect — the idea that an initial government expenditure — say, 100,000 won — can, through rounds of spending, result in a total income increase of 200,000 or even 300,000 won. However, most examples of the multiplier effect do not include the twist of the original buyer withdrawing their money in the end. That has led to satirical references to “no-show economics” — questioning whether a canceled hotel stay can genuinely stimulate the economy.

From a basic economics perspective, it's reasonable to argue that money circulation boosts economic vitality. But the idea that even canceled transactions can contribute to economic health is harder to defend.

Nevertheless, Lee pressed forward. On May 21, he said, “There are fools who don’t understand the multiplier effect.” But more important than debating the cartoon, critics argue, is asking how money will actually be mobilized to generate real economic movement. Rather than dismissing skeptics, this should be a moment for serious policy discussion.

Lee’s campaign has argued that government spending is essential during downturns and should, when possible, be delivered through a cash injection. On May 21, he said during a campaign stop, “Why can’t the country give out free money? Other nations have national debt-to-GDP ratios over 110 percent. Ours is below 50 percent. People who say government debt is unacceptable don’t know what they’re talking about.”

The presidential candidates pose for a photo in the SBS Prism Tower in Mapo District, western Seoul, on May 18. From left: Kim Moon-soo of the People Power Party, Kwon Young-guk of the Democratic Labor Party, Lee Jun-seok of the Reform Party and Lee Jae-myung of the Democratic Party. [JOINT PRESS CORPS]

He didn’t specify which countries he meant, but among advanced economies with high debt ratios, most issue reserve currencies. Recently, reports noted that Korea’s general government debt ratio is expected to exceed the average for non-reserve-currency countries this year.

Few would object to the idea that fiscal policy should play a stronger role during economic slowdowns. But the lingering trauma of Korea’s late-1990s foreign exchange crisis makes many wary of unchecked national debt. The reality is that policy choices involve trade-offs. If money is spent in one area, it’s unavailable elsewhere. Government expenditure can be a necessary priming mechanism, but it cannot be treated as an infinite well.

For a front-runner in a presidential race, this should be a moment not for dismissing criticism but for reflecting on how to refine policy, communicate clearly and lead by persuasion. The debate over the “hotel economy” metaphor highlights a broader issue: the importance of economic literacy and responsible dialogue in political leadership.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.