A prayer for the economy

Suh Kyoung-ho
The author is an editorial writer of the JoongAng Ilbo.

Economic and weather forecasts often miss. Former Bank of Korea Governor Park Seung used to joke that he wanted to hire a good fortune teller. Predicting the economy can be harder than predicting the weather. A meteorological agency can see a storm and dust clouds coming. But where the economy is headed and where it is in the business cycle are hard to read. Wrong though it might be, an outlook on the economy is necessary.

There are ample signs pointing to dangers in our economy. One bank chief raised alarms about the jump in the delinquency rate by self-employed borrowers. The job data in February showed 45,283 on-year losses in the number of self-employed with paid hires. The sector in which the government has been trying to improve the quality of jobs has also been hit hard.

External conditions are equally alarming. The slowdown in the global economy has become increasingly apparent. FedEx’s weaker-than-expected results are signaling a global economic slowdown and reduced trade. Korea, whose economy relies on exports, would suffer. Although keeping up a brave face and upbeat tone about recovery, the Blue House is readying to package a supplementary budget against the growing downside risks.

Sitting and former economic policymakers all express worries. The corporate sentiment has turned decidedly pessimistic. A former economics minister voiced concerns about a corporate exodus. Foreign direct investment by Korean enterprises reached an all-time high of $49.8 billion last year, up nearly $20 billion from 2015, shortly before the start of the Moon Jae-in administration. In particular, small- and mid-sized company investments in foreign countries doubled from 2015 to hit $10 billion. “The factors behind the increased overseas investment by smaller companies are hard to decipher compared with large companies on global outreach,” he said. Some may have taken their businesses overseas due to the negative environment resulting from the rapid increase in wages and reduced work hours, he added.

Fortunately, there are signs that the government is moderating its policies. Its tone and focus on the controversial income-led growth policy have softened. It has moved beyond the demand side to promote the supply side through stimulation in investment and innovation to achieve its goal of inclusive growth. In guidance for the 2020 budget released on Tuesday, the government replaced the term income-led growth — the Moon Jae-in administration’s signature slogan over the last two years — with “income redistribution.”

President Moon Jae-in makes a speech in a meeting with foreign business leaders Thursday at the Blue House encouraging investment in Korea. [YONHAP]

Kim Sang-jo, chief of the Fair Trade Commission, also indicated moderation in hard-line corporate policy. “There cannot be wavering in the government’s goals to achieve a fair economy and growth led by wage increases. However, given our current economic conditions, flexibility is also needed,” he said. The government cannot outright admit to the policy failures and lower its banner on income-led growth, but it nevertheless has begun to veer in the other direction. The tiring dispute over the income-led growth policy must end.

Government officials point to the recent activities of President Moon. Moon chaired a series of meetings focused on regulatory sandboxes and the promotion of venture enterprises and hydrogen cars. But that cannot be enough. A former official who now works for a private company asked, “Does the president have to go to a certain place to make a point?” Another former senior official advised the government to fix obsolete rules, such as labor-related regulations, and reform the system to vitalize the economy instead of simply unveiling road maps of new projects and launching pilot projects. He warned that the golden time to restructure our economical fundamentals is passing.

The government must determine both what it can do and what it must do. The Ministry of Strategy and Finance must reclaim its original role of orchestrating the government’s economic policy. These days, the ministry appears to be merely taking orders from the Blue House. If it still feels helpless, it can recite the prayer of Reinhold Niebuhr: “God grant me the serenity to accept the things I cannot change; courage to change the things I can, and wisdom to know the difference.”

JoongAng Ilbo, March 28, Page 30