In defense of ‘J-nomics’
President Moon Jae-in will pass the halfway point of his single fiveyear term Saturday. According to a poll by The Hankook Ilbo, the sister paper of The Korea Times, Moon has fared worst in the economic area, scoring 5.5 on a 10-point scale. The 21 economists who took part in the survey gave a failing grade to Moon’s economic policy dubbed “J-nomics.” Can he turn it around in the remaining two-and-a-half years? For now, it seems to be anybody’s guess.
It doesn’t take an economic expert to know something is wrong with Korea Inc. Exports are faltering, domestic consumption shows little sign of recovery, and investments remain sluggish. All these are combining to pull down the growth rate of gross domestic product (GDP) below the psychologically significant 2 percent for this year. Most headline figures are gloomy indeed and numbers don’t lie.
If you look at the business sections of local media outlets, particularly those of conservative papers, Korea’s economy is likely to collapse any moment now. Even more painful than these macroeconomic setbacks for President Moon may be two failures — hardly narrowing or even widening the income gap between the haves and have-nots, and the increasing number of irregular employees.
Especially so given J-nomics stands on three main pillars — incomeled growth, innovative growth and fair economy. Despite Moon’s good intentions, the sharp hikes in the minimum wage and curtailing of the workweek are even blamed for causing numerous small businesses and the self-employed to go belly up.
To sum up, the critical experts are saying Moon’s economic team ignored the nation’s economic reality while pursuing idealistic — or socialistic — goals. These critics may be right — like Monday morning quarterbacks are.
Looking two-and-a-half years back, most presidential contenders pledged to raise the minimum wage to 10,000 won ($8.2) an hour during their tenure. The minimum wage for next year is 8,590 won, as the government is set to slow its increasing tempo to ease the burden caused by steep hikes in the first two years.
Also, in the last presidential election, the most eye-catching slogan was the “life with a relaxing evening,” reflecting Korea’s notoriously long working hours. Most financial papers criticize the 52-hour workweek, claiming is hindering all crucial businesses that cannot be accomplished without overtime work.
The nation is hardly alone with its bleak economy. Ninety percent of OECD member nations are sliding into a business slump. In many of them, the interest rate is near zero percent. The EU is afraid that it might follow the Japanese example of the “two lost decades” and the “Trump boom” in the U.S. is likely to end soon.
Korea, a small open economy that relies on exports for more than half of its GDP growth, has to bear the brunt of the global slowdown, aggravated by the U.S.-China trade standoff and its own trade friction with Japan sparked by Tokyo’s apparent economic retaliation for political reasons. Many of these external factors are beyond the reach of the incumbent administration.
Of course, Moon and his government are hardly free from blame. Most problematic are their flip-flopping economic policies, and two sectors are more noticeable than others — reforming the family-run conglomerates and curbing real estate speculation.
Moon seems ready to repeat the failures of his former boss and mentor, the late President Roh Moohyun, in this regard. Roh vowed to tame chaebol but succumbed to their financial clout. He also pledged to eliminate property speculation but failed because of inconsistent policy.
President Moon is also openly wooing Samsung and Hyundai groups while losing the war with real estate speculators, which has long become an endless whack-amole game.
The liberal President appears to feel anxious with a weak economic report card, which his conservative opponents attribute — wrongly — to Moon’s anti-business policy. If no good news comes from the economy, his Democratic Party of Korea will have to wage a difficult battle in the parliamentary polls six months later. Two groups should be the last to criticize Moon’s economic policy, however — the main opposition Liberty Korea Party (LKP) and the conservative media.
Voters know the government’s policy was the result of the “paradigm shift,” from the chaebol-oriented and manufacturing-led economy to an SME-centered, service-dominating one. Going back to the old pattern and its nonexistent trickle-down effect is anachronistic.
The conservative LKP is also responsible for the current legislative logjam by sitting on even those economic bills closely related to people’s livelihoods on which there is little partisan difference of views. One cannot help but suspect their tactics are only aimed to mangle the national economy further to retake political power.
At a time when most foreign economists say expanded fiscal spending is a must to boost the sagging economy, these conservatives also emphasize fiscal health. They are forgetting how the previous conservative governments lavished taxpayers’ money on worthless projects tainted by corruption, such as destroying the nation’s four largest rivers and pouring money into fraudulent resources development overseas.
President Moon and his economic team have only to develop new growth engines befitting the Fourth Industrial Revolution and expand the growth potential with a longer perspective instead of getting anxious to show short-term growth.
He should be able to tell the people to brace for low growth for some more time while the nation makes the essential transition. Instead, Moon ought to expand the social safety net for the weakest links in the economic chain — SMEs and the self-employed. He has only to be pro-market, not pro-chaebol.
Most Koreans, especially in middle-income classes, will have to accept slower growth and stagnant incomes for the time being. If they refuse to endure the current difficulties and take the hands of pro-big business market fundamentalists, the people themselves will turn out to be the biggest losers by going back to the bad old days of a decade ago.