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Opinion

Building strong growth

Sept 08,2018
SON HAE-YONG
The author is the head of the economic policy team at JoongAng Ilbo.

Korea is a typical small open economy that relies on exports. Rather than domestic demand, the global economy determines the fate of the Korean economy.

So when the government rates the economic policy, it should be a relative assessment, not an absolute assessment, based on the rate of global economic growth.

Korea’s strong economy should not get a high grade if it is reliant on the high growth of the global economy. In contrast, a low growth rate should lead to a good score if the global economy is in slump.

The notable example of this is 2009, when the global financial crisis hit. Korea’s economic growth rate was 0.7 percent, but considering global economic growth of minus 0.1 percent and the U.S. economy’s growth of minus 2.8 percent, the government policies got an A plus.
Korea’s high annual growth streak of over 10 percent in the 1980s and ’90s slowed down in 2003. Korea’s economic growth rate was 2.9 percent, less than half of 7.4 percent in the previous year, and it began to hover below the global economic growth rate. The problem is that the gap is growing. This year, Korea’s growth rate is 3 percent, 0.9 percent less than the global average of 3.9 percent.

The Korean government has recently lowered its growth prospects for the year. Some say that the United States may actually grow faster than Korea, as the United States is enjoying an economic boom. In the past, the United States has only grown faster than Korea three times.

It is a sign that growth and investment in the Korean economy is shrinking rather than riding the global boom.

Korea is also going the wrong way in terms of employment. Most of the Organization for Economic Cooperation and Development (OECD) member countries have recovered to their pre-financial crisis unemployment rate, but Korea’s unemployment rate is still higher than the 2007 level. Korea is the only country in the OECD where the unemployment rate has grown for four consecutive years.

A hint can be found in the reference to the global economy. The latest crisis that has befallen the Korean economy is not a global economic issue but a policy issue. The government can no longer create growth. Companies make jobs and lead investments. Policies that burden corporations undermine national competitiveness and reduce employment.

Leaders like Trump in the United States, Angela Merkel in Germany, Emmanuel Macron in France and Shinzo Abe in Japan have presented economic measures that encourage corporations for a reason. Their policies should serve as a guide to ending Korea’s economic crisis.

JoongAng Ilbo, Sept. 7, Page 34
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