+ A

Head in the sand

Nov 27,2019
Lee Sang-ryeol
The author is an economic news editor of the JoongAng Ilbo.

Former President Kim Dae-jung’s leadership shone through as he battled the 1997 crisis. No other country among the affected nations recovered so dramatically. As an opposition leader and presidential candidate, Kim could not have been entirely free from responsibility after the country reached near-default. After being elected president, Kim stayed reliable. He did not scrap the austerity and restructuring medicine prescribed out by the IMF in return for an international bailout, nor did he seek a renegotiation.

If he had not delivered the restructuring promises, Korea could have been stigmatized internationally as an unreliable nation. Kim earned credibility from his first dialogue with the people in early January 1998 after he won the election in December. He honestly told them that our national coffers were empty and that the country could default on maturing loans. He pleaded for pain-sharing from the government, businesses and workers.

Layoffs would be inevitable, Kim explained. “I, too, had fought long for workers. But if we procrastinate with implementing flexibility in the labor market, we cannot draw foreign investment,” he said. His leadership of laying out the reality frankly with the people and asking for sacrifice for national interests helped the country combat the crisis and fully repay the loans ahead of the deadline.

Ten years later, the country was hit with another financial crisis — this time the Wall Street-triggered meltdown. Luckily, conservative businessman-turned-politician Lee Myung-bak was at the helm of the country. Korea was among the fastest to beat the global crisis. Lee would regularly mention that the country was in an “emergency.” He demanded his government secure as much hard currency as possible at times of crisis. Seoul aggressively sought currency swaps with the United States, China and Japan. He urged the corporate sector to become equally aggressive in management. “The ranks can change during times of crisis. One cannot solely be on defense.” Companies invested and met the challenge, helping to reinvigorate the economy.

Crisis can arrive at any time. An accurate response and empathetic communication from the leadership — and public confidence — will reinforce energy to take on any kind of challenge and crisis. The two former presidents set good examples.

The Moon Jae-in administration does not have that sort of awareness and is not taking the right kind of action. Although the economy is doing its worst since the 2008-2009 financial crisis, the president is assuring us that the economy was moving “in the right direction.” The president was misguided on the household income data for the third quarter. The data showed that the income of the bottom 20-percent households gained 4.3 percent, helping to ease the gap with the top 20 percent to some extent.

But he missed the major weakness — the collapse of the self-employed. Business income fell 4.9 percent in the third quarter against the year-earlier period, the biggest fall since the records were first compiled in 2003. The self-employed retreated to the bottom income class. The business income of the two lowest income groups gained 11.3 percent and 15.7 percent, respectively. But that was not because mom-and-pop businesses did better. A greater number of self-employed joined the lower ranks because their income fell from the deterioration of business, the statistics office explained. The self-employed no longer earn enough to stay in the middle-income category. The sharp increases in the minimum wage and a universal cutback in work hours have wiped them out. But the president found a “clear positive effect” from the income-led growth policy in latest household income data. Killing the self-employed could not have been the goal of the income-led growth policy. It is why many resent the president.

The government blames the demographic factor — a thinning working-age population due to the fast aging and a low birth rate — for sluggish employment for those in their 30s and 40s. Hong Nam-ki, deputy prime minister for the economy, observed that the population in their 40s has been decreasing since 2015, leading to the reduction in the payroll in the age group. But he, too, was misleading. The population of the people in their 40s decreased by 121,000 in October, whereas the number of employed in the age group decreased by 146,000. Jobs were lost faster than the decline in population. That has been the case since June last year, except for two months.

The government has been selective with data that sheds favorable light on its policy. But this self-indulgence has hit the confidence of the people who are suffering during the crisis-hit period. No government can survive after losing public trust.

JoongAng Ilbo, Nov. 26, Page 30