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No ‘free lunch’ in the economy

May 02,2017
The Korean economy has been raising hopeful signs, growing at a faster-than-expected rate of 0.9 percent in the first quarter led by strong exports. Still, it is far from safe due to the danger of a lengthy slow movement. Except for a few mainstay items — semiconductors, automobiles and petrochemicals — most of the exporters that traditionally fueled growth have lost steam. Exports and capital investment do not help to boost employment and domestic demand.

The five leading candidates for the 19th presidential election focused on the economy during the latest televised debate. None of them gave a clear picture on their economic direction and policies to address multiple challenges such as balancing growth and distribution, reforming the chaebol sector, leveling the corporate field, setting the economy on a sustainable growth pace through restructuring, strengthening social security or ensuring more jobs.

The liberal camp came under attack for its populist pledge of bringing immediate compensation for the lower-class instead of trying to boost the economy to generate long-term growth and income. Centrist and conservative candidates argued for better environments for corporate activities through deregulation. The liberals stressed the government’s role in areas where fair market practices do not work. They advocated that the proposal to increase jobs through public sector hiring is aimed at compensating for market weaknesses.

All five candidates called for more aggressive fiscal spending to strengthen social security. Their spending outlines would cost billions of dollars over the next five years. But there is no such thing as a free lunch in the economy. The candidates must specify the financial means for the welfare policies before the race ends.

They must honestly acknowledge that they cannot keep their promises if they cannot come up with feasible financial plans. There are ample cases from Europe and Latin American showing how unplanned welfare financing can ruin public finance and a country.

JoongAng Ilbo, April 29, Page 30