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[Editorial] Roh Administration’s Poor Economic Performance

[Editorial] Roh Administration’s Poor Economic Performance

Posted August. 08, 2007 03:02,   

한국어

Whenever criticisms emerged about the current administration’s poor performance regarding the economy, President Roh Moo-hyun said defensively, “Manage the economy just like my administration is doing.” He also said, “Let’s talk based on indicators. What should go up went up, while what should go down went down.” However, the Center for Free Enterprise under the Federation of Korean Industries released a report yesterday which directly contradicts the president’s argument. The report says, “Don’t manage the economy as the current administration has done.”

Apart from the report, there is broad consensus on the administration’s poor performance regarding the economy. The country’s economy has posted growth rates below the average global economic growth rate for four years in a row, rather than achieving the seven-percent annual growth that it promised. It is the lowest economic expansion among major Asian countries. The situation is expected to remain the same this year.

Hong Kong and Singapore, and countries with per-capita income of more than $30,000, usually record at least five percent growth. The report even said, “While Korea is walking, other countries are flying,” in comparison with OECD member countries. As a country with per-capita income of less than $20,000, Korea should not give up on further expansion as if it is blocked by the notorious five-percent growth rate. The administration has also achieved only slightly more than half of its original goal of creating 500,000 jobs.

Although the administration praises itself about the stock price hike, the hike is being driven on the global level. Moreover, there are increasing concerns that a bubble may be forming because of excessive liquidity due to increasing land compensation. Therefore, it should take a more cautious approach, rather than boasting about asset inflation, such as stock price and land price hikes.

What is more concerning is that the country’s mid-to-long-term growth engine has been undermined. Diminishing economic freedom and strengthening regulations reduced corporate investment, undercutting the economy’s growth potential. The facility investment growth rate, which stood at about nine percent in the 1990s, remains at around four percent under the incumbent administration. As it pursues a big government, focusing on wealth distribution, national debts increased. Although it stressed distribution over growth, there is no evidence that income disparity has been addressed.

The only prescription for economic recovery is expansion of market principles, privatization, deregulation, stabilization of labor-management relations, increase in labor market flexibility, and the building of a corporate-friendly country. It is a prescription that all of the leading economies in the world have been writing.