[Editorial] What to Live On Now?

The International Monetary Fund (IMF) warned Korea of a sharp fall in the Korean economy. The IMF, which prevented Korea from going bankrupt nine years ago with its bailout fund, has said in its recent report that Korea’s economic growth rate would fall to 2.8 percent by 2020 and to two percent by the mid-21st century. The nation’s economic growth rate has already fallen to within three to four percent since the current government’s inauguration, but the report is now forecasting a further decrease in economic growth. A low growth one year acts like compound interest, subsequently places a burden on the following year’s growth and eventually eats away at a nation’s future growth. If Korea had maintained a growth rate between five and six percent, or if it had recovered to the previous level of seven to nine percent for the past four years, its people’s livelihood would have been far more vigorous.

As factors that are contributing to lowering Korea’s potential growth rate, the IMF pointed out a labor shortage stemming from Korea’s aging population, rigidity in the labor market, low productivity in the service industry, inefficiency in the capital market and financial trouble that resulted from the welfare budget. However, all of these factors were frequently discussed within the nation as well, so if the government had proactively dealt with these issues in a consistent manner together with the Korean people, it would have never been impossible to rejuvenate Korea’s potential growth rate. Today’s plummeted growth capacity is either the product of inefficient implementation of a policy that is appropriate while the government is focused only on rhetoric, or it is the result of an ineffective policy based on the government’s adherence to ideology.

If Korea really wants to listen to the warning of the IMF and overcome the grim forecast even now, the nation should come up with a comprehensive countermeasure and gather the strength of the Korean people. First of all, the nation should redefine the relationship between labor and management. If labor unions’ current mindset that strikes can take care of every issue is not changed, not only the manufacturing industry but also the entire industry could collapse. In order to allow people with the capability and willingness to work to be able to find a job, it is necessary to facilitate a more flexible labor environment where hiring and firing workers are easier, reemployment is activated and a salary peak system is in place (a salary peak system is a kind of work sharing in which the wage of a worker who reaches a certain age will be reduced, but the retirement age is guaranteed).

It is also ironic that the nation has set out to be a financial hub in Northeast Asia on one hand, but it has actually now fallen into the trap of inefficiency of the capital market. The first step to fostering a high value-added service industry is market liberalization, deregulation and promotion of competition. A welfare system is necessary but under that system, people should be able to work rather than being provided with unconditional benefits.

The president, government, and political community should realize the current serious situation of the Korean economy and make all-out efforts to find a practical answer to the question, “What should Korean people live on now?” They should take the lead in dealing with the current situation and utilize their leadership to gather the strength of the Korean people. But it is quite doubtful whether the current leadership in Korea’s political circle is even listening to the warning from the IMF.