[Guest Opinion] The `visible hand` of Greenspan

Alan Greenspan, chairman of the U.S. Federal Reserve Board (FRB), has displayed his influence over the world economy since the beginning of the year.

His announcement of a 0.5 percentage point interest rate cut triggered a sudden rally in the New York Stock Exchange. The impact was instant, but how long it will last is open to doubt.

What kind of a man is Greenspan, who is credited with leading a 10-year-long boom of in the U.S. economy? In the free market economy of the United States, supposedly ruled by an invisible hand, isn`t the hand of Greenspan too visible? How should we understand the international money market that is at the mercy of the somewhat arcane utterances of his? Won`t his growing power do some harm to the American economy and the world economy?

Such policy measures as an interest rate cut might be a shot in the arm that produces an immediate effect. But its side effects and aftereffects could turn out to be a failure of government over the long haul. A renowned economic pundit, Milton Friedman, said that intervention in the market might break even at best but that it might work against productivity at worst. Fine-tuning of interest rates repeatedly undertaken by Greenspan and the FRB could disturb a natural business cycle and injure the self-corrective capacity of an economic system.

It is noteworthy that Greenspan and the FRB might have been responsible for the uncertainty of the American market. In the latter half of 1998 the FRB lowered the rate three times by a total of 0.75 point; subsequently, it carried out six rate increases by 1.75 point by the end of last May according to its judgment that the economy might be boiling over.

However, excessive monetary stringency combined with soaring oil prices in the latter half of 2000 caused a sudden business slump. Nasdaq prices plummeted below 50 percent of its record highs. Early this year it became necessary to seek a turnaround by attempting another interest cut.

The image of Greenspan as the champion of the longest boom in the American economy is feared to lead the American public to misperceive the nature of U.S. market as one steered by the government. The economy is like a living organism and looks very prone to unstable fluctuations. However, various measures adopted to cure its instability are often tantamount to an abusive application of antibodies whose effects are not yet certain, and might result in undermining market economy.

Some might look forward to the appearance of a Greenspan of Korea to rescue the Korean economy out of its doldrums and sluggish restructuring. The driving force behind the long-lasting economic boom of the United States, I believe, exist not so much in the personal ability of Greenspan as in the general capacity of the American people for technical innovation and improving productivity.

It is time that we recognize that no authority or professional leadership could substitute for market forces and renew faith in the primacy of the market economy as the beacon for the future of the Korean economy.

Chung Mong-Joon, National Assemblyman and Hyundai Heavy Industries advisor