Searching for viable economic policies

The nation`s economic situation is worsening by the day. While the exchange rate hovers around 1,350 won against the greenback, commodity prices are soaring and stock prices fell past the 500-point mark. And discouragingly, the world`s media outlets posted warnings of another round of economic crisis in Asian countries. The main reason for the surge in the won-dollar exchange rate is the Japanese yen`s depreciation against the dollar. And the reason that the nation`s exports saw a downward trend for the first time in 23 months is that Korea`s main export markets are the United States and Japan. Accordingly, there is some justification for the government to stress that the options as far as countermeasures are concerned are highly limited.

However, whatever the reasons for the current problems, it is the government`s responsibility to find solutions. The government should reflect on how much effort it has made to grapple with the dismal economic plight that was anticipated a long time ago. There is no denying that the exchange rate`s gyration is partially attributable to a sense of insecurity about the domestic economy. Such uncertainty was generated by the rigidity of the financial market and notably the government`s unprincipled and makeshift bailout programs for the insolvent Hyundai Engineering and Construction Company and Hyundai Electronics Industries.

Against this backdrop, the government`s policies of lowering bank interest rates to boost the economy are far from reasonable. The ongoing pump-priming measures and currency injections risk boosting commodity prices, as they are based on a mistaken analysis of the cause of the current economic woes. Despite the fact that bank interest rates hit their lowest level since the nation`s founding, local enterprises are still stricken with fund shortages. This is not a result of the banks` lack of money but because of credit rigidity. The most urgent task for the government is stabilizing the financial market. The financial policy council`s decision on Wednesday to invigorate the stock market by injecting pension funds is inappropriate in this context. Noting that Hankook Real Estate Trust Company and Daehan Housing Guarantee Insurance Corporation have already begun drifting, any tinkering in the form of irresponsible policy measures won`t serve a useful purpose.

If the government attributes the current economic pinch to external factors without addressing domestic problems, it amounts to an acknowledgement of the incompetency of economic policy makers. Although the improvised, inefficient reform measures have been laid bare, the government will have answer the challenge to step up structural reforms and strengthen the nation`s economic structure.