[Opinion] Politics, Help the Economy

2001 which began filled with hopes for a new millennium is almost at its end. Although this year was difficult for everyone due to the global economic slowdown, the majority of us quietly participated in the structural reform effort in order to alleviate the economic hardship. Due to our people`s effort, the fundamentals of our economy is improving despite all the difficulties.

Our economy, which was on the brink of national bankruptcy four years ago, is now acknowledged by international society as having overcome the financial crisis. As if to reflect this acknowledgment, recently the U.S.-based Standard and Poors adjusted the Korea chain index to BBB+ and foreign investors are enthusiastic about `Buy Korea`.

Yet, despite these positive signs, our economy must address the following problems in order to move forward one more step. First, the competitiveness in production must be increased. Although businesses have changed their focus from gross sales to actual returns, and ratio of corporate debt has gone down, 30 percent of manufacturing companies cannot even pay off the interest due to operation costs. Moreover, our products in the foreign market are placed between advanced industrialized nation`s products and Chinese products. Exports have been decreasing for the past 10 months. These indicators show that the crisis in production economy is still a reality, and that raising the competitive edge of our businesses in the global market is the only way to overcome the crisis.

Second, structural reforms in financial organizations must be completed successfully. Although amount of insolvent credit in financial organizations has decreased, and the Bank for International Settlements (BIS) standard ratio of owner`s equity has increased by 10 percent, the financial crisis is not over. The trend of bank mergers is a sign that financial structural reforms are going through successfully. In order, however, to complete the reforms, insolvent financial bodies should be merged and abolished even if that requires public funds.

If raising the competitive edge of businesses and completing the structural reforms constitute the necessary conditions, restoring political leadership and awakening the political powers are sufficient conditions. First and foremost, political leadership that can be the central force for unifying the people is needed for another economic leap. The reason why we could overcome the financial crisis was the presence of a political leadership that unified the people. Argentina, which announced a moratorium on payment of foreign debt on December 23, is facing yet another economic crisis due to a chaotic political landscape and lack of leadership. These examples clearly show how important strong political leadership is for economic stability and prosperity.

Unfortunately, we do not have any certainty about our political leadership. Mistakes in medical and educational policies along with a series of scandals have accelerated the public sentiment`s turn against the administration, led to the ruling party`s crushing defeat in the special by-elections, and brought about divisions within the party itself. Consequently, political leadership has grown weak. Restoration of political leadership does not seem likely and our worries are growing larger.

Another condition for moving us toward economic advancement is the awakening of the political powers. The endless springing of `gates` and all kinds of questions surrounding them demonstrate that our politicians have not eradicated themselves from the colluding circle of politics and economics. The only difference between the past and the present is that the former collusion between politicians and conglomerates are now replaced by collusion between unethical politicians and false venture capitalists. How can there be fair competition, or proper function of market principals, or increasing economic competitiveness in a society where a businessman gives money to a politician to watch his back? This is truly frustrating and unfortunate considering that one of the main causes of the financial crisis was collusion between politicians and businesses.

Political leaders need to look at themselves honestly. They must sincerely reflect on why the people`s distrust and contempt increase by the day and why the press criticizes the politicians for putting a ball of chain on the economy. Without a new politics born from this kind of reflection and self-examination, a leap in our economy can only be a distant dream. We sincerely hope that the politics of next year will support the economy.

Cho Myung-Hyun (Korea University, Professor of Business Economics)