[Opinion] Selfish Group Interest Ruins the Economy

Our stock market is becoming energetic. Foreign investors regard our economy in a favorable light. Yet, there is anxiety in our hearts. This is because the politicians are raising their voices. These politicians are more concerned about economic policy as a tool for gaining more votes for the imminent elections rather than actually improving the economy. Their polluting the economic air through the provincial and presidential elections is a serious cause for concern.

The politicians have a considerable share of the responsibility for the 1997 financial crisis. The `power leakage` before the presidential elections weakened economic policy and this was the decisive factor in bringing about the financial crisis. The fighting between politicians made the leakage worse, and the political leadership failed to perform its most basic function of mediating conflict. The politicians focused solely on getting more votes and encouraged conflict among their constituents while such political logic led the administration to implement mutually contradictory policies and create an excess of ineffective policies.

The government was smug and complacent in the midst of this situation. It may have been only a matter of course that various economic interest groups behaved so irrationally. The fall of Kia Automobile made a huge impact on reducing foreign investment in the Korean economy in 1997. The confusion and chaos surrounding the government`s countermeasures for the crisis were caused by the political line of the then governing authorities and the spinelessness of the administration.

At the beginning of the year, President Kim Dae-Jung announced the plan to raise our nation`s economic competitive edge to world-class levels and proposed various policy measures. These policy measures will have a powerful effect when the domestic and international circumstances harmonize. When we consider first the international circumstance, the world economy, except for Japan, will show signs of recovery and as the U.S. IT industry bubble burst settles, IT investments will rise again. Excluding the Japanese economy and yen exchange rate, the international conditions are on the positive side.

Domestically, consumer activity is getting better while investment in construction and facilities are showing signs of recovery. Much of the corporate insolvency is becoming resolved and the continuing low interest rates are helping financial organizations improve corporate expenditure. Although the won exchange rate and exports remain problems, over all the national economy is definitely feeling the ground of recovery. The most dangerous trap, however, still remains – the problem of consistency in implementing policy. Our experience in 1997 taught us what kind of negative impact power leakage and the presidential elections can have on the consistency of policy. Economic policy is like a traffic light at an intersection. When the traffic light is functioning consistently and operating safely, the traffic in the intersection is orderly. When economic policy loses its consistency and stability, there is chaos in the economy, and corporate investment and store consumption activity become distorted or contracts.

Many things happening these days are cause for worry. The Federation of Korean Industries (FKI), who represents the major corporations, is raising its voice while some president of a chaebol company is making statements on political funds – things that have never happened before. Having witnessed how interest group politics involving groups like labor organizations, teachers associations, doctors and medical groups, and farmer unions can ruin the consistency of economic policy, one worries even more about the potential economic instability caused by the added voices of the chaebol companies and the FKI. If we cannot mediate the conflict between the various interest groups in the common interest of the nation`s good, our economic policy will lose its consistency which will in turn lead to delays in economic recovery and an end to President Kim`s ideas. Therefore, we must take the lessons we learned in 1997 and put our collective efforts into two things.

First, let us support and protect the administration from being swept into political lines. In other words, the people can block the pressure that interest groups put on the administration and policy makers. Second, let us strengthen the monitoring system over the politicians. For example, we can analyze the consistency of presidential runners` platforms and political ideas by constantly keeping track of their statements. We can bring to light conflicting and contradictory ideas and notify the public through various outlets.

We need the help of the press, NGOs, and academics for these two efforts. If we succeed in making this a reality, the damage that various interest groups inflict on policy consistency will be greatly reduced.

Kim Kwang-Doo (Sogang University, Professor of Economics)