[Opinion] “Numbers Game”

At the New Year’s press conference, President Roh Moo-hyun told reporters that the Korean economy is likely to reach the per capita income of $20,000 by 2008, thereby joining the ranks of advanced nations. It is such heartening news. Still, the prediction left the general public suspicious. When there are few signs of an economic recovery during the Participatory Government, crossing the threshold of a developed country in three years is unlikely. The truth is either that the president lied or that he did not know much about economic statistics. Or the president’s economic scenario could not come along unless the presidential aides misled the president about the economy.

▷Why was the ever-elusive goal of $20,000 mentioned? The number was mentioned due to a statistic delusion. For a start, won dropped from around 1,200 to the range of 1,000 against dollar last year. The drop considerably boosted the national income in terms of dollar when the national income based on won stayed more or less the same. Approximately 67% of the increase in the national income based on dollar was attributed to the falling won against dollar.

▷Secondly, the Bank of Korea adopted a new method of calculating the national income last year. The change alone increased the nominal national income by more than 14%. The central bank shifted the standard year for the calculation from 1993 to 2000 and adopted the 1993 System of National Accounts (SNA), which shows details of the national income, in place of the 1968 one. In fact, the bank is supposed to adopt a new basic year every five years in response to recent changes in the economic environment and a new calculation mechanism for the economy (1993 SNA), following U.N.’s advice. However, any increase in the nominal national income thanks to the new standards cannot elevate the real national income or the living standards of people.

▷When one figures out the economic growth for the last few years again, employing the new standards, there is not much difference to speak of. The growth of the national income is a statistical one, not a real economic growth. Moreover, considering the new calculation method for the national income and price rise, the first threshold of an advanced country in 2008 will be up to $25,000 from current $20,000. Playing “Number games” alone cannot make a developed nation.

Na Seong-lin, Guest editorial writer, Economics Professor at Hanyang University, hwalin@hanyang.ac.kr