[Editorial] Prime Minister Says Economy is Doing Well, But People Feel Uneasy

The Korean economy is doing well if you listen to Prime Minister Lee Hae-chan’s press conference celebrating the first anniversary since his inauguration. He said, “Although it may not be a carousal they had in the past, the livelihood of the average people is stabilizing and housing prices have been stabilized. The economy will recover sometime around October. Excessive growth only triggers income gap and price instability.”

The real income for the lower 20 percent of city workers decreased last year. 40 percent of households, which is almost half of the national population, were in the red in the first quarter of this year. About 30 percent of small-scale businessmen received a monthly income of less than the minimum living cost, or 1.13 million won for a four-member family standard. The average ratio of debts to annual sales for 20 percent of self-employed business was 174 percent. Prime Minister Lee judged that the livelihood of the average people is “stabilizing” maybe because he was not informed of these numbers. It is questionable whether he has any countermeasures which would only be found if he also feels the agony of the average people.

Prime Minister Lee talked as if the government’s real-estate policy was successful, saying, “Housing prices increased only in Gangnam - areas located south of the Han River in Seoul - and there was no increase in other regions including Mapo and Seodaemun. Crying out that the “increasing housing prices in Gangnam is causing a bipolarization of distribution,” the government implemented a policy to curb housing prices in Gangnam for about two years under President Roh Moo-hyun’s leadership. The result, however, was an aggravated bipolarization of housing prices. Price hikes for medium and large-sized apartments in some parts of Bundang-gu, Seongnam and Ilsan-gu, Goyang in Gyeonggi Province are also steep. In other words, Prime Minister Lee is praising the policy which worsened the bipolarization phenomenon as a success. He also said, “Due to development plans, land prices are increasing but there is little transactions going on.” It seems that the prime minister sees it as a “stable market” while in reality the land owners are not selling their pieces only because they are expecting additional increases in the prices. The wind of land speculation is blowing harder after the government announced that it will move public enterprises to other provinces.

The government announced two weeks ago that they will come up with a real-estate policy package in August. I feel that it would be fortunate if the government’s new policy does not aggravate the bipolarization phenomenon and nation-wide speculation since it judges that its policy was a triumph.

In addition, Prime Minister Lee stated, “Investment is becoming sound. [I] will not employ a stimulus package that will bring side effects.” Economic experts and the market know that the economy’s growth potential is plunging because investments in potential and promising areas have been low for several years. The government has been implementing artificial stimulus packages spending tens of trillion won of finances and starting various land development projects which amount to hundreds of trillion won. Foreign institutes, nonetheless, estimate that Korea’s growth rate will be three to four percent this year. Even when the annual growth rate is falling to three percent in contrast to candidate Roh’s promise for seven percent, Prime Minister Lee instead worries about the side effects of “excessive growth.”

What is worse than a political failure is not acknowledging the failure itself because one cannot come up with integral countermeasures.