[Editorial] Don’t Give Up the Economy for Speculation Control

Deputy Prime Minister Han Duck-soo recommitted himself to controlling real estate speculation, even if that means risking the construction market, by saying a couple of days ago, “The real estate comprehensive measures to be announced at the end of the month may not contribute to a recovery in the construction market.” Han’s remark seems to be backing President Roh’s commitment to “[controlling] real estate speculation no matter what.”

No one would argue against the idea that speculation in the real estate market needs to be restrained, but that does not necessarily mean that the construction market should be sacrificed. The black-and-white logic of abandoning everything else to contain speculation would drive our economy further into trouble. After all, it doesn’t take a Ph.D. in economics to understand what consequences were brought on by economic policies that preferred wealth distribution at the cost of growth.

Our economy is at a critical juncture toward a possible recession and a cut in its potential rate of growth. The U.S. federal funds rate exceeded Korea’s call rate, and market interest rates are climbing up, but the economic situation in Korea is so dire that the central bank cannot pull up the call rate. In July, youth unemployment recorded 8.3 percent. More and more people are giving up on looking for jobs. The stronger the government’s will to improve distribution of wealth, the greater the opposite effect it brings. Fifteen percent of the entire population, or some 7.16 million people, are now poor.

Sacrificing the construction market, despite these circumstances, for the short term gain of containing speculation is unlikely to yield the intended effect. The super-stringent anti-speculation policy would render the economy off track, dealing a heavier blow to most poor citizens than to speculators.

Real estate policies, additional budget planning and other partial, piecemeal measures are not enough to successfully tackle the difficulties in the overall economy. Better answers can be found in realigning the economic policy direction toward growth and efficiency and formulating corresponding policies because that would rein in speculation and revive the economy. For instance, deregulation of metropolitan area investment restrictions, aimed at revitalizing corporate investment and creating jobs, would be helpful for economic recovery and rescuing the poor. Moreover, readjusting the so far relentlessly-pursued balanced-growth development project would significantly dampen the wild wave of speculation. The deputy prime minister is expected to demonstrate leadership in making the policy shift, while President Roh and the ruling party is expected to fully support him.