[Opinion] Consumer Confidence Critical to Economic Health

In early 2002, it was all the rage to say the line from a TV commercial, “I wish you would get rich,” as part of a greeting when we met someone. But since then, lots of people might have newly joined the ranks of the rich themselves.

Moon Seung-ryeol, a team leader at Kookmin Bank and an expert on the rich, said in his book titled, “Korean Rich, the Secret of Seven Power” (publisher, Human & Books) that among the rich, many of them are born in the winter and morning persons. In his book, he says while the well-to-do buy plain furniture and wear modestly, they are spendthrifts when it comes to their children’s educations. One advertisement company says that “rich wives” estimated to number about 250,000, value family the most and hate spending money lavishly without any good reason, even though they like famous brand-name products.

In the past, we used to blame the rich for being too lavish. It seems like that wasn’t so long ago. However, we now are worried that the well-to-do do not spend money. It is because we are living in an era when consumption is a virtue. Production and employment improve when consumers spend money to some extent. If private consumption and business investment continues to be sluggish, it will be difficult to shake off concerns about a prolonged recession.

In July, the Korea CEO Forum comprised of chief executive officers conducted a survey on its members. About 70 percent of those surveyed said that the Korean economy is on the verge of a long slump, or has already entered it.

The U.S., whose economy was sluggish until 2003, puts a high value on the private sector’s consumer confidence. This is because more than two thirds of the U.S. economy depends on private consumption. Every month, when the consumer confidence index and other indices related to private consumption are released, not only the government and businesses but also the stock market gets nervous, and stock prices are affected, although it has been pointed out that their prediction rate has decreased.

From 1998 to 2002, in Korea, consumption accounted for 64~66 percent of its economic growth rates, the same level as the U.S.

The consumer expectation index released by the Korea National Statistical Office last week was 94.8, hovering below 100, a standard benchmark for consumer confidence. What it means is that there are more households that have a negative outlook for the economy, their livelihoods, and consumer spending for six months later from now than those who have a positive outlook.

We can find some relief in the fact that the index reading for the income bracket with more than four million won in average monthly income hovered above 100 from this February up until this August. Though on the decline, the “patriotic consumption” that appeared early this year seems to be remaining. To boost consumption, the rich should be encouraged to loosen their purse strings. It has become all the more urgent to stabilize their consumer confidence.

Hong Kwon-hee, Editorial Writer, konihong@donga.com