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[Opinion] New Three “Highs and Lows”

Posted May. 12, 2008 03:07,   


About this time last year, many experts pointed to the “three highs” as the hardship the Korean economy was facing. They expressed concern that high oil prices, high interest rates and high won currency was leading to the high possibility that the Korean economy will slip off the growth slope. Out of the three, only one is still there and the rest two have been replaced by other “highs.” High oil prices remain the same, but high interest rates and high won currency have been replaced by high commodity prices and high exchange rates. Last year when the exchange rate was too low, many lamented its negative impact on export. As the exchange rate rose, the burden on the commodity prices has increased. For Korea, a country highly dependent on external trade, high and low exchange rates both cause concerns.

It is not easy for even an erudite economist to interpret economic phenomena with numerous variants intermingled with one another, in a way understandable for anyone. It is partially for this reason that there are so many coinages related to the economy. While phrases like “three lows and highs,” in particular, are prone to erroneous simplification, they nevertheless have the strong points of catching the essence when the economy fluctuates. The same phrase can have completely different meanings according to the state of the time. The “three lows” that headed the prosperity of the Korean economy in early 1980s were “low commodity prices,” “low won currency,” and “low interest rates.” On the other hand, the “three lows” representing the gloomy reality of the Korean economy are “low growth,” “low employment,” and “low consumption.”

The Bank of Korea says that fulfilling the current expectation of mid-four percent growth rate this year would not be a bad performance in a situation where the world economy is frozen. The responsibility of the current government, which puffed the expected value of the Korean people by pledging a growth rate of 7 percent, is a different problem here. In a difficult situation like this, the reasonable solution is to look toward the future and reinforce the potential for growth through deregulation and the improvement of investment conditions.

The prices of oil and raw materials are inevitably external factors, but this does not mean that it is okay for the government to sit blaming others for the changes. What makes the “three highs” awesome is that they easily transform into “three pains” for the economically less privileged and add weight to their difficulties. Getting rid of the confusion within the government and the ruling faction will reduce the pain on the people to a considerable degree. The important thing is to do away with useless power games, come up with necessary policies, be it additional taxation or the reduction of it, and put them into action without delay.