Failure to stimulate domestic consumption

In February, then Strategy and Finance Minister Yoon Jeung-hyun asked reporters, “If you suffer a sudden stomachache at 10 p.m., is there a pharmacy that`s open where you can buy drugs?” He added, “There are about 21,000 pharmacies nationwide but the combined number of neighborhood convenience stores and supermarkets exceeds 100,000.” If allowed to freely sell over-the-counter drugs, convenience stores and supermarkets can raise consumer convenience, raise sales of supermarkets, lower drug prices, create jobs, and increase GDP. So five benefits can be derived through one measure. Yoon was minister for two years and four months but failed to introduce a measure to sell non-prescription drugs at supermarkets until he left the post last Wednesday.

In talks with former Grand National Party Chairwoman Park Geun-hye Friday, President Lee Myung-bak said, “The government will pay attention to shoring up domestic consumption and work hard in this regard from now.” Since the onset of the global financial crisis, export-focused conglomerates and manufacturers have spearheaded the Korean economy. The benefits of economic growth, however, have not evenly spread to the working class people. Boosting domestic consumption is an urgent agenda in state administration not only to assure stable economic growth but also to spread the effects of economic recovery to the working class.

The proposal to allow the sale of over-the-counter drugs at convenience stores and supermarkets, which intended to galvanize the service industry aimed at increasing domestic consumption, has been shelved in the face of strong resistance from the Korea Pharmaceutical Association. A Strategy and Finance Ministry official said, “As the government has failed to introduce the sale of over-the-counter drugs at neighborhood supermarkets, a policy deemed the easiest among other measures designed to help galvanize the service sector, none of the public will believe in the government’s pledge to boost domestic consumption through deregulation of the service industry.”

The incumbent administration has emphasized the galvanization of domestic consumption several times: after Yoon’s inauguration in early 2009 and after the G-20 summit in Seoul in fall last year, and the inauguration of new Strategy and Finance Minister Park Jae-wan. Tangible results remain elusive, however. One reason for the failure is the struggle by interest groups to preserve their “privileges,” but a more credible cause is ministers who do not share a vision and strategy amid lack of leadership that can mediate conflict between interest groups. If the government merely emphasizes the justification for a policy but fails to implement it, it will be labeled incompetent.

The medical field is attracting a large number of talented human resources. If entry barriers are lowered to allow private capital to enter the sector, Korea can significantly expand medical tourism, which attracts foreign patients to the country. The administration has failed to overcome those opposed to this measure, however, citing “protection of the working class.” It is pathetic to see the administration claim “protection of the working class” despite failing to create national wealth and blocking job creation. The government should overcome such an ideological fallacy by itself.