September 05, 2018 13:36
Korea's gross national income, which includes wages and earnings from investments, fell one percent in the second quarter. In the fourth quarter of last year GNI also fell 1.2 percent but then recovered 1.3 percent in the first quarter this year, only to fall again. The total savings rate also dropped 0.3 percentage point to 34.6 percent, the lowest in four years. That shows just how cash-strapped people have become. The Bank of Korea says the decline in GNI stems from rising consumer prices due to increased oil and raw material costs. But the fundamental reason is slow economic growth, which translates into stagnating wages.
GDP growth in the second quarter stood at a measly 0.6 percent, mostly thanks to booming exports in a tiny handful of sectors, but facility investment plunged 5.7 percent, and construction industry output declined 3.1 percent to the lowest level in six years. Private consumption fell to the lowest level in a year and a half, while manufacturing and service-sector output have fallen to the lowest levels in six months. In short, all major economic indices -- output, investment and consumption -- have severely deteriorated. These are the tell-tale signals of a full-fledged economic downturn. Yet the Moon Jae-in administration still claims that the economy is on a "recovery track," and the president said the country is headed in the "proper economic policy direction." What planet is he living on?
The government's basic strategy of boosting growth by raising income through public spending has turned into a bad joke. On a cumulative basis, Korea's growth as of the second quarter stood at 2.8 percent, which is already short of the 2.9 percent targeted by the government. U.S. economic growth stands at 4.2 percent, while global growth is forecast at 3.9 percent this year, up from 3.7 percent in 2017. How can wages rise when the economy is in such bad shape?
Of course the government is not alone to blame. Bad decisions of previous administrations are also at fault. But it is undeniable that this administration is clinging to a faulty economic policy that has run exactly counter to the successful measures taken by advanced countries. Instead of nurturing businesses and stimulating the market, this government wants to use taxpayers' money to spur growth. It drastically boosted the minimum wage, with the unintended effect of actually causing people to lose low paying jobs and widening the wage gap it had hoped to reduce. This government is so hostile to big businesses that it has severely weakened their competitiveness, so they invest less and produce less.
Yet on the very same day that the dismal second-quarter GNI figures were released, the head of the ruling party gave a speech in the National Assembly vowing to boost the GNI to US$40,000 a year, by plowing ahead with the current economic policies. Even a former finance minister during the Roh Moo-hyun administration, Lee Hun-jai, said in an interview with the Chosun Ilbo on Monday that Moon is "behaving like an infallible prince." He warned that the country could end up "paying a huge price if these problematic policies continue to be pursued." And it is ordinary people, not those in charge, who will have to pick up the tab.
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