August 14, 2019 13:42
The average amount of debt shouldered by each salaried worker in Korea stood at around W41 million last year, up 7.4 percent compared to 2017 (US$1=W1,224). That means debt increased more than twice faster than wage growth of 3.6 percent over the same period. The number of people who filed for bankruptcy during the first six months of this year alone reached 23,000, up 8.2 percent from the same period of 2018. The government intended to stimulate economic growth by boosting the earnings of low-income households, but the dismal result has been an increase in debt.
Meanwhile the middle-class, the backbone of society, is shrinking rapidly. The proportion of the households who earn between 50 to 150 percent of the median income shrank from 63.7 percent when President Moon Jae-in stepped into office in May 2017 to 58.5 percent this year. The middle class had been growing steadily until the Moon administration started but shrank more than five percentage points over the last two years. A total of 150,000 prime manufacturing positions have disappeared during that time, leading to a deteriorating job market and an erosion of the middle class.
The government rolled up its sleeves to pressure businesses to grant full-time status to temporary workers and ensure that they work no more than 52 hours a week. But the result has simply been a decline in the number of available jobs. It also spent a whopping W54 trillion in taxpayer's money to create jobs but failed to boost employment since they were all fake jobs like menial positions for the elderly.
Last year, the number of new applicants for unemployment benefits reached 101,000 and payments soared to a record high. Low-income households' earnings dropped 37 percent, while 56 percent of the bottom 20 percent of the income bracket are now unemployed. These people are now lining up to cash in their insurance policies, and many are turning in desperation to loan sharks. The amount of returned payments from cancelled insurance policies increased by W2 trillion over the past year, while 4.12 million people have turned to loan sharks.
But the president is delighted with his achievements. Only on Tuesday he claimed, "The basic fundamentals of our economy remain strong." Perhaps he was holding the graphs upside down. In reality Korea fell to last place in the OECD in economic growth, while exports have been declining for eight consecutive months and listed companies' profits declined 40 percent over the past year. The number of corporate bankruptcies has soared to a new record under Moon's watch, and unemployment is the worst in 20 years with the real unemployment rate soaring to 25 percent. But the president claims that job figures are "improving."
He is looking for solace in the fact that global credit ratings firms have given a higher sovereign credit rating to Korea than Japan. But they only evaluate a country's ability to service debt and are no indication of its real economic conditions. In fact, Korea received the highest sovereign credit rating in its history just before the 1997 Asian financial crisis but ended up turning cap-in-hand to the International Monetary Fund for emergency loans just two months later.
All three global credit ratings firms have slashed Korea's growth rate forecast citing weak corporate investment and deteriorating profitability of businesses. Some global investment banks project Korea's economy will grow only in the one-percent range, the lowest in a decade. On top of that, Korea's stock market is the only one among the G20 countries' to retreat this year, while the won has weakened the most after the Argentine peso.
But Moon continues to bury his head in the sand and still blames naysayers for spreading "fake news" and causing anxiety in the market. Anything negative, in Moon's eyes, is fake news. All true news is good. Pollyannas should not be put in charge of running a country.
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