(EDITORIAL from the Korea Times on Sept. 15)

A year later
Solidity, not speed, is important for economic recovery

Korea's faster-than-expected recovery from the global financial crisis and
recession is now drawing the attention of media outlets and rating agencies.

The situation is similar to a decade ago when the nation got over the Asian
financial crisis ahead of most neighboring countries ??? only to fall back into
more financial turmoil amid ``credit card fiasco." So we hope the Lee Myung-bak
administration will get rid of the-sooner-the-better mindset, but not a few
analysts are seeing ominous signs.
The Korean economy is doing well ??? seemingly too well ??? by most indices such
as gross domestic product and export growth with its stock and property markets
even showing signs of overheating. Like most major economies, however, the
initial rebound is thanks to the heavy fiscal spending of the government.
In other words, global financial capitalism has been busy just covering the
losses from one bubble (financial) with another bubble (fiscal), and Seoul might
have been the most active and preemptive player of this tactic. So the real
outcome of crisis management will not be known until the stimulus loses its
efficacy because of budgetary restraints. Only the countries that have managed to
make the most of fiscal pump-priming for implementing essential reforms will
emerge as winners. We are afraid Korea won't.
Despite policymakers' determination a year ago to restructure ailing industries
and corporations as well as to tighten controls on financial systems and
practices, the situation remains largely the same. Over the past year, the
government was just bent on rescuing industries and firms ??? sound or unsound
??? as well as loosening financial regulations further under the slogan of free
market principles, while the financial time bomb of swelling debts at small
businesses and households was still ticking.
The Lee administration's economic team is split in two as to the timing of the
``exit plan'' ??? tightening the monetary spigot to head off inflation.
Considering up to 80 percent of smaller companies and individuals are saying they
have yet to feel any substantive recovery, the government may be forgiven for
continuing expansionary policy for the time being. As was the case of overall
recovery, however, what matters is not when the government shifts to a monetary
squeeze but how to allocate the financial resources until then.
If Seoul pushes ahead with massive public works and replenishing social
infrastructure as Tokyo did during its lost decade in the 1990s, its stimulus
money could only end up swelling budget deficits amid snowballing governmental
debt, instead of developing new growth engines and creating sufficient jobs.
Chances are high Korea's construction-oriented recovery programs could lead to an
even bigger failure than Japan's, because while the global economy enjoyed a boom
in the 1990s, it is currently mired in a serious recession and may remain so for
a protracted period, if the reports on unchanging pay and business practices
among Wall Street financial firms is any guide.
What Koreans need most right now are not overheated asset markets but jobs coming
from brisk corporate spending on plants and equipment. Any recovery without this
will be an illusion. This is a time not for reminiscing about the past year with
self-complacency but for preparing for the coming one with renewed resolve.
(END)