Korea’s economic growth over the last year and a half hasn’t been great. It’s been average at best and hasn’t been up to expectations or projections. From a some perspectives, the Korean economy isn’t employing enough young people coming out of college and isn’t creating a lot of wage growth for many of those who are employed. Well, it’s fair to say that Korea isn’t the only country suffering the same woes, but any ways.
So, the natives are getting restless and something needs to be sacrificed to the volcano god. Madame Park pounded her fist on the table in a recent cabinet meeting and demanded ideas to “revive the economy no matter what.”
What’s the old standby when you need instant economic gratification? Pump cash into the economy! So, Finance Minister Choi Kyung-hwan came up with the (sarcasm on) brilliant idea (sarcasm off) to dump 41 trillion won ($39.8 billion USD) into the economy through three ways: 1) make buying homes cheaper 2) make capital cheaper for some businesses and 3) give households more spending power.
Choi Kyung-hwan has dubbed this policy “Choinomics.” Many people (including this writer) are skeptical that it is the panacea that many in the Korean press is making it out to be. Short term stimulus, whether by fiscal (Choinomic) or monetary (Abenomics) means, are a temporary fix. It’s kind of like cocaine, makes you feel like you are on top of the world for a few hours, but it’s not real medicine. Structural reform is the real medicine. But, like in Japan, structural reform is tedious and sometimes hurtful (in the short term) to the immediate electorate, so it is often the economic weapon of last resort.
If Choinomics is just a morale saving measure to counteract the artificial temporary decline in GDP caused by the Sewol disaster, then I would be more supportive. Given the modest improvement in GDP estimated by Choi (estimated at only 0.1% GDP improvement for this year and 2015) I suspect that’s all it is, despite the enthusiasm for it demonstrated in the Korean press as some sort of counter to
the equally futile Abenomics. So, my qualms are not in the actual policy itself, but in the manner in which it is being marketed by the government and the press as a “do all” and “save all” genius economic miracle policy.