Fire Has Spread to Main Street in Korea, Too

Samsung Electronics' first-ever net loss in the October-December quarter came as a shock, not just in psychological terms but in substantive meaning.

Friday's report, coming on the heels of gloomy news, including Ssangyong Motor's filing for court receivership and Hyundai Motor's plunging profits, means the fire of the financial crisis has now spread not just to the traditional industries like automobiles but also to IT, more susceptible to changes in consumer income.

It also signifies the global financial turmoil and ensuing economic recession have begun to squeeze the bottom lines of the nation's manufacturing sector as a whole, which relies heavily on the overseas export market.

With its main export locomotives crippled like these, it's of no surprise that the nation's economy contracted 3.4 percent in the three months ended Dec. 31 for the first time since the fourth quarter of 1998 when Korea was in the throes of the Asian economic crisis triggered by problems in giant business groups, causing an eerie sense of deja vu.

Fortunately, the business community seems to have learned something from the crisis 11 years ago, overhauling their production process and marketing strategy, as well as tightening their belts, as shown by the voluntary slashing of executive pay and the return of their stock options. If and when these self-help efforts and bold R&D investment and other long-term strategies pay off, the current crisis should turn into opportunity.

What has hardly changed is the government sector, if the Lee Myung-bak administration's personnel management is any indication.

Looking back on the past year of ``MB-nomics,'' one finds mistaken forecasts, wrong moves and conflicting signals. Totally unaware of the looming crisis from abroad, the government stuck to its growth-first policy, wasting lots of previous foreign reserves in the process. While trumpeting loudly about the need for a market economy, it employed 1970s-style economic control, slashed payrolls at state enterprises while calling for new job creation, and urged banks to increase lending while calling for them to improve capital adequacy ratios at the same time.

The government is also moving toward deregulation and privatization in an era of re-regulation and re-nationalization. The governing camp is still praising itself for tax cuts for the wealthy, which will drain governmental resources for any significant economic stimulus, vital to sustaining the national economy during the economic slump.

President Lee only recently sacked his economic czar behind the fiasco ― only to name him head of a blue-ribbon panel on national competitiveness, dashing cold water on public expectations of an entirely new economic team.

Holding meetings underground may appear dramatic, but depending on the participants and policies, the outcome could be comedic.