Rumors of ‘September catastrophe' need preempting
Is skepticism the best attitude to adopt when dealing with a crisis? Can't we try to flip it around to make an opportunity out of it? That spirit of enterprise is conspicuously absent in government, corporations and ordinary people, lending more credence to rumors of an immediate economic catastrophe than it deserves. Since this crisis is not the first, when and if it comes, and, certainly, will not be the last, it is time to prepare for what is to come after this wave, so as to make a great leap forward and become free from a "slippery slope" blocking Brazil and Argentina from a final dash to the ranks of advanced countries. For that, we should learn from ourselves when we beat the 1998 currency crisis.
Although crises may differ in nature, the remedy would often be the same. We should be patient to hunker down and brace for the worst, trust the leadership and get esprit de corps. By the crisis-busting timeline, we should by now be reinventing ourselves. For detractors, be reminded that it is no use wringing the hands in anxiety and hoping against hope that they will prove to be Cassandra.
Rumors of the September Crisis are based on abnormal signs in the world's factory, China's economy. The communists have tried to resuscitate China's stock markets through repeated intervention without much success. They have manipulated the exchange rate but failed to make much difference. Beijing put on a brave face, saying that it is cruising on the growth target of 7 percent or more for this year but analysts expect it may tumble to the 5 percent range. The biggest fear factor is that it is the first case in which the government's policy has not worked since the 1978 start of its "Reform and Opening-Up" policy led by Deng Xiaoping. In a way, it should not be alarming because China is showing signs of an end to the fast-paced growth model purely based on surplus workers and should be seen as one of many clashes to come as the result of the paradoxes from the market economy running on the collective dictatorship.
For Korea, this correction poses a great risk as China is the destination for a quarter of its exports. It relies on it for 10 percent of gross domestic product and 40 percent of Korea's overseas investments are in China. A 1-percent drop in China's growth will shave 0.17 percent from Korea's GDP. It comes at a vulnerable time for Korea, as its second-quarter 0.3 percent growth compared with Greece's 0.8 percent, Taiwan's 1.59 percent and Indonesia's 3.78 percent. This dismal number is coupled with a youth unemployment rate over 10 percent and 1,100 trillion won in household debt.
When looked at together, these figures can feel formidable. But taken apart and dealt with one by one, there is no problem that cannot be solved. But it requires us to take some of the same bitter medicine we gave up at the first sign of recovery in the crisis 18 years ago. The medicine is composed of deregulation to make a level playing ground for businesses, domestic or foreign, small or big; reform of four sectors, starting with labor as planned, and, last but not least, an end to claustrophobic parochialism toward foreign interests.
Is skepticism the best attitude to adopt when dealing with a crisis? Can't we try to flip it around to make an opportunity out of it? That spirit of enterprise is conspicuously absent in government, corporations and ordinary people, lending more credence to rumors of an immediate economic catastrophe than it deserves. Since this crisis is not the first, when and if it comes, and, certainly, will not be the last, it is time to prepare for what is to come after this wave, so as to make a great leap forward and become free from a "slippery slope" blocking Brazil and Argentina from a final dash to the ranks of advanced countries. For that, we should learn from ourselves when we beat the 1998 currency crisis.
Although crises may differ in nature, the remedy would often be the same. We should be patient to hunker down and brace for the worst, trust the leadership and get esprit de corps. By the crisis-busting timeline, we should by now be reinventing ourselves. For detractors, be reminded that it is no use wringing the hands in anxiety and hoping against hope that they will prove to be Cassandra.
Rumors of the September Crisis are based on abnormal signs in the world's factory, China's economy. The communists have tried to resuscitate China's stock markets through repeated intervention without much success. They have manipulated the exchange rate but failed to make much difference. Beijing put on a brave face, saying that it is cruising on the growth target of 7 percent or more for this year but analysts expect it may tumble to the 5 percent range. The biggest fear factor is that it is the first case in which the government's policy has not worked since the 1978 start of its "Reform and Opening-Up" policy led by Deng Xiaoping. In a way, it should not be alarming because China is showing signs of an end to the fast-paced growth model purely based on surplus workers and should be seen as one of many clashes to come as the result of the paradoxes from the market economy running on the collective dictatorship.
For Korea, this correction poses a great risk as China is the destination for a quarter of its exports. It relies on it for 10 percent of gross domestic product and 40 percent of Korea's overseas investments are in China. A 1-percent drop in China's growth will shave 0.17 percent from Korea's GDP. It comes at a vulnerable time for Korea, as its second-quarter 0.3 percent growth compared with Greece's 0.8 percent, Taiwan's 1.59 percent and Indonesia's 3.78 percent. This dismal number is coupled with a youth unemployment rate over 10 percent and 1,100 trillion won in household debt.
When looked at together, these figures can feel formidable. But taken apart and dealt with one by one, there is no problem that cannot be solved. But it requires us to take some of the same bitter medicine we gave up at the first sign of recovery in the crisis 18 years ago. The medicine is composed of deregulation to make a level playing ground for businesses, domestic or foreign, small or big; reform of four sectors, starting with labor as planned, and, last but not least, an end to claustrophobic parochialism toward foreign interests.
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