Korean New Deal

Different Stimulus Needed for Different Countries

The conservative Grand National Party made rare favorable comments Monday on the policy directions of liberal U.S. Democrats.

GNP floor leader Hong Joon-pyo, touching on President-elect Barack Obama's ``21st-Century New Deal'' plan featuring large public works construction programs, said, ``Now that the U.S. Democrats are about to bolster the economy by investing in social infrastructure, the opposition Democratic Party will hardly be able to oppose our government's similar program.''

Hong will be doubly pleased to hear Obama may keep tax cuts for the wealthy for a while. True, benchmarking the U.S. President-elect is a global phenomenon, but Korea's governing party appears to be bent on imitating the surface of Obama's policy, not its essence.

Investment in public works programs could be one of the quickest and most effective ways to stimulate the economy and create jobs in the short term. The Chinese government is also planning huge investment into replenishing so-called social overhead capital, including roads, ports and airports.

What's important is to select proper targets of investment guaranteeing sufficient investment returns, which should differ in each country. The U.S. infrastructure facilities, built in the 1950s, may need renovation, and China, still largely an agrarian country, will also require massive construction of transportation facilities. On the contrary, Japan's huge spending on expanding infrastructure has ended in failure with its overly extended road networks in remote provinces used only by "bears and squirrels."

The government's policymakers should carefully consider which case Korea, a nation built relatively recently, belongs to.

Nor should they fall to the temptation of easy ways such as housing redevelopment projects, which would end up only rekindling the speculative boom and slowing the process of removing bubbles from the economy.

Even more controversial will be the moves to ``resurrect'' President Lee Myung-bak's campaign pledge of building a cross-country waterway. Recently, Lee's aides have made frequent remarks suggesting the governing camp could revisit the ``Grand Canal'' project.

It's only a few months ago that President Lee said he would not pursue the program, unless popular sentiment turn around to its favor. And as far as most people understand it, the proposed project is a foregone conclusion, not just because of its dubious economic feasibility but also because of its disastrous, long-term effects on the environment.

If Cheong Wa Dae and the governing party push ahead with the waterway plan, it will inevitably split the nation in two at a time when unity is needed more than ever to tide over the economic recession.

Economists say the nation's biggest economic problem is its recent failure to make sufficient, long-term investment into basic science and high technology. This means Seoul should focus on the information, bio and environmental technologies as the next growth engines on a longer horizon.

The spirit of the Korean New Deal, as it was in the United States some 70 years ago, should be to narrow the gap between the haves and have-nots by enhancing ― or restoring ― the middle class, which has all but disappeared since the 1997-98 financial crisis.

What could be better for this than strengthening the nation's public educational system as President-elect Obama vows to do in America?