By Cho Jin-seo
Staff Reporter
Optimism abounds among economists while the government boasts of the nation's fast recovery from the global financial crisis, but a prominent critic says it's such a fantasy that is ruining the long-term fundamentals of Korea's economy, as it has done over the past 10 years.
Kim Kwang-soo, head of KS Economic Research Institute (KSERI), says that recent economic indices by the government and the central bank should be taken with a pinch of salt. In particular, the unemployment rate and public and private dept are much worse than they look on paper, he says.
``Korea's national dept level seems lower than developed countries. But what is important is the rate it is piling up,'' he said in an interview with The Korea Times, Tuesday. He even called the IMF's first deputy managing director John Lipsky, ``crazy'' and ``ignorant'' for his remarks, Sunday, that Korea's national debt was in a favorable position by international standards.
One may take his point. According to The Economist, the IMF praised the modern finance system only three years ago saying it had become less vulnerable because of the introduction of credit derivatives. Yet, since the financial crisis erupted, the organization has quickly transformed itself into a pessimist, blaming the credit transfer market as the main culprit of the chaos. On the other hand, Kim, at least, has consistently been critical.
His outspokenness has made him a figure of rebellion; a reformist economist in Korea, where all other influential economic research institutes are owned either by the government or large business groups. Kim, a former economist of Nomura, opened his office in 2000. His still has a small team of researchers stationed in suburban Seoul, and their budget comes solely from the subscription fees for newsletters and book sales, while big institutions owned by Samsung, LG and Hyundai have large funds from their mother companies.
KSERI is most famous for warning citizens of the real estate bubble for years, and this gave Kim the nickname of South Korea's Dr. Doom. But he disagrees, and says it is the politicians, bureaucrats, international organizations and mainstream economists who are unreasonably optimistic.
``I agree that political leaders can have an optimistic attitude, but only when it is based on reason,'' he said.
In a report sent to subscribers on Jan. 11, KSERI claims that there is a severe distortion by the government on unemployment statistics. For example, the administration said about 500,000 people were counted as seasonally employed in the agriculture sector, which is hard to believe considering the size of Korean farming industry. The institute also said that the statistics did not say that an increase of some 1.5 million employed people was in the services sector, whose jobs are in many cases unstable and who do not create any additional value to society, such as real estate agents, insurance salesmen, and full-time stock traders.
Other gloomy signs he cites include the bubble in real estate prices, which is now about to explode. Only 30 percent of homes in South Korea are owned by residents without loans, he said in his recent book. And the continuous weakening of the Korean won against other major currencies is the most ominous sign, which shows that the national economy is losing global competitiveness, as in the cases of the shipbuilding and IT businesses, he argues.
This may sound a too simple an analysis for ``mainstream'' economists who favor complex mathematical models and theories, but they do ring a bell with ordinary people. KSERI has over 70,000 members registered on its Internet forum. His newsletters are shared by many more, including bureaucrats, journalists and businessmen and reaches 20 countries, he says.
``We even found out that the finance ministry was sharing one account for newsletters on their intranet,'' he laughs.
Kim has been one of most critical economists in Korea in the past decade. He rode to fame as one of few people who warned about the Asian Financial Crisis as well as the seriousness of the recent global crisis. He was once vindicated by Lee Hun-jai, a former deputy prime minister, as a ``hidden jewel of the Korean economy.''
Being independent from government and corporate funding while his influence continues to grow in the economic circle has given Kim the confidence that he can achieve more than just being an economic prophet. He is actively engaged in building up an army of followers, and has recently invited Moon Kook-hyun, a former presidential candidate of the Creative Korea Party, as an advisor.