Fortune Favors the Bold

By Phillip Hartman

Recently, President Barack Obama signed into law a massive $800-billion stimulus plan. It's a bold move at a time when the United States is already deep in debt thanks to years of deficits under the Bush administration.

But history bears witness to the power of bold moves. At a time that seemed even more dire than today, during the Great Depression, President Franklin D. Roosevelt made a similar bold move called the ``New Deal."

The series of spending programs helped pull gross domestic product (GDP) and unemployment back to levels prior to the great crash in five years time. As bold as the New Deal was, it was a drop in the bucket compared with the massive spending put towards World War II. U.S. debt was 52 percent of GDP in 1940, but climbed to an extraordinary 105 percent of GDP by 1945.

As history has shown, World War II ended up building the United States into the world superpower it is today. The economy went on a miraculous run of growth from 1940 to 1968. If the New Deal and World War II serve as any example, it's that the bolder a plan is the better. Few economists are debating the logic of spending a trillion dollars as the national debt shoots ever skyward, even if journalists do.

They simply look at history and realize what works. Paul Krugman, columnist for the New York Times and Nobel Laureate of Economics, commented in Portland, that the stimulus plan doesn't go far enough in stimulating the economy and needed to be twice as big. But even that may be too little. The United States spent 50 percent of its average yearly GDP on World War II, the largest and most successful stimulus plan. The current $1-trillion plan is only 7 percent of GDP.

War is also a successful stimulus, because it gives politicians the political capital to spend big. Few challenged the Bush administration as they spent nearly $3 trillion on the wars in Iraq and Afghanistan, yet Obama has struggled even to pass a bill with $600 billion in direct spending even during dire economic times. If the stimulus bill fails to turn around the economy, it will be because politicians weren't bold enough in their plans.

Now is an opportunity for countries to rise and make once-in-a lifetime decisions. During the Depression, the United Kingdom and France sat idly by as Germany and the United States spent their way to recovery and power. This time, countries around the world won't be observational. Perhaps their combined effort will be enough to pull the world economy up from the depths. But while a return to demand may help restore the Korean economy, perhaps this country will have missed a golden opportunity to boldly change the course of its history.

The South Korean economy showed great strength during the 1980s and 1990s, but it is now showing weakness far too early in its development. Per capita GDP briefly reached $20,000 last year, though it is certainly lower now. But GDP growth is slowing, averaging 3.5 percent a year since 2002, compared with 8 percent a year in the 1980s. This is barely keeping pace with developed countries, never mind catching up with them. Hong Kong, a country with similar conditions as Korea, averaged 4.7-percent growth over the same five-year period, yet Hong Kong's per capita GDP is more than double that of South Korea.

At this rate, it will difficult for South Korea to play catch-up. Something needs to be done; business as usual won't complete the ``Korea project." The government has so far offered loans and tax cuts, but such measures can only be so useful and are not effective during times of low consumer confidence.

To truly take this country to the next level, there needs to be a massive undertaking by the government to propel the country forward. Plans must be laid; the government disciplined; and projects initiated. This is the time for dreams, and the bigger the dream the better. Fortune does not favor the timid, only the bold, so whatever the government does, the bolder the better.

The writer has taught English at LCI Kid's Club and EWAS Uijeongbu for two years and is now living in Seoul. He can be reached at johannphilipe@hotmail.com