New BOK Chief

President's Choice Brings About Mixed Response at Best

Kim Choong-soo, who will take office soon as new governor of the Bank of Korea, is a well-known economist with rich experience at home and abroad. No doubt these are necessary conditions for a central bank chief, but it is more than just questionable whether they are sufficient.

There are two key requirements for any top monetary policymaker: expertise and independence. Kim, Korea's ambassador to the OECD who once headed the Korea Development Institute, a state think tank, must be good at grasping macroeconomic trends and making future projections, which is a prerequisite to deciding benchmark interest rates. But his total lack of experience in implementing monetary and financial policies makes one hesitate to give him high marks.

Even more uncertain is whether Kim will be able to maintain the top monetary agency's independence from the government, let alone his appointer ― President Lee Myung-bak. Kim's own remarks only deepen such worries. In the run-up to selecting the new BOK head, Kim said, ``The BOK is just part of the government" and ``The President decides whether the nation should seek growth or stability."

True, the buck should finally stop at the chief executive in a presidential government. If the president acts like just the head of the executive branch in a narrowly-defined meaning of the government, however, other organs, such as the legislature, should be able to check the top leader. When it comes to monetary matters and getting inflation under control, it is the BOK governor who must do the job.

One only needs to think about what happened in the United States over the past three decades or so: Paul Volcker, the Fed chairman under the former Presidents Carter and Reagan, repelled enormous pressure from those administrations to tame inflation and pave the road for the consequent economic boom. On the other hand, his successor, Alan Greenspan, kept in tune with the administrations, kept the money rate at record-low levels and took the lead in the unprecedented boom, which proved later to be a house of cards and led to the worst recession in almost a century.

Given Kim's career, track record and quotations, there's no need to wonder whom Kim would resemble more. He was President Lee's first chief economic secretary and one of the key preachers of ``MB-nomics," marked by growth-first, market-worshipping and deregulation-oriented neo-liberalistic policy, which has been on the ebb throughout the world since the 2008 financial crisis.

Little wonder growth rate-sensitive economic bureaucrats and debt-ridden corporations and individuals are breathing a sigh of relief that the much-dreaded ― but quintessential ― ``exit strategy" of withdrawing liquidity will be delayed toward late this year at the earliest. The delayed monetary squeeze will taste sweet for most economic players for now but a possible adverse effect will be far bitter later. A case in point is Japan, which has been reeling from the ``lost decade" by missing the timing for raising interest rates.

President Lee and his finance minister Yoon Jeung-hyun have ruled out any chances of early rate hikes more than a few times. If they turn the Monetary Board, the central bank's rate-setting organ, into a ``dovecot" as well, the national economy may be in for serious concerns.

The new BOK chief said, ``President Lee will not push for growth at the expense of stability." We will be keeping our fingers crossed he is right. If not, however, Kim will have to bet his job to change his boss's mind. And if he is not confident in doing so, he'd better bow out.