ed ABCDE economy

Polarized society needs intensive care

Policymakers paint a pessimistic picture for the economy next year. The economy will grow at an earthworm’s pace in the year of the Black Dragon.

The Ministry of Strategy and Economy used ABCDE in describing the global economy next year. It sees the

A

sia-Pacific region as the engine of the world economy. Political risks in North Korea and the Middle East as two

B

lack Swan events.

C

ontagion of the Eurozone fiscal trouble will spell omen for the global economy. It also warns of a possible

D

epression worldwide.

E

lections worldwide will weaken global alliance.

The same abbreviations can be applicable to the local economy.

nti-polarization should be the key word. The gap between the rich and the poor has been on an upward curve. Few have yet to come out solutions to the well-known problem. Anti-polarization crusader will become the next president.

Demands for extra welfare

udget will be raging. The question is how politicians and policymakers will not be populism-oriented over the exploding call for extra welfare programs. Expanding welfare fund without straining fiscal health is the key solution.

Both in Korea and the U.S.,

apitalism itself has been undergoing a critical review for retooling. The growth-first policy has limits in the trickledown effect. Income disparity has deepened social mistrust.

Consensus is emerging over an enlarged role of the government in the market. This is a reversal of the current move toward the free market economy. The Korean economy will get extra vitality and dynamism through a successful adaptation of capitalism for the betterment of the lives of the people.

The record household

ebts will continue to haunt the economy. The dilemma is the government has few magic solutions.

In an

lection year, North Korea may plot to play a role for influencing the elections in the South. Managing relations with the North is to be a stabilizing factor for the economy.

Debate on MBnomics will corner President Lee Myung-bak. Opposition parties say anything but MBnomics would ease the economic plight. Tax hike for conglomerates and the rich will be necessary although legislation is difficult in an election year. Anti-chaebol sentiment will likely to grow as the people perceive conglomerates have been the prime beneficiaries of President Lee’s pro-business policy.

Banks and other financial companies must get rigorous regulatory oversight. Despite the hardship, financial groups posted record earnings this year, which was made at the sacrifice of ordinary people. Squeezing their profits will help ease the burden of borrowers.

The government projected a growth rate of 3.7 percent next year. The country will enter a low-growth and a high-inflation phase. Signs of stagflation — slow growth amid a surging inflation — is a possibility.

Policymakers must not just issue a warning over the economic outlook. They need to provide solutions. They must be in full preparation for the Black-Swan events. Remaining pessimistic will do little for the betterment of the economy. Psychological stability is more effective than other macroeconomic tools.