Moon's 3% - another magic number?

By Park Hyong-ki

The Moon Jae-in administration has given the public its gross domestic product (GDP) growth projection ― 3 percent.

It is more like its desire over the next five years of Moon’s term.

At this point, it seems to be hoping for it after the government’s hard-fought extra spending plan was passed by the National Assembly.

Three percent could be possible in the short term since the country is going to use money out of its supplementary budget to create jobs and boost wages.

Or will it be another meaningless number presented yet by a new government like its predecessors?

Over the last decade, former governments of Lee Myung-bak and Park Geun-hye also had their own growth numbers.

Lee pledged for a 7 percent annual growth during his presidency as part of his 747 policy with $40,000 per capita income and Korea becoming 7th largest economy.

Park too had a fancy number ― 474 ― 4 percent annual growth with a 70 percent job rate and $40,000 per capita income.

They never happened, and critics say they had taken the people for fools with those hocus pocus numbers. Korea’s per capita income can barely touch $30,000.

The big difference with Moon’s 3 percent and the other two’s is that the incumbent president will take into account other key indicators such as inequality, welfare and wage growth considerably to achieve that desired growth. The two former presidents mostly neglected those issues as their policy was more geared toward benefiting the rich and chaebol.

Achieving growth is very important for all countries. Their economic capacities and viabilities are ranked in accordance with how much they have grown quarterly and yearly. It is one of key factors to measure sovereign ratings.

But President Moon should not follow his predecessors and present a magic number that could potentially raise false hopes.

He should have his economic team present a realistic vision with substance that can help reduce poverty, improve welfare and encourage innovation, rather than going for a short-term policy that can help his political party garner votes ahead.

GDP growth does not measure people’s happiness, and it does not include environmental factors when calculating one’s economic output.

The mathematical equation ― growth equals to consumption plus government spending, private investment and net exports ― is considered the best economic invention created by a group of international statisticians, economists and scholars, which included John Maynard Keynes.

Data such as employment, environmental impact and income may be embedded indirectly in the GDP measurement.

But still, a higher growth does not mean improved livelihoods, and because of this, critics say the formula has become outdated ― no offense to Keynes, whose economic theory most countries have practiced in times of a cyclical slowdown.

Can Koreans endure another potentially unachievable number when they know that growth has been falling by a percentage point during each of the past three governments?

It is somewhat doubtful that this country can achieve it when it has not yet provided solutions to its real structural problems ranging from aging population, low birth, labor inflexibility, unfair taxation, inequality, pension and growing social costs.

President Moon has shown commitment to resolving these issues for sustainable growth. But some pointed out his five-year 3 percent growth policy lacks substance.

This is because it concerns the most economically and politically sensitive issue ― taxes.

The administration will need to raise taxes or cut some of its key budgets to come up with the money to fix the mountain of social problems.

He should take the advice from Byeon Yang-kyoon, a former secretary for policy planning during the Roh Moo-hyun administration, who said in his book that the incumbent administration should just come out and communicate with the public that it will have to collect more taxes from those earning a lot.

Otherwise, Moon’s 3 percent may end up being another number that tried to fool the people like Lee’s 747 and Park’s 474.