Lee Jae-myung’s Economic Statements Under Scrutiny After General Election Victory

The weight of opinion has changed after the landslide victory in the general election There are not many known economic experts around.

After the 22nd general election, the weight of every word of Lee Jae-myung, the leader of the Democratic Party of Korea, became heavier than it was before the election. This is because it is the opinion of a political leader who leads the first party in the 175-seat National Assembly. The meaning of ideas related to economic policy has also changed. If statements were previously limited to political rhetoric by influential opposition politicians, they now have the power to implement ‘receipt laws’ if the ruling party opposes it. Despite this, it is still difficult to interpret his economic statements. Even if the economic situation inside and outside the country changes quickly, there are many cases where it is not possible to update. This seems to be because ideologically biased knowledge was deeply rooted without systematic learning.

The immediate problem is the perception of inflation. When the 22nd National Assembly opens, the Democratic Party says it will move forward with Representative Lee’s general election promise, ‘A living recovery assistance payment of 250,000 per citizen,’ with the first they have a bill. The unanimous response of economic experts at home and abroad to this is that ‘now is not the time for price instability.’ Global credit rating agencies that evaluate national credit ratings, Bank of Korea Governor Lee Chang-yong, and even the Confederation of Trade Unions all want a ban.

In a situation where external variables are unstable due to the conflict in the Middle East, it makes basic economic sense to expect that if 13 trillion won is released, prices will change again. Representative Lee tries to avoid this by saying, “It’s like the story that if you throw a stone into the Soyang River Lake, the water level will rise and the dam may overflow.” However, releasing 13 trillion won while the central bank is tightening the money supply by raising interest rates is not something that can be compared to one stone

Moving on to the ‘interest rate’ issue, questions arise about Representative Lee’s economic sense. He is a politician who has shown extreme hostility to high interest rates which cause hardship to the common people. In 2020, the government, which plans to lower the maximum interest rate from 24% to 20%, even provided guidelines for the ‘appropriate interest rate’, saying, “The appropriate rate is around 11.3 to 15%.” Even though financial experts have pointed out that ordinary people who cannot get loans from loan companies due to statutory interest deductions are being pushed out as victims of illegal loans, they have never changed their minds. .

The 13 trillion in subsidies that Representative Lee wants will most likely increase market interest rates and extend high interest rates. When the government prints more government bonds to prepare a supplementary budget, the price of government bonds falls in the financial market and, on the other hand, the interest rate on government bonds rises. Market interest rates, which are set at a higher rate than government bond interest rates, will also rise, increasing the interest burden on debtors and the self-employed. A household with a debt of 100 million won will have to pay an additional 1 million in annual interest every time the interest rate rises by 1 percentage point. The aid money received from the front is to be used as interest on loans from financial companies.

The problem becomes more complicated when exchange rates are considered. In a situation where the US base interest rate is 2% points higher than the Korean rate and the dollar remains strong, if money is released to increase the money supply, the value of the winner is likely to fall. When the value of the winner falls, the prices of not only crude oil, which is 100% imported, but also fruits for common people, such as bananas imported from abroad instead of apples gold, rising. During the last presidential election, when it was announced that the fiscal deficit ratio in Korea, a country with an unsecured currency, would increase too much because of its promise to release money, Representative Lee made the absurd statement, “It is very likely that Korea will soon become a reserve currency country. ” There is an enemy. Is it too much to ask to understand international currency issues?

Our society has already experienced what happens when a person with exceptional common sense, separated from the principles of economic activity, has the power to make policy decisions. The Moon Jae-in administration’s ‘income-driven growth’, which has been criticized as ‘the logic of a horse pulling a cart’, hastened the downfall of the self-employed and small businesses by raise the minimum wage quickly. The harm that comes when a political leader holds beliefs that contradict economic principles can be seen in Türkiye. Due to the after-effects of the monetary policy of President Recep Tayyip Erdogan, who responded to rising prices by lowering interest rates in accordance with Islamic law that sees usury as a sin, the people of Turkey are suffering from an increase 60% in prices and drop in prices. the value of the lira.

It is difficult to find widely recognized economic experts around Representative Lee. There are several people who received an offer of employment but turned it down because they were not confident in providing logical support for their policies and claims that went against economic principles. It is said that the number of economic experts among the members of the Democratic Party who were elected in the 22nd general election has decreased compared to the 21st. This means that there are not enough people to correct wrong economic policies when they are implemented. Representative Lee sometimes calls himself a populist, but when he criticizes the government, the public goes into a frenzy when he says something unintelligible, like “If we do something wrong, (the country could us) end up as Argentina. In keeping with the elevated political status, it is necessary to increase the level of economics studies by hiring qualified teachers.

Editorial Writer Park Jung-hyun sanjuck@donga.com