The purpose of this study is to suggest a new policy choice: namely, a new general economic policy that can help Korea overcome the current inflation crisis plaguing its economy.
South Korea was one of the poorest countries in the world up until just a decade ago, with the gross national income (GNI) per capita reaching only USD 95 or so. Abject poverty and despair are bygone memories today, as the Korean economy bustles with new energy; the GNI per capita has grown more than two-fold to USD 250. Koreans developed the industrial and manufacturing facilities and infrastructure they have today almost out of nothing. The Korean economic policy, however, sadly remains outdated. An annual inflation rate hovering at nearly 10 percent has had a serious impact on Korean businesses, households, and even government over the last two decades. Korea now needs a new general economic policy that will, in the short run, enhance the competitiveness of Korean businesses and increase the security of daily living for ordinary Koreans through price stabilization. In the long run, the policy should help Korea adjust its trade balance and securely situate the country on the track for continued growth.
Today, our goal should not be on increasing the amount of investment, but on increasing the efficiency of investment. Similarly, we should focus not on increasing the output, but on improving quality and unit productivity in order to enhance the market appeal of Korean goods. Households in urban and rural areas alike should also streamline their spending and enhance the stability of their finances based on hard work and saving. In order for Korea to escape the vicious cycle of inflation and recession, income stability must be secured for all sectors and classes, including the government, corporations, households, and rural communities. Businesses must abandon hopes of maximizing their profits by transferring their cost factors onto consumers. Raising public charges for the sake of compensating public corporations for their losses should no longer be an option. The inefficient and corrupt practices of increasing consumer prices of over-supplied goods in order for businesses to make profits and of encouraging the deterioration of the financial structure of businesses through financing via irrational channels must be strictly prohibited.
While supporting the cost reduction efforts of businesses, the government must also guide them towards more productivity through devising rational pricing guidelines. The partnership between the government and businesses can significantly reduce business costs and enhance productivity, helping Koreans achieve the Third Five-Year Plan and realize price stability on schedule. Policies on the Industry Rationalization Fund, on minimizing the investment of public funds in businesses, on the rational planning and implementation of government budgets, on foreign investment, on finance, and on trade should be adjusted and updated accordingly so as to prevent the Korean economy from again falling victim to the confusion and instability we are experiencing today.
새 정책의 선택을 위한 결단(The need for a new policy choice)
[서울] : 한국개발연구원
|Series Title; No||연구보고서 / 제5권|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < General|
|Holding||KDI; KDI School|