hankyoreh

senior members of the Federation of Korean Industries appear with Prime Minister Han Seung-soo after a meeting of senior members at the Hyatt Hotel in Seoul. The FKI has garnered criticism for having exaggerated the negative effects of the candlelight protests on the economy.

While many economists point out that the government’s handling of higher oil prices and present highs in inflation was inappropriate and can mainly be attributed to the difficulties with the domestic economy, the government and business organizations have been trying to link their economic problems to the candlelight demonstrations. As for policy failures, the government seems as though it is trying to shield itself from responsibility by citing “worsening external factors,” seeming to say that the candlelight rallies are responsible for the current economic crisis. Experts say, however, that this kind of “wrongheaded approach” will likely undermine the public’s trust in the government.

The Federation of Korean Industries, in particular, has garnered criticism for having exaggerated the negative effects of the candlelight protests on the economy. This seems to be the worst tactic, according to some experts. A report released on July 8 by the Korea Economic Research Institute, which is affiliated with FKI, claimed, “The recent candlelight protests have cost the country a total of 1.92 trillion won (US$1.85 billion), which includes 1.35 trillion won in macroeconomic costs due to social unrest, 668.5 billion won in direct losses at stores adjacent to the protest sites, 58.5 billion won for costs related to police deployment and 35.6 billion won in productions losses due to labor strikes.”

In the report, titled “The social costs of the candlelight protests,” the institute also argued that the social costs could eventually top 7 trillion won if the candlelight rallies continue. Jo Gyeong-yeop, a senior researcher at KERI, said, “Based on our own macroeconomic model, we have analyzed how 42 illegal protests have caused a ripple effect on the gross domestic product through investment reduction and contraction of consumption.”

In a radio interview broadcast before the report was released, new Deputy Finance Minister Kim Dong-soo also took issue with the candlelight rallies, saying, “The more than two months of candlelight protests are likely to cost the economy and society up to 500 billion won.”

Many economists, however, say that these claims do not make logical sense. Lim Won-hyeok, a researcher at the Korea Development Institute, said, “Though KERI has an independent, macroeconomic model that could be used to calculate the financial damage to nearby stores, it would be difficult to show the comprehensive damage done to society in simple numbers. In order to conduct a proper calculation, the positive effects of allowing the government to rework its policy should also be taken into account.”

Experts say the approach being taken by the government, the ruling party and business organizations is a typical example of tactics used to evade criticism. The head of an investment strategy team at a securities company, who asked not to be named, said, “With uncertainties about the global economy becoming more widespread, money is moving out of emerging markets. If the government continues to promote the idea of an economic crisis with an emphasis on external factors, it could create a much more serious situation, such as the flight of foreign capital, by sending a wrong signal to the markets.”

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