hankyoreh

Blue House policy chief Lee Ho-seung and Korea Chamber of Commerce and Industry (KCCI) Chairman Chey Tae-won pose for a picture after their meeting on April 7 at the KCCI office in Seoul. (provided by the KCCI)

A politician was heading home late one night when they saw an economic analysis and policy expert looking for their lost keys underneath a streetlight on the darkened road. Seeing the potential to win over a voter, the politician stopped and helped look for the keys, but they were nowhere to be found.

“Where did you lose them?” the politician finally asked.

In response, the expert pointed toward a dark area some distance away.

“So why on earth are you looking over here?” the politician asked.

“Because this is where the light is,” came the amusing reply.

This well-known satirical analogy shows the habit among economic policy officials to rely too much on the theoretical guidelines and conventional wisdom that appear in textbooks.

Some of South Korea’s top policy leaders, including Blue House policy chief Lee Ho-seung and senior secretary to the president for economic affairs Ahn Il-whan, began a series of relay meetings with economic groups on April 7, including the Korea Chamber of Commerce and Industry (KCCI), the Korea Federation of SMEs (K-Biz) and the Korea International Trade Association. They aim to communicate and cooperate with businesses toward an economic recovery from the COVID-19 pandemic and the implementation of carbon-neutral policies.

While there are a number of factors at play in terms of economic variables — including technology, the market, industry structure, business cycles, globalization, and different policies and institutions — these two areas, COVID-19 and carbon neutrality, are the kinds of external shocks you don’t read about in “Principles of Economics.” That is to say, there is no scientific map like the streetlight in the analogy, something that can serve as a textbook to devise a policy solution.

Responding to climate change poses an unprecedented challenge for South Korea’s export economy, which has prospered over the 60 years of the development era thanks primarily to carbon emissions-generating manufacturing.

The government has pledged to the international community to achieve carbon neutrality by 2050, but there’s a delicate sort of tension at play in our trade policy.

“Climate change demands a global response, but environmental measures can’t be allowed to serve as a means of restricting trade,” explained one trade official, sharing concerns about “green trade protectionism” with the adoption of a global carbon border tax.

According to World Bank averages for 2017 to 2019, South Korea’s carbon intensity rate (the percentage of carbon dioxide emissions in the production process for one unit of value-added) stood at 0.29, while manufacturing averaged 26.3% of gross domestic product.

Both figures are far higher than the average for the G7 countries — 0.19 and 13.6%, respectively. In the valley of our transition toward a low-carbon economy, South Korea is very likely to have to pay a steep price.

Another rapid change is afoot for jobs, which have expanded as South Korea has become broadly and deeply integrated into the global production sharing system.

There has been talk that the president’s Economic, Social and Labor Council will shortly be launching a special committee to deal with “climate change and labor.” Our response to the imminent climate issue demands strategic choices in several regards, including the pace and scope of the associated hardships and costs (unemployment in different industries and job areas and the redeployment of workers) and the opportunities and benefits (new job creation).

In a recent talk with reporters, KCCI chief Chey Tae-won said, “Eco-friendliness is something our times demand, but we need data to establish how far something needs to go to be considered ‘eco-friendly.’ If something can’t be measured, it can’t be managed.”

This amounted to an admission of the difficulties of harmonizing policies from someone who has been vocal in preaching the importance of environmental and social responsibility on the part of companies.

But does it perhaps show the kind of “dynamism” that is so basic and characteristic of the capitalist economy? The recent signs of a fourth COVID-19 wave in South Korea are alarming, but various economic indicators send a signal that we’re breaking out of our virus doldrums.

The stock market’s breathless rise has already gotten people talking about how things are getting “too hot too quickly.” On April 8, one private economic think tank even shared a forecast predicting that exports would top US$600 billion this year.

Deputy Prime Minister Hong Nam-ki has giddily proclaimed the economy’s powerful resilience, noting that the International Monetary Fund “named just three of the advanced economies, including South Korea, that it expects to recover their pre-COVID-19 economic scale this year.”

Many of the profitability indicators for South Korea’s chaebol have shown record-high performance for last year and the first quarter of this year. This is not about the “fist” of vested economic interests, but a matter of the iron law of comparative economic advantage — but it does give the impression that we’ve miraculously succeeded in making bread from stones.

It’s quite a dramatic turnaround from last year, when policy officials grimaced at the COVID-19 pandemic that was swallowing the world, fretting that even after it passes, we would be stuck with a “90% economy” — with our production, investment and consumption activity all persistently reduced from before — and gloomily predicting that we would “never return to pre-COVID-19 times.”

But underneath all those gaudy indicators, SMEs and the self-employed are still “infected” by the virus. For now, they are barely hanging on, weighed down by a deep sense of helplessness.

These are people who lack the opportunity to meet with policy officials, or the kind of organization that would allow them to take collective action. It’s the grim reality we face, a perverse characteristic of the COVID-19 pandemic: a phenomenon of “K-shaped polarization” that is leaving deep and extensive wounds.

The economist John Maynard Keynes noted that extraordinarily talented economic analysts and policy officials are “rare birds” indeed. The structural changes that the climate crisis and COVID-19 are inflicting on our economy and society are poised to last long into the future — like coins that don’t melt in a fire.

This is why we need to be seeking out the rare birds: well-trained people who will look for the keys on the dark parts of the street where the light doesn’t reach.

By Cho Kye-wan, staff reporter

Please direct comments or questions to [english@hani.co.kr]