[The Editors' Verdict] Policies Need a Long-Term Perspective

Published 28 Apr.2020 14:08(KST)

Uncertainty in the economy manifests in various forms. It can appear as bubbles and crashes caused by speculation, or as natural disasters. Epidemics are probably among the most unpredictable factors within uncertainties that humans cannot control. What is lamentable is that humans themselves, who suffer the most from uncertainty, sometimes cause it. A prime example is war.

The most economically challenging crisis in modern times was probably the Great Depression of the 1930s. Many scholars believe that the Great Depression began with the stock market crash in the United States in October 1929. However, in many cases, stock market crashes are consequences rather than causes. The academic consensus is that the Great Depression was a disaster brought about by excessive optimism in the 1920s and clumsy policy responses. This shows that dealing with uncertainty and the resulting crises is not an easy task.

There are several ways to respond to uncertainty. When managing uncertainty related to assets, diversification is one method. Insurance exists to cope with unpredictable situations such as fires or traffic accidents. However, there are many uncertainties and crises that individuals cannot manage through diversification or insurance. The wars mentioned earlier and the pandemic caused by the novel coronavirus infection (COVID-19) that the world is currently experiencing are such cases. For these types of comprehensive uncertainties, neither diversification nor insurance exists.

Crises beyond the scope of individual management must be handled by the government. What distinguishes the government from individuals is its ability to pool the capabilities of the people. At this time, it is important to recognize that the government's capacity rarely exceeds the combined capabilities of all its citizens. Given this situation, the first step toward good government policy is to assess the capabilities of the country and its people and distinguish between what can and cannot be done.

The COVID-19 crisis is wreaking havoc worldwide. At least for the time being, these difficulties seem likely to continue. It is now time to consider how to manage the situation. Policies for economic stabilization are urgently needed. However, the government says it will distribute what is called a disaster basic income to all citizens. They say this because U.S. President Donald Trump did so. In short, I believe this is a policy that should not be implemented if one is sane.

If distributing a few hundred thousand won to all citizens could restore economic circulation and the global economic value chain, it would be welcomed with open arms. But anyone can see that this is not the case. Moreover, some groups are told to donate the amount they receive again, or that public officials are excluded. Is the country's policy a child's play? What is needed now is not this kind of populism but policies that look to the future.

It is necessary to continuously focus support on small and medium-sized business owners and socially vulnerable groups in difficulty so that they can overcome this crisis, and after economic circulation is restored, enable them to participate dynamically. If that is the goal, no matter how much fiscal spending is injected, I would not want to oppose it. Can a policy that mocks even those who can endure the current crisis be called a policy? How long will the country be run this way?

What is urgently needed now is economic circulation. The focus of policy must be on how to restore economic circulation to the pre-pandemic state. However, judging from the situations in various countries, it seems that considerable time and fiscal resources will be required. Policies must be operated with a long-term perspective. And I want to emphasize once again that policies must be concentrated and sustained for the groups most vulnerable and hardest to endure in this crisis.