Korean firms out to fix booze problem

Observers paint election preview on macro-economic data

It’s obvious that the economy will be of greatest concern to voters when they head to the polling booths come December to pick a new president. So observers could do much worse than break down the recent economy-related numbers when making their predictions on which candidate will end up as Korea’s next leader.

Of course, Korean voters don’t cling to statistics in the same way as voters in Western democracies do. A case in point is the role of the US media in shaping voter sentiments when it cites that no president has been re-elected with an unemployment rate above 7.2 percent since World War II.

However, the blizzard of bad economic data about the performance of the Korean economy over the past year has been dominating debates as polling day looms.

It does appear that the disastrous vortex of declining economic activity, high unemployment and spiraling debt has the nation facing a perfect storm of public discontent and candidates from both the conservative and liberal spectrums are competing to offer bold promises for economic growth and improved welfare systems to attract votes.

Most political watchers and economists seem to believe that Park Geun-hye, daughter of former military strongman Park Chung-hee and presidential candidate for the ruling Saenuri Party, has most to lose from a bad economy. The reason is simple. The incumbent president Lee Myung-bak, sitting as the lame duck that he has become has nothing to show for his five years of neo-liberal shebang economic policies. The onus thus lies on Park Geun-hye to make a convincing case for re-election by branding herself differently, for which she is putting in Herculean efforts in order to convince the electorate that she is different.

The numbers show that the Korean economy grew by 2.8 percent and 2.4 percent in the first and second quarters of 2012 respectively. Indeed, far below the pace of the previous presidential election when the country was still posting up five-plus figures.

Living standards are being squeezed too. Consumer price inflation rose at around 3 percent in the first three months of the year and 2.4 percent during the second quarter, outpacing gross domestic product (GDP) growth during this period. Consumers feel that the pinch of inflation is stingier than the numbers show because the prices of food and daily necessities have been rising higher than headlines indicate.

Data from previous elections show that there is a co-relation between low economic growth and preference to candidates from opposition parties. Good examples are Kim Dae-jung and Lee Myung-bak, both opposition candidates who swept to power in 1997 and 2007 respectively on the back of poor economic conditions. Both of them benefited from then-disappointing growth rates of 5.8 percent and 5.1 percent for each year, according to data from the Bank of Korea (BOK).

Kim Dae-jung in particular, owed much of his election triumph to the Asian Financial Crisis that ravaged the country a few months ahead of the 1997 elections. Koreans generally viewed the $57 billion IMF brokered bailout as an outright national humiliation that blighted the nation’s modern history.

If this trend is to be believed, it was certainly not an aberration when contenders from governing parties succeeded in attracting voter support during elections. Roh Tae-woo, a former army general is arguably good proof of how incumbent parties can gain an electoral triumph if the economy is performing well. Given that the Korean economy was growing at a remarkable 12.3 percent of GDP coupled with a modest 3 percent inflation, a highly unprecedented feat, the 1987 election was largely his was for the taking. The opposition could hardly make any convincing counter claim against such glaring economic success.

So was the election of the late former President Roh Moo-hyun. As the candidate of the governing party that was presiding over an economy growing at 7.2 percent with an inflation rate of 2.8 percent, his 2002 electoral victory was by no means a surprise.

Conversely, Kim Young-sam’s electoral victory that saw him defeat his archrival Kim Dae-jung in the 1992 election is somewhat of an aberration of the trend. His election came against a grim inflation rate of 6.2 percent and a subdued growth of 5.8 percent. Critics meanwhile contend that the electoral outcome was largely indicative of the country’s entrenched factional regionalism and less about economic considerations. Much of his political base, as a consequence of the regional phenomenon coalesced in the form of massive support from the ruling party’s home support base in the Yeongnam area which includes Busan, Daegu, South and North Gyeongsang provinces.

Unsurprisingly, Fidelity Worldwide Investment, referring to the upcoming US presidential elections reiterated the assertion that unemployment and inflation, the key indicators of economic robustness, generally determines electoral outcomes based on data from the country’s elections between 1920 and 2008. The data generally indicates that when consumer prices were less than 2 percent and there was a corresponding GDP growth of more than 5 percent in an election year, then an incumbent party earned more than 50 percent of all votes cast during this period except in 1952. Hence, it highlights the palpable correlation between the state of an economy and the likely electoral outcome for an incumbent. Within that context, the implications for Korea’s impending presidential elections can be inferred. <The Korea Times/Kim Jae-won>

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