Radical central banking is being debated as never before as policy makers throw everything they have, and then some, at safeguarding growth.
It’s often thought that Ben Bernanke and Mario Draghi are the ones pushing the boundaries of monetary policy, if not the dismal science itself. But neither the Federal Reserve chairman nor the European Central Bank president is as unconventional as their South Korean counterpart, Kim Choong Soo.
As the Bank of Korea governor navigates dueling crises and a world flooded by zero-interest-rate money, he’s finding time to agitate for social changes that may leave the economy better off. They include scrapping a seniority system, empowering women and arguing for increased immigration.
Kim’s first initiative since taking the job in April 2010 was to internationalize the bank. He was shocked to find that not one joint research project was afoot -- not with the International Monetary Fund, World Bank or any nation. Today, his team is participating in 18, gaining new connections and insights from around the globe.
The real shakeup came in the bank’s boardroom. Kim elevated young staffers to senior posts, running afoul of Korea’s strict age-based hierarchy. It was a revolutionary act in a system informed more by the Confucian orthodoxy of the past than future competitiveness. He also promoted a woman to run the financial markets division. Suh Young Kyung is the highest-ranking female in the central bank’s history.
More recently, Kim took on the verboten topic of importing more foreign talent. With one of the world’s fastest-aging populations, South Korea has gone from a country where labor was the only abundant resource to one lacking enough people to run the plants and farms of Asia’s fourth-largest economy. Putting out a bigger welcome mat might bring new blood into the economy.
All this raises a question of great relevance to policy makers everywhere: How far should a central banker go to fill the void left by gridlocked government? It’s one that Kim, too, has considered.
“I am not sure a central-bank governor is supposed to say such things,” Kim said over lunch in Seoul earlier this week. “But someone has to break the barriers. You don’t expect to be popular.”
Kim, 65, was outspoken about the obstacles to faster growth. When I asked about gender inequality in Korea, Kim declared “it doesn’t make sense.” On liberalized immigration, he said, “it’s the way to introduce competition into the economy.” Kim made it clear he thinks there’s no need to change interest rates, at 2.75 percent, for now, even though low inflation would, in theory, give him scope to ease policy: “There is no reason not to lower the rate, but there is no reason to lower it.”
Yet it’s his stealth campaign to revitalize Korea’s $1.1 trillion economy that may be his real legacy when his four-year term ends in 2014.
While some monetary purists may object, the end may justify the means. If this rankles elected officials, maybe it’s because Kim is suggesting they aren’t doing their jobs. The biggest risk facing South Korea as 2013 unfolds is complacency. Yes, the developing world can certainly learn from South Korea, which is now numbered among the developed nations. It steered around Wall Street’s 2008-2009 crash nimbly and impressively. The country is set to grow a respectable 3.3 percent this year, up from 2 percent last year. As Kim sees it: “I put a little more emphasis on the upside risks.”
Yet income growth is sluggish, huge family-run conglomerates stifle smaller companies, China’s rise poses epochal challenges, North Korea is a perpetual risk and government gridlock delays vital reforms. It’s here where Kim’s quiet activism is filling a void.
Kim’s interventions in political controversies are rare in conservative South Korea. The structure of the economy can’t remain static while the world evolves around it. South Korea’s obsession with age is a case in point. Deference to experience and skill can be important, of course. The trouble is when the top echelons of the Bank of Korea, the Finance Ministry or corporate boards are loaded with like-minded lifers and too few working-level employees with differing viewpoints.
This cultural sclerosis feeds a chronic gender imbalance that deprives the country of the skills and talents of half its 50 million people. A reason South Korea does so dismally in the World Economic Forum’s ranking of female empowerment, behind the United Arab Emirates, Burkina Faso and Cambodia, is indifference among the men who long ruled the nation. It’s worth asking if President-elect Park Geun Hye, Korea’s first female leader, will champion the cause. Doing so, though, would be to break with her New Frontier Party’s tenets.
Those who worry that unelected officials such as Kim might overstep their bounds should blame politicians who fail to perform. Say what you want about Bernanke’s ultralow rate policies, the Fed bailed out an inept U.S. Congress when crisis hit. The same is true of Draghi’s stealth monetization of European debt as leaders dither.
If politicians are too timid to act in today’s world, central bankers may feel compelled to. That’s as true in South Korea as any place. Someone has to do it.
(William Pesek is a Bloomberg View columnist. The opinions expressed are his own.)
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