Financial Crisis Polarizes Korea Inc.

By Kim Tae-gyu
Staff Reporter

Following the financial crisis a decade ago, Korea has seen a widening of the income gap between the rich and the poor. Another economic downturn this time is expected to further widen the wealth divide, making the rich richer and the poor poorer.

Debates have been under way over whether or not the economy is on a recovery path from the financial crisis. The answer may depend on people's financial status ― where the light at the end of the tunnel is visible only for the rich.

Observers pointed out Monday that social integrity is coming under threat because income polarization is amplifying the gulf between haves and have-nots.

``The real force underpinning today's stock market rally and strong real estate prices seems to be massive liquidity, which has little to do with a genuine economic recovery,'' Prof. Kim Sang-jo at Hansung University said.

``The strong financial markets do not signal a recovery in the economy. The result? The rich with cash on hand will get richer while the poor will get poorer. This threatens social integrity,'' he said.

The stock market has generated more than 30 percent returns for investors since early March as the benchmark KOSPI surged 31.12 percent from 1,018.81, March 2, to 1,336.39, Monday.

The junior Kosdaq rocketed 40.67 percent over the same period and the property market also heated up, especially in the southern part of metropolitan Seoul.

The increased financial income caused those with deep pockets to return to the luxury market as demonstrated by increased sales at department stores.

Lotte and Shinsegae, the country's foremost outlets, saw their revenues jump 8.3 percent and 4.4 percent, respectively, over the first quarter from a year ago.

In stark comparison, have-nots are still stuck in an unprecedented quagmire.

The number of jobs decreased 195,000 in March from the same month the previous year, thus increasing the tally of the unemployed to 952,000. As a result, the jobless rate is approaching 4 percent ― very high in Korea as the country lacks a social security net compared to Western countries.

In contrast, those in the lower bracket with empty pockets cut their spending in discount markets, which saw their sales go down by 1.9 percent over the first three months of 2009 from the same period last year.

``Too much liquidity and deregulation for the property market can generate a severe backlash if the booming financial markets fail to prop up the economy,'' Prof. You Jong-il at KDI School of Public Policy and Management said.

``For example, a double dip is feared for the economy as well as the aggravating gulf between haves and have-nots. We need to prepare to deal with any potential problems,'' he said.

voc200@koreatimes.co.kr