President Lee Myung-bak has renewed efforts to curb inflation ― again resorting to a strong-arm approach. In the first Cabinet meeting of the year Tuesday, Lee instructed officials to introduce a system in which an official is appointed for each of the major daily goods to monitor and manage its prices.
Under the system, a section chief of, for instance, the Ministry of Strategy and Finance would be made responsible for checking the price movements of, say, napa cabbage. If cabbage prices are forecast to go beyond a certain level, the official is expected to take whatever steps are necessary to bring the prices down.
This measure is a follow-up to a pledge Lee made in his New Year’s speech. Lee promised on Monday he would do all he could to stabilize consumer prices this year. “The government will bring down inflation to the lower end of the 3 percent range from 4 percent last year,” he said.
Lee stressed at the Cabinet meeting that government officials should have a sense of responsibility for stabilizing consumer prices.
“I have never seen any official take responsibility for the government’s failure to prevent the prices of daily necessities from wildly fluctuating,” he was quoted as saying.
Lee’s concern about inflation is welcome. And he was right to urge government officials to step up efforts to prevent unnecessarily wild movements in the prices of key daily goods, which affect the livelihoods of ordinary people.
But his strong-arm approach to curbing prices has not quite been effective. In 2008, he ordered officials to put the prices of 52 key daily goods under enhanced monitoring and compute their inflation rate separately from the consumer price index. The so-called “MB price index” based on these 52 items, however, is not much different from the CPI.
Early last year, Lee also ordered the Fair Trade Commission to crack down on price hikes following steep increases in global commodity prices. The commission used its administrative power to prevent manufacturers of daily goods from raising prices. This coercive approach only delayed price hikes for a couple of months.
Lee should have learned a lesson from these examples. Fighting inflation is basically the job of the Bank of Korea. Last year, the bank all but failed to keep inflation within its target band. This year, inflationary pressure is expected to be less severe, with consumer price increases forecast to slow to 3.2 percent. This may give some room for the bank to cut interest rates if the eurozone crisis boils over and negatively affects the Korean economy.
