Weak economic team struggles to lead in crisis

Koh Hyun-kohn

The author is the chief editorial writer at the JoongAng Ilbo.

Korea’s economy is facing its most serious test since the 2008 global financial crisis and the 2020 Covid-19 pandemic. The conflict in the Middle East has triggered a trio of pressures: high inflation, a weak currency and elevated interest rates. With about 90 percent of Korea’s imported crude oil passing through the Strait of Hormuz, concerns are growing over a possible energy crisis in April. Even if the war ends soon, normalization is expected to take three to five years. Economist Paul Krugman has warned of emerging signs of stagflation, recalling the oil shocks of the 1970s.

President Lee Jae Myung presides over a Cabinet meeting at then-presidential office in Yongsan District in central Seoul on July 29, 2025. The meeting was aired live. [PRESIDENTIAL OFFICE]

What is puzzling is the relative absence of Korea’s economic leadership in this emergency. Despite financial market volatility, few officials have stepped forward. In the immediate aftermath of the Iran conflict, it was not the government but the Bank of Korea that first sought to calm markets, noting that interest rates and exchange rates had risen excessively relative to fundamentals. The so-called F4 meeting, involving Deputy Prime Minister Koo Yun-cheol, Bank of Korea Gov. Rhee Chang-yong, Financial Services Commission Chairman Lee Eok-won and Financial Supervisory Service Gov. Lee Chan-jin, has rarely convened. Among them, only the central bank chief appears to command market confidence. With his term nearing its end, concerns are rising that even this voice may soon be absent.

The weakening of the economic team reflects a broader decline in the civil service. During Korea’s era of state-led development, government officials wielded considerable authority and prestige. Top talent gravitated toward economic ministries, and senior officials often played decisive roles in shaping policy. Even around the early 2000s, figures such as Jin Nyum, Jeon Yun-cheol, Lee Hun-jai, Kang Bong-kyun, Kang Man-soo and Yoon Jeung-hyun led economic policy with clear conviction and strong leadership. That era, which extended through the mid-2000s, saw experienced officials guide the country through financial crises.

Today, many of the most capable individuals choose the private sector, where compensation is higher and career prospects are clearer. Public service offers fewer incentives, while the risks have increased. Officials who simply followed instructions have at times faced legal consequences, discouraging initiative. Frequent travel between Seoul and Sejong has also eroded morale and sense of mission.

Frequent changes in government have further weakened the bureaucracy. Senior officials are often labeled according to the administration under which they rose, making them vulnerable to replacement after political transitions. Politicians and politically affiliated academics frequently rotate through key posts, while experienced bureaucrats leave prematurely. As a result, the pool of capable officials has steadily shrunk. Faced with this environment, many civil servants either align themselves with political currents or remain passive to avoid risk.

Another factor is President Lee Jae Myung’s hands-on leadership style. He tends to set clear directions and advance policies with specific instructions, leaving little room for independent judgment within the economic team. Since the start of the year, the president has taken the lead on a wide range of issues, including stock market measures, taxation on multiple homeowners, investigations into collusion, a nationwide farmland survey, fuel price caps, supplementary budgets, pension reforms and vehicle rationing schemes.

Supporters within the ruling camp praise his attention to detail, noting his administrative experience and decisiveness. A senior presidential official described him as someone who does not hesitate. His approach often produces swift results and addresses public concerns effectively.

However, no president can oversee every issue in detail, nor should policy be determined solely by one individual’s preferences. Decisions must be evaluated from multiple perspectives, including market principles, fiscal sustainability and long-term impact. This is the domain of experts and working-level officials. Public discussion and consensus-building are also essential when necessary.

President Lee Jae Myung asks a question to Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol during a Cabinet meeting at the presidential office in Cheong Wa Dae on March 10. [JOINT PRESS CORPS]

Cabinet meetings are broadcast live, but they do not appear to foster open debate. The president often delivers extended remarks while ministers focus on recording instructions. Offering dissenting views can be difficult, especially in a public setting. Officials may hesitate to raise concerns, even when policies require careful scrutiny.

For example, when discussing higher capital gains taxes on owners of multiple homes, Deputy Prime Minister Koo Yun-cheol suggested it might be the last opportunity to avoid stricter taxation. The president immediately objected to the uncertainty in his wording. Such exchanges can discourage open discussion. When the president emphasizes boosting the stock market, few are likely to warn against excessive borrowing for investment. Similarly, when a supplementary budget was proposed, the response was limited to agreeing to review it, without broader debate on potential side effects.

An economic team that primarily reacts to presidential directives risks becoming preoccupied with following instructions rather than exercising independent judgment. Once a policy signal is given, multiple agencies, including tax authorities, regulators and law enforcement bodies, move quickly to implement it. This top-down dynamic, combined with a cautious and risk-averse bureaucracy, raises questions about whether Korea can effectively navigate a crisis of this scale.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.