[The Editors' Verdict]Progressive Governments' War on Housing Prices, Conservative Governments' War on Inflation

The Roh Moo-hyun administration season 2. It was a label that always followed whenever the Moon Jae-in administration announced real estate policies. The Roh Moo-hyun administration, launched in 2003, wrestled with the real estate market throughout its term, but during its five years in office, apartment prices in Seoul soared by 57%. The phrase "crazy housing prices" circulated openly, and that war ended with the painful result of a regime change. Fourteen years later, the Moon Jae-in administration, which took office, followed the same path. Kim Hyun-mi, the first Minister of Land, Infrastructure and Transport under Moon Jae-in, and Kim Soo-hyun, the Blue House policy chief who led real estate policies during the participatory government, took the lead in vowing to definitely curb housing prices, but ultimately had to close season 2 resembling a regime change.

However, this is not an unfamiliar scene. If you slightly replace "housing prices" with "consumer prices," that is. The Lee Myung-bak (MB) administration, which took office right after the Roh Moo-hyun government, faced monthly consumer prices soaring to the 5% range immediately after inauguration and even created the "MB price index" to wage war against high inflation. It is a famous anecdote that the government pressured oil companies by investigating them after a presidential remark that "oil prices are strange." However, it had no effect. In the first year of the MB administration in 2008, the annual consumer price index inflation rate soared to 4.7%. This is similar to the current situation where the Yoon Suk-yeol administration, which heralded MB government season 2 with the massive entry of MB men, is waging a price war right after taking office.

Of course, the current high inflation is not a crisis unique to Korea but a structural crisis experienced worldwide. The global competition to distribute "helicopter money" to prevent economic recession caused by the COVID-19 pandemic, combined with the Ukraine war and abnormal climate causing the collapse of energy, food, and raw material supply chains, had a significant impact. The problem is that although the main causes of high inflation are clear, there are no suitable policies we can implement. The resurgence of COVID-19 or the war are not issues we can solve by our own response. Still, we cannot just pray like an "Indian rain dance" for the war to end quickly or for COVID-19 to stop spreading. Moreover, price stabilization is the most urgent livelihood task identified by the Yoon Suk-yeol administration. In times like these, it is all the more important to uphold conviction and principles.

To stabilize prices, above all, consistent signals of monetary tightening must be sent to break inflationary expectations. When the money supply decreases, prices tend to be controlled to some extent. However, expecting immediate effects is a naive thought. This is because only one of the causes of price increases, helicopter money, has been withdrawn. As a result, the cries of ordinary people due to interest rate hikes may resonate more strongly, and voices calling for cash handouts may emerge, especially in political circles. But if conviction is broken and monetary tightening is stopped, greater pain may follow. This is because high inflation threatens the livelihoods of low-income groups more than high-income groups. Jeff Bezos, the Amazon founder who recently had a verbal spat with U.S. President Joe Biden, also said, "Inflation is a regressive tax that hurts the poorest the most." The government must not resort to price controls like the MB administration to stabilize prices in the short term. Price controls do not align with the market economy principles that the Yoon Suk-yeol administration values. The current economic team of the Yoon administration, where many MB men are positioned, should know this better than anyone. Nevertheless, if they take the reckless step of price controls again, they will become no different from the Moon Jae-in administration, which was criticized as Roh Moo-hyun government season 2 due to tangled real estate policies throughout its term.