[Inside Chodong]"Prices, the Most Regrettable Issue" Will President Yoon Repeat MB's Reflections?

The Yoon Seok-yeol administration has launched ‘Inflation War Season 2.’ If the ‘Price Management System’ introduced to curb the consumer price inflation rate, which exceeded 6% at the time of his inauguration on May 10, 2022, was Season 1, then Season 2, restructured after two years, focuses on structural reform. To this end, a ‘Livelihood Price Task Force (TF)’ was also established in the Presidential Office. The core plan of Season 2 is to stabilize prices at around 2% by improving the supply, storage, and distribution structures of livelihood-related items through the Livelihood Price TF.

Although the Yoon administration has put forward the grand discourse of structural reform to stabilize prices, this scene is not unfamiliar. It was exactly 13 years ago. On July 18, 2011, then-President Lee Myung-bak formed a price-dedicated TF within the Blue House and instructed Chief Secretary for Economic Affairs Kim Dae-gi to "check the basic management system first," saying, "It is difficult to stabilize prices by conventional methods now."

Prior to this, in his first year in office in 2008, former President Lee selected 52 essential daily items, known as ‘MB Prices,’ for special management and implemented a responsibility system for each item. In a way, this was the original version of the Inflation War Seasons 1 and 2 that the Yoon administration is currently fighting.

Of course, this is nothing new. Since the presidential transition committee period, the Yoon administration has been labeled ‘MB Government Season 2’ because both its personnel and policies closely follow those of the MB government.

According to data compiled by the Organisation for Economic Co-operation and Development (OECD), South Korea's inflation rate for 'food and non-alcoholic beverages' in February was 6.95%, exceeding the OECD average of 5.32%. This was the third highest among the 35 member countries surveyed. The photo shows a citizen shopping at a large supermarket in Seoul on the 21st of last month. Photo by Yonhap News.

Perhaps that is why, despite the Livelihood Price TF being launched with a fancy title, there is little expectation. The original version essentially ended in failure. During the five years of the MB government, prices of representative agricultural, livestock, and fishery products, which are staples on the dining table, surged by more than 30%.

Repeating a failed policy like a broken record offers no solution. Now is the time to confront the essence of the problem, not to show off policies that claim to address it. The essence lies in the ‘implementation’ of distribution structure reform, which was pointed out as the cause of rapid price increases both during the MB government and the Yoon administration. Agricultural products produced at the production site pass through producers, local auction markets, wholesale markets, large distribution companies, and retailers before reaching consumers. As margins are added at each stage, when incidents like the current golden apple price shock occur, hoarding by middlemen runs rampant, causing price volatility. At such times, instead of strengthening penalty systems for each distribution process, the wholesale market structure, which is mainly offline auction-based, must be completely overhauled to reduce the distribution stages themselves. The nationwide online agricultural wholesale market, which took its first step last October, can be the starting point. Although fierce opposition from existing offline wholesalers is expected regarding the activation of the online wholesale market, it is an unavoidable matter.

To prepare for poor crop yields caused by climate change, which has become a constant factor, advanced techniques such as smart farm activation, detailed production and inventory management by item, and reorganization of import items must also be actively pursued. These are not measures that can immediately curb prices like discount subsidies. They require long-term time and effort and may be passed on to the next administration. However, repeatedly using fiscal resources to temporarily lower prices can be like showing off in front but stabbing in the back. Although visible economic indicators may stabilize immediately, the resulting lagging real economy can further stimulate the relative deprivation of ordinary citizens.

Former President Lee, who fought a fierce war against inflation, recalled in his book The President’s Time that "(inflation) was one of the issues I regretted the most during my term." It is hoped that President Yoon will not repeat this as well.