[Constitutional Amendment, Connecting the Future] "Prolonged Era of Hyper-Uncertainty, Resolving Political Polarization is Top Priority"

Political Uncertainty Grows in Both the United States and Korea
Potential for Increased Financial and Geopolitical Uncertainty
Supplementary Budget Needed... "Should Be Used for Growth"

"We expect the current era of ‘hyper-uncertainty’ to continue in the future. How can countries like Korea respond? The most important thing is to resolve the issue of political polarization."

Barry Eichengreen, a professor at the University of California, Berkeley (UC Berkeley), first introduced the term ‘era of hyper-uncertainty’ in 2017. This was 40 years after Kenneth Galbraith, a professor at Harvard University, defined the ‘era of uncertainty’ in 1977. Since then, the real world has experienced great turmoil including the COVID-19-induced economic recession, the Russia-Ukraine war, the Israel-Hamas conflict, and the potential return of Trump to power. Korea has also faced unprecedented crises, such as the declaration of martial law for the first time in 44 years and the third presidential impeachment motion in its constitutional history.

Professor Eichengreen said that this global trend of ‘hyper-uncertainty’ is ongoing. He explained, "Political uncertainty remains high in both the United States and Korea," adding, "New financial uncertainties may arise due to deregulation of cryptocurrency and financial markets, and considering the potential conflict between China and Taiwan, geopolitical uncertainty is also clearly elevated."

Barry Eichengreen, Professor at the University of California, Berkeley Campus

In the interview, he identified resolving ‘political risk’ as the foremost way for Korea to overcome the ‘era of hyper-uncertainty.’ He said, "So-called ‘middle powers’ like Korea cannot change this global situation, so they have no choice but to ‘hunker down.’ The most important thing Korea can do is to solve the problem of political polarization."

In reality, after the martial law incident, Korea entered a ‘proxy acting president’ system, causing the executive branch to lose leadership, while the political sphere remains sharply divided between conservatives and progressives. Amid this, not only livelihood-related bills such as supplementary budgets and the Semiconductor Special Act but also foreign and security policies have lost direction. Professor Eichengreen emphasized, "The two parties need to take measures to move toward the middle of the political spectrum," adding, "The more the ruling and opposition parties cooperate to prepare responses as unexpected global events unfold, the better."

However, since resolving political polarization is difficult to achieve in the short term, he advised taking measures to shield the economy from shocks. He mentioned the necessity of additional fiscal spending, which has recently become a key issue in the political arena. Initially, the government and ruling party were negative about drafting a supplementary budget that would burden national finances, but as domestic demand stagnated, they partially accepted opposition party opinions and began discussing the supplementary budget. However, disagreements over the items and scale of the budget raise concerns about missing the ‘golden time.’

Regarding this, Professor Eichengreen diagnosed, "Korea’s debt-to-GDP ratio is lower than international standards, so there is room to use fiscal policy to promote spending and growth," adding, "The GDP growth rate and interest rates on debt are somewhat balanced, so there is no immediate risk of debt burdens spiraling out of control."

However, he noted, "The composition of additional government spending is important," stating, "Additional spending on social security is desirable, but some should be invested in infrastructure and education to promote medium-term growth." He explained that spending should be directed more toward growth-supporting areas rather than populist expenditures. He said, "The Korean people and political circles need to prioritize between current growth and insurance against future shocks."