Concerns about the Korean economy are mounting due to a series of overseas relocations by domestic companies, ongoing labor-management conflicts, and an uncertain MRO (Maintenance, Repair, and Operations) market. In addition, a significant contraction in consumer sentiment is raising fears of a vicious cycle in which the momentum for economic recovery weakens.
Experts are focusing on consumer psychology theories such as the "Veblen Effect" and the "Bandwagon Effect" to analyze how consumer sentiment is functioning in this environment. These concepts are considered key to understanding how people's psychology actually impacts the economy, beyond what simple economic indicators can show.
◆ Companies on the Edge ... Rush to Move Overseas and Shrinking Consumption
The domestic industrial sector is facing increasing uncertainty in its business environment due to strikes by powerful labor unions and unpredictable labor-related regulations. As a result, many companies are relocating their production bases overseas or reducing domestic investment, which is directly leading to a contraction in the job market.
The problem is that this trend is having a negative impact on consumer sentiment. The future uncertainty caused by corporate relocations is reducing the spending capacity of the public and could accelerate an overall economic downturn.
This could lead to a negative manifestation of the "Bandwagon Effect," where economic agents, influenced by pessimistic outlooks, reduce consumption and investment. The psychology of "if most people are holding back, I will too" weighs down the entire market.
◆ MRO Market Turmoil ... Uncertainty Over 'New Pathways'
The MRO market, which had been expected to serve as a new industrial breakthrough, is also experiencing increased turmoil due to hardline union stances and political controversy. The MRO market, based on manufacturing, is not just a simple distribution industry but a key factor that determines the cost efficiency of the entire industrial sector. However, policy uncertainty and ongoing conflicts are blocking its development.
Ultimately, this leads to increased production costs, which are eventually passed on to consumers. This can further fuel the contraction in consumption.
◆ Luxury Consumption Amid Crisis ... 'One Last Spark'?
Interestingly, even amid this crisis, demand for high-end consumer goods remains strong among certain segments of the population. This is a classic example of the "Veblen Effect," where high prices themselves stimulate consumer demand by appealing to social status and the desire for conspicuous consumption.
However, this consumption pattern is limited to a very small minority and is insufficient to offset the widespread contraction in consumer sentiment experienced by the majority of the population. On the contrary, it may highlight the polarization of consumption between classes and exacerbate social conflict.
◆ No Recovery in Consumption Without Structural Reform
Experts agree that structural improvement of the economic system should take priority over short-term stimulus measures. Stabilizing labor-management relations, incentivizing domestic corporate investment, institutional reform of the MRO market, and increasing flexibility in the job market are cited as urgent tasks.
In particular, there is growing criticism that the excessively worker-centered legal framework must be restructured first. Only then can companies invest with confidence, and the public can trust in the long-term outlook.
The role of the government is also important. At this point, it is crucial to establish an economic strategy centered on national interests, rather than partisan interests.
The Veblen Effect, first introduced by American economist Thorstein Veblen in "The Theory of the Leisure Class," describes the paradoxical consumer psychology in which higher prices actually increase demand. This is mainly observed in luxury brands, jewelry, and premium markets.
The Bandwagon Effect refers to the tendency of consumers to blindly follow the choices of the majority, leading to more optimistic behavior when the market is positive and even greater retrenchment when the market is pessimistic.
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