Perils of Good Intentions; Roh's idealism has turned South Korea into a debtor state.

Byline: B. J. Lee

South Korean president Roh Moo Hyun came to power last year as a populist outsider, and in recent months has spelled out spending plans that deliver on his promises in a big way--some say too big. The total amounts to as much as $300 billion over 10 years, a vast sum for a $600 billion economy with an annual government budget of $150 billion. There's $100 billion to support financially troubled farmers and fishermen, $52 billion to build housing for the poor and, in a direct jab at the Seoul elite, nearly $40 billion to move the capital to the southern town of Gonju. Billions more will be spent on the military in the wake of a planned redeployment of U.S. troops, a move hastened by Roh's nationalist rhetoric. "Our economy is too small to pursue all those megaprojects at once," says economist Hong Ki Ttack at Seoul's Chung-Ang University. "We need careful evaluations of those projects."

The president and his Blue House aides are unwavering. The megaprojects are popular with Roh's base of low-income voters and nationalistic youths, particularly in his southern home region. Roh's aides argue that public spending is a classic response to a downturn, and growth has been sluggish since last year. Their critics say the spending plans are too large and long term to provide timely stimulus, and buck the normal evolution of a modern economy. Typically, as nations grow richer, governments shift from big spending to more subtle pump priming, like interest-rate or tax cuts, says Choi Sook Hee, an analyst at Samsung Economic Research Institute. "Unlike Korea, many countries avoid fiscal pump priming because it can outlast economic recovery, causing overheating."

In a way, Roh is moving back to the system that prevailed before the 1997 Asian financial crisis, when presidents, often with a general's rank, commanded the economy from the Blue House. The crisis exposed many flaws in their direction of the economy and inspired a wave of free-market reform. But Roh has vowed to fix what he regards as a graver ill: an economic structure that perpetuates deep income disparities between regions and classes, dominated by the Seoul elite.

Roh has thus revived an old Korean tradition: political control of the economy. Since last ...