SEOUL – South Korea’s ferry disaster has had a profound psychological impact on Asia’s fourth-largest economy, shaking public confidence in the very foundations of the country’s “miracle” development model.
The most tangible economic impact has been on domestic demand, as the mood of national grief at the loss of so many lives — most of them schoolchildren — has manifested itself in collective consumer abstinence.
In the month since the 6,825-ton Sewol capsized with 476 people on board, a self-imposed moratorium on leisure-time spending has been in effect.
On an institutional level, spring festivals were canceled, corporate entertainment events and retreats indefinitely postponed and music, sports and other cultural events scrapped or significantly toned down. On a personal level, many ordinary South Koreans simply stopped dining, drinking and shopping in their usual numbers.
“First of all, public confidence has been hammered,” said Chun Sang-jin, a sociology professor at Seoul’s Sogang University.
“On top of that there’s a collective sense of grief and guilt that just doesn’t sit with drinking, cracking jokes and merrymaking,” Chun said.
On Monday, South Korean President Park Geun-hye formally apologized for the disaster that killed about 300 passengers and said she would break up the coast guard because it had failed in its rescue mission.
Park has been hit hard by an angry nationwide outcry over the government’s response to South Korea’s worst civilian maritime disaster in 20 years, as well as the seemingly slow and ineffective rescue operation.
At least 286 people were killed and 18 remain missing. Only 172 were rescued, with the rest presumed to have drowned. Of the passengers, 339 were children and their teachers on a field trip from a high school on the outskirts of Seoul. Park fought back sobs as she remembered some of the teenagers who perished while trying to help each other.
She vowed sweeping reforms to improve oversight, as well as tough punishment for bureaucrats and businesses whose negligence endangers public safety.
“A 20-year-old vessel was bought and refurbished to add excessive capacity, then it was loaded with much more cargo than allowed with a false reporting on weight, but not a single person in the position to supervise stopped any of it,” Park said.
She singled out structural problems within the coast guard as the main reason why there was such a high casualty toll from an accident that played out on national television as the vessel gradually sank with most of the passengers trapped inside.
The government has also announced a number of measures, including front-loading this year’s budget, to help protect the fragile economy.
In a bid to boost domestic demand, the share of the annual budget to be spent in the first six months of the year has been increased from 55 to 57 percent — meaning an extra $7.6 billion in spending by the end of June.
According to data compiled by market researcher FnGuide, South Korean brokerage houses have cut second-quarter earnings outlooks for companies in the telecoms, food and retail sectors.
Credit card companies have reported a drop in transactions of up to 10 percent, while small businesses, shops and restaurants are all feeling the pinch.
“A slump in consumption following the Sewol disaster . . . could dampen a hard-won economic recovery,” Finance Minister Hyun Oh-seok said, promising “pre-emptive” measures to mitigate the fallout.
Low-interest loans were announced for small and medium-sized businesses involved in tourism, transportation and accommodation.
The export and manufacturing sectors are dominant in South Korea, so a dip in the domestic consumer market has a limited impact in terms of the overall economy. But a protracted slump would have a significant social and political impact.
“There is certainly a worry about just how long this might go on for,” said Shin Hoon, policy director of the Korea Foods Industry Association.
The country has suffered disasters in the past, including a 1995 department store collapse that claimed more than 500 lives and a 2003 subway fire that killed 192.
But the Sewol tragedy has wounded the national psyche in a way that those events did not.
The unprecedented number of children among the dead is a huge factor. Then there is the increasing evidence that the disaster was wholly man-made: the result of cut corners, regulatory violations, poor safety training and a woeful lack of oversight — all, or nearly all, attributable to a desire to maximize profits.
And even when the corner is turned, the legacy of the disaster looks set to endure in the questions it has raised over the formula for South Korea’s extraordinary economic success.
The rapid transformation from dictatorship to vibrant democracy and war-torn, impoverished backwater to Asia’s fourth-largest economy is a source of great national pride.
But maybe, some are now asking, the unfettered growth came at too high a price, as safety standards were sidelined and regulations ignored in the blind rush for development.
“The Sewol tragedy has called into question all our great achievements . . . (and) it feels like the country may never be the same again,” the novelist Kim Young-ha wrote in an Op-Ed piece for The New York Times.