In politics, even strife has a red line

Audio report: written by reporters, read by AI

Cho Min-geun

The author is the business and industry news editor at the JoongAng Ilbo.

In late 2024, South Korean businesses were thrown into a state of alarm following the government’s abrupt declaration of martial law. Overseas investors and buyers, taken aback by the news, bombarded corporate representatives with the same inquiry: “What is happening in Korea?” The question reflected growing concern about the country’s political and economic stability.

One institutional investor, previously encouraged by the government’s Corporate Value-up Program and committed to long-term investments, expressed disbelief. “We thought we had accounted for every potential risk, including the North Korean threat,” the investor said. “But this was beyond our imagination.” Corporate investor relations officers found themselves in damage control mode. “We’ve endured political turmoil before,” said one representative. “The economy and business environment kept moving then, and I had to convince them the same would hold true now.”

The government had limited tools at its disposal. Instead, it relied on public messaging, repeatedly telling international credit rating agencies and media outlets that the country's economy was functioning normally, separate from political events. Authorities emphasized the country’s institutional resilience and its ability to navigate temporary instability.

Bank of Korea Gov. Rhee Chang-yong played a prominent role in these efforts. In interviews with foreign media, he stressed that Korea’s economic command center remained intact and that economic policy would proceed without disruption. His push for a supplementary budget — despite a politically paralyzed National Assembly — was designed to reinforce that message. “If rival parties and the administration can reach an agreement on fiscal policy,” Rhee said, “it sends a signal that the economy is being managed despite political divisions.”

For a moment, it appeared the country had managed to pull back from the brink. The worst-case scenario — a sovereign credit rating downgrade — was avoided. The Constitutional Court’s decision to remove the president did not trigger mass unrest, and a date was set for a snap presidential election. Financial markets, which had experienced sharp volatility, began to stabilize. The won regained ground and the benchmark stock index showed signs of recovery. A delayed supplementary budget was ultimately passed with bipartisan support.

But as the election drew closer, a new layer of uncertainty emerged. Acting President Han Duck-soo announced his candidacy for the upcoming vote and stepped down from his interim role. In response, the Democratic Party moved to impeach Deputy Prime Minister and Finance Minister Choi Sang-mok, who had been expected to succeed Han in leading the caretaker administration. Choi resigned just before a parliamentary vote. The acting presidency was handed over to Education Minister Lee Ju-ho — marking the third interim leader in a matter of weeks. 

This sequence has resulted in an unprecedented leadership vacuum: a president ousted, an acting president stepping down to run for office, a finance minister forced to resign, and a new acting president without experience in economic policymaking. While Korea has experienced political turbulence before, the absence of a stable economic command structure at such a critical time presents a serious challenge.

The implications for Korea’s international credibility are not insignificant. The country had staked its reputation on the assertion that, even in political crises, the economy would remain stable. But as the leadership carousel continues, that narrative becomes harder to sustain. In February, Fitch Ratings kept Korea’s credit grade unchanged but issued a pointed warning: Prolonged political uncertainty could harm policy efficiency, economic performance and fiscal soundness.

The timing of this instability could hardly be worse. Domestically, Korea’s economy has begun to contract, with the first quarter of 2025 posting negative growth. Internationally, U.S. President Donald Trump’s administration is escalating its protectionist trade agenda, creating new pressure on global trade frameworks. The intersection of a weakened domestic economy and global economic headwinds increases vulnerability.

Foreign media have not overlooked the connection between Seoul's political dysfunction and the country's economic fragility. Bloomberg described the resignation of Finance Minister Choi as “another jarring development” deepening the country’s political crisis. It noted that the “merry-go-round” of leadership threatens to leave the government in a weaker position as it enters high-stakes trade negotiations with the United States.

Indeed, those negotiations are already at risk. Choi was Seoul’s counterpart to U.S. Treasury Secretary Scott Besent, who leads Washington’s negotiating team. Without a senior economic official in place, Korea finds itself at a disadvantage. While the final outcome of any bilateral agreement may ultimately rest with the next administration, setting the terms early and establishing a credible presence at the negotiating table is essential. That opportunity may now be lost, at least in the near term.

Washington is unlikely to slow its timeline to accommodate Seoul's internal political calendar. With tariffs potentially spilling into currency and financial markets, the lack of a coherent leadership structure is more than a domestic concern — it is a liability on the global stage.

With less than a month remaining before the election, some may hope the country can simply drift through this period without further disruption. But history suggests complacency is dangerous. In the lead-up to the Asian financial crisis, Korea’s deteriorating economic fundamentals were exacerbated by a loss of confidence in the political system’s ability to manage them. What followed was one of the country’s most painful chapters in modern history.

Today, Korea finds itself in another moment of risk. The shock waves from martial law and presidential impeachment were bound to cause institutional friction. Yet the response must be measured. Political parties cannot allow partisan competition to undermine the country's credibility and capacity to govern. There is a point beyond which conflict ceases to be part of the democratic process and becomes a threat to national stability.

Ultimately, the question is not just about political survival but about national responsibility. Voters will be watching closely to see who can draw the line — who can rise above political calculations and protect the broader interests of the country. In times of crisis, that is the leadership Korea needs.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.