Revisiting 'Hotel Economics'... Fact-checking the Statements of Lee Jae-myung and Lee Jun-seok [Presidential Election Fact Check]

[Financial News] “To defend hotel economics, Lucas Chaije was brought up. The surprising thing is that this person was an editor-in-chief of the German Communist Party's newspaper.” (Lee Jun-seok, Reform Party presidential candidate)
"That case is also mentioned in the Bank of Korea's booklet. I am not interested in what ideology Lucas Chaije has." (Lee Jae-myung, Democratic Party presidential candidate)
Democratic Party's presidential candidate Lee Jae-myung and Reform Party's presidential candidate Lee Jun-seok clashed once again over 'hotel economics'. Hotel economics refers to a statement by candidate Lee Jae-myung during a regional campaign, where he mentioned that "even if a tourist pays a reservation fee of 100,000 won at a hotel and takes the money back, the money circulates and stimulates the economy." Candidate Lee Jun-seok criticized it as "nonsense." Are the statements of the two candidates true?
In the third presidential TV debate held on the 27th, a heated discussion on hotel economics took place. First, we verified candidate Lee Jun-seok's statement. Lucas Chaije, whose real name is Lucas Emanuel Chaije, was born in 1944 in Frankfurt, Germany.
He majored in philosophy and economics at university and later worked at the Japanese Ministry of Economy, the German aluminum industry, the Frankfurt-based economic newspaper Börsen-Zeitung, and Financial Times Deutschland, which he co-founded. Until 2017, he served as the editor-in-chief of the German Communist Party's (DKP) weekly newspaper UZ, and he currently contributes columns to Junge Welt. Junge Welt is known as a progressive daily newspaper in Germany.
Based on this, Lucas Chaije has a history of working at the German Communist Party's weekly newspaper UZ. Therefore, candidate Lee Jun-seok's statement is true.
We checked candidate Lee Jae-myung's statement. The 'Bank of Korea booklet' mentioned by candidate Lee Jae-myung is the 'Bank of Korea and Payment and Settlement System' published in December last year. On pages 8-9 of the report, there is an illustration and text titled 'How to Save a Village with 50,000 Won'.
The core of the content is that a stranger appeared in a village and paid 50,000 won for a night's stay at the village motel. The motel owner paid off his debt to the butcher, the butcher paid the pig farmer, the pig farmer paid the feed store owner, and the feed store owner paid the motel owner 50,000 won each. After looking around the room, the traveler canceled the reservation and got the 50,000 won back, leading to the settlement of each debt without any transaction of goods or services.
The flow of the story is almost identical to what candidate Lee Jae-myung mentioned. Candidate Lee Jae-myung raised the value to 100,000 won and changed the motel to a hotel, altering the surface elements, but the content that the money originating from an outsider circulates within the village and exits again was used as is. Therefore, candidate Lee Jae-myung's statement is also true.
However, the Bank of Korea's case is not known to be related to the 'multiplier effect of fiscal policy'. Candidate Lee Jae-myung, at a campaign site in Paju-si, Gyeonggi Province, on the 20th of this month, responded to criticism of hotel economics by saying, "When the economy is this bad, we need to stimulate consumption to make money circulate in the neighborhood," and "There are fools who don't know that stimulating consumption when the economy is bad is called the multiplier effect."
The multiplier effect refers to a situation where the impact of a change in a specific variable on the overall economy is much greater than the change itself. For example, the multiplier effect of government spending means that when the government spends 1,000 won, the national income increases by more than 1,000 won. The Bank of Korea has previously stated that the content is not related to the multiplier effect.
kjh0109@fnnews.com Kwon Jun-ho Reporter