The global economy is in a shambles. The subprime mortgage crisis in the United States, instead of subsiding, is threatening to cause a global financial meltdown. The United States is calling for international collaboration to avert such a catastrophe.

It is not just the mortgage debacle that is hurting the world economy. Also holding it hostage are commodity prices, whose rapid rises are dizzying. Oil prices above US$100 per barrel appear to have gotten a foothold. Soaring food prices are also hurting the international economy. "Agflation," a new buzzword, alludes to the inflationary effects of the price increases of agricultural products.

But the severity of all these economic difficulties does not appear to be dawning on South Korean President Lee Myung-bak's administration, which is saying that it will pursue both a high rate of growth and a low level of inflation at the same time.

A news report quotes an unidentified policymaker as saying that it would be silly to ask whether the accelerating growth or taming prices will be given top priority. According to this man, the Lee administration will pursue both.

Nothing could be better, if only this goal were attainable. But Korea is not a halcyon island shielded from outside upheavals. On the contrary, a resources-poor Korea is more vulnerable to a crisis originating from abroad than are other countries which produce oil or other commodities in abundance.

Undeterred by the worsening global economic conditions, however, the Korean Ministry of Planning and Finance says it has no plan to lower its 2008 target growth rate of 6 per cent. The ministry is clinging to this goal at a time when many domestic economic think tanks are predicting that growth will fall below the 5 per cent level. Others are even more pessimistic.

Nor is the ministry planning to revise its goal of keeping consumer prices from rising 3.3 per cent or higher. In its fight against inflation, it has lowered the oil tax and promised to cut customs duties on 82 items. That may be about all it can do, under the current circumstances.

But the administration has a greater ambition. It is attempting to place the prices of 50 core daily necessities under its tight control, by order of President Lee. Early last week, Lee said that such price regulation is needed to protect low-income families. The ministry has since been developing a separate price index of the items, in a first step toward price control.

But such intervention will do more harm than good. In the 1960s and 1970s, the military-backed dictatorship attempted to control the prices of daily necessities, without restraining the demand for them or expanding their supply. This policy, which failed to stabilise prices, resulted in a supply shortage of those items.

Korea's is not a command economy in which supply and prices can be regulated by the government, as opposed to market forces. As such, the Lee administration cannot decide which goods are produced in what quantities and at which prices they are to be distributed.

What the administration needs to do is help corporations raise their productivity, streamline complicated distribution and logistical systems, and take other indirect approaches to lowering the costs. But a more sensible way to curb inflationary pressure is to review world economic conditions, determine what would be a tolerable level of inflation, and lower the growth target accordingly.

It may be difficult for this administration to make a change in policy and call for belt-tightening before the crucial parliamentary elections next month. But a responsible government would not mislead the public by pretending that it is possible to boost growth and keep prices at a low level simultaneously.