The German People Who Chose `Reform`, What Can Korea Learn?

Stories about Korea’s economic crisis dominate the media day after day. Domestic demand has been severely sluggish since the beginning of the year, and with household debt and the political turmoil surrounding impeachment layered on top, a visible rebound appears unlikely. The construction sector is equally frigid. Following last year, construction investment is again expected to post negative growth this year. The number of companies filing for court receivership or bankruptcy has reached an all-time high. Unsurprisingly, unemployment has surged as well, with reports that the number of unemployment benefit recipients has hit a historic peak.

As if this were not enough, an external shock—almost an external crisis—has now been added to the mix. Exports offer little hope, and Korea must navigate the rising tide of aggressive protectionism, including tariff barrages from the newly inaugurated second Trump administration in the United States. China’s level of advanced technology, once thought to lag far behind, has already caught up with—or even surpassed—Korea’s in some areas. The time when we merely worried about China’s pursuit in global markets has passed; we now find ourselves struggling not to fall behind. Korea is facing formidable challenges both at home and abroad. Reflecting this grim outlook, the Bank of Korea has sharply lowered its growth forecast for this year from 1.9 percent to 1.5 percent.

Despite all this, the “clock of Yeouido”—the political world—seems to be gazing in a completely different direction. A giant opposition party is pushing ahead with a revision to the Commercial Act so aggressively that major business associations felt compelled to issue an emergency joint statement of opposition on a Sunday. The amendment, which expands directors’ fiduciary duty to include shareholders, is widely criticized by business groups and economic experts for inviting a flood of lawsuits, threatening managerial control, and discouraging investment—ultimately harming the entire economy. Yet these warnings fall on deaf ears, like chanting scriptures to a cow.

The same applies to rigid working-hour regulations designed primarily for unionized workers in large corporations and public enterprises. Companies and workers alike are crying out, “We want to work more”—whether to grow further or simply to survive—but politicians turn a blind eye. They insist that no exceptions whatsoever will be allowed to the 52-hour workweek rule. Their mindset seems steeped in arrogance: “You are supposed to rest.” After all, are these not the same people who arrogantly claim they will take responsibility for the retirement and health of the entire population? In reality, however, there are more than a few politicians to whom one is tempted to throw back the famous movie line: “Mind your own business.”

That said, one cannot ignore the fact that they are “politicians who can survive only by selling votes.” As is well known, most politicians are willing to pursue policies that voters cheer for, regardless of whether those policies damage the economy or impoverish the nation. Such figures are commonly called “populists,” “populist politicians,” or simply “political hustlers.” Truly principled politicians, by contrast, are exceedingly rare in history.

Politicians are sellers in a “political market,” acutely sensitive to public opinion—that is, to the direction of votes. What ultimately moves them is public sentiment, the social mood, and shifts in voting behavior. This is the fate of mass democracy. As a result, whether abroad or at home, reform remains elusive unless public opinion clearly demands it. Even the sweeping reforms of Margaret Thatcher—so consequential that they gave rise to the term “Thatcherism”—would have been impossible without strong public support driven by the conviction that “this cannot continue.”

In Korea’s case as well, would it have been possible to overcome the IMF financial crisis through reform without the nationwide participation exemplified by the gold-collection campaign? Likewise, unless public opinion today coalesces around the belief that “this cannot go on,” and unless the people of Yeouido recognize that their policies are “no longer selling votes,” they will persist in their current behavior.

The recent German federal election, which delivered the worst defeat in history to the ruling Social Democratic Party (SPD) and a resounding victory to the Christian Democratic Union (CDU)–Christian Social Union (CSU) alliance, represents a clear expression of the German people’s resolve that “this cannot continue.” Germany has chosen policies of deregulation, tax cuts, and reduced welfare spending—a path toward “small government and a large market.” What choice will Korea make? That choice will determine whether we continue to sink further into decline or seize an opportunity for recovery.

Kwon Hyuk-cheol
Director, Free Market Research Institute

Korean version: https://www.cfe.org/20250228_27375