Where is Korea`s Cowperthwaite?

Politicians often seem to believe that they are like gods—capable of doing everything and solving every problem. In reality, however, the outcomes are almost always the exact opposite. Yet this pattern continues to repeat itself. Take the real estate market as an example. With the stated goal of creating affordable and stable housing, governments impose controls on housing prices and rents while levying heavy taxes. As we witnessed vividly through more than 20 rounds of real estate regulations under the Moon Jae-in administration, the results ran completely counter to the original intentions. Housing prices soared, and the rental market deteriorated to the point where people were forced to “line up and go through interviews” just to secure a lease. Even so, real estate regulations show no sign of being relaxed.

The same applies when we look at the economic policy directions being put forward by political parties and candidates ahead of the June presidential election. Everyone boasts that they will have the state “nurture and revive” the economy and industry. Semiconductors, electric vehicles, secondary batteries, biotechnology, and AI are repeatedly cited as key strategic industries. Let us briefly examine AI policy in particular.

In the Democratic Party, one candidate promises to invest 100 trillion won to provide a Korean version of ChatGPT for free, secure more than 50,000 GPUs, and support the development of AI-dedicated neural processing units. Another candidate likewise pledges a 100 trillion won investment to develop a Korean AI foundation model and support industry-specific AI innovation projects. Yet another candidate promises to invest 100 trillion won to train 100 world-class AI leaders and secure one million GPUs.

In the People Power Party, one candidate promises a 200 trillion won investment, including 150 trillion won over five years for AI infrastructure and a comprehensive overhaul of AI education. Another candidate pledges 20 trillion won to train one million core science and technology talents and raise R&D investment to 5 percent of GDP. A third candidate promises 50 trillion won for R&D investment in advanced fields such as AI. Yet another candidate proposes a 100 trillion won investment to train 200,000 young AI talents and establish AI convergence centers and startup villages.

The claim is that such policies will allow Korea to secure a leading position in AI and preserve its “AI sovereignty.” Yet, as noted earlier, contrary to politicians’ grand promises, reality usually delivers the opposite outcome—or produces little effect while merely draining public finances. During the Moon administration, when anti-Japan sentiment surged to the point that the term “bamboo spear” was invoked, the government loudly proclaimed the need for “materials, parts, and equipment (MPE) independence” and vowed to aggressively foster these industries. The measures introduced at the time are not very different from those now being proposed for AI policy. And yet, several years later, how much more independent and competitive has Korea’s MPE sector become compared to then? More importantly, is there anyone who even takes the time to examine what the results of those policies actually were?

The economist Ludwig von Mises once said that “the history of economic policy is a long record of government failures caused by ignoring the market.” Sir John Cowperthwaite, the architect of Hong Kong’s economic success, put it even more bluntly: “When the government runs businesses, it helps no one.” Cowperthwaite was sent by the British government to Hong Kong after World War II to oversee its reconstruction. Serving as Financial Secretary for a decade from 1961, he led what we now know as Hong Kong’s economic miracle.

His guiding principle was simple: first, the free market; second, the free market. He believed that if the right conditions were created for entrepreneurs to operate freely, they would take risks and create new business opportunities in pursuit of profit. “The government should not tell entrepreneurs what they must do or must not do. When the functioning of the market is constrained, economic growth declines,” he said. He also remarked: “I strongly dislike proposals to use public funds to provide preferential support to selected entrepreneurs—especially when such proposals are based on bureaucrats’ views about which industries are good and which are bad in the process of industrialization… If an industry truly has a promising future, it does not need government help. Precisely because it is promising, it can develop on its own, and in a normal market it will grow without special assistance.”

Cowperthwaite even refused to compile economic statistics, fearing that once bureaucrats had numbers in their hands, they would start making plans and intervening in the economy. Does this not stand in stark contrast to today’s Korea, where it has recently been revealed that the previous government even manipulated real estate statistics to justify market intervention? In any case, where is Korea’s Cowperthwaite—someone who can say, and actually act on, the belief that “when the government runs businesses, it helps no one, and creating a free market is the best policy”?

Kwon Hyuk-cheol
Director, Free Market Research Institute / Economist

Korean version: https://www.cfe.org/20250423_27551