Where Is Korea’s Cowperthwaite?

Politicians seem to think that, as if they were gods, they can do anything and solve every problem. Even though real-world outcomes are almost always the exact opposite, this pattern keeps repeating itself. Take the real estate market, for example. With the stated aim of creating affordable and stable housing, they control property prices and jeonse and monthly rents while imposing heavy taxes. As we vividly witnessed through the more than 20 real-estate-related regulatory measures under the previous Moon Jae-in administration, the results turned out to be the exact opposite of the original goals and intentions. Property prices soared, and in the jeonse and monthly rental market, things deteriorated to the point where people supposedly had to “stand in line for interviews.” Even so, real estate regulations show no sign of being lifted.

The same is true when one looks at the directions of the economic policies being put forward by each party and each candidate ahead of the presidential election in June. Everyone is confidently declaring that “the state will foster and build up” the economy and industry. The advanced industries most frequently mentioned are semiconductors, electric vehicles, secondary batteries, the bio industry, and the AI industry. Let us briefly look at what is being proposed for the AI industry.

In the case of the Democratic Party, one candidate promises to invest 100 trillion won to provide a Korean-style ChatGPT free of charge, secure more than 50,000 GPUs, and support the development of AI-dedicated neural processing units. Another candidate likewise promises to invest 100 trillion won to develop a Korean-style AI foundation model and support industry-specific AI innovation projects. Yet another candidate also promises to invest 100 trillion won to cultivate 100 top-tier core talents at the level of global AI leaders and secure 1 million GPUs.

In the case of the People Power Party, one candidate promises to invest 200 trillion won, including 150 trillion won in AI infrastructure over five years, and to completely overhaul AI education. Another candidate promises to invest 20 trillion won to cultivate 1 million core science and technology talents and raise R&D spending to 5% of GDP. Yet another candidate promises to invest 50 trillion won in R&D for advanced fields such as AI. One more candidate promises to invest 100 trillion won to foster 200,000 young AI talents and establish AI convergence centers and startup villages.

The claim is that if these policies are implemented, Korea can join the leading group in the AI industry and avoid losing AI sovereignty. But as noted earlier, contrary to politicians’ confident boasts, reality often leads to exactly the opposite result, or else produces little effect while merely draining public finances. During the Moon Jae-in administration, when anti-Japanese sentiment was intensifying to the point that even the word “jukchang” was being used, the government vowed to aggressively foster the materials, parts, and equipment sector while calling for “independence in materials, parts, and equipment and securing competitiveness.” The measures introduced at that time were not all that different from those now being mentioned in connection with AI policy. And yet, several years later, how much more independent and competitive has our materials, parts, and equipment industry become compared with back then? Indeed, is there anyone even interested in examining what became of that policy?

The economist Mises said that “economic history is a long record of the failure of government policies that ignored the market.” Cowperthwaite, who led Hong Kong’s economic success, put it even more bluntly: “When the government goes into business, it helps no one.” Cowperthwaite was sent by Britain immediately after World War II with the task of rebuilding Hong Kong. He later served as Hong Kong’s Financial Secretary for 10 years beginning in 1961 and was the man who led the economic miracle of Hong Kong that we know so well.

His policy was, first, the free market; second, the free market. He believed that if the right conditions were created for entrepreneurs to work hard, they would take risks and create new business opportunities in pursuit of their own profits. “The government must not tell entrepreneurs or businessmen that they should do this and should not do that. When the functioning of the market is constrained, the rate of economic growth falls.” He also said this: “I strongly dislike proposals to use government funds to give preferential support to a select group of entrepreneurs. This is even more so when such proposals stem from bureaucrats’ ideas about what is good and what is bad in the process of industrialization.... If an industry truly has a promising future, it can develop on its own precisely because it is promising, and in a normal market it will develop without special assistance.”

Such was Cowperthwaite that he even refrained from compiling statistics, on the grounds that once bureaucrats had them in hand, they would use them to draw up plans and intervene in the economy. Does this not stand in dramatic contrast to the current situation in our country, where it is now coming to light that the previous administration intervened in the market while even committing “statistical manipulation” related to real estate? In any case, where is Korea’s Cowperthwaite—someone who can actually put into practice the principle that “when the government goes into business, it helps no one; the best policy is to create a free market”?

Hyeokcheol Kwon (Director of the Free Market Institute, Economics)

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Original title: 한국의 카우퍼스웨이트는 어디에?

Author: Hyeok-cheol Kwon

Date: 2025-04-23

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=1&idx=27551