Beyond the Limits of the Green New Deal, Toward the Future

The government has unveiled a blueprint for a Korean New Deal that will inject 160 trillion won in fiscal spending by 2025. The stated goal is to overcome the economic shock caused by COVID-19 and support sectors that can grow into new engines of growth. This time, the modifier “green” has even been added before “New Deal.” A new term, the “Digital New Deal,” has also appeared. With the budget so enormous and the slogans so grand, expectations are naturally high. But flashy slogans do not ensure efficient spending or greater economic vitality.

Each measure must be examined one by one for realism and business viability. First, the problem with renewable energy is serious. The government is making the mistake of rejecting nuclear power, an environmentally friendly energy source, while stubbornly insisting on renewables. Why has nuclear power, among so many alternative energy sources, become a top-tier option with profitability? Because it is safer and more efficient than the alternatives. If there were an energy source capable of replacing nuclear power, that industry would naturally have grown on its own. Yet despite the government’s long-term support for renewable energy, the result has been no meaningful achievement—only wasted tax money and troubled companies. The answer is clear when one looks at Korea Electric Power Corporation, which posted a loss of 1.3 trillion won because of the nuclear phase-out policy. The more the government ignores reality, clings to abandoning nuclear power, and pushes renewable energy, the more the energy sector will lose its competitiveness.

The green agenda imposed by the government bruises businesses. In fact, the technological capabilities of our nuclear power companies are among the best in the world. Doosan Heavy Industries & Construction, once a strong company, became distressed because of the government’s nuclear phase-out policy. Now the company says it will pursue the Green New Deal and foster its offshore wind power business into one generating more than 1 trillion won in annual sales by 2025. In other words, it is seeking a path to survival while looking to government support. But why does this look so uneasy? We need to recognize the trap hidden behind the words “green” and “New Deal.”

Green is something many people favor, but it is not something the government should impose. It is arrogant to think that the government can micromanage people’s behavior and find solutions to every problem on their behalf. In 2018, the government regulated the use of disposable cups in cafes. In many ways, people were inconvenienced. They had to put up with the unpleasantness of drinking through paper straws and the discomfort of reusing cups that someone else had put their mouth on. But that administratively convenient environmental regulation was swept away by COVID-19. Consumers were finally able to escape this coerced version of green and return happily to everyday life.

Furthermore, the “New Deal” cannot be the solution to the threats we face. The New Deal was a failed policy even during the Great Depression. Economists agree that fiscal spending packaged under the New Deal has no real effect. It is worrying that continuing to put the New Deal front and center reflects concern for politics rather than the economy. Repeating supplementary budgets and increasing spending simply because the economy is struggling only leads to more debt. In the end, government debt and private debt pile up, and the economy becomes a zombie economy, sinking into paralysis.

The government’s approach of trying to create new growth engines through support policies is outdated. It has drawn up budgets in a planned-economy manner and rolled out all kinds of support measures, while turning its back on competition, choice, and business freedom. The core is missing. The world does not move according to government design. It is businesses that find the path forward and generate profits, and when the government acts as though it knows the future, it only expands showcase projects.

Economic experiments in which the government leads with slogans and supplies funding must now stop. Consumers decide what kinds of energy will be used in the future and what kinds of cars they will buy. That is the only way sustainability is possible. It is not something that can be achieved simply because the government chooses and subsidizes on their behalf. Whether the renewable energy, solar power, hydrogen vehicles, and electric vehicles that the government has chosen to promote can truly succeed in the market remains to be seen. History shows that businesses have been far better than governments at identifying and meeting consumer choices.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: 그린 뉴딜의 한계를 넘어 미래로

Author: Sung-no Choi

Date: 2020-07-24

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=20&idx=22955