Self-Harm Politics, Self-Harming Economic Policy

A vicious cycle of legislative overreach → vetoes → revotes

The political desire to lord it over business leaders remains strong

The greater the political intervention, the more the economy declines

The year is drawing to a close. At the start of the year, many hoped the Korean economy would soar with the energy of the Blue Dragon, but contrary to those hopes, it remained stagnant. The outlook for 2025, viewed from the end of 2024, is even more pessimistic. That is because the unfavorable external environment likely to be brought by the second Donald Trump administration, along with severe political turmoil, seems set to push the Korean economy into deeper stagnation.

Over the past several years, the Korean economy has been on a downward path. This is the result of misguided government policy. The driving force of economic growth is business. When business activity is vigorous, the economy grows, jobs are created, and people’s lives improve. Yet over the past several years, the government has continued to enact laws that constrain business activity. From the Roh Moo-hyun administration in 2003 to the Moon Jae-in administration in 2021, a total of 22,196 regulations were newly introduced or tightened by the government. These misguided regulatory policies weakened the competitiveness of industries and businesses.

To revitalize the economy, the Yoon Suk Yeol administration pledged to overhaul outdated systems and regulations. But amid endless political strife, it failed to move forward even a single step. Both the ruling and opposition parties spoke of people’s livelihoods while remaining consumed by partisan interests, making no progress at all on livelihood- and economy-related bills. Tax-cut legislation and urgently needed bills to support semiconductors, artificial intelligence (AI), and the expansion of the national backbone power grid all failed to clear the National Assembly. The ruling People Power Party, split between pro-Yoon and pro-Han factions, engaged in power struggles and failed to produce even one meaningful policy for the public. The dominant opposition paralyzed state affairs through relentless legislative overreach and impeachments. “Legislative monopoly, presidential vetoes, and National Assembly revotes” were repeated without end. The economy steadily lost vitality.

In this situation, President Yoon Suk Yeol’s sudden declaration of martial law, followed by the political crisis surrounding impeachment, caused economic activity to cool sharply. Although the impeachment motion was passed, the ruling People Power Party is still mired in factional infighting, while the opposition Democratic Party of Korea is driving state affairs into dysfunction through successive impeachment motions against senior government officials and legislative overreach, and is exploiting the situation to force through misguided bills. It is pushing ahead with the amendment to the Grain Management Act, the amendment to the Agricultural and Fisheries Products Distribution and Price Stabilization Act, and the amendment to the Act on Testimony, Appraisal, etc. before the National Assembly.

The amendment to the Grain Management Act would require the government to cover the price gap when rice prices fall below a certain level and to purchase excess output. President Yoon vetoed the bill in March last year, leading to its final defeat, but it has now been proposed again. The amendment to the Agricultural and Fisheries Products Distribution and Price Stabilization Act centers on paying producers all or part of the difference when agricultural product prices fall below a benchmark price. The amendments to the Grain Management Act and the Agricultural and Fisheries Products Distribution and Price Stabilization Act are anti-market bills. If enacted as written, they would inevitably lead to oversupply of rice and agricultural products. It would cost the government enormous sums to purchase, store, and dispose of the oversupplied rice and agricultural products. Government spending would snowball, and the burden on taxpayers would increase tremendously.

The amendment to the Act on Testimony, Appraisal, etc. before the National Assembly is a pernicious law that would further strengthen the already enormous powers of the National Assembly. It expands the scope of “compulsory attendance orders,” which had previously applied only to parliamentary audits and investigations, to hearings and other proceedings, and stipulates that witnesses or reference witnesses may not refuse to submit materials on the grounds of “personal information protection or trade secrets.” Such an amendment would sharply reduce business productivity and competitiveness, further deepening the economic slump.

This law stems from politicians’ desire to dominate business leaders. In our society, where remnants of the old scholar-peasant-artisan-merchant hierarchy still remain, politicians tend to treat economic actors and businesspeople like subordinates. This was clearly illustrated in 1995, when Samsung Chairman Lee Kun-hee was rebuked by the government of the day after saying in Beijing, “Politics is fourth-rate, administration is third-rate, and business is second-rate.” If business leaders are repeatedly and pointlessly summoned to the National Assembly under the pretext of parliamentary audits, valuable time that should be used to closely monitor market conditions will be wasted, and business productivity and competitiveness will inevitably decline. Moreover, there is a risk that core corporate secrets could be leaked to the outside through the political sphere. If a company’s core secrets are leaked, not only its competitiveness but even its survival may be threatened.

No country has prospered by allowing politics and government to intervene deeply in the economy. The greater the political and government intervention, the more the economy declines and the worse people’s lives become. The extreme example of political and government intervention is socialism, and socialist countries have all failed. If we are to pull the economy out of stagnation and return it to a growth trajectory, we must abolish the self-destructive policies by which we are harming ourselves.

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Original title: 자해 정치, 자해 경제정책

Author: Jae-uk Ahn

Date: 2024-12-23

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=27210