In the ChatGPT Era, We Must Boldly Advance Industrial Regulatory Reform

Generative AI, and the fever sparked by ChatGPT, is red-hot. Many media outlets and experts compare the arrival of “ChatGPT” to “the arrival of the iPhone.” AI has already moved beyond the stage of technological development and entered the stage of implementation. Once AI is integrated into industry and services and becomes part of everyday life, it is expected to change our lives more broadly and more rapidly than the internet and smartphones changed the world. While companies have been scrambling to respond—some viewing the ChatGPT boom as a new business opportunity, others anticipating drastic changes in industrial structure—it is concerning that voices calling attention to AI’s side effects and demanding preemptive regulation are already growing louder.

The Industrial Revolution can be defined as a sweeping transformation of life across the entire social and economic structure, brought about by rapid and innovative changes in industry and increased industrial productivity. At the 2016 World Economic Forum in Davos, Switzerland, the “Fourth Industrial Revolution” was conceptualized as an intelligent revolution based on hyperconnectivity driven by digital technology, and participants were urged to prepare for a new era. For a time, however, the Fourth Industrial Revolution was dismissed by some as little more than a marketing term.

But with the advent of “ChatGPT,” there is a growing sense that the era of the “Fourth Industrial Revolution”—characterized by hyperconnectivity, superintelligence, and predictability—has truly begun. Industrial revolutions bring not only greater industrial efficiency through technological progress, but also a massive paradigm shift across society, including the economic structure, affecting our lives so profoundly that there is no going back to the way things were before.

Joseph Schumpeter, the Austrian-born American theoretical economist, emphasized “innovation” as the single most important driver of the dynamism of the capitalist market economy, and strongly argued for the importance of entrepreneurs—the key agents behind technological innovation and industrial change—and of their innovative activity, which he conceptualized as “creative destruction.”

Yet innovation that is expected to transform society as a whole is inevitably met with resistance from those who reject change, and the birth of new businesses and the innovative activities of firms face many uncertainties and obstacles. Representative examples are vested interests that dominate existing markets through old technologies and business models, along with legal and institutional regulations.

Current examples of clashes between innovative services and vested interests include conflicts between professional associations and platforms. These include the legal services platform “LawTalk,” the tax services platform “Samtax,” the real estate brokerage platform “Zigbang,” the cosmetic surgery information platform “Gangnam Unni,” and the telemedicine platform “Doctor Now.” In the sectors to which these services belong, many overseas firms have grown rapidly—some becoming unicorns and others going public—reshaping existing industrial structures in the process. In Korea, however, these companies are instead being blocked by vested interests, seeing their business networks shrink and facing difficulties in expanding operations and raising capital, to the point of worrying about their very survival.

The situation facing Korean companies may appear to be merely a clash of interests among private-sector businesses. But if incumbent firms use their vested positions to obstruct the legitimate business activities of innovative companies and block the emergence of innovative business models, this does not remain a problem at the level of individual firms. In the long run, such dynamics may lead to harm to user interests, dependence in related industries on foreign companies, and a decline in industrial competitiveness. Therefore, even from the standpoint of securing the competitiveness of domestic industry, relevant institutions must engage in proactive administration so that innovative businesses can be created and grow. At a minimum, these institutions must make decisions quickly and clearly state their positions on such conflicts.

Another factor is the range of regulatory issues that arise when commercializing new business models, including conflicts with existing laws and institutions. The government has also devoted considerable attention and effort to regulatory reform, for example by establishing the Regulatory Reform Committee and operating a regulatory sandbox. Despite these efforts, however, there are cases in which business models that have been legalized overseas and have even gone public are blocked in Korea by outdated regulations before innovative technologies and services—new engines of growth—can even get off the ground, causing firms to abandon their businesses.

At a time of industrial restructuring like the present, regulations designed for the old industrial structure are more likely to hinder innovative growth. Government regulatory policy should serve as a core tool for supporting innovation and innovation-driven growth. For regulatory reform efforts to be effective, what is needed is meaningful regulatory innovation that can be felt in the field, fast-moving implementation, and flexibility in application.

Specifically, in the AI era ushered in by ChatGPT, to support innovation-driven growth by businesses, it is necessary to shift the direction of regulatory reform toward a “negative regulation” approach and to apply a “comprehensive negative regulation” framework and the “regulatory sandbox” more actively. In addition, to respond swiftly to changes in the domestic and external environment and to the pace of technological innovation, it is urgent to enhance the capabilities of regulatory officials, ensure speedy execution, expand private-sector self-regulation, and improve the flexibility and operational efficiency of overall regulatory governance.

AI technology has now moved beyond the development stage and entered the implementation stage of convergence and application. In the era of the Fourth Industrial Revolution, relevant institutions must actively work alongside Korean companies so that they can produce creative and innovative business models and establish themselves as global leaders. As we enter the era of the Fourth Industrial Revolution, now is the time to reform the various regulations that hinder free business activity—so long as innovative business models do not violate ethical standards, public safety, or the public interest—and to actively support corporate growth, so that Korean firms can play a leading role. There is not much golden time left to prepare for the future in this new era of industrial revolution.

Hanjoon Cho

Senior Research Fellow, Center for Free Enterprise (CFE)

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Original title: 챗GPT 시대, 산업규제 개혁 과감히 추진해야

Author: Han-jun Jo

Date: 2023-03-09

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=25447