Regulations Are Economic Arteriosclerosis—Only Deregulation Can Revive Growth

Inadequate responses to the economic crisis are instead causing the crisis to accelerate. Inflation is surging, the dollar remains strong, demand is contracting, and financial market instability continues, yet government ministries are either standing by idly or even producing conflicting policies. Now is the time for each ministry to respond appropriately to the crisis.

The financial authorities are standing by as if financial market anxiety can be calmed simply by raising interest rates. The foreign exchange market and financial market are so tightly constrained by policy rigidity and regulations that they can hardly breathe. Lending is blocked by regulations, and market interest rates are capped, preventing finance from playing its proper role. As lax management by banks and government agencies has accumulated, bonds have become distressed and financial weakness has been internalized. Rather than supporting the real economy, the financial sector is showing signs of arteriosclerosis that instead obstruct it.

In the areas of labor and the environment, draconian regulations are densely blocking business activity. Even a small shock can deal a severe blow to companies. In a crisis, regulations should be eased so that swift management through restructuring is possible, yet the government is instead showing an inclination to tighten regulations further.

Even though the real estate market continues to stabilize, the Ministry of Land, Infrastructure and Transport says it will continue its war on speculation and has not lifted the regulations imposed by the previous administration that distorted the real estate market. This not only heightens uncertainty in real estate and delays normalization, but also raises serious concerns that it could further worsen the economic crisis. Such a misguided response is nothing more than a populist political approach.

The Fair Trade Commission is hobbling businesses by mobilizing anti-market regulations. It should be helping ensure that companies are not swayed by political risk, but instead it is using the force of public opinion campaigns to unfairly sanction businesses and weaken their competitiveness.

In times of economic crisis, all ministries must work to increase market flexibility. Price controls and government decision-making should be rolled back so that prices are determined in the market. Regulations that restrict economic activity should be lifted so that transactions and contracts can be made freely.

The government must shift to a system capable of responding swiftly to crises. Centered on Deputy Prime Minister Choo Kyung-ho, all ministries should make efforts from their respective positions to improve the flexibility of the economy. They must show that they are hurrying to respond proactively, from measures that can be taken in the short term to long-term institutional improvements.

The swift responses shown during the foreign exchange crisis and the global financial crisis must once again be demonstrated. If time is wasted in political infighting, the economy loses strength. Politics, too, exists for the people and for businesses, and should not pursue only its own power. The flexibility and speed shown by Presidents Kim Dae-jung and Lee Myung-bak gave great strength to our economy. Once again, I hope for courageous action from the political sphere.

The National Assembly must not make businesses and entrepreneurs scapegoats in political fighting. Now is the time to stop anti-market legislative activity and engage in politics that saves our country from crisis. When the National Assembly moves beyond its anti-business posture, engages in pro-market legislative activity, and shows a willingness to make rigid systems more flexible, the future of our economy becomes brighter.

The continued retreat in the competitiveness of the business economy is the result of accumulated anti-business policies, so it cannot be restored overnight. It is necessary to gradually improve the business environment through institutional reforms that ease regulations. This effort is a task that the National Assembly and the political sphere must undertake from a long-term perspective.

Now is the time to exercise wisdom to overcome the crisis. If a crisis has come, we must show that we are responding to it. Government regulation, protection, and support do not increase corporate competitiveness. Extraordinary measures are needed to remove government regulation and protection so that our companies can compete freely on the global stage.

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

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Original title: 각종 규제는 동맥경화, 풀어야 경제가 산다

Author: Sung-no Choi

Date: 2022-10-24

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=25030