Ease Business Regulations to Drive Economic Growth

A political consensus is emerging around the idea that “we must return to the path of economic growth.” The major candidates from both the ruling and opposition parties in the 20th presidential election all showed a strong commitment to economic growth. In particular, the presidential candidate of the ruling Democratic Party of Korea declared that he would become an “economy president.” Now is the time to consider how we can restore economic growth.

In modern capitalism, businesses create the fruits of growth through competition. In other words, firms are the primary units of competition in the economy. Without exception, countries with vibrant business sectors post high economic growth rates. The force that enables the United States to lead the global economy comes precisely from its businesses. Companies such as Google, Apple, Amazon, and Facebook, which emerged through IT (information technology) innovation, have all become world-leading firms. These companies, which grew through fierce market competition, are the very source of America’s core strength.

Korea also has global companies. Samsung is one of them. So are Hyundai Motor, SK, and LG. All of them are firms with global competitiveness in world markets. Their presence is what has allowed Korea to maintain its openness. But these are all companies that emerged long ago. Since the high-growth trend that continued through the 1980s came to an end, Korea has not produced any new global companies. A renewed rise in our growth rate would mean, in effect, the emergence of new global firms.

Then how can Korea produce new global companies? It can happen only if they overcome limitless competition in the global market. For that to be possible, firms must above all be able to take on challenges. In other words, they must be given the “freedom to compete.” Competitiveness emerges through intense competition. Without competition, world-class firms cannot emerge.

Some people believe that “large corporations emerged through government support.” That is, of course, not true. Just because the government encourages and supports companies does not mean they all become competitive. It was possible because they were allowed to compete freely. Korea’s successful large corporations were all able to become top-tier firms through that competitive process.

The fact that Korean companies in the past grew into global firms despite poor conditions was close to a miracle. Consumers in advanced-country markets had no reason to trust companies from a poor country. Yet Korean firms overcame that adversity. Korea is now recognized around the world. Compared with the past, the conditions are now far more favorable for world-class companies to emerge. Even so, the fact that no new global firms are appearing leaves us no choice but to conclude that there is a problem with the policy environment surrounding businesses.

The economy cannot be made to grow through the campaign pledges of politicians such as presidential candidates alone. Those in power must clearly express their commitment to economic growth and create conditions in which firms can compete and grow. Now is the time to remove support-and-discrimination policies and overlapping regulations on large corporations. That is the path to raising our potential growth rate. Building an institutional foundation in which firms can compete is the road to growth.

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

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Original title: 경제 성장 위해 기업 규제 풀어야

Author: Sung-no Choi

Date: 2022-03-03

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=24580