Why We Need to Reconsider Economic Growth

The Bank of Korea announced that our economy grew 4.0% last year. The economy, which had been stagnant after COVID, has begun to recover. Given that economic growth had retreated to -0.9% in 2020, this rebound is welcome news.

Over the past decade, our economic growth rate has been in the 2.2% to 3.2% range. However, the average growth rate for 2020 and 2021 was about 1.6%, which falls short even of the lower bound of the trend level seen over the previous 10 years. This shows just how significant the impact of COVID was.

Looking at the trend over the past five years, the economic growth rate has been on a downward trajectory. After 3.2% in 2017, 2.9% in 2018, and 2.2% in 2019, the average growth rate over the most recent two years has fallen below 2.0%. It is concerning that our economy’s growth momentum is collapsing in this way.

The economic growth rate is the most important indicator showing that people’s lives are improving. It means more jobs are being created and living standards are becoming more abundant. When economic growth slows, the darkness of unemployment and poverty spreads across society, which is why politicians in advanced countries make economic growth their top priority.

Our economy once achieved rapid growth in the past. But from the late 1980s onward, the phenomenon of declining growth continued steadily for 30 years. Why did this happen?

It is often explained by saying that growth naturally slows as a country becomes wealthier, or that a declining growth rate is inevitable because of demographic problems. But in our case, the decline in growth has been caused by different political factors.

As the strengthening of labor union privileges and increased regulation of businesses accumulated over a long period, our economy’s growth trend continued to decline. Politicians even openly expressed hostility toward economic growth. They claimed that growth produced no trickle-down effect, or that growth would only worsen polarization.

Based on such anti-market logic, regulations were created, and as the corporate sector lost vitality, society instead fell into a vicious cycle in which jobs were not created. The more socialist policies were adopted, the more severe polarization became.

Our society must now once again reflect on the value of economic growth. Fortunately, all the ruling and opposition party candidates running in the upcoming presidential election are emphasizing the importance of economic growth. For citizens who will share this land’s future, the question will be who is more friendly to economic growth.

The anti-market regulations and laws created by politicians have undermined the spirit of the rule of law. Rather than simply demanding unconditional obedience because “it is the law,” the major task our society must now confront is how to make laws that protect the people’s freedom and property rights.

For our society to advance to the level of an advanced country, above all it needs politics that is friendly to economic growth. Now is the time for everyone to remember that economic growth is the very path to caring for the people and making life more prosperous.

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

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Original title: 다시 경제성장을 생각해야 하는 이유

Author: Sung-no Choi

Date: 2022-01-26

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=24514