What the National Assembly Must Do Now

As regulations continue to pile up on top of one another, the business ecosystem is losing its vitality. Companies that should be considering investments with an eye to 10 or 20 years ahead are instead blocked by regulations and exhausting their managerial resources dealing with immediate problems. Small and medium-sized firms and mid-sized companies, which have little room to maneuver, are finding it difficult even to maintain their businesses. Large corporations, too, are preoccupied with preserving the status quo rather than creating future sources of profit through investment.

The regulations that the National Assembly continues to pour out one after another are targeting the business economy like bombs. Companies complain that they can hardly breathe, yet the political sphere views the world solely through political logic. The problem is that economic problems cannot be solved with political logic that ignores reality. Regulations that force political demands distort corporate business activities. As management contracts as a result, business motivation declines and entrepreneurs lose the vitality to invest.

When investment loses momentum, that is effectively a sign of economic recession. Economic slowdown leads directly to fewer jobs, low growth, and unemployment. Therefore, politically driven regulation is not merely a problem for businesses; it endangers the economy as a whole.

Legislation that lacks the logic of the market economy cannot be called the rule of law. The rule of law should guarantee free transactions and contracts for individuals and businesses and protect property rights. However, conduct compelled by political logic undermines the market’s price function and, in the long run, brings about economic destruction by eliminating transactions themselves. The chilling effects that arise when the government enforces misguided laws persist until those bad laws are undone, causing long-term harm to individuals and businesses.

Representative examples of political demands being imposed by law include the mandatory extension of the retirement age, the mandatory 52-hour workweek system, and the mandatory punishment regime for serious industrial accidents. The government’s excessive increase in the minimum wage and its sharp expansion of tax revenue by raising the corporate tax rate have also had major negative effects. As a result, outcomes that no one wanted are occurring.

Our economy is in a precarious state, like a sinkhole whose underlying structure has collapsed. It is fortunate that large corporations are still holding up. Without the competitiveness they have built over several decades, it would have been difficult for the economy to withstand the National Assembly’s reckless regulatory pressure.

The National Assembly must break away from legal omnipotence. If regulations targeting businesses continue, the likelihood of shrinking investment and prolonged recession will only grow. It must stop creating bad laws based on a flawed understanding of the corporate world, such as the Three Fair Trade Acts. The Platform Regulation Act and the punitive damages system will become obstacles that stifle corporate business activity.

Once investment contracts, it leads to a vicious cycle that continues to create problems. When investment shrinks, output and jobs decline; when output falls and sales drop, investment declines again.

The world competes around businesses and achieves better progress through them. Using political logic to hold businesses back is a path of self-inflicted decline. It is necessary to clear away the layers of accumulated regulations and shift toward pro-business policies. What the National Assembly must do is create an institutional environment that guarantees free transactions and competition for businesses.

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

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Original title: 지금 국회가 해야 할 일

Author: Sung-no Choi

Date: 2021-08-16

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=24122