[Editorial] Economic Freedom

Sogang University’s Market Economy Research Institute gave 50 points out of 100 in terms of market friendliness to the current administration’s corporate policies and real estate policies. It took the example of market unfriendly policies as price ceilings for apartments, disclosure of apartment construction costs, and investment cap on affiliates for conglomerates.

The Heritage Foundation and The Wall Street Journal ranked Korea 36th in terms of economic freedom, up 9 steps from 45 a year before. Yet, it is too low for the 12th largest economy in GDP and trade volume. Hong Kong and Singapore stand at first and second places, respectively, and Australia, competing with Korea for financial hub in East Asia, ranked third. This year, again, Korea scored low in finance, transparency (corruption-free) and labor.

Korea has grown remarkably through the market economy and trade. The Roh Moo-hyun administration often ignores market principles, however. The government is expanding the public sector. This is the characteristic move of a “leftist” government. No nation has grown through such an approach. This holds all the more true in the 21st century when globalization accelerates and competition knows no national boundary and gets fiercer. Market friendly policies not only increase per capita income but also strengthen standards of living among the poor, political freedom, and civil rights, and lower the unemployment rate. On the contrary, regulations lead to corruption.

To inject vitality into the economy, the government and the public sector, in general, should step in only when market failure occurs. Even this complementary role should go hand in hand with market principles. For example, if the local government has land suitable for developing as a resort complex, it should sell the land through bidding procedure, rather than let civil servants run the complex, to make a more effective business. Negative impacts of monopoly should be resolved through market opening, rather than direct regulation. Since the government has less knowledge of the market trend and nature of money than private sector players, its interference in every aspect of the market often leads to government failure, weakening the economy.

One possible way to prevent anti-market policies and legislation is to label them with the names of those who propose them in the first place to assess the merits or demerits of the laws and policies. The law on disclosure of apartment construction costs can be the Kim Geun-tae - Lee Mi-kyung Act and the law on half-price apartments can be the Hong Joon-pyo Act. By this way, we can hold them accountable.