[Free Speech] To Make the Korean New Deal a Success, Business Regulations Must Be Eased

Act II of “the Great Society” is beginning.

The Great Society refers to the policy pursued by the Johnson administration in the United States in the 1960s, which declared “an unconditional war on poverty in American society,” expanded universal welfare support, and sought to dramatically increase government regulation, social involvement, and public spending. Unlike small government, which minimizes government intervention, this was a representative example of big government, in which the state intervenes broadly across society. The trend toward big government, which gave way to the Reagan administration’s small-government approach due to practical problems such as funding shortages, is now reappearing half a century later.

Its necessity has been raised as a response to the large-scale social and economic downturn caused by the COVID-19 pandemic. Even many leading scholars around the world who had defended small government came to agree on the need for big government, and governments across the globe are keeping pace with this trend. As of March 2020, the United States had allocated more than $1 trillion in supplemental spending for COVID-19, while Japan moved to stimulate domestic demand by further expanding unlimited quantitative easing. Altogether, the scale of government stimulus packages adopted around the world in response to COVID amounts to $3 trillion.

The Korean government, too, is pursuing a shift toward big government in line with the trends of the “AC (After Corona)” era through its “Korean New Deal” policy. The major components of the Korean New Deal include: 1) the creation of nearly 500,000 new jobs in areas such as the public sector, non-face-to-face services, and digital employment; 2) the establishment of a KRW 40 trillion key industry stabilization fund to support major industries such as aviation, shipping, and shipbuilding; and 3) support measures totaling KRW 85 trillion, including KRW 35 trillion for corporate bond purchases and assistance for small business owners, and KRW 10 trillion to protect workers in employment blind spots.

Both the New Deal of the past and the economic stimulus policies currently being implemented through big government in countries around the world are not simply aimed at increasing government spending; they seek a system in which government and business can grow together and advance society. The Trump administration in the United States pursued the “two for one rule,” under which two existing regulations would be abolished for every new regulation introduced, and in fact ended up abolishing 7.6 existing regulations for every new one. The Macron administration in France announced an economic stimulus package worth about KRW 140 trillion and pledged to cut corporate taxes by about KRW 28 trillion over two years. The Korean government as well has continued to request participation and support from businesses, saying that the success of the Korean New Deal depends on corporate cooperation.

But it remains unclear whether business participation will actually be achieved successfully. That is because regulations on businesses have continued to intensify over the three years since the launch of the Moon Jae-in administration. During the past three years alone, more than 8,600 new or strengthened regulations were introduced by the government and the National Assembly—a daily average of eight regulations being newly created or reinforced.

More serious still is the fact that, at a time when companies have been hit hard by COVID, the government is pushing ahead with the “three corporate regulatory bills,” represented by the “amendment to the Commercial Act,” the “amendment to the Fair Trade Act,” and the “bill for the enactment of the Act on the Supervision of Financial Groups.” In particular, these three bills include a number of measures that could weaken corporate management rights, such as the separate election of audit committee members typified by the 3% rule, the multiple derivative action system, and the abolition of the Fair Trade Commission’s exclusive right to file complaints. The business community is fiercely opposing the three corporate regulatory bills, saying they would “kill companies already struggling because of COVID,” but the government is determined to pass them within this year.

At this point, one cannot help but wonder whether the Moon Jae-in administration is using “the need for big government” as cover to do only what it wants. In its flagship “Korean New Deal,” it encourages business participation, but in reality it is increasing regulations and thereby suppressing businesses, which are the very key to boosting the domestic market. Policies like these cannot overcome the economic recession brought on by the COVID-19 pandemic. Mere tax hikes and increases in government spending can provide only short-term stimulus; they cannot develop into long-term, sound policy.

What matters for a government enlarged by COVID is the role it chooses to play and the direction it takes. It should avoid moving in an anti-business direction centered on universal worker support and stronger regulation. While maintaining the broad framework of big government, policy should move in a direction that enables businesses—the pillar supporting society as a whole—to grow. COVID-19 cannot serve as a blank check for government policy. In this renewed era of the Great Society, one hopes the Moon Jae-in administration will adopt a wise policy direction.

Seungsu Kim

Intern Researcher, Center for Free Enterprise (CFE)

---

Original title: [자유발언대] 한국형 뉴딜 정책 성공하려면 기업규제 완화해야

Author: Seung-su Kim

Date: 2020-12-24

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=12&idx=23379