The economy recovers when businesses are supported

Countries that are friendly to business reap the rewards of economic growth. In other words, the key to reviving the economy lies in energizing the business sector. That is because growth can rise and jobs can increase only when companies expand investment and hiring.

What happens if the government ignores the business economy and pursues state-led growth policies? As autonomy declines, the economy becomes more rigid, and an economic downturn becomes inevitable due to inefficient allocation of resources. If the government increases spending and expands the number of public officials under the pretext of stimulating the economy, this places a greater burden on the private sector and is harmful to long-term economic growth.

So how can companies be encouraged to increase investment and hiring? The answer is simple: create a business-friendly environment. This is something the government must do if it truly wants economic growth and job creation. The National Assembly should engage in pro-market legislative activity that promotes economic freedom, and the executive branch should eliminate regulations that constrain business management.

What if, on the contrary, the National Assembly increases anti-market legislation and the executive branch strengthens regulations? If the direction is wrong, negative economic effects are bound to follow. Business activity will contract, investor sentiment will cool, and employment conditions will worsen.

That is what happened in our country. For a long time, the National Assembly and the executive branch turned away from pro-market legislation, and the executive branch neglected regulatory reform. As a result of creating an environment in which doing business became difficult, the business economy contracted and the growth rate continued to decline.

It is difficult to expect much vitality from our companies going forward as well. That is because the political establishment is concentrating its political power on creating anti-market policies. As uncertainty in the business environment rises and institutional conditions deteriorate, companies will inevitably become even more hesitant. If the political establishment does not move toward pro-market legislation and regulatory reform, the damage will be irreversible.

To revitalize the business economy, government policies must be changed in a pro-market direction. Economic problems should be addressed according to economic logic if political conflict is also to be reduced. When economic issues are forcibly handled through political power, wasteful struggles over vested interests arise and everyone falls into the trap of a zero-sum game. If a situation continues in which political logic suppresses the economy, the market will be distorted and businesses will lapse into paralysis.

In modern society, because the business economy plays a central role, it is important for politicians to listen to the voices of businesspeople. From the standpoint of politicians, who must be mindful of popularity and votes, they may find business leaders’ demands for a more pro-market environment unwelcome. But this is something politicians must endure and willingly accept. Without economic results, they will be recorded in history as failed politicians.

If politicians continue to ignore the demands of businesspeople, the day may come when businesspeople all disappear and no voice remains calling for a pro-market business environment. Politicians may be pleased not to hear complaints, but society will enter a dark age like a graveyard. Just as in Ayn Rand’s novel Atlas.

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

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Original title: 기업 밀어줘야 경제가 산다

Author: Sung-no Choi

Date: 2019-01-10

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=25&idx=11356