[Diagnosis and Prescription] The Korean Economy: Other Problems, Causes, and Solutions

Table of Contents

I. Korea’s Economic System: Interventionism

1. Three Economic Systems

2. Interventionism

(1) Price

Regulation

(2) Non-Price Regulation

(3) Conclusion

II. Land Policy

1. Problems in the Land Market

2. Causes of Problems in the Land Market

3. Solutions to Problems in the Land Market

III. Environmental Pollution

1. Introduction

2. Corporate Air Pollution

3. Automobile Exhaust Emissions

4. River Pollution

5. Ocean Pollution

6. Summary and Conclusion

IV. Fiscal Deficits, Deficit Financing, and National Debt

V. Agricultural Growth and Capital

VI. Rethinking Unemployment

VII. Comprehensive Editorial

1. Preface

2. Business Fluctuations

3. Fiscal Policy

4. Labor Unions

5. Resource Waste and Capital Consumption

6. Concluding Remarks

References

I. Korea’s Economic System: Interventionism

1. Three Economic Systems

The world’s economic systems can be broadly divided into three categories.

These three are capitalism, socialism, and interventionism. Capitalism is sometimes called the “first way,” socialism the “second way,” and interventionism the “third way.”

The conditions for capitalism include “the protection of private property, freedom of contract, and sound money.” The Austrian School identifies sound money as a condition of capitalism. This is because when the state monopolizes the issuance of money and controls its circulation, as with fiat money, private property and freedom of contract are significantly infringed upon. For a detailed explanation of sound money, see Mises (1996), Rothbard (1993), and others.

Socialism refers to a system in which the state owns the means of production. Because socialism places the means of production under state ownership, no market exists for trading the means of production, and as a result, no prices exist for them. Without prices for the means of production, resources cannot be allocated efficiently, and the result is the collapse of the socialist economic system itself due to confusion, disorder, and a dramatic decline in productivity. This is what Mises (1996) called the “problem of economic calculation.” He was the first to demonstrate that socialism cannot survive because economic calculation is impossible under it.

Interventionism refers to an economic system in which private property is protected but freedom of contract is not. Even when money is not sound, freedom of contract is also not fully protected. In that case as well, the system is interventionist to some extent. However, the lack of protection for freedom of contract here refers to government suppression of freedom of contract. When socialism collapsed, some European politicians and experts argued that the third way—that is, interventionism—was viable. However, when the government suppresses freedom of contract, many harmful effects arise, and under the pretext of eliminating those harms, it moves toward further restricting freedom of contract or abolishing private property. In other words, in the long run, interventionism becomes socialism.

Present-day Korean society can be seen as having interventionism as its dominant economic system. Of course, this is based on the author’s intuition. Government regulation of the prices, quantities, and quality of goods is a typical example of interventionism. The sections below will examine the harms caused by interventionism by dividing them into price regulation and non-price regulation. In “Series 1–7” as well, the harmful effects of interventionism were addressed at some length.

A comparison of the three economic systems is omitted here. Properly doing so would require considerable effort and space. However, if the three economic systems are compared and summarized in one sentence, it is this: capitalism is far more efficient and morally justifiable than the other two economic systems. Even so, this is not to claim that capitalism is a flawless system. The truth is that capitalism is not without defects, but it has far fewer defects than the other two economic systems.

Most of the poverty, inequality, disorder, confusion, and conflict we experience today arise not because of capitalism, but because capitalism has not been properly practiced. In fact, they arise from socialism, interventionism, or a mixture of the two. Nevertheless, ordinary people and non-specialists who do not understand the three economic systems well believe that capitalism is the cause of all problems. This is because experts who do not properly understand capitalism and establishment economists have made such claims. For example, when the U.S.-originated economic crisis occurred in 2008, they argued that capitalism had worsened inequality and that this had led to the economic crisis. The 2008 economic crisis occurred because of government intervention in money and finance and because the government suppressed economic freedom. Therefore, it is important to remember that accurate knowledge of the three economic systems is the first step toward solving the economic problems we face.

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Original title: [진단과 처방]한국경제: 기타 문제, 원인 그리고 해법

Author: Yong-deok Jeon

Date: 2019-08-29

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=report&pn=2&idx=20462