Moon urged to shun interventionism
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A group of experts participate in The Korea Times roundtable meeting in Seoul, Wednesday, in time with the inauguration of President Moon Jae-in. From left are Hyung Tae-gun, senior adviser of Yulchon, Yonsei University professor Sung Tae-yoon, Korean Academic Society of Business Administration Chairman Han In-goo and Chairman Yoo Jang-hee of the National Academy of Sciences’ humanities and social science division. / Korea Times photo by Shim Hyun-chul
By Park Hyong-ki
President Moon Jae-in should redefine the roles of the state and the market before carrying out his pledges and economic policies over the next five years, a group of experts said Wednesday.
Han In-goo, chairman of the Korean Academic Society of Business Administration (KASBA), said Korea needs to be cautious about raising corporate taxes and strengthening regulations on big companies.
“We need to redefine what the government can do and what the market can do in the economy,” Han said in a roundtable discussion hosted by The Korea Times.
“Korea needs to be careful when it comes to issues concerning corporate taxes and regulations when economies such as the United States and France are looking to lower taxes and promote a business-friendly environment.”
Han, also a professor at KAIST College of Business, added that the government needs to implement policies that can help boost competitiveness of domestic companies abroad and promote a level playing field at home where small businesses can thrive.
“The government should manage and oversee the economy in line with market principles,” he said.
Yoo Jang-hee, chairman of the National Academy of Sciences’ humanities and social science division, and Hyung Tae-gun, senior adviser at Yulchon law firm, concurred.
Han, Yoo, Hyung and Yonsei University professor Sung Tae-yoon participated in the roundtable held on day one of the Moon administration.
“I believe the Moon government needs to send a clear message to the market that it respects that Korea is a free market economy,” said Yoo who also headed the Korea Commission for Corporate Partnership.
“Just because it is a progressive government, it should not ignite concerns that it will aggressively change and undo everything. Instead, it needs to highlight some of the problems the country has, then stress to the private sector that it needs to fix them.”
The most important task would be to create a business environment through policies where companies can freely invest and workers can flexibly work, Yoo added.
Hyung also said the government cannot do everything on its own, adding that there are things it can do like intervene in the market, and things it cannot do like create jobs.
Hyung agrees with centrist Ahn Cheol-soo of the People’s Party and Yoo Seong-min of the Bareun Party that the private sector, not the government, should lead in creating jobs.
The roundtable participants believe Moon’s pledge to create 810,000 jobs in the public sector is unfeasible and undesirable.
“Over the past 10 years, we saw former governments intervening in the market too much to do everything. The new government needs to make a choice and focus on what it can do for the economy,” said Hyung, formerly a standing commissioner at the Korea Communications Commission.
Sung said Moon’s job creation in the public sector would not help boost the economy because in response to the measure, people would reduce their consumption due to concerns on future tax hikes. It is the classic economic tenet of the Ricardian Equivalence theorem, he said.
But the roundtable participants said the Moon government needs to intervene and tackle inequality, poverty, labor inflexibility and low incomes by increasing fiscal spending.
“It needs to improve the country’s labor market to help increase workers’ disposable income,” Sung said.
“Moon’s proposal for increasing fiscal spending by 7 percent annually should support the private sector in preparing for the Fourth Industrial Revolution.”
The economist suggested raising taxes on gains in the private sector’s financial resources and assets, in addition to on high-income earners, to finance its welfare for the elderly and low-income citizens.
Korea only spends about 10 percent of its GDP on social welfare, well below the OECD average of 21 percent.