&#91VIEWPOINT&#93Greed and free market go together

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&#91VIEWPOINT&#93Greed and free market go together

The beauty of the market economy is that we do not have to be particularly altruistic to contribute to the welfare of others. Every man is far more interested in whatever immediately concerns him, than in what concerns any other man. But by pursuing our own self-interest, we frequently help others.
In the 1987 movie “Wall Street,” the corporate raider Gordon Gekko preached: “Greed is good. Greed works. Greed is right.” Relentlessly attacking and swallowing target companies in pursuit of his greed, he faithfully practiced what he truly believed and preached. Then how can the ignominious fall of Gordon Gekko be explained? It is not just that he failed to get away with his misdeeds; he damaged companies and threatened the livelihood of their workers. He not only ruined himself but also harmed society. What went wrong, since it is obvious he did not fail from a lack of greed? Greed generally works and is mostly right for society in the free market. But there is more to it than that.
Among the market economy’s many features, two are worth noting. First, assets become tradable in the market only when property rights are adequate. Think for a moment how a parcel of land could be traded unregistered. On the other hand, when properly represented, even things you cannot see can be traded. Indeed, intangible assets are becoming more and more important in society. Intellectual property and financial commodities are examples of intangible assets that are vital to the functioning of a modern economy.
The second notable feature, which is related to Gordon Gekko’s story, is that no trade will take place unless both parties benefit from it. Note, however, that such a phenomenon is possible only to the extent that the trade is voluntary. The opposite of volition is coercion and fraud, which are the enemies of the free market. While an extreme libertarian may argue that a free market can eventually cure itself of any disease, we mortals simply cannot wait for such a theoretical eventuality. Thus, rules should exist to protect the market from coercion and fraud. We should be skeptical when government officials and accidental pundits argue that enforcement of such rules might damage companies and the economy. Coercion and fraud, be it embezzlement, bribery, insider trading or accounting irregularities, have already inflicted great harm on companies and the economy. The enforcement of rules is hardly the cause of such harm but an antidote to vices. Like anything that is invisible, the free market relies on the faith of the participants. Therefore, the success of any free market depends on the rules and how they are applied.

* The writer, a former judge of the Seoul High Court, is a partner at the Bae, Kim & Lee Law firm.

by Kwak Kyung-jik
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