Regulations are suffocating growthThe government announced eight state-led projects, including those focused on future mobility and drones, that it hopes will create 300,000 jobs in new fields by 2022. Deputy Prime Minister for the Economy Kim Dong-yeon reported to President Moon Jae-in in a meeting that the number of newly registered corporations reached a record high of 26,747 in the first quarter, and the secondary Kosdaq stock index gained 32.2 percent during the first three months of the year. All of this paints a picture of lively entrepreneurship in Korea.
But few would agree with the government’s rosy perspective. In fact, the president was right to point out that achievements and pace of progress “were lacking.” Moon said, “It is like we are walking while our competitors are running.” He ordered speedy removal and reform to a regulatory system that hampers innovative growth.
The president’s view that progress in removing regulations has been slow is correct. But his views differ from the administration and ruling party’s actions.
The so-called regulation-free zone bill, pending since 2015, has been opposed by the ruling party. It claims the act favors large companies. The deputy prime minister has been pitching the bill, saying that large enterprises play an important role in innovation growth. The ruling Democratic Party pledged to develop regulations in line with the pace of innovation as one of its five campaign proposals for the June 13 local elections. It is recycling a delayed measure to win votes.
Former presidential policy chief Byeon Yang-kyoon advises the government to balance the supply-end stimulus policy of economist Joseph Schumpeter with the income-led growth policy. Schumpeter championed an environment that invites corporate innovation and entrepreneurship to add life to the economy.
An entrepreneur can experiment with creative destruction by tinkering with traditional production resources of labor, real estate and capital. But Korea’s large companies, which are being rounded up and whipped for past wrongdoings, cannot afford new and creative ventures. Today’s situation raises questions about whether much will be left for creativity and new growth after the destruction.
JoongAng Ilbo, May 18, Page 30