A terrible ideaRuling Democratic Party (DP) Chairman Lee Nak-yon has proposed the novel idea of sharing corporate profits to help ease deepening wealth polarization among businesses after the Covid-19 outbreak. Stressing the “need for help from companies who gained more from the pandemic,” Lee asked party members to “find various ways to achieve that goal” rather than uniformly enforcing such measures. His remarks are in line with Prime Minister Chung Sye-kyun’s proposal last week to demand contributions from businesses that prospered during the pandemic.
After the DP immediately set up a task force to mitigate inequalities from Covid-19, Rep. Hong Ik-pyo, head of the task force, proposed the establishment of a social solidarity fund. Conglomerates, including Samsung, SK and LG, who made considerable profits last year, as well as some IT companies and delivery platforms, are being urged to share their profits with companies that suffered. Wealth polarization is a conundrum that should be solved on a societal level. But such a rush to forced profit-sharing requires serious debate on a national level.
The DP’s approach is, in fact, an echo of the government’s loopy policy experiments of the past. First of all, the idea is based on a simple dichotomy between haves and have-nots despite a more complicated reality, as seen in the government’s arbitrary dividing of big companies and small ones, full-time employees and part-time workers, and homeowners and renters. Policies based on such simple dichotomies are certain to twist market principles.
Another problem is that it’s hard to tell if a company’s profits or losses resulted from the pandemic. Despite the ruling party’s reassurances, the idea will likely end up as a government enforced contribution by large companies to some do-gooding fund.
Similar attempts have failed. In 2011, former Prime Minister Chung Un-chan under conservative President Lee Myung-bak came up with the idea of sharing big companies’ profits with their contractors, but nothing came of it. In 2018, the DP proposed a similar bill, but it could not pass the National Assembly.
As President Moon Jae-in recently said, companies that did their best to maintain employees deserve praise. But the government’s role is to help companies create jobs in the face of domestic and external challenges so as to spur investment and innovation for the future. The liberal administration has been engrossed with one regulation after another, as clearly seen in the recent passage of a bill aimed at punishing business owners for occupational accidents. The opposition People Power Party (PPP) has denounced the latest proposal as an antimarket idea bordering on socialism.
Despite the DP’s insistence on its good intention, many people believe the party came up with the idea to win upcoming mayoral by-elections in Seoul and Busan and next year’s presidential election after its touted “K-quarantine” bump flattened out after the government botched the buying of vaccines. The primary responsibility for easing polarization after the pandemic falls on the government and DP. They must not force it onto the private sector.