[Editorial] Stop the excessive market intervention

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[Editorial] Stop the excessive market intervention

The government is going all-out to tame the inflation before it goes flying again. Core inflation has been rising fast with diners charging a bottle of soju near 6,000 won ($4.5) after public service charges from electricity and gas bills to transportation fares all shot up. Government offices are scurrying to do their part upon commands from President Yoon Suk Yeol and Deputy Prime Minister for the Economy Choo Kyung-ho, who also serves as finance minister.

The Fair Trade Commission has carried out probes on three wireless carriers, as well as the Korea Telecommunications Operators Association and the Korea Association of Information and Telecommunications, after President Yoon ordered government ministers to find measures to reduce harms from oligopolies in the financial and telecommunications sector.

The Ministry of Economy and Finance plans to investigate liquor producers amid signs of rises in soju prices. The National Tax Service also met separately with soju makers to ask them to refrain from raising prices. The Ministry of Trade, Industry and Energy has mandated greater disclosure on wholesale prices from oil refiners and asked them to cooperate in stabilizing LPG prices.

The industry is baffled by the sudden rush of attention and government pressure. Refiners complain that there is no such regulation overseas. Liquor producers complain that they cannot keep prices at the current level due to a jump in input prices.

The government must step in if public livelihood is hardened by an excessive rise in prices. The market can fail, and fair play rule can be broken. But the government must refrain from over-meddling. Instead, it can demand a bigger scope of disclosure in wholesale energy prices from oil refiners. If oil refiners disclose the prices of their gasoline and diesel supplies to outlets and gas stations, fuel prices can go down from competition even without government intervention to stabilize the price.

But the finance ministry is checking up on liquor price policy and income statements from liquor companies, while the National Tax Service is holding discreet meeting with them. They went overboard. Liquor makers can hardly ignore the call for “cooperation” from the tax office.

The government role must stop at refereeing so that players play fairly. If the government interferes in prices, it can be accused of state control. Free market is the conservative government’s motto. But it is hypocritical for a government upholding free market principles to interfere in market prices.

The side effects from state control over prices are big. South Korea is the world’s sixth biggest trading country. It must not return to the days when the government controlled consumer prices.
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