No government can defeat the market

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No government can defeat the market

Published: 29 Jan. 2026, 00:01

Audio report: written by reporters, read by AI

Chang Duk-jin

The author is a sociology professor at Seoul National University.

President Lee Jae Myung has a knack for unveiling policy ideas or political claims that few others anticipate. His supporters may be thrilled, but to experts, they can be dizzying. Universal basic income, a campaign pledge, has been tested only in small pilot programs in a handful of countries. No nation has ever fully implemented it. Direct democracy, which Lee promoted during his time as party leader, is likewise absent worldwide and, according to enduring conclusions in political thought, can even become a threat to democracy itself. Jung Chung-rae, the current party leader, has eagerly inherited and deployed this repertoire.

President Lee Jae Myung speaks during a Cabinet meeting at the presidential office in Seoul on Jan. 27. Lee said that “to properly realize inclusive growth through a major transformation of the economic structure, the distortion in resource allocation caused by our society’s abnormal concentration on real estate must be corrected.” He had earlier posted four messages on X on Jan. 25, an unusual move, to make clear that higher capital gains taxes on owners of multiple homes would take effect on May 9. Writing again on X that day, Lee said, “There is no government that can defeat the market, but there is also no market that can defeat the government.” [JOINT PRESS CORPS]

The latest installment in the series is Lee’s assertion, offered while signaling that there would be no extension of the capital gains tax relief on housing, that “there is no market that can defeat the government.”

An economic system that leaves all transactions to market principles is a free-market economy. At the opposite extreme is a socialist planned economy in which the government determines every transaction. Real-world economies lie somewhere between these poles. If it were true that no market can defeat the government, it would not have been the former Soviet Union that collapsed, but capitalist countries such as the United States or Korea. We might now be describing Korea as a post-capitalist society rather than calling Eastern Europe post-socialist. Fortunately, the experience of world history has shown the opposite: markets defeat governments.

Whether scarce resources should be allocated by markets or by governments is a central theme of the social sciences. The field is crowded with studies of market failure and government failure. The overwhelming conclusion is that governments cannot defeat markets. This is hardly surprising. Government policy is shaped by the limited rationality of a small number of people and often by distorted political objectives. Markets, by contrast, move through the continuous actions of tens of millions. A government trying to defeat the market is like trying to hold water in one’s palm. No matter how careful the effort, the water inevitably slips away.

There are rare exceptions. A well-known saying in investment circles is “don’t fight the Fed.” It means that strategies built against the Federal Reserve's policy direction are likely to fail. Yet the Fed’s tools are interest rates and liquidity. It nudges people to invest in desired directions by adjusting incentives. If policymakers want capital to flow away from real estate, they must make other investments more attractive. Korea instead chooses to punish those who invest in property through taxation.

There is another difference. Interest rates and liquidity apply uniformly, while taxes are imposed selectively on owners of a single high-value home or multiple homes. To justify disciplining only part of the population through taxes, those people must be cast as villains. Yet it is awkward to explain why investing in capital markets, which the Lee administration actively promotes, is virtuous, while investing in housing is immoral. If owning multiple homes were truly reprehensible, the biting satire that asked whether owning two chickens should also be punished would not have left the Moon Jae-in government speechless. Warren Buffett, a globally respected investor who has called for higher taxes on people like himself, owned three homes. Was he a bad person or a good one?

The dark history of Korea’s real estate policy shows repeated defeats at the hands of the market. Based on average apartment prices in Seoul, the Roh Moo-hyun administration fought the market, and prices rose from 250 million won (about $175,000) to 500 million. The Moon Jae-in administration fought the market and prices climbed from 600 million to 1.2 billion. After just over a year of fighting the market, the Lee Jae Myung administration has seen prices rise from 1.2 billion to 1.5 billion.

A view of the Raemian One Pentas apartment complex in Banpo-dong, Seocho District, Seoul. It is currently one of the most expensive apartment complexes in the city. [SAMSUNG C&T]

The biggest victims were ordinary people dreaming of home ownership. No matter how hard they worked or saved, it was impossible to keep up with housing prices doubled by the government’s battle with the market. Outdated lending regulations tilted the field toward cash-rich buyers. A ministerial nominee who paid 3.6 billion won in cash for a unit in One Pentas, a luxury complex in Seocho District, one of Seoul’s wealthiest Gangnam area neighborhoods, and reportedly booked a 3.5 billion won gain became emblematic. As jeonse (long-term housing rental deposits) listings vanished, renters were squeezed by monthly payments. To avoid punitive capital gains taxes, homes were sold early to young children, making it unthinkable for those without inherited wealth to catch up.

If the president truly believes that “there is no market that can defeat the government,” the implication is alarming. It clashes with historical experience, the conclusions of countless experts and the record of failed housing policy. There are no new policies under the sun. There are no ingenious shortcuts. Only textbook policies, tested by history and scholarship, applied consistently over time. Policy results grow slowly but surely, like compound interest. They do not fall suddenly from the sky.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.