Promoting Economic Freedom in Korea

Korea Times

October 23, 2009
by Sean C. Hayes (Host of this blog)

Two roads diverged in Korean yellow woods. Will Korea remain on the road less traveled and maintain its cumbersome regulatory framework governed by an inefficient, illogically burdensome and self-interested bureaucracy or will Korea free itself from its autocratic regulatory regime and bureaucracy and choose the other road?

In a country with a notorious Sybil-type personality, only the most arrogant of pontificators will take a stab at predicting the future of Korea.

What is definitely known about it, however, is that most economists and business professionals nearly unanimously opine that we must free ourselves from autocratic, authoritarian and government-focused regulatory regimes in order for the people of nations to prosper.

In short, we must respect and foster economic freedom. The leading indicator of economic freedom is the Index of Economic Freedom.

The index was developed by the Wall Street Journal and the Heritage Foundation and has empirically established, over its 15-year history that those nations that have increased scores year-on-year have nearly universally increased their economic prosperity and those nations with high scores are the most prosperous of nations.

Korea ranks in the “moderately free” category behind regional rivals Hong Kong, Singapore, Australia, New Zealand, Japan, Macau and Taiwan.

The seven economies ranked free are Hong Kong, Singapore, Australia, Ireland, New Zealand, the U.S. and Canada. Twenty-three nations are ranked “mostly free” and include the United Kingdom, Iceland, Japan, Austria, the Netherlands, Germany, Sweden, Norway and Spain.

Nations ranked “free” had per capita GDP average of $40,253; “mostly free,” $33,428; “moderately free,” $15, 541; “mostly unfree,” $4,359; and “repressed,” $3,926.

Also, higher ranked nations receive higher scores in the Human Development Index, Pollution Control Index, Democracy Index and other prosperity related rankings.

The Index of Economic Freedom has also shown that nations that decrease their score year-on-year decrease their overall prosperity, while nations that increase their score year-on-year increase their overall prosperity.

Korea in many areas ranks as a “mostly free” nation. It has respectable rankings in business and monetary freedom and less than “mostly free” scores in financial, trade and investment freedom, government size and property rights, and of course dismal scores in freedom from corruption and labor freedom.

The good news is that the Lee Myung-bak government has made significant regulatory reforms during its administration.

The most significant reforms have been in the area of tax, zoning and industrial complex procurement and development, environment and capital markets, but many of the reforms have been thwarted by the efforts of a vocal radical liberal super minority that is highly capable of manipulating the population into believing in their anti-American, anti-free trade, anti-foreign capital and pro-militant labor policies.

Another great development under the Lee administration has been the Regulatory Reform Committee. The committee is headed by one of Korea’s great scholars, Choi Byung-sun.

Choi has been a lifetime advocate of economic freedom and has taken a prominent role in the administration and his committee has taken a prominent role in fighting what he has noted on the committee’s Web site as “nonsense” regulations.

The future of Korea may be in hands of the mainstream if the mainstream can be motivated to act. If the mainstream is willing to stand up against the minority it is likely that Korea will head down the path to joining the ranks of the most developed nations.

The question remains whether the Lee administration or other political leaders can motivate this mainstream to stand up against the minority or will major reforms be stymied again by this politically powerful, yet, small minority.

This post can be found in Korean here.

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