hankyoreh

President Yoon Suk-yeol presides over a Cabinet meeting at the presidential office in Yongsan on Feb. 21. (courtesy of the presidential office)

President Yoon Suk-yeol read Milton Friedman’s book “Free to Choose” as a young man, and has said that it left a lasting impression on him. Friedman, the leading proponent of neoliberal economics, heavily influenced the conservative economic politics of US President Ronald Reagan and British Prime Minister Margaret Thatcher, such as tax cuts and deregulation.

This book was published in 1980 as a compilation of a 10-episode television series in which Friedman propagated his neoliberal doctrine which advocated for less government intervention and more market freedom. Yoon cited this book as something that most influenced his values during his confirmation hearing as prosecutor general in 2019.

Yoon retired as prosecutor general in March 2021, and an acquaintance who met him in private after his retirement remembered that Yoon talked about that book in length. From this, one can infer that the “freedom” that Yoon loves to mention in his speeches, starting from his inauguration speech, is no throwaway phrase. There is certainly nothing wrong with emphasizing freedom. However, it’s a different story when this “freedom” is reflected in various government policies that significantly impact people’s lives. This is why we need to think about just “who” this “freedom” is for.

The current administration’s tax cuts, put forward last year, and the more recent “labor reform” policies are prime examples. These two policies are described in detail in “Free to Choose.” If the policies do what they say they will do — that is, revitalize the economy and improve the lives of disadvantaged workers — that would be great. However, if the policy itself has been poorly designed, there will be major side effects.

The truth is, tax cuts are designed to primarily benefit large corporations and high-net-worth individuals. Tax cuts, under certain conditions, can stimulate the economy by inducing investment, but in times in which both the domestic and international economic environments are extremely unstable, it is difficult to use them as a pretext for investment.

Large-scale tax cuts during the Reagan and Bush administrations, as well as the Lee Myung-bak administration here in Korea, have had little effect and have in turn contributed to rising inequality.

In the wake of high inflation and interest rates, which would inevitably lead to a recession the following year, the wise prescription would be to save as much money as possible, and expand support for normal people, who will be hit the hardest by a recession. However, the current administration decided to go ahead and push for tax cuts for the rich. Yes, the administration may be doing this with the intention of fulfilling a campaign promise and, by doing so, reward its supporters. But it didn't take long for the effects of this ill-made judgment to show.

Since the beginning of 2023, heating bills have skyrocketed and utility bills are going through the roof, but even despite the loud complaints of citizens and small businesses, the government's response has been scant. The reason: it does not have sufficient funds. In its latest public livelihood measures, the administration was busy trying to squeeze out money from the private sector (including banks and telecommunication companies). Even conservative business newspapers are worried about excessive market intervention.

As for the administration’s labor reforms, we could dub them an “anti-union” policy. There is no way to know exactly why such a strong “union-bashing” policy came about. However, we can make inferences from the fact that “Free to Choose” uses high-income professionals, such as medical associations, to explain the nature of unions. This economist’s way of thinking, in which reality is thought in terms of extreme abstractions, fails to acknowledge the difference between high-income doctors and laborers who have to worry about making ends meet on a daily basis. This way of thinking makes the two very different groups seem to be the same interest group.

Yoon’s perception of unions as “rent-seeking” seems to be rooted in this line of thinking. Now Yoon has likened construction unions to “gangsters,” and has even used the term “construction gangsters,” to vilify them and to reiterate his vow for a hard crackdown.

This is reminiscent of the Chun Doo-hwan regime in the early 1980s, when Chun launched a massive social cleansing movement to eliminate social evils under the pretext of the national goal of realizing a just society.

Although the targets and methods are different, the essence of this policy is like the social cleansing campaigns that were carried out for soldiers who took over the regime at gunpoint, to gain legitimacy. The prosecution regime, which has reached the limit of its ability to cater to the population’s needs, seems to be using this tactic to try to boost its plummeting approval ratings.

I do not believe that Yoon is pursuing these policies for personal gain. However, if the policy in question does not match the reality we are currently facing, we need to ask what its problem is. The neoliberal “freedom to choose” prescription has long since run its course in the US. Neoliberalism gained ground in Western societies in the 1980s and 1990s after stagflation in the 1970s exposed the limits of Keynesian prescriptions.

But the price of widespread deregulation was bitter. Financial deregulation led to widespread lending under the guise of new financial techniques, creating a real estate bubble. The collapse of the real estate bubble destroyed the densely intertwined financial system and led to the 2008 global financial crisis. It was a major event that exposed the limits of the neoliberal model.

Western societies, including the US, turned to strengthening financial regulations as a result of this, but the opposite happened in Korea. The Park Geun-hye government’s policy in 2014 that encouraged people to rack up debt to purchase homes is a prime example. Regulations for not only mortgages, but also jeonse rental loans were greatly relaxed, making them easy prey for speculators. The Moon Jae-in administration also failed to control this. The roots of the current chartering scam problem with jeonse were conceived there.

Recently, the current government has been talking about breaking up the banking oligopoly. Yoon's assertion that “banks are public goods” is understandable, but the “full competition” approach that Financial Supervisory Service (FSS) Governor Lee Bok-hyun talked about to control bank greed ignores the reality of the financial industry. Banks are the core of the economic system, just like the blood vessels that carry blood in the human body, and risk regulation is inevitable.

Any abuse of market power or unfair behavior by banks should be addressed by strengthening financial supervision. Otherwise, deregulation under the guise of promoting competition will only make the market more chaotic. Improving the banking oligopoly system is a typical financial policy, which is the responsibility of the FSS. However, what the current head of the service is pushing for is closer to an abuse of power. I’m worried that the former prosecutor is trying to manipulate financial policy.

Economic, social, and financial policies directly affect people’s lives. If the government intervenes in the market excessively and with the wrong approach, it will cause great damage. The current situation is even more dangerous because intervention is being promoted by the core of the regime, which is made up of prosecutors, and there are no visible checks and balances.

Yoon expressed his opinion in a speech during an emergency meeting on the economy and public livelihood: “[It] shows that when government policies are based on ideology and populism, not science, the people suffer.” The subject of this sentence was reportedly inaudible to reporters. It is time for Yoon to move away from the neoliberal ideology of the 1980s.

Please direct questions or comments to [english@hani.co.kr]