{"id":2200080,"date":"2023-02-16T10:09:04","date_gmt":"2023-02-16T10:09:04","guid":{"rendered":"https:\/\/www.nknews.org\/koreapro\/?p=2200080"},"modified":"2023-04-05T16:09:43","modified_gmt":"2023-04-05T07:09:43","slug":"why-yoons-embrace-of-populist-economics-is-bad-news-for-south-koreas-economy","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2023\/02\/why-yoons-embrace-of-populist-economics-is-bad-news-for-south-koreas-economy\/","title":{"rendered":"Why Yoon\u2019s embrace of populist economics is bad news for South Korea\u2019s economy"},"content":{"rendered":"
On Monday, the South Korean presidential office <\/span>instructed<\/span><\/a> the Financial Services Commission, the country\u2019s financial regulator, to devise measures to ease the burden of households suffering from higher interest rates.<\/span><\/p>\n \u201cBanks serve the public interest and as such, some of their profits should return to the people, self-employed and small business owners as a benefit of so-called finance of co-existence,\u201d Yoon Suk-yeol said on Monday during a senior Cabinet meeting.<\/span><\/p>\n Yoon <\/span>echoed<\/span><\/a> his earlier statement on Wednesday when he said he would freeze utility fees for the first half of the year and called on the communications and financial industries to take steps to contain prices.<\/span><\/p>\n But instead of alleviating economic woes, Yoon\u2019s attempt to force private companies to participate in what appears to be a political support scheme has the potential to exacerbate South Korea\u2019s financial troubles.<\/span><\/p>\n STATE-LED ECONOMIC GROWTH<\/b><\/p>\n Just months ago while campaigning for office, Yoon emphatically <\/span>criticized<\/span><\/a> his predecessor\u2019s economic policies, which he described as state-led economic growth, saying the private sector should be the driving force for a \u201cfair and innovative\u201d economy.<\/span><\/p>\n \u201cThe economic paradigm should be completely changed, led by the private sector and innovation, not by the government and its debt-incurring spending,\u201d then-candidate Yoon said.<\/span><\/p>\n But he has adopted a different tone as president. \u201cBanks have the nature of a public good,\u201d he said <\/span>earlier this week<\/span><\/a>. \u201cSo it is appropriate for them to use their profits to help struggling people, the self-employed and small business owners through so-called win-win financial benefits and to build a solid reserve in case of future instability in financial markets.\u201d<\/span><\/p>\n Taking their cue from Yoon, SK Telecom, KT and LG U+ <\/span>\u2014 South Korea\u2019s three largest telecommunications companies \u2014 <\/span>announced they would provide 300 gigabytes of data for free to all adult users in March. This move will likely cost the three companies <\/span>millions of dollars<\/span><\/a>.<\/span><\/p>\n THE STEWARDSHIP CODE<\/b><\/p>\n When Yoon announced on Wednesday his administration\u2019s plan to freeze utility bills for the first half of the year, he also made a barbed remark about the previous Moon Jae-in administration, which worked to phase out nuclear energy for <\/span>most of its five years<\/span><\/a>. He <\/span>said<\/span><\/a> government policies must be based on science because \u201cpolicies driven by ideology and populism have proven to bring suffering to the people.\u201d<\/span><\/p>\n But freezing utility fees and bringing in some of the country\u2019s largest corporations to support his political decisions appear to mirror the approach to governance for which the president criticized his predecessor.<\/span><\/p>\n More importantly, regardless of how Yoon\u2019s office chooses to brand his actions, Yoon possesses a powerful tool to compel businesses to see things his way: the <\/span>National Pension Service<\/span><\/a> (NPS).<\/span><\/p>\n The NPS has been a significant shareholder in South Korean companies for <\/span>years<\/span><\/a>, and that influence has sometimes led to <\/span>collusion<\/span><\/a> or outsized influence as a <\/span>corporate watchdog<\/span><\/a>. Under the Yoon administration, the NPS has adopted the stewardship code \u2014 the idea that it will use its capital to influence the decision-making process of the companies it invests in to ensure they are well run.<\/span><\/p>\n By Nov. 2022, the NPS <\/span>invested<\/span><\/a> $107.5 billion (138 trillion won) in the domestic stock market. And whereas the NPS focused on chaebol (family-run conglomerates) companies during the Moon administration, it has become the biggest shareholder of many non-chaebol firms, such as KT and Woori Financial Group under the Yoon administration.<\/span><\/p>\n Woori was one of the financial institutions that defended its bottom line by laying off employees by offering <\/span>voluntary retirement packages<\/span><\/a> last year. While such a decision may have been good for the company and its shareholders, it is clear that Yoon Suk-yeol doesn\u2019t see it that way.\u00a0<\/span><\/p>\n In theory, with the NPS holding <\/span>7.86%<\/span><\/a> of Woori Financial Group\u2019s shares, the NPS could use its clout to affect the company\u2019s leadership if it displeases the president.<\/span><\/p>\n