firmly in place has been confirmed through an abundance of historical evidence.
For the Reform of the Korean Market Economic Order
There are many disputes on market reform. The market economy is a system where the market basically takes the allocation of resources. Depending on how market allocates the resources, the national competitiveness, growth engine of future and distribution are determined. Market reform means removing or improving the obstacles that interfere in carrying out such tasks. In order to have the flawless marketing function, there are two essential prerequisites to be equipped. Economic policies for the market reform has to be set toward the direction to complete these prerequisites. Those are to guarantee fair competition and to form a culture that accepts the outcome of the competition. The disputes on market reform should be assessed based on this standard.
The government repeatedly stated that it will drive various reforms for enhancing the market transparency and promoting the competition in the market. Looking at the strong will of it, we know that the government will carry out what it says will do. However, the business sector has a great suspicion that there is a political intention to disassemble the large conglomerates, while the civil organizations criticize the government that it looks over the business sector and shows the attempt to step back the market reform. The resistance of the business sector is in the logic that the reform of the government rather rejects the market principle and harm the competition. Looking at this point of views, the government, the business sector and the civil organizations all cry out market reform. It seems that people could not deny that there is no other system to allocate resources better than the market. While doing so, they assert that the other parties' argument is not a true market reform. It is interesting to see who truly says the correct argument.
Competition is an effort to do better than the others. Fair competition is realized only when the opportunity to make such an effort is equally available for all. Under the fair competition, only way to do better than the others is the competence of himself. In this point, the fairness of competition is very important for the possible competence competition. It is also the prerequisite in order that the market price may condense and reflect the market information to the most accurately. Depending on how the competence is interpreted, the competition policy may differ greatly. The conflict between the government and the business sector is fundamentally found here.
Since the Fair Trade Act was newly enacted in 1987, the government has been implementing various regulations on the large corporate groups through ‘prohibition of mutual investment in equity,' ‘prohibition of guarantee on debts,' ‘right to trace the bank accounts', and ‘limit in total amount of capital investment'. These systems are those clearly interfering the fair competition in light of the equality of the opportunity for competition. Discriminated only because a specific company belongs to these corporate groups is a violation of the 'principle of equality' under the Constitution, and also, it is a violation of the 'principle of prohibition of excess' under the Constitution to become a subject of regulation only because of the very existence of a force that has not even been exercised.
The government has a strong distrust that the large corporate groups have commonly used the power beyond the level that was vested in them for the past 40 years. In particular, the current administration has a deep-rooted distrust. Exercise of power beyond what it has is not a fair one. The government describes it with the index called ‘alienation of possession and control', and the competition would be fair if there is no such an alienation. It argues that the companies shall have the strength that they actually possess. In relations to the fairness of competition, there is not much of other opinions. However, the problem gets complicated when the competence is assessed not only by the degree of individual possession but also the strength of organizations. In general, the competence includes these two, and the fairness of competition has to be assessed in this point of view. This is the same analogy for a sponsor who helps out the athletics to exert better result would have no one to argue for his motive or business. Therefore, the index of ‘alienation of possession and control' is only the partial assessment of fairness of competition.
The government seems to expect the activation of competition and increase of dynamics in the market economy through the policy for the control of economic concentration at the expense of fairness of competition. Companies which newly enter into the market has generally vulnerable organization system. So, the discriminatory treatment on large corporate group has an aspect to grant the motivation to these companies that activates the competition. Furthermore, if the power of organization under the ring of asset and liability in corporate group overwhelms capital and technology of newly coming companies, it may very well be possible not to have the ‘creative destruction process' of J. A. Schumpeter, ‘search process and discovery procedure' of F. A. v. Hayek, or ‘replacement and parallel process of information' of E. Hoffmann by the competition.
However, in the event that it is excessive, the activation of competition and dynamics of market economy may greatly damaged. Particularly, strengthening of ‘limitation on the total investment' implemented by the government is a subject of controversy in this point. With the purpose of controlling the business diversification of the large companies and improving their competitiveness, this system is applicable for the top 11 corporate group of 5 trillion won or more. This is easily understandable as a very artificial and arbitrary policy. However, the problem is that the potential competitors of these large companies are very close or better domestic and overseas companies in terms of fund mobility, technology and organizational strength. Only because they are in the top-notch corporate group to be discriminated against the competing companies, this would clearly make new investment and management defense much more difficult. Adaptability and development on market would be essential to survive in the competition. Diversification of business is an expression of market adaptability and is an issue for a company to determine. While doing so, the market economy dynamically progresses through the process of catching and going-forward in competition. Among these, the latter creates more strongly the dynamics of the market and activation of competition. For Korea, those top-notch companies generally have been leading it. In this point, breaking up the energy of leading companies in artificial force would have high probability of interfering with the activation of competition and dynamics of market.
In particular, the national competitiveness of Korea in the global competition era depends greatly on these upper echelon companies that control policy of economic concentration would lead to lowering of national competitiveness. Such a concern is well demonstrated from the fact that our domestic economy has been sustained by export, and as the result, it is very sensitive to the negative facts of overseas. The evidence that the government concerns on this point is that each ministry has often its own voice on the 'Jaebul' policy and its voice is changed according to the turbulent moves in financial and capital market. Obviously, how fortunate it would be if many companies that are equipped with the national competitiveness appear by this policy and they change the economic structure of Korea not to depend on only a handful of large companies? However, I could not help to think that it would not be probable. On the formation of superficial capital by the indirect mutual capital investment is now to be controlled by the market. That is the market economy. The controlling function of our financial market and capital market has made great stride after the 1997 foreign currency crisis.
The last thing to mention in relation to the market reform for competition order is that we do not have sufficient culture to accept the outcome from the competition compared to the advanced countries. The survey that even says that we are lagging behind China makes us very regrettable. Our educational reality shows the point in extreme aspect. Our parents do not accept such a signal when the signal on the talent and capability of their children is given in significant portion during elementary, middle and high schools. At least until they completed the first year of high school, most of parents invest substantial resources into their belief their children would advance to the college with reputation. A vast amount of waste in resources occur in our surroundings everyday. It is greatly different from German parents who absolutely depend on the assessment of teachers about the learning capability of their children. Therefore, Germany does not have much problem in appropriate distribution of human resources not only for the elite education but the general public education as well.
Is the education field only field not to accept the result of competition? Today, we have so much of culture not to accept the adverse result in every corners of our society. This type of culture has deepened with the emergence of the current regime. The main line power of this regime including the president, civil organization and some of the press and broadcasting media seems to be not rarely determined to make the competition order as a meaningless existence. How could not accepting the result of the competition differ from the attempt to breakdown the foundation of the competition order? The discussion of fair competition and its activation is nothing compared to this issue.
The particular problem is in the broadcasting media. Broadcasting media has the unilateral and vertical information delivery system that the manipulated, distorted or unfair information may be delivered to the general public without much criticism and indiscretion as the intent of the broadcasting media. In the situation of Korea in particular, the broadcasting media impacts more greatly than that of press media in the way of thinking and consciousness formation of youth due to the recreational and sensual feature as well as the easy access. Therefore, the details of the broadcasting media would have critical impact on the configuration of the community and order formation. If the broadcasting media overly emphasizes the solidarity with the social integration in mind, the principle of competition may be seen as unjust thing. The outcome is shown in the phenomenon to blame the defeat from the competition to the society without cleanly accepting it. It goes so far as not complying the rule is inevitable and acceptable thing for the people on the vulnerable side. Market reform for the competition order should begin from the culture to accept the outcome of the competition, and our broadcasting media should have the genuine sentiment to be willing to participate in forming such a culture.
Bae, Jinyoung (Professor of School of Economics & International Trade, Inje University, email@example.com)