[Column by Koo Bon-young] You Can’t Revive the Economy with Orders and Scoldings Alone

The other day, just before Lunar New Year, I visited a traditional market near my home. The alleys were bustling for the first time in a while, as people seemed busy preparing food for ancestral rites. Yet I could not help wondering whether the stock market boom, with the Korea Composite Stock Price Index (KOSPI) soaring well past 5,000, had really warmed up the real economy. My impression was that the energy still fell short of previous years. That feeling grew stronger when I stopped by a large discount store afterward and found the aisles looking noticeably quiet.
Even so, you could sense the holiday rush in apartment complexes. Delivery trucks and couriers were busily weaving through every corner of the neighborhood. That made me curious about the stark temperature gap between offline markets and the online parcel delivery business. The answer soon became clear. I happened to see a news report that when the government and ruling party announced they would push to revise the Distribution Industry Development Act to allow big-box retailers to offer dawn delivery, Coupang’s share price on the New York Stock Exchange (NYSE) plunged more than 13 percent in a single day.
This was Coupang’s stock, which had barely budged even when our National Assembly lambasted the company over the leak of 33.7 million items of personal data and the National Tax Service launched a tough investigation. Yet investors reacted sensitively the moment they heard that regulations on big-box stores, Coupang’s main competitors, might be eased. It laid bare the fact that the true source of Coupang’s overwhelming competitiveness was the very "large discount store regulations" created by our political class.
Since 2012, big-box retailers have been forced to close twice a month and shut their doors from midnight until 10 a.m. This began when politicians introduced the Distribution Industry Development Act under the banner of "protecting traditional markets." During the restricted hours, consumers were not even allowed to place online orders for delivery from those stores. Even so, instead of returning to traditional markets, consumers turned their eyes to electronic commerce (e-commerce) platforms such as Coupang.
In effect, the Act functioned less as a "neighborhood business protection law" and more as a "Coupang support law." The fact that Coupang’s annual sales have now surpassed the combined revenue of the three major big-box chains is proof of that. As recently as 2020, just before its listing, Coupang’s sales were only about half of those three chains put together. The price of wielding the sword of regulation indiscriminately has been grim. In trying to divide up the pie, policymakers ended up driving small merchants even further into a corner.
Of course, the market is not a cure-all. When there are unfair subcontracting relationships between large and small firms, or when polarization deepens across regions, classes, and generations, there is clearly a need for government intervention to correct market failures. Even so, excessive regulation that fixates solely on the banner of protecting the vulnerable often leads to even greater harm. It is almost certain to erode consumer welfare and hold back industrial growth. Blocking telemedicine has stunted the growth of the digital healthcare industry, and clinging to a rigid 52-hour maximum workweek regulation has undermined global competitiveness in cutting-edge research fields.
"The economy grows when politicians are asleep." This is an old saying from Western societies, where democracy and the market economy took root earlier than in our country. It implies that when politicians, chasing popularity, ignore market logic, they can end up wrecking the economy instead. That is why I am deeply worried about our political scene, where policy after policy is distorted by populism. You can see it in the way President Lee Jae-myung, in his drive to rein in housing prices, is prioritizing punchy sound bites on social media (SNS) over carefully calibrated policy.
Realistically, it is difficult to secure a massive increase in housing supply in the short term. In that sense, I can understand the president’s intention to end the temporary suspension of heavier capital gains tax on owners of multiple homes in order to bring some additional properties onto the market. Having long been without a home myself and now owning just one, I am, emotionally at least, inclined to sympathize with that approach. However, when the president goes so far as to call multi-home owners "devils" and denies even the role they play in supplying rental housing, it is hard to imagine that many citizens will agree with such harsh rhetoric.
The housing market is not something that can be stabilized with a simplistic equation of "multi-home owner equals real estate speculator." The failures of the Roh Moo-hyun and Moon Jae-in administrations, which mobilized every punitive tax available, including the Comprehensive Real Estate Holding Tax, should serve as a cautionary tale. Yet President Lee is now putting daily pressure on multi-home owners, warning, for example, that "May 9 is the last chance to avoid heavier capital gains tax." Some additional properties are indeed coming onto the market, but ahead of the moving season, the balloon effect is more striking: the supply of jeonse rental units on the outskirts of Seoul is shrinking sharply.
As economic actors, all citizens are individuals riding what might be called "the streetcar named desire." The desire to own a home is part of that. Just look at the fact that 12 senior aides in the presidential office and six cabinet ministers in the Lee Jae-myung administration own multiple homes. So will demonizing multi-home owners really solve anything? Even if they put their properties up for sale, they are out of reach for ordinary, first-time buyers who have seen their borrowing capacity choked off by the government’s policy missteps. There is also a high chance that even homes sold by retired one-home owners, who are scared of taxes, will simply be snapped up by cash-rich buyers hunting for "one smart property." Instead of trying to control housing prices through a kind of command economy that appears nowhere in economics textbooks, it is time to devise a sophisticated policy mix that prevents ordinary people from being hit by stray bullets.
kby777@fnnews.com Koo Bon-young, Editorial Writer