Statism Isn't Working in South Korea, Either
Higher taxes and minimum wage in the name of economic growth aren't working there either.
Alexandria Ocasio-Cortez, Bernie Sanders, and much of their Democrat caucus believe capitalism is an immoral system that can be corrected via socialism. Socialism is exorbitantly pricey, of course, but in the Left’s view it can be fully funded and “equality” can be achieved by aggressively taxing high-income Americans. Democrats have attempted to distance their utopian ideas from what has transpired in countries like Venezuela, where “cratering” doesn’t even begin to describe that nation’s socioeconomic situation. Ocasio-Cortez recently stated, “My policies most closely resemble what we see in the UK, in Norway, in Finland, in Sweden.”
Notwithstanding the fact Sweden isn’t actually socialist, socialism or quasi-socialism has been implemented around the globe with detrimental effects. That includes in South Korea, which The New York Times profiled this week with surprising candidness. The Times says that President Moon Jae-in has instituted policies antithetical to Donald Trump’s. “South Korea has raised taxes and the minimum wage in the name of economic growth,” the Times explains. “So far, it hasn’t worked out as planned.”
The Times continues: “Growth has slowed, unemployment has risen and small-business owners like Moon Seung are complaining. Mr. Moon, founder of an auto parts maker called Dasung in Incheon, an industrial town near Seoul, says his labor costs were up an extra 3 percent last year after the minimum wage rose to 7,530 Korean won, or about $6.70, an hour. That may not sound like much, but it ate into his razor-thin profit margin and prompted him to stop hiring.”
The unemployment rate in South Korea reached as much as 4.2% in August, which is still very low but higher than at any point in the last eight years. That uptick also coincided with a minimum-wage hike, and additional hikes are in the pipeline. Moreover, third-quarter GDP registered at 2%, or .8% less than second-quarter GDP. The Times adds, “In a 2017 survey of its members by a small-business organization known as Kbiz, 42 percent said they would be forced to shed employees because of the minimum wage increase.”
Even the senior secretary for economic affairs has admitted, “Our quality of life has been somewhat deteriorated, and income disparity has been widening. This is not the road we should continue to follow.” Yet he paradoxically added, “The path my president has suggested might be somewhat new and unfamiliar. But this is the sustainable way of running the economy.” Many South Koreans probably disagree, especially considering the president’s 84% approval rating has dropped precipitously to just 45%.
The Times isn’t completely forthright, though. It also claims, “The discouraging early results don’t mean that Mr. Moon is wrong and Mr. Trump is right.” Furthermore, “Conservative analysts would point to Mr. Moon’s struggles as evidence against a more state-led approach to the economy. But some economists argue that it is too soon to judge Mr. Moon’s program.”
On the contrary, there is plenty of evidence — past and present — to suggest that deregulation and low taxes form the backbone of a healthy economy. How else do you explain the superlative economy under Trump? To borrow from the Times’s logic, does near-full employment, mass deregulation, and strong GDP in the U.S. mean that Trump’s policies aren’t working? The absurdity of such a question speaks for itself. Recent volatility in the stock market has more to do with uncertainty over Democrat lawmakers’ incoming legislative onslaught that could derail economic progress.
People like Alexandria Ocasio-Cortez and Bernie Sanders wrongly think that the vast amount of wealth in the U.S. proves that socialism can be instilled here. But what they conveniently ignore is that our world-leading wealth is a product of capitalism. If you take that away, wealth will evaporate. And we’ll follow in the footsteps of South Korea — and eventually worse.