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On the 3rd, President Moon Jae-in announced the so-called ‘Korean version of the New Deal Fund and the New Deal Finance Support Plan’. It plans to invest in “New Deal-related businesses and projects” by creating three types of New Deal funds over the next five years. The intention is to revitalize the economy by absorbing liquid capital from the market as investments due to the fiscal expansion and the low interest rate policy.
The ‘policy fund’ consists of 3 trillion won from the government and 7 trillion won, including policy financial institutions, as the parent fund, and 13 trillion won from private financial institutions, pension funds, and private sectors as sub-funds. Invest in a project. For the safety of private investment, in case of loss of the fund, it is paid first as investment of the government and political financial institutions. The private ‘New Deal Infrastructure Fund’ induces existing private public offering funds to invest in the infrastructure of the New Deal sector on the basis of tax benefits, and the ‘Private New Deal Fund’ induces private investment by creating an environment investment friendly. Furthermore, the main objective is to invest in the New Deal with 100 trillion won from political financial institutions and 70 trillion won from private financial institutions.
Let’s make two points. First of all, if the New Deal company is a company that carries out the New Deal project, what is the New Deal project? Of course, government officials will be able to compile a list based on data and forecasts. The question is, can these companies make a profit?
If economic activation means growth, then growth is not just an increase in production, but an increase in wealth, and wealth is a subjective value that consumers place on production. However, capitalists and entrepreneurs are those who discover the value that consumers want while experiencing gains and losses in the market economy system. They make money and they lose money. Also, you take full responsibility for it. On the other hand, the government does not know what products consumers want. This is because it is not an organization that operates on a profit and loss system. That is why most economic policies based on government judgment fail. Therefore, it is absurd for the government to set a New Deal investment guideline. Also, the government is not responsible for investment failures.
Then there’s the issue of getting rid of the losses that occur when government-led investment fails. Civilians will lose their own losses, but government tax losses will translate into personal taxes. Furthermore, political financial institutions, private financial institutions, and pension funds mobilized for vain government policies will suffer from insolvency. If public funds are used to remedy the insolvency, they will also be returned to the popular tax. Because the barns of the field are already full of debts.
The New Deal of aid was implemented by President Franklin Roosevelt in the 1930s to get out of the Great Depression. However, the New Deal only deepened and prolonged the goal of the Great Depression stemming from an increase in the money supply. The recession is a sign that market distortions by the government are being corrected through market self-regulation, but the government stepped in and distorted them further. If the New Deal is based on the policies of former President Park Chung-hee, it is also a misunderstanding. The policies at that time can be summed up in the protection of private property, the growth of private companies, the leadership of exports and the elimination of the moral risks of the users of foreign loans. The government used the market economy to assist the private sector in economic activities. It was also helpful to be able to find business opportunities in an underdeveloped economy without difficulty.
The New Deal’s policy of attracting all kinds of funding sources to make up for policy failures so far is useless. The only way to save the bankrupt economy is to abolish the wrong economic policies so far and create a market economy.