Publication
[MIDAS] The “new” critique of capitalism - Old wine in a new bottle

Houses in decay in Eastern Germany (© Bernhard Seliger)

Criticism of capitalism is on the rise, but the Hanns Seidel Foundation’s Dr. Bernhard Seliger rejects it. Dr. Seliger first draws attention to housing and illustrates his argument using the example of the German Federal Republic (GDR). Under the socialist government, housing prices were limited to their 1937 level. This however discouraged investments and resulted in a lack of maintenance. Some landlords even gave their houses to the state for free because renting them out left them at a loss, but the state, too, lacked the funds to maintain them. Ultimately, the threat of having to demolish entire quarters loomed over a number of cities in the GDR and had it not been for the German unification and the subsequent introduction of market principles, cities in Eastern Germany would certainly look very different. Nowadays, efforts to cap rents in a similar fashion can be observed. However, the consequences are the same, too, as investments are discouraged and the housing shortage is boosted.

Second, he draws attention to state spending. There are multiple factors that increase state spending, namely a rising state ownership rate and increasing welfare spending for people who are not willing to work, which can also be observed in Korea. Furthermore, there is a growing network of NGOs that work on behalf of the state and replicate its narratives and benefit from state funding. As a result, these NGOs do not work independently and are subject to state regulation. Ultimately, this drives up state spending and thus taxation, and limits economic freedom through more regulation.

The article proceeds by showing that, despite the criticism, capitalism does have a successful track record, using the example of the Washington Consensus. The transformation to market economies has further notably improved living conditions in formerly socialist countries like China. On the other hand, socialism has resulted in environmental damage, a lack of investments, and a run-down economy.

In conclusion, people tend to dismiss the shortcomings of socialism and undervalue the merits of capitalism. Also in Korea, Dr. Seliger reminds the readers, people tend to forget the link between the economic system and the performance of the economy. The article closes with a call for action in which Dr. Seliger urges the current Korean government to pursue political and economic freedom associated with capitalism.

For more information, please visit the Midas magazine website. The full text of the article (in Korean) can be found here.