The ruling Democratic Party of Korea launched a task force Wednesday to push for “profit-sharing” proposed by its chairman Lee Nak-yon.
Lee proposed Monday that the Korean society should discuss ways for businesses that gained from the COVID-19 crisis to contribute part of their profits to helping those that suffered economically from the pandemic.
The task force decided to induce profit-sharing through “voluntary participation.” It is reportedly considering tax exemptions and financial support as incentives.
Smaller businesses hit hard by the coronavirus crisis need help to survive. Basically, helping them is the responsibility of the government, which imposed shutdowns to mitigate the spread of the virus.
Some businesses such as food-delivery apps may have benefited from the pandemic lockdowns, but it is not so convincing that they should be morally bound to compensate other businesses for the losses they suffered.
It is problematic to define some companies categorically as beneficiaries of the lockdowns. It is impossible to know how much of their profits were attributed to the coronavirus shutdowns, industrial changes, their improved products and services, or new technologies.
In the case of delivery apps, demographic changes such as an increase in the number of single-person households might have played a big role.
Delivery apps and information technology companies had been growing as promising businesses in the era of the fourth industrial revolution before the coronavirus outbreak.
Businesspeople are asking, “On what grounds are the party demanding companies share their profits with others? Can the party categorize numerous businesses into beneficiaries and victims of the pandemic crisis?”
The proposal is unreasonable and unrealistic.
Well-meaning as it may look, voluntary contributions are prone to become semi-coercive when those in power say those words to businesses. Few of them would take the word “voluntary” at face value.
Donation is not truly voluntary anymore when givers have to worry about being hated and enduring negative consequences from refusing to share profits or sharing less than expected. Silent pressure will likely turn voluntary profit-sharing into a quasi-tax.
The party stresses the pandemic-caused inequality as the main reason of the necessity for profit-sharing. Coronavirus shutdowns caused losses to smaller self-employed businesses in particular, but it is hard to deny that the coronavirus is not the only cause of inequality. Anti-market real estate measures and the income-led growth policy amplified inequality and deepened polarization. There is no compelling reason for companies to take responsibility for the proportion of the inequality that was caused by policy failures.
The Moon Jae-in administration pushed unsuccessfully to legislate for a “cooperative profit-sharing system” in the previous National Assembly. The system would have forced large companies to share part of their profits with their suppliers.
Even before the government completed distributing the third COVID relief to the self-employed and freelancers doing unstable jobs, the party is considering a fourth round of relief for the entire nation.
Now, it has raised an issue of an additional relief means in the form of profit-sharing, even though a similar idea had been scrapped earlier amid criticism. It is questionable if the party has some political motive in offering support funds ahead of the Seoul and Busan mayoral by-elections in April.
Inequality is a complex problem. A detailed and multifaceted approach is required. Taking part of corporate profits and giving it to economically vulnerable groups is not a reasonable solution. That is a dangerous way of thinking that caused adverse effects of the Moon administration’s ideologically biased policies so far.
In a market economy, companies earn profits through business activities and contribute to the nation by paying taxes. Polarization is worrisome, but it is an issue for the government to address while following the market mechanism. Sharing profits is a spurious idea far from the market economy. It is unreasonable, impractical and even divisive. Debate on it is unproductive. The ruling party had better find other ways if it wants to offer COVID relief money.