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Abstract
The Constitution of the Republic of Korea and Economic Democratization
Sung, Nak-In*2)
The political power that changes periodically is based on popular mandate.
Hereditary succession of political power transfer is unimaginable. However, in the corporate world, nothing is more important than economic power. Inheritance of wealth and ownership of the business is taken for granted. As democracy grows, political authorities, bound by Constitution, are more likely to be swayed by corporate power. Reform for the free market system became inevitable as communism was introduced under the banner of “Proletarians of all countries, unite!” However, the utopian idea of communism failed, evidenced by the collapse of the Soviet Union. Nevertheless, it helped to recognize the problems of the free market economy. A case in point is the U.S. anti-trust regulations. Furthermore, France and Germany describe themselves, in their constitutions, as a ‘social’
republic.
The Founding Constitution of 1948 provided a separate chapter for economy.
That was uncommon among liberal democratic countries. The economic system of Korea, from the first Constitution to the Second Republic Constitution of 1960, intended “to achieve social justice and balanced growth of the national economy.”
The individual freedom of economy can “be guaranteed only in this limitation.”
Although some elements of free-market economy had been annexed to the controlled-market economy of the Founding Constitution, the fundamental frame had never been modified. It could be justified by the nation’s poor economic infrastructure. In addition, an opinion survey after the Independence showed that two thirds of the people preferred socialism over capitalism.
However, the economy chapter of the Constitution was revised dramatically in the Third Republic Constitution. “The economic order of the Republic of Korea shall be based on a respect for the freedom and creative initiative of individuals in economic affairs.” The State may only “regulate and coordinate economic affairs” in order “to achieve social justice and balanced growth of the national
* Professor, Seoul National University School of Law
Journal of Legislation Research / 43th Issue
economy.” The current Constitution of 1987 maintains this framework in clause (1), and strengthens state regulation and coordination regarding economic affairs by substituting “social justice” with “democratize the economy” in clause (2). As a result, the basic policy of the economic order consists of private property guarantee as a fundamental right [article 23 clause (1)] and free-market economy [article 119 clause (1)] in the current Constitution. On top of that, social restriction of property [article 23 clause (2)] and economic democratization [article 119 clause (2)] justify state regulation and coordination. The name “social market economy”
is given because market economy is the principle and regulation can be attached in order to democratize economy. Thus, “market economy” is the stem and “social”
is the modifier.
The controversy over “economic democratization” returns to the interpretation of the term “social.” The standard here is the contemporary values of the community. Through experiencing worldwide economic crises including the Asian economic crisis in 1997, people have recognized that the economic polarization may bring about the breakdown of the community. The response to the distortion of free-market economy was the calls for economic democratization. However, legal regulation to decrease centralization of economic power has its limit. That is why the virtue of the rich is required to solve the problem. The virtue of the rich should start from business ethics, not from mercy. The greed of conglomerates (known as "Chaebol" in Korea) has led to the distortion of the market and the prevention of the virtuous cycle of the economy. Business owners have used extensive power beyond their shares. For instance, large retailers are threatening small local businesses by expanding their businesses in the local market, increasing the polarization of wealth. If current corporate governance goes unchecked, it will create an economic vicious cycle. To be part of the global economy, businesses should put much more effort to make operations as transparent as possible and reinforce ethics and responsibilities. This must come first before political rhetoric during political seasons.
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