3.3 Legacies of government - led economic management
more than thirty years – of active government intervention have created legacies that pose serious obstacles to the policy regime shift toward greater participation by the private sector.
Although informational requirements for efficient economic policy making have become increasingly difficult to maintain , Korean policy makers , including economists who are accustomed to the mind - set of the past regime , still assert that they can and should manage the economy down to the finest details . These economists believe they can and should regulate the deregulation process . This mentality . severely impedes the processes ' of economic reform and liberalization . To compound this problem , many private economic agents have lost their sense of independence and fear that liberalization may createchaos . Thus , they often seek government - intervention , even in the affairs of the private sector , and ask the government to " control the process of economic liberalization " , For example ,it was the Korean government which made decisions for commercial banks over such issues as how much to lend to what important business and at what interest rates . Indeed , even during the process of financial liberalization , before the financial crisis of 1997 , the commercial banks were asking for government intervention through guidance on how to manage banking businesses .
In addition , active government economic management has created various barriers to entry that have led to the creation of monopolistic and oligopolistic industrial structures . The tendency to rely on dire regulations for economic management has also produced widespread regulations of prices and quantities , which have created distortion it the economic incentive structure . As a result , the individual economic
agent has not been presented with sufficient motivation to economize and innovate Finally , as government intervention has - become more widespread there by creating an excess demand for intervention beyond it true capability or necessity , the effectiveness and therefore the credibility of . government economic management policy has rapidly declined .