Commentary: Capitalism is the unsung hero of South Korean democracy

SINGAPORE: When the history of this tumultuous week in South Korean politics is written, legislators who demanded the president rescind his declaration of martial law will surely be lauded. It’s also worth standing back to examine the role that economics has played in the country’s transition to democracy, and why that least-worst system of government, to quote Winston Churchill, survived.

The contribution of capitalism – its constraints and opportunities – has been vital. The rhythms of global commerce have been present at key points in South Korea’s journey. It’s fair to say that without the thrills and spills of money, there wouldn’t have been a mature democracy to protect. That you may not have noticed is a testament to its success and durability.

Of all the potential year-end shocks that traders had gamed out, Tuesday (Dec 3) night's brief but alarming events didn't come close to making the cut. Markets were braced for social media posts on outlandish cabinet picks by Donald Trump, new tariff threats, and the prospect of a French government implosion, not an attempted coup by President Yoon Suk Yeol.

The reaction was swift but contained: The currency tumbled in offshore trading, along with other assets tied to South Korea. By Wednesday morning, after lawmakers rebuked Yoon, the won had recouped losses and bonds were little changed. Equities fell in local trading, but by no means was it a bloodbath.

Regulators were ready to provide ample liquidity. Dramatic gestures like shutting the stock exchange were eschewed, as were panicky moves like further interest-rate cuts. Officials backstopped the system without fuss.

This is the way it's supposed to work: Instill confidence, not sap it. Textbook central banking. 

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