[In-Depth Review] The 'Good Landlord Movement' and the Resetting of Capitalism

by Moon Hyewon

Published 04 Mar.2020 14:53(KST)

Kim Young-woo, Senior Expert at the Win-Win Growth Committee.

Even in a chaotic world, there are heartwarming stories. Despite the economic freeze caused by the recent COVID-19 pandemic, the 'Good Landlord Movement' is spreading, led by some building owners. Warm news continues to come from places such as Jeonju Hanok Village, Seoul Namdaemun Market, Daegu Seomun Market, and Incheon complex shopping malls. The financial sector and large corporations across society are sharing this sentiment, practicing a warm spirit of capitalism.

Capital originally comes from the term meaning 'head of an animal.' Rooted in the Latin word caput, this term initially referred to cattle, the most important asset of farms at the time, and over time came to encompass goods, funds, and assets. The modern form of capitalism can be traced back to the emergence of mercantilism in city-states like Florence, where liquid assets related to the production and exchange of goods were central to capital.

Capitalism is an economic system characterized by private ownership of the means of production and the pursuit of profit. It has driven economic growth over time. Between 1820, when capitalism was formed, and 1998, the global economy grew fiftyfold, and individual incomes increased on average more than ninefold. This success was due to free markets determining production and prices and allocating resources efficiently.

In the 21st century, the global economy has continued to grow at an average rate of over 3%. However, since the 2007 global financial crisis, a 'new normal' of low growth and low employment has persisted. In particular, the share of manufacturing has declined by 2 percentage points worldwide over the past 20 years. Much capital has been directed toward increasing rental income rather than production facilities, leading to a loss of economic vitality and dynamism and deepening economic polarization. Statistics show that as of 2015, the top 1% in the United States owned 21.2% of total income, and in Korea, they held 14.2%. This was the result of capitalists pursuing only shareholder profits or rent-seeking.

Last September, a remarkable article appeared in the influential economic journal Financial Times (FT). It was a special feature titled "Capitalism: Time for a Reset." It stated that "the capitalist model has brought peace, prosperity, and technological progress over the past 50 years and has been the foundation for creating wealth that provides more jobs, capital, and taxes," and it acknowledged that capitalism "has contributed to reducing poverty and raising living standards worldwide."

However, as the new normal has persisted since the global financial crisis, FT emphasizes that companies should not focus solely on maximizing shareholder profits but also bear social responsibility by sharing with customers and workers amid slowing productivity and worsening inequality. It also argued that we must move away from 'rentier capitalism,' where unearned income is enjoyed, toward a warm capitalism where hardworking people are rewarded.

In Korea, the Commercial Lease Protection Act was amended in January 2018, lowering the cap on rent increases from 9% to 5% and extending the right to request contract renewal from 5 to 10 years. However, between the fourth quarter of 2017 and the first quarter of 2018, rents had already surged by 30%, raising concerns that rentier capitalism is intensifying.

Amid this, the spread of the coronavirus has made the issue of rent for small business owners severe. Recently, the 'Good Landlord Movement' has shown consideration for those in difficulty and created social value as members of society. Furthermore, this movement is an act of practicing warm capitalism by looking beyond one's own interests and caring for others. I am confident that this movement will continue and greatly contribute to resetting capitalism with consideration for creating social value.