Arresting times

Weekly Updates

This week, former South Korean President Yoon Suk Yeol was sentenced to life imprisonment for leading an insurrection. The presiding judge referred to the execution of Britain’s King Charles I in 1649. Later that day, the brother of King Charles III was arrested after an investigation associated with the Epstein files.
These are dramatic political, social, and historical events. They are also important economic events. After his brother’s arrest, the King declared “the law must take its course.” This reiteration of the rule of law matters economically.
The idea “no one is above the law” helps guarantee property rights. If someone in power can seize property or demand money at random, a significant risk premium is attached to economic success. Too much success could attract the attention of those in authority, and the benefits of an entrepreneur’s hard work could be seized on a whim. This discourages innovation and growth.
Weak rule of law also tends to accompany excessive regulation in the economy. Corruption is more lucrative in an overregulated economy, because bribery becomes the most effective way to avoid regulations or taxes. This is an additional burden for businesses, weakening growth. High-profile demonstrations that the rule of law applies to even the powerful is good for growth.