A populist prescription kills the economy The main Kospi soared 5.66 percent to above 2,500, and the secondary Kosdaq index also surged 7.34 percent on Monday after the government imposed a full ban on short selling. The government and the People Power Party gave in to the repeated complaints from 14 million retail investors about the dumping of borrowed shares by institutional short sellers whom they blame for the stagnation of the Korean shares. Short selling can help contain excess bubbles in stocks and manipulative forces. The move to ban such a practice to bolster stock prices is populism. Among advanced markets, only Turkey and Korea impose a ban on short sales. The price can be dear. Korea’s elevation to the developed market category in the Morgan Stanley International Index (MSCI) would be difficult. Bloomberg reported that the ban could dampen Korea’s bid to move onto the developed market status on the MSCI scale. The Korean shares being listed in the emerging market category itself has been the cause of undervaluation in Korean stocks. After containing foreign capital, authorities are directing their aim at banks. Financial Supervisory Service Gov. Lee Bok-hyun noted that commercial banks are expected to rake in a record-high 60 trillion won ($46 billion) from interest income this year. In the third quarter, banks have reaped operating income bigger than the combined profits of the country’s top companies, Samsung Electronics, LG Electronics and Hyundai Motor, he said, suggesting they may have to pay taxes for their interest boon. Illegal activities by international banks and greedy practices of commercial banks should not be tolerated. But authorities also must answer for their negligence. Retail investors have long complained of illegal short selling. Banks also have not corrected their business practices, though they were profiting big from heavier interest rates on borrowers. Because authorities have neglected their supervisory role, retail investors and the self-employed have been burned. Before taking hasty action, authorities must ruminate on the ramifications of populist policies, such as the loss of global investors in Korean markets and the waning competitiveness of domestic banks. The government and the PPP are trotting out vote-buying measures, such as merging Gimpo into Seoul after their crushing defeat in the recent by-election in Seoul. The PPP admitted that the megacity project is a part of the election strategy in the capital region. There has not been any serious deliberation on balanced land development. Vote-buying populism deepens social confusion and economic losses. The government and the PPP must brood harder on fundamental ways to escalate our national competitiveness and social unity.