Rule of law

Daily update

In the UK, 11pm is when pubs close and the risk of sending incoherent text messages increases. In South Korea, 11pm was when President Yoon decided to declare martial law. Parliament rejected this, martial law was rescinded, the cabinet is threatening to resign en masse, and impeachment proceedings against Yoon start today. The Bank of Korea pledged unlimited liquidity to markets.
The direct economic consequences of the political turmoil are limited—there may be some strike action in protest, perhaps. What matters to investors is the bigger picture. Martial law is not supposed to happen in advanced economies. In any country, at a time of dramatic structural economic change, intellectual freedom and the ability to challenge the status quo are vital to innovation and the rule of law is critical to investor confidence.
France’s government faces its no-confidence motion today, with the left and the far right against the government. If the government does fall, a caretaker administration and continuation of the current fiscal arrangements seem the most likely outcome. In other words, inertia.
The OECD publishes its Economic Outlook today. All economists’ views should be revered, but OECD economists have no special insight compared to other economists, and the views are often dated. The �۶��Ƶ Year Ahead is at www.ubs.com/yearahead.