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Korea's Chaebol a Hot Election Issue
Who do you think is the fiercest enemy of Samsung, the giant Korean conglomerate, which dominates the country’s economics and politics?
From a business perspective, it might be Apple fighting the vast, politically well-connected family conglomerate over patent lawsuits in various countries. But Samsung’s concerns far deeper at home than abroad, as do those of the chaebol, the huge family-owned corporate groupings that dominate the South Korean economy.
That is because South Korea’s presidential election in December may well be one of the turning points for the chaebol, of which Samsung is the biggest. It is responsible for nearly a fifth of the country’s exports alone. The conglomerate has been beset by a long string of political scandals in which top figures have been indicted and convicted, but freed “for the good of the country.”
Swing voters appear to be fed up and in a mood to regulate of the super-rich, to say nothing of cleaning up what appears to be rampant political bribery. When it comes to corruption, even moderate conservatives are looking for revolutionary change in the plutocracy that has developed along with democracy.
The chaebol are regarded ambivalently by Koreans as a source of pride and humiliation. They have grown to be globally acclaimed enterprises on the one hand and on the other, they have proven to be rapacious in making money.
Scores of veteran political analysts and economists predict that the election will highlight the role of the business groups in widening the abyss between Korea’s haves and have-nots. A banker friend recently joked about the social safety net, calling it a hammock for the super-rich. The moderate professional, a PhD in his late 40s, added that the never-ending greed of the rich has ruined the hopes of those who think they can climb high only if they work hard.
He is not alone in his pessimism. Many politicians on both the right and left are calling for ‘economic democratization’ ahead of the December election. Economic democratization, commonly considered to mean ‘equity on the starting line,’ has become the zeitgeist. Detractors of the conservative Lee Myung-bak government point out that the administration eventually opted out of both distributive justice and participatory democracy.
While critics have blamed the Lee administration for the prevailing mood, the conglomerates themselves have contributed to the anti-chaebol venom. Even conservative politicians such as the ruling Saenuri Party’s presidential nominee Park Geun-hye have joined into the criticism. Although she is ideologically at the opposite end of the spectrum from the other presidential candidates Ahn Cheol-soo and Moon Jae-in, the three do have this in common: When it comes to chaebol reform, they act as if they were the Three Musketeers -- ‘One for All, All for One.’ And, judging from their respective playbooks, they are not just talking the talk.
Ahn Cheol-soo, a professor and head of a software company who announced his candidacy on September 19 after considerable vacillation, spoke out against Samsung, LG and other major corporations for creating what he called “zoos” and “a realm of predators and lawlessness.” The maverick Ahn, although closer to the center in terms of his politics, is also on record as feeling the need to correct the chaebols’ business practices.
Moon Jae-in, the presidential candidate of the main opposition Democratic United Party, is another strong advocate of strictly executing cross-shareholding and equity investment restrictions between the top chaebol. The human rights lawyer-turned-politician, in his late 50s, was chief of staff to the late Roh Moo-hyun, the most left-leaning of the South Korean presidents. The center-leftist Moon is therefore commonly described in the press as Roh’s avatar.
Polls show that the Ahn-Moon alliance politics would be more popular than Park’s ideological conservatism. Thus core Saenuri party members also appear to be finding it politically wise to argue that it is dangerous for the future of the country to become over-reliant on one big company like Samsung. Kim Jong-in, a key economic adviser to Ms. Park and an architect of economic democratization cannot explain the problems of the South Korean economy without the anti-chaebol mantra.
Kim’s language has already entered the South Korean political vocabulary on a national scale, leading the charge within his party over income inequality and blaming the disparity on the chaebol, a charge that has alienated him from some in his own party, particularly Rep. Lee Hahn-koo, the Saenuri floor leader, who maintains the chaebol don’t need to be regulated. Park’s allies are thus worried about whether Kim’s unfettered straight talk may poise a political challenge to her in terms of an identity crisis.
With all of the presidential candidates, even their previous protectors, thus in an anti-chaebol mood, Samsung will likely become the lightning rod for economic inequality in an era of joblessness.
Despite the fact that they are ideologically as different as Samsung’s smartphones are from Apple’s iPhones in many respects, election strategists of each party regard chaebol reform as a crucial element in gaining traction with voters. Plus, they all feel convinced that economic democratization cannot be achieved in a single five-year presidential term.
The chaebol were at the core of South Korea’s economic success until the late 1980s, a time when the country was ruled by dictatorships, generally military in character and largely dependent on military aid from the more conservative circles in the United States. Politicians and government officials were advocates of the belief that the chaebol should not be discouraged in the event of any future emergency. They have been joined to the chaebol hip.
It is not a coincidence that Lee Kun-hee, chairman of the Samsung Group, in April 1995 dismissed South Korean politicians as a low-quality group, showing disdain for them and telling Korean reporters in Beijing that “Korea can’t become a first-class nation unless regulation and a sense of power disappear. The nation’s politics is fourth-class, bureaucracy the third-class, and business the second-class,” blustered the chairman.
While Lee bluntly described the world as one where ideally the business tail wags the political dog, the Kim Young-sam and Kim Dae-jung governments alike became later mired in corruption scandals in which their own sons and cronies went to jail. Wrongly tainted as an economic socialist, former President Roh Moo-hyun was the first leader who campaigned aggressively against the power of the chaebol and who acknowledged the realities of the powerful conglomerates overshadowing the Korean economy. It was Roh who acknowledged glumly that power in South Korea gave way to the chaebol. But people knew that the chaebol’s power also corrupted.
In 2007, a corruption scandal at the Samsung Group shocked the country. A former Samsung chief lawyer exposed the hidden face of the global company to the public with detailed information on how the conglomerate had bribed politicians and government officials seemingly by the score.
When the lawyer’s 474-page expose, “Thinking Samsung,” hit the stores in 2010, People in the street became fond of calling the alliance of politicians, government officials and chaebol the three bedfellows of embedded corruption. According to the bestseller, the chaebol were the main culprits of economic concentration in South Korea, raising the fundamental question of whether their wealth was accumulated in a just manner.
After all, the lawyer’s crusade was considered a quixotic one for political and economic reasons. The country’s main newspapers mocked the lawyer’s grit as no more than adding another whistle-blower to the list. But people are now skeptical about the chaebol’s capability to maneuver the economy.
In all, the presidential candidates will likely take the lead in campaigning that for a revamp of the conglomerates’ ownership structure for the sake of fair competition and social justice, without killing entrepreneurship. That has generated a well-founded fear of a worst-case scenario from the chaebol themselves.
However, they are not likely to easily abandon their efforts to maintain corporate governance structure to their advantage, even if the heavens are on the verge of collapse. Nonetheless, it appears that whoever wins, the winner will take on the conglomerates. That can’t hurt.
(Lee Byong-Chul is a Senior Fellow at the Institute for Peace and Cooperation in Seoul.)