Korea’s top 10 conglomerates employ about 2 million people in all. You may double or triple this number to estimate the total size of people directly dependent on the large businesses called “chaebol.” If you regard all adults in this category as the sympathetic force toward chaebol, they would still remain a tiny minority in Korea’s political arithmetic. So, parties don’t have to be too cautious in joining the bandwagon of chaebol bashing, which seems likely to gain more votes to than it loses.
While they compete with attractive welfare programs, party strategists in both ruling and opposition camps are racking their brains to produce more appealing policy statements about what they would do to control conglomerates. “Economic democracy” is their common slogan, although the practical steps to reach the goal vary.
Politicians are aware that Samsung, Hyundai, LG, SK and other big names are a source of pride for Koreans, but they also know that people are increasingly frustrated by the concentration of wealth causing them a sense of deprivation. All political forces on the right and left have concluded that the Lee Myung-bak administration’s business-friendly policy helped only the chosen few, and the vast populace is suffering from the narrowing job market, rising prices and growing household debt.
Smartphone users and motorists are thrilled by the fact that the latest local brands they just bought are dominating the world market. But they soon realize that they have to go into arrears on their credit cards to pay for them. Politicians now call for economic justice as if most of the present woes on the national and individual levels were attributable to chaebol.
There are ample statistics to prove how dramatically Korea’s conglomerates have grown over the past several years, but with insignificant trickle-down effect on the rest of the economy. The 100 largest businesses hold more than half of the nation’s total wealth and the 10 largest conglomerates now have 629 subsidiaries ― 200 more than just three years ago.
This process of expansion apparently accelerated from the latter half of 2009 after the Lee government lifted the restriction on the larger conglomerates’ total investment in domestic enterprises. The 10 chaebol groups saw their sales increase from 47.2 percent of the national total in 2008 to 51.9 in 2010 and the combined value of their stocks in the KRX and KOSDAQ markets have now reached some 53 percent of the total.
If their products were gaining consumer trust in the local and overseas markets, the leaders of some conglomerates have tainted their firms’ reputations with slush fund and embezzlement scandals. The chairmen of the Hanwha and SK Groups have been criminally prosecuted this year for separate business improprieties. The notorious imperial style of corporate governance continues and social calls for increased transparency and accountability remain unanswered.
Drawing the most complaints are the practices of internal trading among conglomerate subsidiaries, which gives huge profits to suppliers owned by family members. Outside suppliers are forced to make relentless price cuts and the government’s efforts to promote a system of profit-sharing between large and small businesses have been ignored by chaebol. Conglomerate family members’ recent opening of bakery and snack franchises earned them further criticism.
That parties are all out for chaebol bashing is encouraging, as it may indicate that Korean politics has finally weaned off conglomerate contributions, a terrible tradition of which traces remained until recent elections. Yet, calling them an evil in unison just to please the ears of frustrated voters without close scrutiny of the good and harm they do is just as undesirable as the present partisan contest of populist programs.
What is probable about the elections in 2012 is that whichever party wins in April or in December will have to take some kind of chaebol reform initiatives, be it the reintroduction of investment restrictions or a more coercive form of profit-sharing with small businesses, to fulfill their campaign promises. If they anticipate such actions, conglomerate families and executives may now calmly ponder what to correct in their business practices, perceiving, hopefully, the current global trend of 1 percent against the remaining 99.
