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This column has discussed issues related to Korea's status as an advanced nation. From the late 20th century to now, South Korea has moved past developing-country status. It is now an advanced nation. By many measures of power, be they population, gross domestic product or military might, South Korea outperforms and outranks many countries of similar size. Typically, these days in international relations, South Korea has the title of "middle power."
What must occur to continue and carry forward the Korean miracle? The answer is the proper reform of the Korean chaebol.
When I studied at the University of Chicago, I met Korean students, many of whom today occupy leading positions in Korean society. I cannot tell you how many times they referred to the power of Korea's economic conglomerates. Conservative and liberal, they all noted the great dependence of Korea's development and economy today on the "chaebol". Some criticized them; others now work for them. The chaebol represent so much of Korea's economy. It is difficult to imagine a different Korea.
When I visited Korea for the first time in 1998, I saw the common signs of SK, Samsung, Hyundai, Daewoo and LG, among others. I marveled at the array of goods and services of these companies. No one could argue against the world famous contributions they have made to Korea and the world. All around the globe, people use telephones, LEDs, ships, chips, cars, photovoltaics and so many other technologies created by these companies.
Wikipedia lists nearly 40 chaebol. The biggest (Samsung, Hyundai, LG, and SK) account for most of Korea's economic production. It does not take an economics expert to see that this lopsided predominance prevents small and medium businesses from growing, stifles competition and feeds poor oversight by the public and government. If as we hear the crude phrase, "they're too big to fail," there is a deeper problem of overdependence.
Too often we hear stories of alleged and proven crimes committed by chaebol leaders. Bribes, triangulation with governmental leaders and political candidates, and unfair economic practices happen too often. Mismanagement, boondoggle projects and poor asset valuation and accounting practices abound. The problems and absence of oversight did not happen overnight, and it will take a movement and years to change.
Chaebol should not sunset, but they need different economic light and heat. The Korean government's subsidization of these energetic families and companies to develop the economy must give way. The power of a democratic and advanced economy must further spread to new entrepreneurs, to ever more individuals and companies that start up and compete for economic shares. The service sector need not come to dominate in Korea, but at least give it some room. Chaebol stand in the way, control and monopolize, and prevent this from occurring at anything like an ideal level. Their combined power will be tough to check.
What tools can steer economic freedom toward a broader and more inclusive participation by Korean citizens? How do we allow public representatives control over conglomerates? This is one area that qualifies the Korean economy and society as a developing country.
Democracy and a more democratic economy can occur in different ways. Asian models should not copy American or European or other existing models, and successes in anything like a one-to-one manner. In some ways, Korean conglomerate heads work as intermediary lords for sectors of economic activity. Just as with other Asian economies, dividing and spreading economic power must occur to increase economic growth. Each of the top chaebol should with public oversight fund 100 new companies that will have independent ownership and financial status. All chaebol should create an entrepreneurship fund to match public funding for startups.
There will be no more Park Chung-hee's for South Korea. Looking for one confuses democracy and pre-democratic cultures and histories. The future advance of Korea wants the people as sovereign. That is more powerful but more difficult to organize. Better or worse presidents will come and go. They will wield greater or lesser mandates to rule. Creating a reform agenda for chaebol will not occur until the Korean people decide it is time to do something. It is time.
If Korea is a middle power, it should not lower its innovation to become a falling power. Falling and stagnant powers tend to conflict, and they are more vulnerable to decline. The key to democracy is freedom. Its leaven is equality. Enlivening the Korean economy will need Koreans to tame the economic conglomerates. Chaebol reform increases freedom and equality.
Bernard Rowan is associate provost for contract administration and professor of political science at Chicago State University, where he has served for 22 years. Reach him at browan10@yahoo.com.
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