Waiting for Chaebol reform

2013-11-12 17:13

Waiting for Chaebol reform

Bernard Rowan
When I first visited Korea, I learned about chaebol. Chaebol refer to Korea’s large business conglomerates, often centered on a particular family.
In 1998, LG, Hyundai, Daewoo, Samsung, and SK were the main chaebol.  I looked up at the names of associated buildings, apartment complexes, gas stations, industrial concerns, electronics stores, and automobile dealers and saw these business titles. Chaebol have made the Korean economy a giant.  They’ve invented many products and services.  Hundreds of millions use what they make and provide.  Autobiographies of their founders, written and unwritten, should qualify as modern historical classics. It’s no exaggeration to say that chaebol are Korea’s real hallyu or Korean Wave.
Some Korean friends criticize the power of chaebol, but others work for chaebol businesses that pay well.  Some chaebol come and go, with the dramas of financial crises, family events and global trends, and some of their power rankings change.  But chaebol continue to control the Korean economy for exports and hiring top talent.  What’s the problem here?
Democratic cultures are suspicious of power because absolute power corrupts absolutely.  Chaebol have great power, and that power corrupts greatly.  Is it good that chaebol account for over half of Korean GDP?
Just in the past several months, we’ve seen Cho Suck-rae and Koo Cha-won face investigations.  The same events happen nearly every year.  Prosecuting offenses in accordance with public laws is important.  However, Korea needs 21st century policies to limit chaebol power to a degree more than just prosecuting corrupted corporate bosses.
This problem isn’t unique to South Korea.  Look at the trends of income and wealth concentration in the United States.  The top one, five and 10 percent are America’s chaebol.  Long ago, Adam Smith noted the power of illusion for capitalism.  Too many don’t know they will never be rich.  We want to copy the wealthy.  The drive to be like others frames economics.  The glue combines envy and ambition.
Targeted and episodic prosecutions in the U.S. leave unscathed and untouched broader policy problems.  Jamie Diamond of Chase and other faces of Washington Mutual, Bear Stearns, Lehman Brothers and AIG came before various courts of opinion.  However, the more general excesses that gave us the rot of credit derivatives and mortgage-backed securities remain.
Obama and Park, the U.S. Congress and the Korean National Assembly, and both the American and Korean people lack enough will to change policies and increase enforcement.  Most demand today no more than a mixture of after-the-fact warnings and publications.  Transparency is important but not a cure-all or substitute for legal oversight.
We’re too impressed by the notion of corporate entities “too big to fail” ― or rather, too big to change.  Chaebol affiliates multiply.  High profile inquiries and isolated fines and punishments leave unchanged continuing patterns of behavior.
The signs for necessary reforms continue to grow, but the Korean public (just like the American) remains inert.  Rhetorical excuses by leaders are like drugs.  They depend on these Titans for their power.  The American Democratic and Korean Saenuri parties aren’t forces for progressive accountability.  They deflect reform in the name of common self-interest, nationalism or fear.  Americans fear growing Chinese power over our economy.  Korean interests fear foreign powers too.
Public opinion science and political history tell us that cycles of reform aren’t frequent.  They don’t arise in direct correlation with need ― not with time.  It takes awhile for the educated public, let alone the public, to become sensitized to an issue, to learn of and consider alternatives, and to hold leaders accountable.
Rarely does tackling concentrations of business power match “crises” or “emergencies” equivalent to a world war or terrorist attack.  Pitiful indeed!  The stakes reach our nations’ central interests.  Democratic imagination wants education.
Park Geun-hye has chosen to give up the banner of progressive change.  Dropping the rhetoric of “economic democratization” for that of a “creative economy” is a sign of her rearguard’s power.  Many pundits state flatly Park’s administration won’t achieve the promised gains of democratic governance in Korean corporate culture.
There’s every warrant for Korea’s top businesses to allow greater public oversight and to adopt limits on their total debt.  It could only invigorate the Korean economy to insist on greater accountability and to open corporate boards to more independent voices.  For all the power they hold, chaebol heads lack the foresight.
Liberals don’t hope for much change in the Park administration.  The middle class is shrinking.  South Korea must shed some of her export-production dependence.  Look for chaebol reform to become a campaign issue in the next round of national elections.  The willful blindness of too many elected and business leaders makes it a good bet.
Bernard Rowan is assistant provost for curriculum and assessment, professor of political science and faculty athletics representative at Chicago State University, where he has served for 20 years