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Park Chung-hee’s Recipe for Economic Growth Casserole

As opposed to your local brick and mortar butcher who’s running the shop with his son, which is what really comes to my mind when someone says ‘family business,’ Koreans have managed to take the concept of a family business and turn it into a synonym for ‘too big.’ In the Western world, the names of these conglomerates are associated most often with their flagship consumer products, but in reality their long arms reach to the furthest corners of the Korean economy, and monopolise everything that comes to their path.


Just as the last year’s editor-in-chief went to South Africa with the Sefa Study Trip and wrote two articles about it (here and here), I think it’s granted that I write about my trip to Seoul. In this case, I’ll be discussing a concept that was introduced to as, pretty much as soon as we landed in Incheon (a city mostly associated with the international airport on one of its small islands). We were introduced to the word “chaebol” by the Dutch embassy. The Korean term jaebeol stands for the conjugation of jae, meaning wealth, and beol, standing for faction or clan. “Wealth clan” is quite appropriate for what these companies are, and how they conduct business in Korea.


These conglomerates were all extremely small at first, none of them were founded with the idea of turning into multinational conglomerates in the first place. The big-three chaebols you might know by name are Samsung, LG, and Hyundai. Samsung started off as a trading company that sold dried fish, vegetables, and noodles; and Hyundai was simply a construction firm.


Now, much separated from what they initially started off as, these companies are globally known for their electronics or cars. Yet it’s good to note that they work in areas from shipbuilding to steel, food to aerospace, planes to insurance. Having complete domination over the daily lives of Koreans in pretty much every profitable industry imaginable, these companies are not seeing slowdowns in growth anytime soon.


The way that these companies came to the position they are in right now can be attributed much to Park Chung-hee, the de facto president of Korea from the military coup in 1961 until 1963, and the de jure president of Korea until 1979, when he was assassinated. He led the Supreme Council for National Reconstruction (which is a very aptly named council),


The assassination aside, Mr Park achieved a great deal of progress in Korea during his time and time after through his modernisation plans. By establishing a planned economy where companies selected by the government (and the current set of chaebols were already sizeable at the time) were entitled to start large projects and the government loans to fund them. This system continued for quite a while, with foreign loans being added into the equation further down the road. As it established itself further down in the lives of Koreans and the culture, political favours and corruption became normalised too.


Considering all these benefits of this established system, one might wonder if these conglomerates are beneficial to Korea as a whole, today still. Although there’s been a lot of debate about this matter, one signal that should be clear to us is that the former Korean president Park Geun-hye, and the current president Moon Jae-in both campaigned for the position that chaebols should be slowed down, and their powers over the nation’s economy and its bureaucracy should be weakened.


Unfortunately, Park Geun-hye was sentenced to 24 years in prison this April over corruption charges for the 2016 South Korean scandal. Her aide and unofficial adviser Choi Soon-sil, the daughter of a cult leader, was accused of extorting money out of chaebols using her influence. Ms Park was accused similarly of bribery and leaking government documents to Ms Choi. So, well, the whole anti-chaebol position did not really work out; in fact, the presidents of several chaebols which funded organisations that ultimately help oust Ms Park denied the allegations that they were motivated to do so with their donations.


The central criticism against chaebols have been that they are extremely detrimental to the growth of smaller entrepreneurial businesses, but it can be seen that the influences do not extend solely on the economic side of things. When letting private organisations have such powers, you do end up benefiting from the fact that things move faster and higher economic growth, but the costs of such schemes may not always be immediately apparent.


One thing that was quite interesting to all of us was the fact that most young Koreans are very disinterested in working for smaller firms or startups as opposed to how we might prefer them. In turn, they are most often taking up engineering studies due to the excessively high demand, and targeting the big-three (also well known to us): Samsung, LG, and Hyundai. They provide comfortable lives, great benefits, extremely competitive salaries; all of which are very desirable in a country that’s not well-known for their social benefits.


For the Netherlands, I can’t even think of companies that operate at such scale, and ones that are capable of hand-picking the crème de la crème out of its universities.

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