If young South Koreans wonder who’s to blame for why they’re so gloomy about the future, they should look no further than the country’s chaebols.
The family-owned conglomerates towering over Korea have long been hogging most of the economic oxygen. Samsung is Exhibit A for a competition-destroying system in obvious need of reform, but Korea’s leaders continue to fall well short of the mark.
The drama playing out between Samsung’s Jay Y. Lee and President Moon Jae-in almost perfectly encapsulates why the nation’s next 10 years could be less prosperous than the last decade.
Since 2017, Moon has had few significant economic victories. He talked boldly about changing a system that coddles huge corporate champions—Samsung Group being the biggest—to one that generates “trickle-up growth” shared by all Koreans.
The prosecution of Lee was Seoul’s main claim to success in taking on the tycoon class hoarding the fruits of national growth. Lee went to jail as part of the corruption scandal that got Moon’s predecessor Park Geun-hye impeached and imprisoned. Now indications are Moon may be mulling releasing Lee so he can get back to running Korea’s biggest company and, in theory, boosting the economy.
It’s an unpalatable idea that will destroy any legacy Moon hoped to leave and probably set back living standards for millions of Koreans. Moon would be falling into the same pattern that wrecked the presidencies of his two immediate predecessors and squandered time Korea didn’t have to waste.
Think back to 2008, when Lee Myung-bak was elected to recalibrate engines to ensure Korea kept up with an ascendant China. It was always odd to think a former chaebol CEO—he ran Hyundai’s construction and engineering operations—would curb the system that produced him. Sure enough, chaebols were more powerful when he left office in 2013 (he’s in jail for bribery).
Enter Park, whose father essentially created the chaebol system during his 1960s-1970s tenure running Korea. She talked of “democratizing” growth by catalyzing a startup boom. Yet Park, too, saw the magnitude of the task and took the easy route: asking the chaebol to help Seoul hasten growth. Worse, she got coopted by Korea Inc., a scandal that landed both Park and Samsung’s Lee in prison.
We might soon add Moon to the list of presidents who took the easy way to faster grower. In Korea, the relationships between politicians and big business is so symbiotic it’s hard to discern where one ends and the other begins. So, the impulse is almost always to circle the wagons.
Sadly, that means an economy that should be leading Asia in the creation of tech “unicorns” is going in circles, too. The bigger the Samsung’s of Korea get, the less space there is for startups with world-changing ideas to thrive.
Trouble is, as Korea grapples with global fallout from Covid-19, supply-chain disruptions and semiconductor shortages, the public is losing patience for this reform process.
Polls show that Koreans in their 20s and 30s are among the least optimistic in the Organization for Economic Cooperation and Development ranks. A key reason: as wages stagnate, Seoul apartment prices skyrocketed about 60% on Moon’s watch, widening the gulf between the haves and have nots.
Had Moon done more since 2017 to cut red tape and make its easier for young entrepreneurs to access venture capital and take big risks, Korea might be generating millions of new high-paying jobs from the ground up. Instead, he’s mulling doubling down on chaebols. No wonder Korea is often called “Republic of Samsung.”
To be fair, many Koreans seem keen on Moon giving Lee a pardon, perhaps figuring the end justifies the means. Polls show that as many as two-thirds of voters are fine with Lee returning to Samsung to help address chip shortages reverberating through the economy.
There’s also hope that a freed Lee could help the execution of the new deal for Samsung Biologics Co. to manufacture Moderna Inc.’s Covid-19 vaccine.
Recently, Moon invited chaebol leaders to the presidential Blue House to highlight their investments in new chipmaking capacity. There, Moon noted he understands the public’s “sympathy” for a Lee pardon.
Yet doing so would demonstrate that Moon is reverting to the same short-termism that felled his two predecessors. Sure, Samsung plays an outsized role in generating gross domestic product. And that’s exactly the problem. Do you fix a problem by making it even bigger?
If Jay Y. Lee genuinely cared about Samsung’s competitiveness or the welfare of millions of South Koreans, he would have resigned in 2017. Yes, yes, the Lee’s control Samsung. But Samsung, remember, was in limbo for a few years before 2017.
In 2014, Lee’s father, Lee Kun-hee, suffered a heart attack and fell into a coma. In the years that followed, Samsung was run by Jay Y. Lee as “de-facto” CEO. During that time, Lee the younger did more to solidify the family’s control over Samsung than raise the company’s innovative game. Then came Lee’s legal troubles—troubles that persist even now.
Isn’t there someone who isn’t a Lee family member who can steer the behemoth away from the rocks of scandal and distraction? What’s more, shouldn’t Moon spend his last year in office reducing the influence of a handful of families who care more about control and growing fortunes than Korea’s trajectory?
Moon took office promising to steer Korea in a different, more vibrant direction—to make the economy less of a family affair. Sadly, he may be about to veer more toward a past the nation should avoid than a brighter future.