How the Rich Ate South Korea: how the chaebol have dominated South Korean politics and economy since 1945

“How the Rich Ate South Korea” (Asianometry, March 2022)

One paradox regarding South Korea’s economic success over the past 60 years is that (as this mini-documentary observes) one factor in that success is turning out to be a major curse. Moreover that factor may well become a cause of the country’s downfall as an economic power. South Korea’s economy is dominated by a group of large corporate conglomerates known collectively as the chaebol. These conglomerates are familiar to Westerners with names like Hyundai and Samsung, and (in earlier years) LG and Daewoo. These companies had their origins in the 1940s – 1950s, when South Korea’s first president Rhee Syngman began privatising state enterprises and enterprises seized from Japanese owners in order to raise money to fight the Korean War. The prices that buyers paid for these enterprises were determined through private negotiation. After 1961, when Park Chunghee seized the presidency, he enlisted the help of the chaebol in his goal to emulate Japanese economic success: the companies supported his import substitution policies and his ambitions to develop export industries, and the South Korean government gave loans to the chaebol at below-market rates. Over the next couple of decades, the South Korean government favoured the chaebol with economic “reforms” that also had the effect of suppressing the country’s medium and small business sectors. By the 1980s the wealth inequalities that had appeared between the families that owned the chaebol and the rest of the South Korean public – who also wanted better environmental regulations and working conditions, and a better quality of life – were becoming a major political issue.

After Park Chunghee’s assassination in 1979, South Korea was taken over by a military government and the chaebol supported the presidencies of Chun Doohwan and Roh Taewoo by throwing money at them. In 1987, the country became a democracy but rules for political campaigning and their funding were either weak or non-existent, and the chaebol took advantage of this situation to penetrate democratic politics and buy parties and politicians by financing their election war chests. The chaebol were rewarded by the politicians they bought via “reforms” such as regulations that favour them, protections from foreign competition and legislation that allow them to access foreign capital financing. Other “reforms” affected the chaebol’s organisation structures that allowed members of the families that owned the chaebol to own shares in many subsidiary companies and thus exercise more control over more companies. Cross-ownership (in which companies hold shares in one another) was allowed. Many of these so-called “reforms” were to lead to economic meltdown in 1997 as a result of the companies’ over-exposure to debt.

Although reformist Presidents like Kim Daejung and Roh Moohyun tried to curb chaebol abuses by limiting debt capacity and cross-shareholder structures, these changes did have the unintended effect of concentrating ownership in a number of industries to the extent that some industries became monopolies. In 1997, there were five independent Korean auto-makers; after that year, there was just one: Hyundai. In the early 2000s, the chaebol took advantage of a neoliberal global economic environment to expand their markets and huge profits began rolling in. After 1997, an agreement between the Korean government and the chaebol allowed the chaebol to start laying off people in droves with the result that hundreds of thousands of people lost their jobs and poverty, especially among older people, escalated rapidly.

Although the Korean voting public has tried to bring to power politicians who can solve the country’s economic problems and reduce poverty and wealth inequalities, leaders like Lee Myungbak and Park Geunhye have failed to curb the excesses and greed of the chaebol. At the same time, the national government has failed to enforce laws and regulations that the public has long demanded be strengthened and which the chaebol resist. At the time this mini-documentary was made, chaebol power over South Korean politics and the resulting consequences and tragedies (such as the sinking of the MV Sewol ferry, killing 304 passengers including 250 high school students, in April 2014) continue to be the prime issue in South Korean society.

South Korea’s economic success story mirrors that of Japan during the late 19th / early 20th centuries and one can argue that South Korea is now in a position similar to Japan’s in the late 1940s: Japan solved its crisis by breaking up the zaibatsu (admittedly because the US post-war administration insisted on this) and replacing the institutions and networks associated with the zaibatsu with looser arrangements. It is obvious that the chaebol also need to be broken up but in the current global economic context, in which neoliberal economics favouring centralisation of power in larger institutions dominated by small yet powerful elites prevail, what should replace the chaebol is the major problem: South Koreans need to ensure that whatever organisations or arrangements replace the chaebol do not themselves turn into a new generation of chaebol in everything but name.

The mini-documentary is well made with good, often quite lavish visual material made up of photographs, archived film and aerial scenes of metropolitan Seoul. It serves as a useful introduction into the history of South Korea and its economic development. Where the video could be improved is in noting that despite the rampant corruption in politics and economy, the country still prospered and this is due to the hard work and sacrifices made by the Korean people themselves as factory workers, medium and small business owners and employees, public servants, employees in logistics companies, and in other occupations supporting these workers.