Capitalism or feudalism?

Time to ponder how to rectify chaebol system

The Fair Trade Commission released a chart Monday, which illustrates the shareholding structure of 63 family-controlled conglomerates and their subsidiaries. The diagram, which appears even more complicated than the Seoul subway map, drew attention to two things: how these families dominate huge corporate empires with limited equity, and whether and how long Korea should let the chaebol system continue as it is.

According to the antitrust agency, the equity share of chaebol owners has dropped below 1 percent for the first time, but the “intra-family” equity ― those held by family members, relatives, affiliated firms and board members ― rose to 55.7 percent, the highest level in the past two decades.

What this signifies is simple: the efforts of successive governments, except probably the current one, to rein in chaebol’s economic power succeeded outwardly but failed inwardly, because their industrial might has grown even stronger than before the 1997-98 financial crisis.

Elections or not, it is long past time for the nation to seriously think about whether it should continue to leave the entire economy in the hands of a few dozen families and their vassals.

People who support the chaebol system, including bureaucrats and economists, say the conglomerates and their owners are only victims of their hard-won success. They also cite the swift and bold decision-making process as the decisive advantages over foreign competitors who have to watch the faces of investors and shareholders before making even minor decisions. The chaebol supporters brush aside critics as just envious socialists who don’t understand or ignore free market principles.

True, the founders of major chaebol, including Samsung, Hyundai and LG, were entrepreneurs, but many of their children and grandchildren seem to have inherited only their money, not the spirit of enterprise and genius. Even the founding fathers’ accomplishments wouldn’t have been possible without the permitted exploitation of resources, including the people who worked for them, at the national level. Now many of their grandchildren appear more interested in amassing assets through financial and other speculative activities rather than genuine corporate action.

Chaebol families and a handful of their professional management cannot cope with the rapidly changing industrial structure of the future which demands enormous creativity and originality. The increasing economic polarization and deepening estrangement within the rest of society will also make another industrial leap by Korea difficult, because it requires social consensus.

All this explains in part why the United States dissolved about 300 corporate trusts that dominated major industries about a century ago and has since kept weakening the power of monopolies and oligopolies through a series of antitrust legislation. Germany and Japan followed America’s example after World War II sometimes with the help of U.S. occupiers.

Theories about Korean-style capitalism are as egregious as Korean-style democracy. What’s keeping the nation from transitioning from economic feudalism to advanced capitalism are the vested interests of chaebol and their parasites in all sectors of society ― politicians, bureaucrats, judges and journalists.

Koreans should start again what their industrial counterparts underwent a century ago. Whoever occupies Cheong Wa Dae in 2013 should ensure this occurs. <The Korea Times>

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