The Success of Korean Chaebols Comes with a Cost

The Korean chaebol system was born in line with Korea’s growth strategy driven by Korea’s political economy. It has served as a tool to grow the means of production, build Korea’s industrial base, maintain and extend the political regime, and pursue the mercantile export drive. Korea’s economic development and innovation endeavor have revolved around the chaebol system to a significant extent.

And yet, despite some positive aspects that the chaebol system has brought about, its success has come with a cost.

The shortcomings of the chaebol system are much deeper in the context of the long-term economic prosperity and innovation capacity building. They have been concealed due to…

The chaebol system has fostered the concentration of power, wealth and innovation capacity at a few hands…

Technology transfer to Korea has been mostly absorbed by chaebols. Technology spillover effect has been limited…

Korean chaebols have played at globalization…

Corporate borrowing was one of the culprits for the 1997 financial crisis. This problem got compounded by Korea’s weak financial structure…

Chaebols are not the engine of hiring. Unless there is hiring, consumer spending wouldn’t likely to pick up. This means that Korea’s domestic consumption won’t be boosted much as long as chaebol’s dominance persists.

Monopolization even hinders political democracy. Spreading growth around through the continued growth of productive capacity would make the democracy work…

Korea’s policy apparatus has favored chaebols’ growth and dominance through subsidies, taxation and regulations…Some policy choices have been squandered on the few chaebols…

As noted before, Korea’s power elites should have considered that the competitive advantage Korea had in the early stage of industrialization could wane and should have prepared Korea’s economic and innovation engines accordingly. The chaebol system is a big part of that…

(A detailed analysis on this topic won’t be shared due to the proprietary nature of the content.)