There have been two trends in Korea’s economic landscape since the 1997 financial crisis: financialization and deindustrialization. While financial bubbles have been blown up, Korea’s productive sector has gradually declined. The financial bubbles are the consequence of policy failure. They have also resulted from Korea opening up its market to international finance as a part of the IMF austerity program after 1997. On the other side, the manufacturing base has dwindled.
As discussed, Samsung has continuously shipped its manufacturing operations overseas. Samsung has become a formidable global company while Korea’s industrial power has gradually waned since the 1997 financial crisis. As the below article points out, Samsung accounts for a fifth of Korea’s GDP. As goes Samsung, so goes Korea?. Why has Samsung gotten so big in the first place?
As I have emphasized many times, any discussion on Samsung may have to revolve around how Samsung has contributed to Korea’s real economy, the productive side of economy. Keeping manufacturing jobs in Korea are a part of it. In reality, Samsung’s move has been the opposite, gutting Korea’s manufacturing base while their balance sheet has gotten stronger since 1997. Hence, any reform efforts re chaebols including Samsung may have to start from their role and contribution to Korea’s productive economy.
The chaebol system was effective when the mercantilist, export-led, central planning economic model was working. And yet, Korea has to transition to a more household, SMEs-oriented model since the current model is broken. I have stressed that this model was flawed from the start and bound to hit the wall.
The chaebol system is the product of Korea’s political economy. Hence, the Korea's chaebol reform is a matter of political will.
Korea is desperate for new measures and mechanism that would allow the productive economy to strengthen. The very mechanism may threaten the existence of the political party itself. Without meaningful political reform, there will be no sustainable recovery. Fundamental economic reforms including chaebol reform are all about politics.
That’s why many people are greatly concerned about a leadership change in the presidential election, which is only 7 days away and policy measures a newly-elected president will take.
From Washington Post:
So sprawling is Samsung’s modern-day empire that some South Koreans say it has become possible to live a Samsung-only life: You can use a Samsung credit card to buy a Samsung TV for the living room of your Samsung-made apartment on which you’ll watch the Samsung-owned pro baseball team.
Samsung is South Korea’s greatest economic success, and, more recently, the subject of major controversy. Economists, owners of small- and medium-size businesses, and some politicians say Samsung no longer merely powers the country but overpowers it, wielding influence that nearly matches that of the government.
Debate over how to curb the size and power of Samsung and other family-run conglomerates has become the key issue in South Korea’s Dec. 19 presidential election, with polls showing that about three in four voters say they feel negatively about the country’s few behemoth businesses. Candidates are sparring over how far to go to constrain them.
Samsung draws the greatest scrutiny because it is by far the largest chaebol — the Korean term for corporate groups that were jump-started with government support — and because it is wildly prosperous as the rest of the economy slows down. The conglomerate contributes roughly a fifth of South Korea’s gross domestic product.
Some Koreans call the country “The Republic of Samsung.”
Famous globally for its electronics, Samsung would be one of the largest conglomerates in almost any country. But within its tiny home country, the size of Virginia, it acts more as a do-everything monolith, building roads and oil rigs, operating hotels and amusement parks, selling insurance, making not only the world’s best-selling smartphone, the Galaxy, but also selling key components to Apple for the iPhone — even as the two battle in a series of lawsuits.
Critics say Samsung elbows into new industries, knocking out smaller businesses, limiting choices for Korean consumers and sometimes colluding with fellow giants to fix prices while bullying those who investigate. They also see in Samsung the picture of closed-door wealth, a family affair in which Chairman Lee Kun-hee is passing power to his son.
That sentiment has intensified in recent years, a period during which Samsung has obstructed price-fixing investigations — drawing only minor fines — and seen its chairman indicted for financial crimes, only to receive a presidential pardon “in the national interest,” as a government spokesman put it.
South Korea ranks poorly among democratized countries in corruption rankings, and the traditionally cozy ties between government and the biggest companies were widely seen as the enabler of the country’s economic rise.
The leading candidates say South Korea should prevent conglomerates, Samsung included, from weaving their various companies together in what’s known here as “cross-shareholding,” a controversial ownership structure in which a family concentrates its shares in a few core companies, then passes investment to other affiliates within the group. The arrangement allows families to control a broad range of businesses, even those in which they hold few, if any, shares.
Though there is broad agreement about some reforms, the level of concern about chaebol differs across party lines. The position of conservative candidate Park Geun-hye is that the conglomerates are merely unruly — a notable view in itself, given that Park belongs to Lee Myung-bak’s pro-business ruling party, and that her father — dictator Park Chung-hee — built the chaebol system after taking power in a military coup in 1961. Park Geun-hye said recently that chaebols often steal technology from smaller innovators and force unfair pricing on suppliers.
“In the economic area, we have emphasized the concept of efficiency, and in some sense, we haven’t paid enough attention to the concept of fairness,” she said.
But the opinion on the far left is that chaebols, particularly Samsung, hold a dangerous level of influence. That viewpoint caught traction after a former Samsung counsel, in 2007, accused the conglomerate of systematically distributing money from a slush fund to influential figures. In the ensuing probe, a special investigator found no evidence of bribery but did uncover the financial crimes for which Lee, the chairman, was later pardoned.
“Samsung has the government in its hands,” Lee Jung-hee, a liberal presidential candidate with virtually no chance of winning, said in a nationally televised debate Tuesday. “Samsung manages the legal world, the press, the academics and bureaucracy.”
Samsung, which began in 1938 by exporting vegetables and dried Korean fish, became a budding power after an alliance was forged between its founder, Lee Byung-chull, and the military dictator, Park, who controlled the country’s banks and determined who got loans.
But the conglomerate thrives now in part because it makes good products — an important point for South Koreans, who are deeply competitive and see in Samsung some of the traits they want for themselves: ambition, speed, and the ability to adapt and stay on top.
But Samsung has been steadily growing for decades. It operates 79 subsidiaries, more than twice what it did 25 years ago. Its size relative to South Korea’s economy has also grown: The conglomerate accounts for 28 percent of the nation’s exports, twice its share in 1987.
A powerful Samsung is healthy for the country, corporate spokesman Kevin Cho said, because it makes “major contributions to Korea’s exports, tax revenue and employment.” Cho also emphasized that Samsung is a global player, not a just a domestic one. In 2011, 84 percent of its electronics revenue was generated outside Korea.
Samsung has prospered on the strength of its electronics company, which has made a decade-long run of smart bets on tiny batteries, low-cost flat-panel TVs and smartphones. While Japanese companies fixated on ornamental and pricey home electronics, Samsung purchased proven technology and quickly began producing cheaper — and high-quality — versions. In the case of smartphones, such a strategy has led to a global patent war with Apple, Samsung’s top competitor. But it has also turned Samsung, once a non-factor in the mobile phone market, into the world’s leading producer in three years.
The Samsung Group makes a point of never doing any one thing for too long, and Lee Kun-hee says frequently that his employees should feel a sense of permanent crisis. Even in its glossy corporate profile, Samsung sounds alarmist. “The positions we currently hold will be obsolete and untenable 10 years from now,” Samsung says. “Across global business, attachment to laurels is folly.” The group is investing billions in green technology, medical equipment and pharmaceuticals.
http://www.washingtonpost.com/world/in-s-korea-the-republic-of-samsung/2012/12/09/71215420-3de1-11e2-bca3-aadc9b7e29c5_story.html
경향신문으로부터:
제18대 대통령선거를 앞두고 이른바 ‘삼성공화국(The Republic of Samsung)’이 핵심 쟁점으로 떠올랐다고 미국 워싱턴포스트(WP)가 10일 보도했다.
워싱턴포스트는 이날 1면 기사에서 ‘삼성공화국’을 이렇게 소개했다. ‘삼성이 지은 아파트에서 삼성 신용카드로 산 삼성 스마트 TV를 통해 삼성이 구단주인 야구팀의 경기를 볼 수 있다.’ 신문은 기사에서 삼성이 한국의 경제 성공을 상징하지만 최근에는 경제학자·중소기업·정치인들로부터 지나친 영향력에 대한 지적을 받는 등 논쟁의 대상으로 떠올랐다고 소개했다. 삼성 등 ‘재벌’ 그룹의 규모와 영향력을 어떻게 제한하느냐가 이번 대선을 계기로 이슈화하고 있으며 후보들의 논쟁도 뜨거워지고 있다고 신문은 전했다.
신문은 “이런 논란은 삼성이 한국 경제의 성장동력을 넘어서 국가를 압도하고 정부에 맞먹는 영향력을 행사하고 있다는 비판에 기인한다”고 설명했다. 워싱턴포스트는 삼성을 비판하는 쪽에서는 중소기업 영역 진출에 따른 소비자 선택권 제한, 다른 재벌 그룹과의 가격담합, 감독기관에 대한 압력, 세습 경영 등도 문제삼고 있다고 보도했다.
이명박 대통령이 지난 2009년말 평창동계올림픽 유치를 이유로 국제올림픽위원회(IOC) 위원인 이건희 삼성그룹 회장에 대한 특별사면을 단행한 것은 유치 성공 이후에도 부정적인 여론에 직면했다고 신문은 지적했다. 한국의 주요 대선 후보들은 한목소리로 정부가 재벌 총수에 대해 지나치게 관대하다는 견해를 내놓으면서 이들이 범죄를 저지를 경우 강하게 처벌해야 한다는 주장을 내놓고 있다고 신문은 전했다.
아울러 재벌 그룹의 ‘순환출자’ 관행에 대해서도 후보들은 반대 입장을 밝히고 있다고 전했다. 워싱턴포스트는 그러나 대선 후보들이 재벌 개혁에 대한 필요성에는 공감하고 있으나 수위는 정당별로 큰 차이를 보이고 있으며, 특히 새누리당 박근혜 후보와 통합진보당 이정희 후보의 시각차를 비교했다.
From Yonhap:
Ruling Saenuri Party contender Park Geun-hye, main opposition Democratic United Party (DUP) candidate Moon Jae-in and Lee Jung-hee of the minor opposition Unified Progressive Party (UPP) touched on a wide range of issues, including economic growth and the much-touted "economic democratization" that aims to rectify inequalities facing the country.
Some polls taken over the weekend showed Moon reducing Park's lead, although other surveys showed almost no perceptible difference between the two candidates. Polls that showed the DUP candidate gaining on the front runner indicated that he received support from former independent hopeful Ahn Cheol-soo who threw his support behind the liberal candidate.
Ahn, a former computer software mogul who dropped out of the race last month, is still popular among young voters and those disenchanted with the political establishment. He may, moreover, influence voter turnout particularly in urban areas like Seoul and the nearby Gyeonggi region that is home to roughly half of the country's 40 million voters.
The 60-year-old Saenuri candidate, who wants to become the country's first female president, said while the incumbent Lee Myung-bak administration can take some flak for problems facing the country, many of the country's woes that have weighed down the livelihoods of the people originated from policy failures committed under the previous Roh Moo-hyun administration, of which Moon was chief of staff.
Moon conceded that the liberal president committed mistakes, but emphasized that those mistakes were not as serious as those made under the present administration and the Saenuri Party.
On the economic democratization issue, Park said that if elected she will enhance transparency, root out unfair competition and firmly deal with big companies that break the law.
She, however, said that there is a need to promote the positive aspects on the economy, investment and the job market created by the country's conglomerates.
Moon countered that Park's stance will not be effective and pointed out that giving favors to conglomerates as was the case with the incumbent administration have led to big businesses encroaching on small and medium enterprises as well as mom and pop establishments.
He pointed out that if he wins the election, he will gradually enforce a ban on cross-shareholding and reintroduce the investment ceiling system.
Moon stressed that creating jobs is directly linked to welfare, consumption and economic growth.
"Jobs is the greatest form of welfare," he argues, adding that if elected he will create 400,000 new jobs in the public service and another 700,000 posts through work-sharing programs.
http://english.yonhapnews.co.kr/national/2012/12/10/13/0301000000AEN20121210010100315F.HTML
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