It’s maybe me, but in the dramas I’m recently
devouring watching, this word pops up often. I bet everyone who watched few shows knows this word. And I bet everyone can picture what chaebeol is. And what chaebeol is not (yes, Taoist wisdom speaks through me, no connotation, wild ladies!). Some may say it’s the same as japanese keiretsu, but it’s not true. The main difference is that chaebol companies are run by one family. And keiretsu is run by an assembly of associates. After Japanese left Korea after occupation, first chaebeol were created, both as taking over what was left of japanese companies or some started from the scratch.
When the military rule took over in 1961, they wanted to eradicate all remnants of Syngman Rhee’s policy, including the corruption among the high finance world. Some were put into the prison, but military junta, I mean government, realized that the development is not possible without the cooperation, so some of those accused people had to pay huge fines and were exempted from the sentence.
Chaebeol could grow because of foreign loans and preferable treatment. From the very start, they specialised in manufacturing, trading, and heavy industries.
In 1980s the trend has changed and it was because of new one (electronics and high-technology industries) that South Korea managed to turn the deficit into the trade surplus in 1986. At the beginning of 1990s chaebol became completely independent from government aid.
And some news from The Economist:
PERHAPS it is the result of being sandwiched between the imperial dynasties of China and Japan. It may have something to do with having a nuclear-armed hermit to the north. Whatever the reason, South Koreans nurture a deep sense of insecurity. That makes them good capitalists. So good, in fact, that if any rich country can claim to have done well in the recent global crisis, it is theirs. Last year, despite its dependence on exports and the collapse of world trade, South Korea’s economy grew faster than any other in the OECD.
South Korea’s remarkable resilience is partly down to clever economic management. The government provided lashings of stimulus. But it was not just domestic demand that kept the economy going. The export prowess of those peculiar corporate beasts, called the chaebol, was also responsible.
In the years after the Asian financial crisis of 1997-98, these unwieldy conglomerates, known disparagingly as Korea Inc, were regarded as villains, because of their habits of crony capitalism. Their shabby corporate governance and their dominance of the economy were widely criticised. Since then, bosses have been jailed, transparency increased and corporate governance improved. Since the global economic crisis they have been regarded as saviours in South Korea. Though the country’s exports slid, its biggest companies, such as Samsung Electronics and Hyundai Motors, gobbled up market share from competitors in Japan, Europe and America. Granted, they benefited from a cheap won. But they also made a fine job of selling things like electronics, chips and ships in fast-growing emerging markets to make up for some of the sales lost in the West. Samsung’s profits this year are forecast at a record $10 billion, and its sales at $130 billion, which would confirm its lead over Hewlett-Packard as the world’s biggest technology company by revenue.
BlackBerry and Apple crumble
The national paranoia has served them well. Though Samsung, for example, is a world leader in televisions and flash memory chips, it continues relentlessly to measure itself against its competitors. Having rebuilt their balance-sheets over the past decade, the chaebol have invested enough in technology, design and branding to remain far ahead of low-cost competitors in China and elsewhere. What’s more, they artfully avoided Japan’s trap of fetishising expensive, state-of-the-art technology for its own sake.
So the chaebol are certainly due an apology from those, including this newspaper, who thought they would be too unwieldy for modern business. But from South Korea’s point of view, they are a narrow base on which to build a country’s economic future. First, they face competition in new forms for which their hierarchical management structures and complicated, dynastic ownership are ill suited. Apple’s iPhone and the ubiquitous BlackBerry crept up on Samsung Electronics, exposing its shortcoming in smart-phones.
Second, the size and strength of the chaebol risk stifling entrepreneurialism elsewhere. By and large, their local suppliers are the only medium-sized South Korean companies to have thrived in recent years. Some young businesses such as internet search and gaming have done well, but these are in fields where the chaebol cannot yet be bothered to tread. If they ever do, they may smother rather than nurture independent talent.
President Lee Myung-bak still seems to be promoting the chaebol. He has just pardoned Lee Kun-hee, the boss of Samsung, who was convicted of tax evasion in 2008, enabling him to retake the reins of Samsung Electronics. The president has also successfully championed his chaebol chums in a contest to provide nuclear power to Abu Dhabi. And his government wants to relax holding-company laws that would make it easier for the conglomerates to own financial firms.
It is one thing to provide leadership. It is another to choose favourites and pick winners. If President Lee wants to promote anyone, it should be South Korea’s underdogs—the small companies that risk getting squashed by the country’s privileged monsters. The chaebol have proved themselves highly successful capitalists. Let them take care of themselves.
To read on some biggest chaebol:
I gathered few (well, 4, let’s just be frank) articles on this topic for further reading:
Corporations in Korea
Chaebol ver Taiwan Enterprises
Can Chaebol Become Postmodern?
Chaebol Reform and Corporate Governance in Korea
And let’s be frank, I have no idea about economy, Korean or whatsoever. I just thought this short outline will help understand all the background in some dramas/movies where chaebeol son (or daughter, who cares) is featured. I hope I didn’t make any grave mistake.