The Koreans by Michael Breen

Author:Michael Breen
Language: eng
Format: epub
Publisher: St. Martin's Press

Chapter Eleven

CONGLOMERATES

The predominance of huge conglomerates is the most notable and at the same time unusual feature of the Korean economy.

Some, like Samsung and LG (formerly Lucky-Goldstar), began during the Japanese rule at a time when Japanese business was dominated by large family-held conglomerates called zaibatsu.170 More were born after the Second World War, when the assets of Japanese companies operating in Korea were confiscated and sold off at exceptionally favourable terms to Korean businessmen. Others, such as Daewoo, began in the 1960s.

At first, Park Chung-hee actively supported certain companies, but these almost all failed.171 Rather than back his favourites, he more generally created an environment in which creative and energetic entrepreneurs could succeed. In a sense, Park strapped a rocket to these businesses but it was up to the tycoons to light their own fuse. The broad measure of success was performance in export markets. Many either never took off or dropped to earth. Those that succeeded went into orbit and are the multibillion-dollar corporations that are internationally known today.

Park wanted firms that could compete internationally with the Japanese. He thought that, as Koreans were not hard workers, and, as businessmen and politicians were corrupt, a few loyal and capable lieutenants would be more effective than the vast army of small and medium businessmen. There was a risk. Large, powerful groups could become power bases for ambitious tycoons to challenge his authority. It was precisely this fear that was behind Chiang Kai-shek’s unwillingness to foster large firms in Taiwan. But Park Chung-hee thought he could control the large conglomerates, or chaebol, as they are called in Korean. (In 1992, the political establishment was directly challenged by big business, when the Hyundai founder, Chung Ju-yung, formed a party and ran for the presidency.)172

Going the Japanese way also posed a risk of another kind. The Korean business culture is characterised by an extremely low level of trust between people who are not of the same family. From this point of view, it would have been more natural to foster small- and medium-size family firms, and for the state to create the large corporations in sectors where size is necessary.

The scholar Francis Fukuyama has introduced this notion of trust as an underlying factor in business success.173 He notes that Japanese, for example, can do business more easily with, say, Americans, than they can with their neighbours and cultural cousins, the Chinese. The point is that in some countries, rational and fair legal systems and business practices underlying economic behaviour work because they are underpinned by a high level of trust between people. This trust may be strengthened by democracy and good, fairly enforced laws, but ultimately it derives from cultural factors. In other countries, trust is very low. Germany, Japan and Britain, and some parts of America are examples of ‘high-trust’ business environments, while Taiwan, China, France and Italy are ‘low-trust.’ In high-trust societies, you see businesses ranging from small family firms to huge conglomerates that endure through several generations of management. In low-trust societies, most businesses are small, family-run affairs.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.