March 1, 2024

South Korean Family Conglomerates Pressured

SEOUL — In Parliament, lawmakers call them “beasts.” Newspaper editorials liken them to unfettered predators robbing ordinary people of their livelihood. President Lee Myung-bak, once an ally, has withdrawn his promise to cut taxes for them, instead urging them to win “respect from the people” by doing more to help the poor.

This is not a happy time for the chaebol, the family-controlled conglomerates of South Korea.

Abroad, they may finally be getting the recognition they have so long striven for, with their cars and cellphones competing in global markets. But at home, as one conservative mass-circulation daily, the Chosun Ilbo, noted in a recent editorial, they are attacked “like public enemies.”

Koreans have grown more uneasy as increasing consumer prices and rising household debts have squeezed their standard of living. Meanwhile, the big conglomerates have generated healthy profits for their owners and expanded their international reach.

“People got disillusioned when they saw big businesses make record profits and roar in the global markets but their own lives got worse,” said Kim Byoung-kweon, an economist at Corea Institute for New Society.

The chaebol and the government are grappling with the rising discontent.

“If you are successful abroad but fail at home, you can’t call that a success,” Chung Mong-joon, one of the country’s leading business magnates, said in a telephone interview, referring to the image problem the chaebol face in South Korea. “Our businesses need to build ties with ordinary citizens.”

Mr. Chung’s Hyundai Heavy Industries, the world’s largest shipbuilder, offers a typical chaebol success story of a family business built up into an industrial giant. Now, he and his peers are trying to show their social conscience.

Last month, Mr. Chung, also a national legislator with presidential ambitions, and his brothers, all owners of Hyundai subsidiaries, made donations worth 1 trillion won, or $930 million, to help needy students and young job seekers.

Even though a sizable amount of the money donated had been pledged years earlier to atone for corruption scandals, Mr. Lee lauded the acts of charity as “a cultural change” in a country where rich businessmen are often accused of bequeathing their fortunes to their children, rather than sharing them with the general populace.

In a further attempt to woo the broader public, Mr. Lee’s government and the governing Grand National Party said last week that they would suspend tax cuts for big businesses, increase subsidies for low-wage temporary workers and reduce college tuition.

Those measures were criticized as “utter populism” by the daily newspaper Munhwa Ilbo. But Mr. Lee was seeking to counter successful efforts by his political opponents to tap the discontent over income disparities.

Since last year, the governing party has lost a series of local and parliamentary special elections. The opposition has seized on the perceived economic “polarization” to galvanize voters.

“It has become a fashion among politicians to bash the rich and chaebol to win votes,” said Kwon Hyuk-cheol of the pro-business Center for Free Enterprise.

The conglomerates are in some ways victims of their own hard-driven success.

While struggling to rebuild the economy after the 1950-53 Korean War, the military dictators of South Korea favored a handful of families with tax benefits, special loans, anti-labor policies, cheap electricity and other subsidies. They grew into industrial giants, each commanding a fleet of subsidiaries. The policy also left South Koreans with a belief that they had participated in and made sacrifices for the achievements of the chaebol, said Mr. Kim of the Corea Institute.

Today, conglomerates like Samsung, Hyundai and LG ship more than 70 percent of the country’s exports, which in turn account for half its gross domestic product. They also dominate domestic markets for cars, TV sets, credit cards and cellphones.

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