[OUTLOOK]Strange Bedfellows Need to Ease Tension

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[OUTLOOK]Strange Bedfellows Need to Ease Tension

The relationship between the government and conglomerates in this country has always been either tense or openly rebellious. As power changed hands, conglomerates would become the first targets of discipline by the new government. During the third republic, many leaders of conglomerates were arrested for allegedly committing crimes to make fortunes, and their wealth was often confiscated as "donations." In the days of President Chun Doo Hwan, the 7th largest business group of its day, Kukje group, was smashed almost out of the blue.

The dissension was especially intense in the days of President Roh Tae-woo. "We are now seeing that the showdown between business power and political power is happening." This is what Mr. Ro Jai-bong, then prime minister said March of 1991 in an address before members of the Kwan-hun Club, the oldest active organization of journalists in Korea. The remark gives us a sense of how tense the atmosphere was then.

This is, briefly, what happened. Around October in 1990, President Roh invited leaders of business groups, such as Chung Ju-young of Hyundai and Cho Joong-hoon of Hanjin, for dinner at the Blue House, which was to celebrate the completion of the new official residence of the president. As they consumed a bit of alcohol, complaints about economic policies started dribbling from the leaders' mouths. The criticism started with "Korean economy is in a muddle because scholars without a sense of reality are in charge of economic policies." The criticism intensified, finally taking aim at the president. President Roh reportedly burst out of the dinning room after blowing his top. When Kim Young-sam occupied the Blue House, Chung Ju-young and Hyundai had to endure many ordeals.

However, the relationship between Korea's conglomerates and government is basically symbiotic, if you look behind the rancor. Governments have acknowledged the role of conglomerates in the development of the economy. Accordingly, governments have returned to cooperative relationships with the conglomerates once they think they have been properly disciplined. The cooperation between political powers and business has been characterized by illegal donations and special favors.

How are things now? The current dissension between the government and business groups is different from those in the past, which were based on implicit mutual recognition. It is based on mutual distrust. Painting chaebol as the main culprit of the recent foreign exchange crisis, incumbent government has tried to pressure them to abolish secretariats to chairmen and to prohibit cross guarantees of debts, aiming to overthrow the emperor or fleet-like management. "I would become the first president in Korea, who reformed the chaebol," is what President Kim Dae-jung said in an address commemorating Liberation Day, August 15, 1999.

The relationship was not been smooth from the start. Right before the presidential election in 1997 Kim Dae-jung's camp asked to meet the leadership of the Federation of Korean Industries, but was turned down. On the other hand right after the election, the Federation of Korean Industries asked a political heavyweight, in vain, for a meeting with the president-elect.

The dissension between the two has been deeper and more serious than before, except for Hyundai Group. The incumbent government scolded business, warning that it should wake up from the slumber of group egoism. Business spent the last three years without active resistance, murmuring that impracticable ideas and ineffective regulations hinder economic development.

We cannot keep wasting our economic strength dissenting among ourselves over hardly productive ideological discussions. The chaebol have lots of problem. But we cannot ignore their contribution to our economy. The top four business groups account for 10.9 percent of Korea's gross domestic product, and 3.8 percent of employment. Whether or not we like them, our economy relies on them that much.

In an economy opened to the world, government and business groups cannot have sweatdeals as before. The owners of conglomerates cannot do things as they wish. It is time to have a different relationship between government and the conglomerates.

The government and business groups are reportedly going to set up a taskforce to devise better ways to limit cross investment among affiliates by the end of this month. I recommend that the government, academics and business groups go one step further and make an extra effort to come up with a new rule for chaebol based on market principles. They should find a fundamental solution that allows them to break away from the ring of dissension and vicious cycles of recrimination. I believe it is not difficult at all if we stick to the principle that companies without competitiveness and run by immoral managers should be immediately pushed out of business, while hardworking companies and mangers are encouraged to do whatever they want to.


The writer is an editorial writer of the JoongAng Ilbo.

by Kim Wang-ky

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