Narrowing the gap

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Narrowing the gap

In a meeting with chairmen and chief executive officers of the country’s major conglomerates, President Lee Myung-bak stressed the need for large and small enterprises to work more closely together to prosper and thrive.

“If the gap between large and smaller companies widens, social conflict can worsen the environment for corporate activities,” the president said. In other words, large companies will suffer if the business environment as a whole sours. The president urged conglomerates and big firms to develop stronger partnerships with small and midsize companies to help create more jobs and growth. If the landscape is bright for smaller companies, Lee stressed, the job market in general will grow and ultimately benefit everyone.

One of the biggest problems in our economy currently is the polarization between large and small enterprises. The Asian financial crisis in the late 1990s widened the gap in terms of profits and revenue. Large companies turned abroad and went global to boost sales, while smaller companies muddled through here at home. The unfair business practices conglomerates have been accused of in recent months originate from the top-down management style large firms use with their partners. The president underscored this problem in his meeting with the top executives of large local businesses.

But a simple discussion and a few firm words from the president won’t improve the situation. We need to see concrete actions.

The government must first set the right example. It should avoid meddling in the affairs of large and smaller companies and instead focus on coming up with plans that help small and midsize firms compete in overseas markets. To do this, the government must reform its sporadic, somewhat reckless policies that essentially provide support to smaller companies without any real analysis of whether the firms deserve such assistance or not. It should therefore narrow its focus and become much more selective. The government can no longer extend lifelines to every company in its push to create what President Lee has dubbed a “fair society.”

Large companies have a big role in this, too, and they should explore ways to help their smaller counterparts. But the brunt of the work must come from the small and midsize companies themselves. While the nation’s large companies aggressively restructured during the downturn, many smaller firms simply carried on as usual and did little to adjust. They now must work to reinvent themselves and boost their competitiveness, which some have indeed done successfully. This will go a long way toward resolving the polarization between small and large firms.
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