[Viewpoint] Collusion that fails small businesses

“Are large enterprises economic yakuza [organized crime syndicates]?” Ikeido Jun asked in his novel “Shitamachi Rocket,” which is the hottest book in Japan right now. In the book, Tsukuda Kohei, the owner of a small engine maker, is furious at conglomerates’ high-handed business practices.

The winner of the 145th Naoki Award chronicles the struggle of small businesses. The first part of the novel is about Tsukuda’s desperate fight against a conglomerate. The business giant raises a vicious lawsuit in order to snatch Tsukuda’s patent. Companies that have contracts with Tsukuda’s factory end the deal without notice. The bank betrays Tsukuda and does not keep the promise. Aggressive investors try to take over Tsukuda’s company at a dirt cheap price and his children complain he has not been a good father.

So Tsukuda is pushed to the verge of collapse. But the only thing that keeps him running is the technology in the rocket engine valve. Japanese media praised “Shitamachi Rocket” as a business novel that inspires and encourages the small- and medium-sized business entrepreneurs.

However, in reality, not many small companies have the key technology or solid know-how. Many of them could not resist the offensives of big enterprises and end up falling. Readers may be feeling substitute content from the happy ending in “Shitamachi Rocket.”

“All happy families are all alike; every unhappy family is unhappy in its own way,” wrote Leo Tolstoy.

And the same holds true for businesses. Each company has a different reason for its struggle. It may have been harassed by conglomerates or hit by a bad economy. It may not have received funding or be short on staff. Government policy may have hindered the business, or it may not have the right technology.

And the government cannot solve all the problems. Instead, the Korean government is pointing a finger at large conglomerates for being responsible for the struggles of small- and medium-sized businesses. The government is pressuring large corporations under the cause of mutual growth.

However, is it fair to ask large conglomerates to be 100 percent responsible for the small-businesses crisis in Korea? The root of the problem was laid by the government a long time ago. Through the 60s and 70s, the government focused on heavy and chemical industries and export-driven economic policy, while neglecting small and midsize businesses.

In 1966, basic laws for small and midsize businesses were enacted, but the enforcement ordinance was legislated much later, in 1983. Also, a law promoting an alliance among small and midsize businesses, enacted in 1975, provided assistance to subsidiaries and subcontractors of large conglomerates, creating a pyramid structure.

So large enterprises became the contract giver, reigning over small businesses. In this structure, unfair deals, contract corruption and exploitation prevailed. Bureaucracy in corporate culture was aggravated as well. Despite a number of government policies to reform the structure, the relationship between large conglomerates and small businesses did not improve.

Generally, Koreans have an inclination toward conglomerates. We have the prejudice that elites will be hired by large enterprises while those who can’t get into the big companies end up in small businesses. Therefore, many small and midsize companies have a hard time finding the right employees.

Consumers, too, are friendlier to conglomerates. Large bakery chains and franchises such as Paris Baguette are everywhere. Customers who prefer the fancy, new stores shun older local bakeries.

The Korea Federation of Small and Medium Business is an interest group for small businesses, but Artisee, a cafe operated by Hotel Shilla, is located in the lobby of the headquarters. It is ironic that there are so many smaller cafes but the one affiliated with a conglomerate is serving small and midsize business owners.

The government, conglomerates and individual consumers have all contributed to the small-business crisis. Most of all, the small- and medium-sized businesses are most accountable for failing to develop a competitive edge. No one party is to be blamed. It is a by-product of rapid economic development and the dark side of the Korean economy.

*The writer is a senior business writer of the JoongAng Ilbo.

By Nahm Yoon-ho