Corporate-bashing seasonMoon Jae-in, presidential candidate of the opposition Democratic United Party, announced yesterday his plans for “economic democratization” focused on conglomerate reform, which includes a ban on chaebol’s cross-investments in subsidiaries and a reinforcement of the separation between financial and industrial capital.
Kim Chong-in, an architect of a similar platform of the ruling Saenuri Party’s presidential candidate Park Geun-hye, also vowed to pass two laws along the same lines in the National Assembly before the December election. Despite slight differences between the two, both campaigns appear to be unabashedly bashing big business under the cloak of economic democratization.
The demand for so-called economic democratization began as a reaction to polarization of wealth in this country. But the politicians just want to blame conglomerates for that rather than finding solutions that are real. The conundrum of a wealth gap should be addressed by job creation and welfare expansion - not by banning cross holdings and separating industrial capital from financial capital. Yet the politicians are now going so far as to set deadlines for anti-chaebol legislation. We are wondering if the political powers know what they’re doing in their attempts to control economic power.
Experts estimate that at least 10 trillion won ($9 billion) will be needed to put an end to the top-10 conglomerates’ cross investments, and that excludes humongous indirect costs. If uncertainty over control of a company grows, who would dare to take such a risk?
Even economic democratization, however you define it, must acknowledge some grim economic realities. As the European fiscal crisis and China’s economic slowdown herald a prolonged era of low or no growth, trying to overhaul our chaebol is an utterly dangerous thing to do.
The vicious cycle will only exacerbate problems with our economy and have a negative impact on ordinary people’s daily lives. Presidential candidates must refrain from such risky populist promises. They must pursue economic democratization that raises the efficiency of the nation’s economy. Chaebol’s bad practices - enriching their affiliates at the cost of others, for instance - must be addressed before cross investments and separating industrial and financial capital. Job creation is the proper answer to the puzzle.