Feasibility key to economic justiceWith the ruling Saenuri Party’s presidential candidate Park Geun-hye’s announcement of her economic platforms last Friday, voters now can see the three candidates’ positions on the thorny issue of “economic democratization.” Stressing the value of fair market order rather than the structural reform of chaebol, Park tried to distance herself from liberal candidates Moon Jae-in of the main opposition Democratic United Party and independent contender Ahn Cheol-soo. While Moon and Ahn pledged an all-out reform of the conglomerates, Park maintained that “excessive chaebol reform should not be allowed to stifle the overall growth of our economy.”
Despite some differences in their approaches to unfair chaebol business practices, the three candidates have mostly touted similar planks on the issue of economic justice as seen by their commitments to introduce a punitive compensation system for subcontractors, a scrapping of the Fair Trade Commission’s exclusive rights to accuse chaebol’ malpractices and a reinforcement of punishment for business crimes of big business groups, to name a few.
A big difference among the candidates comes from their varying positions on the intensity and compulsiveness of chaebol reforms on such issues as a ban on cross-shareholdings among subsidiaries, a cap on total investment and a mandatory injunction to separate a portion of subsidiaries from business groups when they exercise control over their affiliates. Through her economic pledges, Park has demonstrated her strong opposition to arbitrary reform of chaebol structure. But Moon and Ahn came up with a much stricter reform which includes a plan to dispose of earlier cross-shareholdings and a reintroduction of a cap on total investments (Moon) and a forced disposal of existing cross-shareholdings and a mandatory separation of subsidiaries from business groups (Ahn) in what amounts to a radical departure from the existing structure.
We have consistently argued that incremental reform based on improving unfair chaebol practices is more effective than a drastic overhaul. The government should be engaged in correcting unfair practices rather than forcibly revamping their corporate governance. Economic justice should not be achieved by indiscriminate regulation on chaebol investments. The three candidates’ pledges to ban new cross-shareholdings or limit chaebol from entering a particular market, for example, can help foreign capital to take over our domestic market rather than foster small businesses. The candidates must consider the feasibility of their pledges before resorting to populist temptations.