Where are the entrepreneurshipWhen asked what his New Year’s wishes were, Samsung Group founder Lee Byung-chull said, “I hope to earn some money this year.” The audience found the joke funny. But Lee might not have meant to be that funny. His words reflected the same entrepreneurial spirit expressed by Apple Inc. co-founder Steve Jobs in a commencement address at Stanford University: “Stay hungry, Stay Foolish.” Lee ventured into the semiconductor business in his 70s. “It is really exciting to start a new business. I put all my passion into it. Nothing is more thrilling than creating something new,” he said in a New Year’s interview in 1984.
Hyundai Group founder Chung Ju-yung was famous for winning over clients and investors for what would be “the world’s biggest shipyard” by showing them nothing but a 500 won Korean note featuring Geobukseon — the ironclad warship legendary Adm. Yi Sun-sin built in wars against Japan in the 16th century.
Hyundai Heavy Industries has another proud story to tell about its founding. Chung drew the first order for his shipbuilder from famous Greek merchant ship owner George Livanos. But the terms for building two 260,000-ton oil tankers were humiliatingly unfair. The Greek ship owner placed the order significantly below the market price and also demanded the right to refuse delivery if he discovered any flaws.
The first tanker was delivered. But in 1973 when the second delivery was planned, oil prices tumbled. Livanos canceled the order. Another Hong Kong shipowner who placed orders for two tankers was on the brink of going bankrupt. Three giant oil tankers stood idle at the dock in Ulsan. Chung did not panic and instead came up with the adventurous idea of starting a new business with the three vessels. That was how Hyundai Merchant Marine was born.
At the time, Gulf Oil of the United States dominated oil transport to Korea. Chung confronted Gulf with its practice of sending excess profit returns to headquarters and bribing Korean politicians. Gulf yielded half of it oil cargo business to Hyundai.
The Bank of Korea in May announced that Korea has kept a current-account surplus for 51 months in a row with the surplus reaching $10.3 billion. That phenomenon has an ominous similarity to Japan before it plunged into decades of recession. Japan maintained a surplus in its current account for 30 years. Its surplus peaked in 1995 about the time its working population began thinning out. Per capita income also soared. These are the signs of an aging society in a structural slowdown. The vicious cycle begins with a thinning working population that increases the share of highly-paid senior workers in their 50s, leading to stagnation in consumer and corporate spending. The spike in per capita income and current-account surpluses is actually a recipe for recession.
Korea may already have entered the recession tunnel. Sales growth of Korea Inc. has been hovering below the global average from 2012. The fixed asset growth, the barometer for capital investment, has also sunk below the global average from 2012. Current-account surpluses also began to build up from that year. The working population started to thin from this year.
We have pitied Japan for its lost decades. Now we should envy Japan. Japan kept its economy as the world’s second largest and then third largest through the 20-year recession because of its technology strength. It bred companies like Uniqlo and Softbank during the period. Among Japanese billionaires, 80 percent are self-made. Of Korea’s richest, 74 percent inherited wealth. The Korean business sector lacks depth and resilience. Promising ventures are entirely centered in Internet game and bio sectors.
There are many weaknesses like household debt undermining the Korean economy. But the biggest worry is loss of corporate steam. The family-run chaebol have multiple problems such as habitual tax evasion and embezzlement.
But worse, Korea no longer has entrepreneurship. The scions sustain the family name through easy businesses like retail and imports of consumer products. Dream jobs for young Koreans today are in the civil service or teaching in schools. Lack of enterprise poses a danger not only to large companies, but for the entire society. Korea could be headed into a dark tunnel. It is a pity there are no longer visionary entrepreneurs like Lee Byung-chull and Chung Ju-young.
JoongAng Ilbo, Jul. 4, Page 30
*The author is an editorial writer of the JoongAng Ilbo.