If you have been following my articles these past few days you would know that I am visiting South Korea, the land of Samsung, LG and Hyundai- global brands we all know and use! Having visited Japan and China before I imagined Korea to be a mix of both due to its geographical location, history and longstanding relationship with both of its neighbors. Turns out that Korea is a story of its own- and I am not sure whether the story will finish with a happy or a sad ending.
Korea’s basic economic unit of organization is the chaebol or a massive business group encompassing key players from different industries, which are in turn controlled by one family. Can you imagine that a company as massive as Samsung is controlled by one family alone? Moreover that control is passed on genetically from father to son?
On one hand you would question the plausibility of this statement using simple logical reasoning- excessive centralized control is associated with underperformance, corruption and criminality- neither of which are visibly apparent in South Korea- a nation which emphasizes the importance of quality education as key to a high-flying career more that most other countries. Yet, this precisely is the catch, young Koreans need to train to become masters at conforming to the national economic system because they are well aware of the social, economic and status consequences of not doing so. As a result every year the chaebol ruling families receive a fresh generation of brilliant geniuses driving innovation and growth, keeping a decent salary in their pocket while the remaining fortune goes to the ‘kings’ and ‘queens’ of the chaebols.
The chaebol business organization is deeply embedded within the core of South Korea’s culture, tradition and norms. It dates back from the time when China, with its powerful dynasties, transferred religion, culture and political governance structures to its ‘younger’ brother, the kingdoms of now day South Korea. Confucianism, a primary ideology in family organization yesterday is a primary way of economic organization today. Confucianism can be contrasted with American individualist values such as the group is preferred over the individual and social order is achieved through strict hierarchy. Specifically, everyone who is a member of the group (in most occasions a family) is conscious of and adheres to his/her social position- i.e. the eldest male member is the head of the group, usually inherited by the eldest son, while women possess a nurturing submissive role in the group.
This is Korea’s reality today, I see it with my own eyes from a number of situations: entrepreneurial activity is oriented around global giants and very little if no entrepreneurial activity is evident at smaller scale. Furthermore markets and distribution channels are dominated by homogenized products from the same dominant producers, providing consumers with only a limited choice and as a result encouraging them to practice similar lifestyle routines. This represents a stark difference from Europe and the States where individuality is evident among the middle class not just at the upper class level.
My verdict? There are two unique points that need to be considered before deriving a final conclusion. Firstly, one needs to understand South Korea’s geopolitical situation before making rushed judgments about its economy. Throughout South Korea’s entire existence, considering both in the past and today, the country has been under threat of influence and war from its powerful neighbors Japan, China, USSR (now day Russia) and since 1953, communist regime, North Korea. Hence, historically South Korea needed to keep strong and maintain its identity and economic might to counter these threats. Secondly, South Korea’s chaebols should by no means be compared to Russian style FIG (financial, industrial groups) that differ institutionally and culturally in a way that they are more politicized and powerful due to their dominance of the world’s most important resource-oil. On the other hand, Korean chaebols are technically oriented and fuel their growth through skill building and innovation.
Now that you possess a more realistic idea for South Korea economic system I can freely form my conclusion, which is: is the chaebol system sustainable in the long term? Are years of hard work and exams in elite universities, followed by jobs in elite companies going to satisfy future generations or will they start disputing the highly hierarchical chaebol system? In the era of globalization, internet, free communication they might feel the urge of expressing their individuality more and threaten the ‘clan’ system or the best minds might just decide to flee the country dropping Samsung a postcard of their new penthouse, enjoying their success abroad. After all South Korea is a liberal country people have the choice to leave or do they? I guess that is a decision to be fought at the level of the individual.