Saturday, July 17, 2010

The Chaebol and Uneven Development

From Hankyoreh 21 (the Hankyoreh's biweekly? magazine), there are two articles on the uneven effects of the financial crisis on Korean firms. The large Chaebol, such as Samsung and Hyundai, it seems, are doing very well, with high profit margins and revenue growth. The small and mid-size subcontractors that supply them are not. This is not necessarily a new thing. Korea has myriad levels of subcontracting firms, and most of this (I once heard that it was up to 80% of their production, but there is no official number that I know of) is subordinated to supplying the chaebol. So it is no wonder that the big firms are able to keep them in a subordinate relationship. As the second article in the series points out, "small and medium-sized businesses account for 99 percent of all companies and 88 percent of total employment, but [have a profit margin of just] 2 percent of profits in subcontractor deals with major companies." I would add that within this subcontracting system there are also many companies that are part owned by the chaebol, which creates a form of disguised subcontracting: ie, firms subcontracting to themselves to get around unions, taxes, and other regulations. The irregular workers' strike aimed at POSCO back in 2006 was an example of a strike against this form of subcontracting.

When I was doing my research back in 2006/2007 I interviewed a number of reformers connected to the Roh regime and to economic reform groups about the chaebol. While a number of them criticize the chaebol for dominating the economy and want to promote small and mid-size businesses (the current prime minister Chung Un-Chan once compared the chaebol are like old dinosaurs), the fact that most of these small firms are primarily oriented toward supplying the chaebol raises a problem. There was no coherent solution to deal with this issue at the time and reformers seemed divided between shareholder value reform (to break up family-control over affiliate firms), industrial policy, taxation reform, and strategic asset management of the kind done by the Hasun fund (a kind of nationalist ethical fund). I guess the idea here was that by breaking up the Chaebol or using industrial policy and state intervention the state could create a more equitable relation across industry (or, in the case of more progressive taxation, siphon off some of that profit and redistribute it). Unfortunately, no coherent plan emerged (chapters 3 and 4 of my dissertation and my recent Journal of Contemporary Asia piece deal with the problem to some extent, both are linked here).

I would say that another way that reform forces such as the labour movement have tried to deal with the Chaebol is through labour struggle around wage rates and working conditions in subcontracting firms. Here there has been mixed progress through both industrial unionism and through activist campaigns targeting the labour standards at chaebol affiliated firms. On the latter note, the Hankyoreh has a profile of Lee Jong Ran, an activist fighting for bereaved victims of occupational illness at Samsung's semiconductor plants.

On an unrelated note, I've always liked the format that bookforum's omnivore blog uses to post links of stuff they've been reading under a common theme. So, I'm going to start doing the same.