I was recently watching a Korean drama centered around chaebols, and thought it would be an interesting topic to write about. In Google's terms, a chaebol is a “large family-owned business conglomerate”. As we live in a free market capitalist economy, large family-owned business conglomerates aren’t uncommon, but in Korea it is a topic worthy of writing on as it is a big part of their economy, and it has had a large effect on the living culture in Korea.
As seen in the image on the left, Korea (before the split) up to the 1960s was an undeveloped country, in relevance to the western and european powers. It was mostly an agrarian feudalistic society, and it was still recovering from the colonization of Japan.
In the span of less than a 100 years, the country has managed to become one of the leading economies in the world, maintaining an average rate of 5.45% growth in GDP in the recent 30 years. For reference, a good rate is between 2.5% to 3.5%, which is where the United States has been on average over the past 30 years.
So how did Korea manage to boom in development? It’d be a long paper, but one of the main reasons is its use of large business conglomerates and their international export potential as part of their strategy.
Post Korean War, the government tried to implement different strategies to improve the economy, and there were various policies that allowed businesses more freedom, focusing on production for international demand and exports, through credits and loans. As companies found sudden growth, in the 1970s 10 Chaebols accounted for 30% of the economy’s growth. As time progressed, these Chaebols were used as the vanguard of Korea’s economy, and were allowed state incentives like tax breaks and cheap financing. Because of these lax policies and favorable conditions, these bigger companies were able to monopolize the domestic industry, expand internationally, and the government would see growth in GDP. These a
re very recognizable companies, companies like Samsung, LG, Kia, and Hyundai. Today, chaebols account for a whopping 80% of Korea’s GDP, and just 10 of these conglomerates account for 60%. And while this cycle works to some degree (I’m not an economist), it has caused social issues in modern Korea.
To begin with, chaebols were designed to be family-owned businesses. While this may work for small businesses, in larger corporations it is paramount that executive positions are filled with competent people. The structure of chaebols is not only out-dated and arguably ineffective, it has also caused nepotism to be more prominent. Even though these large companies account for 80% of the country’s GDP, they only account for a whopping ~10% of jobs domestically. Also, in east Asian countries, people often stick to their companies for life - creating a strong sense of loyalty and pride in their company. So this mix of exclusivity and prestige, along with the fact that workers at smaller/medium size companies make only ~60% of what chaebol workers make, has driven these chaebols to such a high degree in Korea. These jobs are seen as the best of the best, but it has also caused income inequality and issues with the youth.
Because these companies are so selective, it is seen that students/graduates must have a perfect resume to be a part of the competition for chaebol jobs. But this isn’t just mediocrely so–this sense of competition has gone rampant in the youth of Korea. Parents push their kids even from an early age to ensure that their children don’t fall “behind”, but when everyone does this, it becomes a ruthless cycle of workload and burden. On average, a Korean student attends 3 cram schools at a time, and even ~70% of elementary students attend a cram school. These cram schools are conducted mostly after school, and when students finally finish these cram schools at night, they still have to do their homework and study for their normal classes. This is all to ensure their children can get into college, but more so SKY (Seoul National University, Korea University, and Yonsei University). These colleges are the ivy league of Korea, and the competition has gotten so farce that there have been numerous Korean Dramas centered around this (Sky castle, Penthouse). It doesn’t help that their version of the SAT is only taken once, and so people often say that this one test dictates their life.
While there is so much more that could be written about, this is a small snippet of the issues caused directly/indirectly by chaebols. This rampant competition and burden has caused mental health issues in students, skyrocketing suicide rates as well. A recent study found that the suicide rate for South Korean students was 12.7 per 100,000 students, whereas the rate for United States students is 2.4 per 100,000 students. And as Korea is a well-developed country, we know that this isn’t due to just medical or poor conditions.
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