2011-09-07 21:16
(5) Chung Ju-yung: embodiment of Korea’s economic miracle
By Andrei Lankov The economic success achieved by Korea over the past decades is inseparable from the history of huge industrial conglomerates known as chaebol. The names of many of them are now household names, such as Samsung, LG and Hyundai Admirers of the free market and the capitalist spirit praise chaebol leaders as embodying the “Korean spirit.” For them the founding fathers of these super-corporations are the genii of entrepreneurship and great visionaries. But the political and academic left has a somewhat different view of these individuals. For the leftists, the chaebol are the embodiment of the alleged “neo-colonial development” of South Korea, and their leaders are super-villains whose success sprang from machination and corruption. Perhaps, the greatest of all the founding fathers was Chung Ju-yung, the founder and chairman of Hyundai. His life reflects closely the entire history of the South Korean economy.  Few chaebol founders were born into real wealth, but most were sons of rich landowning families. Chung was different: he came from the genuinely poor. The future tycoon was born in 1915 in the small picturesque village of Asan in what is now North Korea. His parents were common farmers. His father grew rice and vegetable, while his mother ran the household and raised silkworms for additional income. In his native village, he graduated from primary school. For a farm boy in the 1920s, this was a good education as most peasants had no schooling at all. And Chung wanted to study more in order to become a teacher ― probably, the highest social position a peasant boy could aspire to in the early 1930s. But Chung’s family could not afford to pay for his further studies. Chung did not want to settle down as countless generations of his ancestors had done before, however. He did not want to become a farmer. So, he ran away.  His first two attempts ended in failure: The would-be tycoon was found by his father and escorted back home. The third attempt in 1933 was initially more successful. Chung _ how should we put it politely, made an unauthorized borrowing of family funds. He ran away with 70 won, a substantial amount of money at the time which his father had earned from selling a cow. With such a fortune (quarterly salary for a semi-skilled worker), Chung could even afford to take a train! His plan was to study accounting. Since he could now pay the fees, he entered a bookkeeping school. But alas, he was again returned home by his father who had followed him to the capital. No questions were asked about the money. Nonetheless, it was expected that from now on Chung would be a good farmer, like his father was. One dark night, he left again and this time nobody stopped him. In 1934 he came to Seoul. For several years he worked as a stevedore in the port of Incheon, then as a construction worker and a handyman until he found a job in a rice shop. The future automobile king pushed the pedals of a delivery bike.  At the age of 22, Chung took over the shop when its former owner fell ill and gave control of the operations to the promising employee. But in 1939, his business was confiscated by the authorities without any compensation. In 1940, Chung borrowed some money from affluent friends and opened a small auto repair shop in Seoul. Incidentally, the young businessman had had no experience with cars at the time. A cargo bike was the most advanced transportation device he had ever handled. But again, the garage was closed down in 1943 by the authorities and once more, no compensation was paid, so Chung had to start from scratch. In 1946, after Korea’s liberation from Japan, Chung Ju-yung reopened his business. His new shop was called Hyundai and the now famous brand name was born. In 1947, Chung established a new company, Hyundai Civil Industries (later Hyundai Construction). At that time, the new company had 11 employees, among them one engineer, a former teacher from a technical school. Like many other Koreans who had something to fear from the invading Communist armies, Chung fled Seoul in the summer of 1950 and spent most of the war in Busan. He was accompanied by his brother, Chung In-yung, whose presence proved instrumental in the future success of the company. Chung In-yung was a fluent English speaker, a very unusual asset in 1950s Korea. With his help, Chung was able to secure profitable contracts from the U.S. Army. Americans were ideal clients in war-torn Korea: they had money, they paid well and they did not check the books too carefully. They were prepared to pay a fortune if deadlines were met _ and few Korean managers knew how to meet deadlines. Towards the end of the war, Hyundai Construction had become one of the largest builders in Korea. Indeed, it was a major company by Korean standards at that time. The problem was that these standards were extremely low. Korea remained a poor developing country which belonged in the same league as say, Sudan or Nigeria. Nevertheless, Chung managed to successfully complete large-scale projects, including the repair of the Indo-gyo Bridge in Seoul. Some of these projects ― executed with remarkable speed and efficiency ― attracted the favorable attention of the authorities, including a young general named Pak Chung-hee. When General Park staged a military coup in 1961, he already knew who Chung Ju-yung was. Once in power, Pak included Chung Ju-yung in his small circle of “trusted businessmen,” most of whom eventually established chaebol. Chung’s mission was to export Korean construction services overseas. It was in this field that Hyundai Group developed into a major international player. Chung Ju-yung played a pivotal role in this transformation. With plans to transform a hopelessly backward country into a major economic powerhouse, Park put special emphasis on the role of large, diversified companies which came to be known as chaebol. He believed that such companies would have real advantages when competing in the international market. He also thought that it would be easier for the South Korean state if it used it’s abilities to promote a smaller number of very large firms (and state support was integral to the success of ostensibly private South Korean business). Park essentially handpicked the future captains of Korean industry. Such a highly subjective approach was criticized at the time but worked out well. Hyundai Group made its first money in construction projects in the Middle East. In the early 1970s, following the suggestion of the government it began to diversify, investing in shipbuilding, automotive industries and petrochemicals. Among other things, in the mid-1970s Hyundai became one of the four Korean companies which were encouraged (essentially ordered) by the government to start the large scale production of cars. In 1976, five Pony cars produced by Hyundai were shipped to Ecuador, such was the humble beginning of Korean vehicle exports. It took only two decades for Hyundai to become one of the world’s largest producers of cars. By the late 1980s, Hyundai Group consisted of 34 companies, with 160,000 employees. It produced supertankers, cars, microchips and machine tools, built roads and ports and dams across the globe. Chung and his extended family were in complete control of the companies. All important decisions were made by him, his children, his cousins and his nieces and nephews. Admittedly in this regard Hyundai was no different from other chaebol. Korea’s big businesses were and still are largely family owned and family managed. The last years of Chung’s life were somewhat turbulent. The 1997 Asian financial crisis delivered a heavy blow to all major business conglomerates in South Korea and seriously undermined their reputation. The new left-leaning administration in Seoul was deeply suspicious of the chaebol system and introduced measures aimed at breaking up “mega-corporations.” Hyundai was no exception: in the late 1990s it was divided into a number of independent firms. Nonetheless, Chung enjoyed much in Korean society until his death in 2001. He was seen as an embodiment of Korea’s economic miracle and one of the leaders of this truly unprecedented transformation. He moved from poverty to success, at the same as his country did the same. Professor Andrei Lankov was born in St. Petersburg, Russia, and now teaches at Kookmin University in Seoul. He can be reached at anlankov@yahoo.com. |
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