By Chung Min-uck
“Economic democratization,” a term ordinary people and even economists debate the meaning of, has become a core political concept in the lead up to the Dec. 19 presidential election.
There exist various definitions of the expression but the general usage of the term narrows down to one meaning in context of the current political landscape: regulating big conglomerates in order to curb social polarization between the haves and have-nots.
Chaebol, meaning Korea’s big conglomerates controlled by individual owners or members of a single family, have been expanding their economic dominance under the big business-friendly Lee Myung-bak administration.
Yearly sales for the 10 biggest chaebol accounted for nearly 77 percent of the nation’s gross domestic product last year, according to Chaebul.com, an institute that monitors the conglomerates.
In a survey conducted by pollster Research & Research in July, 79 percent of Koreans agreed on “democratizing the economy” and 67.5 percent answered decisions in big conglomerates should be made more democratically for society as a whole.
The three presidential candidates _ Rep. Park Geun-hye of the ruling Saenuri Party, Rep. Moon Jae-in of the main opposition Democratic United Party (DUP) and independent Ahn Cheol-soo _ stress the current capitalist system dominated by a limited number of shareholders is outdated. They claim that the system has caused inequality in society. But the context is quite different when it comes to the question of how to put the brakes on the expanding powers of giant corporations.
Park urges “tough enforcement of the law” for the establishment of a “fair market economy” without touching on the chaebol’s structure of governance.
In line with Park’s stance, discussions in her election camp are mainly focused on reining in unfair practices and abuses by big conglomerates such as funneling works to their subsidiaries, operating an excessive number of super-supermarkets and granting pardons to chaebol heads.
The conservative candidate is against reintroducing an equity investment ceiling for big conglomerates or severing cross-shareholding which allows chaebol to maintain dominant control over their business empires with a relatively small number of shares.
“Breaking the existing investment chain of the conglomerates has no practical benefit because it takes an enormous amount of money to do that,” said Park. “Banning new investment among affiliates would be enough.”
However, Moon is calling for a crack down on the managerial structure of the chaebol.
“The 10 biggest conglomerates are controlling many subsidiaries worth hundreds of trillion won with a mere 0.94 percent of shares,” said Rep. Lee Yong-sup in charge of economic policies in Moon’s election camp. “Democratizing the economy without reform of the chaebol’s ownership structure is an illusion.”
The DUP has already issued related bills including reintroducing regulation on total equity investment, banning cross-shareholding and strengthening separation between financial and industrial capital.
Park recently showed her support for strengthening restrictions on industrial capital from owning financial institutes.
Under a current law, industrial corporations can only own up to 10 percent shares of local lenders.
Meanwhile, Ahn, the software mogul-turned politician, is known to be on the same track as the DUP on chaebol policies so far, except for regulating the amount of their investment.
“It is more important to have a consistent policy in the regulation on total equity investment (than strengthening),” he was quoted as saying in the book “Ahn Cheol-soo’s thoughts.” Ahn also takes a similar position on levying taxes on corporations saying what matters is “consistency in policy.”
However, observers say Ahn’s latest naming of Korea University professor Jang Ha-sung to head his campaign on economic democratization indicates a further shift to the left.
Jang, known as a “chaebol sniper,” earned his reputation by raising problems about the governing structure of Korean conglomerates. He previously served as chairman of the economic democratization committee in the civil rights group People’s Solidarity for Participatory Democracy in protecting the rights of minority shareholders. He also established the Korea Corporate Governance Fund in 2006 to experiment a new kind of monitoring system for interfering in the management of chaebol through becoming a shareholder.
“Reforming the governance structure of chaebol is the priority. We should change the fundamental market structure and the system so that they cannot but change,” said Jang in a recent radio interview. “When I began working on reforms in 1996 as chairman of the economic democratization committee the Saenuri Party took an opposite stance. There is no explanation on why they have made such a drastic shift. I doubt they will fulfill the promises that they have made.”