Coprosperity is crucial for chaebol’s own survival

What most economic analysts have thought least likely is now happening here: The pro-business administration is harshly criticizing family-controlled conglomerates.

President Lee Myung-bak himself has taken the lead in what appears to be the bashing of giant corporations, rebuking the ``shark-like” usury of poor borrowers by chaebol-affiliated lenders, and large companies’ heavy-handed subcontract practices with small suppliers. On Thursday, Lee admonished the Federation of Korean Industries, a chaebol lobby, not to defend only big businesses’ interests but consider their social responsibility as well.

All this was a far cry from the chief executive, who is widely regarded as having opened a new golden age for the conglomerates through a series of pro-(big) business policies.

The government kept both the interest rate and currency value low for large exporters; gave them big tax cuts; tore down barriers for their entry into almost all business lines, including finance; and helped to defend management control from hostile merger attempts. Lee, himself a product of the chaebol system, also offered a decisive help to a chaebol-heavy consortium’s winning of the bid for an atomic power plant export to Abu Dhabi.

Small surprise then that chaebol themselves were the most shocked at the government’s seeming about-face. So much so that the FKI, headed by an in-law of President Lee, went as far as to strike back, calling for the government and political circles to ``keep their balance” in conducting state affairs.

Are the President and his administration really shifting economic policy, and if so, why?

The ever widening economic bipolarization may be the biggest reason, which President Lee could attribute to big businesses’ failure ― or recalcitrance ― to invest and create jobs. Lee’s opponents might also as well suspect political motives, as the mounting popular discontent with the hardly improving economic lives could threaten the governing Grand National Party’s chances for one more victory in presidential elections two and a half years later.

What matters more in possible changes in chaebol policy is not why but how. In that regard, the Lee administration’s arm-twisting tactics, including intermittent probes in their irregularities as reported, can be neither a long-term nor fundamental solution.

All the government can ― and should ― do is use its biggest weapon; policy-making. It only has to change financial and tax policies to take away unfair favors from chaebol and reallocate most of them to numerous small and medium-sized firms and the self-employed. President Lee must also give far stronger authority to the Fair Trade Commission to help the antitrust agency thoroughly ferret out and correct unfair trade practices between chaebol affiliates and their small suppliers.

What Korea needs most now is the fundamental shift in economic paradigm from favoring a small number of giant firms, who have grown enough to stand on their own, to caring for numerous corporate fledglings.

A nation’s economy is like a forest. Its ecosystem cannot thrive with only some giant trees, if they do not coprosper with countless, nameless smaller plants.