To grow together
As Korea has become an economic power, growing small and large business together has become an important challenge. Mutual growth is a desirable model in that the fruits of economic growth are fairly distributed to every class and field of the society.
To achieve this, the government’s role is crucial. Above all, the most needed element is an antitrust law. The antitrust law of the U.S., which started with the Sherman Act in 1890, has greatly contributed to vitalizing the free market economy of the U.S.
In a case where a company becomes so big as to monopolize its market, the antitrust law makes competition in the market possible by breaking the big company into smaller ones. AT&T or Standard Oil was a representative case. Another was the recent attempt to separate Internet Explorer from Microsoft Windows to prohibit the monopoly of Microsoft.
The antitrust law can also help prohibit a monopoly through a merger and acquisition. According to the law, a merger should be permitted by the government, and the government can disallow the merger if it would be fatal to existing small or mid-sized companies.
In short, the intention of this law is to prevent the rampage of the big corporations and their systematic destruction of small businesses by their indiscriminate business expansion to monopolize the market with their almost unlimited financial support.
For example, the world’s largest aircraft manufacturer, Boeing, which employs 160,000 people, concentrates on manufacturing aircraft and invests its profits to the research for the production of better aircraft. It does not expand as a Korean business group does by running every profitable business, such as construction, banking, financial investment, transportation, baking, and large and small scale retail businesses, etc.
This is not because Boeing does not have the money for such expansion; rather, because it is not allowed by the antitrust law and Boeing thinks that such expansion would hugely hurt its public image.
Of course, Korea is in a different situation. It is the big corporations that have turned Korea from a nation of poverty to an economic power, allowing the pride of Korea to shine in the global community. I am proud whenever I’m on an overseas trip and I see the billboards of the Korean companies thriving in the international market.
These days, however, I find that the Korean press frequently criticizes these big companies. It has been pointed out that even with the profits of several hundred billion won, these companies don’t invest; instead, they do business of giving high-interest loans to their subcontract manufacturers, pay them with postdated (often three months or longer) drafts, and cut the unit prices of the products supplied by their subcontractors against their will, even when the prices of raw materials have risen.
Furthermore, they steal the technologies developed by small businesses and try to kill small businesses through big price reductions of popular consumer items such as chicken in the discount stores they own; they are so obsessed with just making profits in the domestic market, which hurts their image and dims their contribution to boosting the pride of Korea at the global level.
This kind of behavior only generates the people’s animosity toward big corporations, especially family-owned chaebol, which in the end makes it hard to avoid conflicts between big and small business.
Mutual growth is hard to achieve without active support from the government. It is not right to demand big corporations to redistribute their profits or to coerce their responsibility for mutual growth.
All the big businesses have to do is to pay their taxes based on their hard earned profit. With this money, it is the government’s role to prevent monopolies and vitalize small businesses. Since most big corporations favorably accepted the government’s plan for mutual growth, now the government should materialize its plan.
I would like to make a few suggestions on this. First, let’s adopt the U.S. antitrust law. Second, do away with the draft payment system. Third, make it illegal to make subcontractors compete after a bid is opened.
Fourth, to make small businesses more independent from big businesses and their subcontracts, increase government projects on which only small businesses can bid, the so-called small business set-a-side program which has been widely practiced in the U.S. Fifth, like the U.S., make the Small and Medium Business Administration under the direct control of the President.
Sixth, study the U.S. system of government-guaranteed loans that allows small businesses to get low-interest loans from banks by the government’s guaranteeing up to 90 percent. Now, as Korea became an economic power, the government’s priority should be building a healthy framework of mutual growth. A strong small business means a strong middle class.
Jay Kim is a former U.S. Congressman. He serves as chairman of the Washington Korean-American Forum. For more information visit Kim’s website (www.jayckim.com).