In Seoul, a waning Moon

Moon Jae-in

On February 5, The Diplomat ran an article by Tae-jun Kang whose headline asked the question: “Is Moon Jae-in Becoming a Lame Duck?” Noting that presidents of South Korea serve five-year terms and are ineligible for re-election, Kang explained that there’s a saying in that country: “the nightmare of the third year makes the president a lame duck.” As it happens, President Moon, the incumbent, will begin his third year in office in May – and “signs of the ‘nightmare’ for Moon and his government,” wrote Kang, “have already begun to emerge.”

It sounds fatalistic – as if Moon’s “nightmare” were foreordained. In fact, as Kang goes on to explain, Moon would appear to have surrounded himself with a bunch of crooks. There are so many of them that it can be hard to keep track of them all.

Sohn Hye-won

One of them is legislator Sohn Hye-won, who is suspected of covert involvement in the purchase of properties that were later officially designated as cultural assets, thus automatically enhancing their values. In late January, in a bizarre effort to prove her innocence, she offered to donate her collection of lacquerware to the government.

Another of Moon’s party hacks is legislator Seo Young-kyo, who purportedly asked a judge to reduce the punishment for a crony’s son accused of attempted sexual abuse. Yet another member of the party, Moon’s economic advisor Kim Hyun-chul, resigned on January 29 over some remarks about South Korean retirees and allies that were deemed offensive.

Moon Da-hye

Then there’s Moon’s daughter, Moon Da-hye, who recently moved out of the country with her husband and children, the supposed reason for which was that her husband had embezzled $2.7 million of a government subsidy received by his employer and left the country to protect his assets from seizure.

Finally, there’s Kim Kyung-soo, governor of the South Gyeongsang province and a former Moon campaign aide, who was sentenced on January 30 to two years behind bars for helping to rig an opinion survey.

As a result of all this, Moon’s approval rating has dropped from a high of over 70 percent to below 50 percent.

Kim Kyung-Soo

In a January 22 piece for the East Asia Forum, Kim Kee-seok, a political scientist at Kangwon National University, was even blunter than Kang. Whereas Kang’s headline ended in a question mark, Kim’s made a firm statement: “Moon’s popularity wanes as South Korea’s economy stalls.” As the headline indicates, Kim, unlike Kang, cited the nation’s faltering economy as a reason for Moon’s declining fortunes. Kim also mentioned the failure of the North Korea peace initiative to bear any fruit thus far.

But Kim, like Kang, also focused on corruption. Whereas Kang itemized the sleazy presidential sidekicks and family members who are dropping like flies, Kim attended not to these specifics but to the general issue of reform.

As Kim put it, South Korean voters who “demanded fundamental innovation of the political system,” including changes in the constitution, electoral process, and judicial system, become “sceptical of the prospects for innovations of this kind as the Moon administration continues to lose golden time.” We could hardly put it better ourselves. In 2017, Moon Jae-in made big promises to an electorate that’s increasingly sick of routine corruption at the highest levels of politics and business – and he’s utterly failed to deliver on them.

South Korea’s top judge is behind bars

Samsung HQ, Seoul

In our ongoing coverage of corruption in South Korea, we’ve focused mainly on the leaders of the chaebols – Samsung, Hyundai, and the other massive family-run conglomerates that are the engines of that country’s economy – and on the top politicians with whom they routinely exchange illegal bribes for illegal favors. As we’ve noted, the politicians who get caught participating in these shady shenanigans often end up with long prison terms, while the members of chaebol royalty either escape prosecution, evade incarceration, or – at worst – spend brief periods behind bars before being magically released by court order.

Which brings us to a sphere of South Korean activity that we’ve touched on in passing here but haven’t focused on: namely, judicial corruption. When a President and a chaebol CEO are discovered to be engaged in a some kind of corrupt trade-off, one would expect both to receive the same punishment; but, as noted, that rarely turns out to be the case. How can that be? Well, think about it: who is in a better position to generously grease the hand of a judge – a politician or the head of one of the world’s richest corporations?

Yang Sung Tae

The reality of high-level judicial corruption in South Korea was exposed in late January, when Yang Sung Tae, who was the Chief Justice of the Supreme Court from 2011 to 2017, was arrested on more than forty criminal charges. South Korea is a country where people are used to seeing their former presidents arrested, but this was a first.

Since last autumn, Yang had been under investigation for abuse of judicial authority. In September it was reported that various unions and other groups that had been involved in legal actions during his tenure had accused him of shady dealing. One of those groups, the Korean Metal Workers’ Union, charged that Yang had reversed lower court rulings in several cases not for legitimate judicial reasons but because he had agreed to do so in under-the-table deals with the Blue House (South Korea’s equivalent to the White House).

Park Geun-hye

Prior to his arrest, it was further reported that that the National Court Administration, at Yang’s behest, had allegedly “sought to use politically sensitive trials as bargaining chips to win former President Park Geun-hye’s support for his long-cherished wish to establish a new court of appeals.” Also, he was suspected of having “amassed slush funds with the budget set aside for running court spokespersons’ offices.”

In short, the fellow seems to have been quite prolific and versatile in his crookedness. As the Straits Times pointed out, he’s in good company: both the president who appointed him to the top judicial spot, Lee Myung-bak, and the aforementioned Park Geun-hye, who succeeded Lee, “are now wearing prison garb.” The Times described this as “a poignant reminder of problems surrounding the highest echelon of the nation’s governing system.” What an elegant way of saying that South Korea’s corridors of power stink of corruption.

Heroes at Hanjin?

Kim Sang-jo, the “chaebol sniper”

This would all make an interesting movie – full of colorful characters, intense conflict, mounting tension, and stunning reversals – except for the fact that it’s all just too sprawling a story, with too many villains and, so far, no hero.

What are we talking about here? We’re talking about the large-scale corruption at the uppermost levels of the South Korean government and business sector that, in the last couple of years, has made for some high drama, complete with palace intrigue, smoking guns, and courtroom clashes. What is required here is a screenwriter who can tame this tale and foreground a single arresting plot line.

Park Geun-hye

But what to foreground? OK, take a deep breath, here goes: in the brief period since 2017, we’ve seen the removal from office – and long-term imprisonment – of South Korea’s first female president (Park Geun-hye) after she was caught doing underhanded deals, through her shady best friend (Choi Soon-sil), with top business leaders – who, as usual, went scot-free – and her replacement by a self-styled “reform” president (Moon Jae-in), who, making bold promises to rein in the power and corruption of the increasingly unpopular chaebols – those massive, family-run conglomerates that dominate that nation’s economy and that operate with impunity – installed an antitrust czar (Kim Sang-jo), widely styled the “chaebol sniper,” who started off his three-year term with a lot of tough rhetoric about cutting Samsung, Hyundai, and other chaebols down to size, only to tone down his language in recent months and talk, instead, in pathetically humble language, about requesting modest alterations in the chaebols’ organizational charts, even as the president himself began getting all chummy with the chaebol leaders, apparently having decided that he needed them on his side if he wanted to kick his country’s weak economy back into high gear.

Moon Jae-in

Phew. So does that mean we’re back at square one? Not exactly. Because, as we’ve mentioned before, while President Moon and his “sniper” seem to have dwindled into impotence and irrelevance, the cause has been taken up by some of the people who actually own sizable chunks of the chaebols but who, in keeping with the curious (indeed, unique) traditions of the chaebols, have been systematically denied any meaningful input into the governance of the conglomerates. The bizarre fact, which remains unchanged, is that in most cases, the families that founded the chaebols and that still hold the key leadership positions in them don’t own a majority or even a plurality of shares in those firms. Indeed, some of the chaebol royal families would, under ordinary Western circumstances, be considered negligible minority stockholders.

Choi Soon-sil

No surprise, then, that as the South Korean economy falters and the chaebols, immense though they are, look more and more as if their best years are behind them, investors – most of them foreigners, many of them Americans – who have plunged large sums of money into the chaebols are increasingly frustrated at their own lack of power to initiate significant changes. The unfortunate truth is that while the men who founded the chaebols were business wizards, their children and grandchildren, who now sit behind the big desks in the corner offices, don’t necessarily have what it takes to run some of the world’s largest corporations. Meanwhile, many of those investors have proven track records at turning failing businesses around – at spinning off or closing down certain subsidiaries, at recognizing the need to hire or fire certain executives, and at successfully restructuring extraordinarily diversified conglomerates to maximize efficiency and profits.

Cho Yang-ho

So it is that, as Kim Jaewon of Nikkei reported on January 21, Korea Corporate Governance Improvement (KCGI), a newly founded South Korean activist fund that is now the second largest shareholder in the Hanjin Group (whose most famous holding is Korean Air), is pushing it to sell its hotel chain, which includes the Wilshire Grand Hotel in L.A. and the Waikiki Resort Hotel in Hawaii, and to form an independent committee that would select Hanjin’s CEO and other top leaders. Now that would be real reform – a change in policy that would actually make it possible to remove from office the scarifyingly rich and corrupt members of one of the chaebol royal families – in this case, the notorious Cho clan, which owns 29% of Hanjin – and replace them with new, competent, and even (could it be?) clean outsiders.

Cho Hyun-min

Such a transformation would mean the departure of company chairman Cho Yang-ho, who last year was indicted on embezzlement charges; of his wife, who has been probed for smuggling; of his daughter Cho Hyun-min, who was accused of assaulting an ad-agency executive; and of another daughter, Cho Hyun Ah, whose outrage at a flight attendant who served her macadamias in a bag and not on a plate led to a scandal and a legal mess that made headlines worldwide. In short, it’s a family that Hanjin, and South Korea generally, would be much better off without.

Bottom line: the protagonists in this drama may turn out, in the end, to be these so-called activist investors. Screenwriters, stay tuned.

Wherein we take yet another snipe at the pathetic “chaebol sniper”

Now here’s a new twist.

As we’ve recounted in some detail on this site, South Korea is going through a rough patch, economically speaking. In the decades after the Korean War, the country grew with remarkable rapidity from an undeveloped backwater into an international powerhouse. Leading this spectacular advance was a relative handful of family-run conglomerates, known as chaebols (the plural in English is often rendered as “chaebol”), whose names – Samsung, Hyundai, etc. – have become famous around the world.

For decades, the chaebols were the engines of the South Korean economy. The nation’s populace looked up to them. The dearest hope of South Korean parents was that their kids would someday go to work for one of the chaebols. In recent years, however, there has been a discernible shift in public attitudes toward the chaebols. For one thing, they’ve increasingly been seen as crowding out new businesses and thus stifling both competition and innovation – thereby making it hard for the South Korean economy to grow even further. For another thing, as ordinary South Korean citizens have grown more and more accustomed to the idea of democracy and equal treatment under the law, they’ve also grown tired of the shameless double standards that have allowed the chaebol dynasties to get away with corruption on a massive scale.

Moon Jae-in

When Moon Jae-in became president in 2017, he promised to clean up the chaebols. Other presidents before him had made the same promise – among them his immediate predecessor, Park Geun-hye, who is now in prison because of illegal transactions with chaebol kingpins. But Moon insisted he really intended to tackle chaebol corruption. To prove it, he put the nation’s Fair Trade Commission in the hands of a fellow named Kim Sang-jo, who called himself the “chaebol sniper.” One gathered that President Moon had put the toughest guy he could find on the job – a sort of cross between Clint Eastwood’s Dirty Harry and the Charles Bronson character in Death Wish. A fella who would make the bigwigs at Hyundai and Samsung tremble in their office towers and give them nightmares in their lavish mansions.

Kim Sang-jo

In fact, when it came to scaring the heck out of South Korea’s industrial giants, Kim turned out to be more like Kim Novak than Clint Eastwood. As we’ve noted, Kim, who at first came out with guns blazing, has more recently presented himself as a “reasonable reformist” who wants to nudge the chaebols, ever so gently, toward “evolutionary reform.” On January 3, in response to an extensive interview with Kim that appeared in the Korea Herald, we concluded that Kim was now yet another public official in Seoul whose posture toward the chaebols was that of a “servile brownnoser.”

Samsung honcho Jay Y. Lee being arrested last year for massive corruption; in accordance with time-honored South Korean practice, he was later given a suspended sentence

Well, it turns out that the Korea Herald story wasn’t the last word on Kim Sang-jo. On January 17, Kim Jaewon and Sotaro Suzuki reported in the Nikkei Asian Review that the sometime “chaebol sniper” was now – gasp – actually taking an adversarial position toward the chaebols. Or, at least, toward the people who run them. The ruling chaebol families, said Kim, “have lost the aggressive entrepreneurship that was shown by the generations of their founding grandfathers and fathers.” The current chaebol bosses, Kim continued, “were born as if they were princes in a kingdom. As the character of the families has changed, the decisive and quick decision-making process of the past has been replaced by a policy that focuses on the status quo to preserve their established power.”

True enough. Funny it took him so long to say so. Everybody else already had.

Hyundai chairman Chung Mong-koo

Kim went on to suggest that the people who have inherited their positions of power at the chaebols need to step down – or at least step away – from their posts, perhaps exchanging the title of CEO for that of Chairman, and choosing to concentrate on long-term strategy while allowing professional managers to make day-to-day decisions.

It doesn’t sound like a bad idea, at least to start with. But is Kim going to use his power to pressure the chaebol dynasties to do this? Or was this simply meant to be a modest suggestion from a man who, with every major media exposure, seems more and more determined to project a modest image? Apparently the latter. For Kim then went on to say: “If you thought I am a chaebol killer, you misunderstood me. The only way to succeed in chaebol reform is to make it predictable and sustainable.” Meaning what? Well, one’s first reaction is that this comment seems to have been formulated in such a way as to mean just about anything to just about anybody. It’s not a policy statement but a political slogan, every bit as empty and meaningless as “hope and change” or “stronger together.” No wonder both Moon and Kim are plunging in the polls.

A rocky start for 2019 in South Korea

Moon Jae-in

In South Korea, the year has kicked off with a bang. On January 8, the South China Morning Post reported that President Moon Jae-in had made some drastic changes in his administration. Moon, who was scoring big in the polls in the months after his inauguration in May 2017, has seen his popularity erode along with his country’s economy.

How to turn things around? Fire some people. Moon has dismissed his chief of staff, his senior political affairs secretary, and his senior press secretary. No sign, however, of him doing what he actually promised to do when he took office – namely, tame the chaebols, the corrupt, family-run business empires that are at one the engines and the anchors of the South Korean economy.

Trump: taking the opposite approach

On January 10 came another tidbit of news from the Blue House (which, of course, is Seoul’s answer to the White House). While Trump was slashing taxes and regulations, reported the Australian Financial Review, Moon was trying to cure his country’s economic ills by doing the opposite. Surprise! “So far,” wrote Michael Schuman, “it has not worked out as planned.”

Joblessness is up. Growth is down. Wages are flat. Both employers and employees are restive. And small businesses are suffering. Their costs are rising, but they’re not in a position to pass those costs on to buyers. Consequently, they’re shedding employees and finding other ways to cut corners.

The Blue House

All this might have been prevented if Moon had kept his promises and tackled the Great White Whale – the chaebols. But he chickened out. He would probably reject that characterization, pointing out that his budget for 2019 contains policy changes that are intended to reduce the power of the chaebols and help out smaller enterprises.

Others might argue that these initiatives are too little, too late. That Moon, take him for all in all, is essentially kicking the ball down the field. And allowing the South Korean economy to continue experiencing the consequences of his relative inaction.

Yang Sung-tae

Then, on January 11, Choe Sang-hun of the New York Times reported on a unprecedented development in South Korea. Yang Sung-tae, a former justice of the Supreme Court, had been confronted by prosecutors over charges that he had “conspired to delay a case that could upset relations with Japan.”

The case was brought by a group of South Koreans who, during the Japanese occupation, were subjected to forced labor by such firms at Mitsubishi. Yang will probably be indicted – a first in the voluminous annals of modern South Korean corruption.

Moon’s government, then, is on shaky ground. The South Korean judiciary has experienced a major embarrassment. The country’s small businesses are even more precariously positioned than they were a couple of years ago. And the ordinary citizens of South Korea are having more and more trouble making ends meet.

But amid all this loss and insecurity and scandal, the chaebols, as always, continue to stand strong.

A new Moon

Moon Jae-in

It’s a new year – and a new Moon Jae-in. Before he became president of South Korea, Moon referred to the chaebols – those hugely successful but profoundly corrupt and immensely powerful family-run conglomerates that dominate that country’s economy – as a “deep-rooted evil.” When Moon rose to the presidency in May 2017, he promised a serious campaign of chaebol reform. Yes, several of his predecessors had made similar promises, but Moon said his promises were for real. He appointed a so-called “chaebol sniper,” one Kim Sang-jo, whom he tasked with bringing the chaebols to heel.

Kim Sang-jo

In the more than year and a half since his inauguration, however, the South Korean people have seen very little in the way of reform. Once again, the promises have proven empty. As we saw a couple of weeks ago, Kim, in a recent interview, presented himself not as an anti-chaebol warrior but as a “reasonable reformist” who respects the chaebols and, far from cutting them down to size, seeks to render them competitive through “evolutionary reform.”

Jay Y. Lee, top dog at Samsung

Now Moon, too, is singing a new tune. As the Korea Times reported on January 6, “the President appears to be expanding communication channels to win backing from the country’s leading industrial conglomerates.” According to a spoksman for Moon, the President planned to meet with chaebol leaders some time in January and would ask them “to hire more and spend more,” in exchange for which his government would provide increased “tax benefits and administrative support.” Partly in order to win votes from younger members of the electorate who are in the job market, according to top government officials, Moon needs “to reach out his hands to Samsung, LG, SK and Hyundai,” the country’s “top four family-controlled businesses.”

Hyundai Motor Chairman Chung Mong-koo

That’s quite an about-face, even by high-stakes political standards. The man who vowed to be an anti-chaebol crusader is now going to the chaebols, hat in hand, and begging them for what is essentially a political favor – and, in response, offering to cut their taxes. In other words, it’s back to business as usual in South Korea, with the head of state and the chaebol kings scratching each other’s backs.

Already, reported the Times, “chief presidential policy chief Kim Soo-hyun met with senior executives at Samsung, LG and SK in a Seoul hotel late last year” in order to set the groundwork for the shift in approach. The question, it seems, is not whether Moon plans to woo the chaebol bosses; it is how the bosses will respond to his bootlicking.

LG Group headquarters

You see, they’re not all that happy with Moon, partly because of the aggressive anti-chaebol rhetoric with which he started his administration, and partly because his hike in the minimum wage has blunted their competitiveness abroad. It’s predicted that South Korean economy will grow only 2.5 percent this year, and the chaebols put a lot of blame for that at Moon’s feet.

The worm, then, has turned. The sometime chaebol slayer has become a servile brownnoser, trucking to the big boys at the “big four” – Samsung, Hyundai, LG, and SK – and hoping that they’ll respond positively to his kowtowing.

The clueless “chaebol sniper”

Kim Sang-yo: almost as tough and scary as Kim Novak

On December 18, the Korea Herald published the most extensive interview we’ve seen yet with Kim Sang-jo, who was appointed to a three-year term as head of South Korea’s Fair Trade Commission in June 2017 and who, tasked with reining in the power of the chaebols – the family-run conglomerates that are at once the engines of that country’s economy and the greatest hindrances to its growth – calls himself the “chaebol hunter.” Shin Ji-hye, the Herald’s reporter, maintained that Kim had made some progress, proposing key revisions to the Fair Trade Act that were approved by the Cabinet in November and await ratification by the National Assembly. Shin also sought to portray Kim as a sympathetic man in the middle, criticized from both sides, one of which assails him for failing to bring about promised reforms and the other of which accuses him of going too far in his purported war on the chaebols.

Hyundai headquarters, Seoul

In the interview, Kim also sought to depict himself as a man of balance – a “reasonable reformist,” who appreciates the value of the chaebols to South Korea and who seeks not to blunt their economic impact, let alone destroy them, but to make them competitive. In fact, it turns out that Kim no longer calls himself the “chaebol sniper” but, rather, wants to be known as an “evolutionary reformer” who “walk[s] the middle line.”

According to Kim, the key to proper chaebol reform, in Shin’s paraphrase, is “to put an end to ‘gapjil,’ unfair business practices employed by market monopolies, as well as undue inter-affiliate trading. Doing away with both is the main objective of the FTC’s proposed bills to amend the Fair Trade Act.”

Samsung headquarters, Seoul

Yet when it came to one of the major issues involving the chaebols — the most prominent of which include Samsung, Hyundai, and LG –Kim was as stubborn as any chaebol CEO. Noting that the U.S. Chamber of Commerce and four of its counterparts in other countries had signed a statement in November challenging South Korean regulations as well as the FTC’s approach to investigation, Kim defended the chaebol system and argued that it wasn’t reasonable for U.S. businesses to expect other countries to model their corporate structures on its own.

As for American investors who are major chaebol shareholders but who, in keeping with the antiquated traditions of the system, have been denied the kind of influence on corporate decision-making that they would enjoy in Western firms – and who, of late, have been raising their voices more loudly to complain about this unfair state of affairs – Kim said, “This is a sensitive issue,” then said of the most prominent of those investors that “its understanding of Korea still remains insufficient.”

LG headquarters, Seoul

In fact, when Kim swipes at a major international investment firm for its supposedly “insufficient” understanding of Korea he is confessing to the very provincialism that lies at the heart of the chaebol problem. It is no exaggeration to say that Kim’s remark is by far the most telling part of the interview, indeed the only part that really matters. It underscores the fact that chaebol reform has been placed in the hands of a man who, however well-intentioned he may be, just doesn’t get it.

He doesn’t grasp, in short, that halfway measures, parochial measures, are just not enough; he doesn’t realize that he’s thinking inside of a very narrow box, a South Korean box, when what is called for in this situation is a major adjustment in South Korean business practice and business thinking — an adjustment that will result in a system that conforms to international norms and will allow for international investment on the same terms that obtain elsewhere in the developed world. Kim’s interview leaves the unfortunate impression that, until South Korea puts the future of the chaebols in charge of another individual, someone with a more global perspective, hope for real chaebol reform will be entirely in vain.

Chaebol progress?

 

The current chapter in the history of the chaebols continues to develop in exceedingly interesting ways.

Hyundai headquarters, Seoul

As we have been discussing on a regular basis at this site in recent weeks, these massive, heavily diversified, internationally famous, and family-run conglomerates – which have dominated the South Korean economy since shortly after the Korean War, raising the nation up from indigence to prosperity even as its government moved gradually closer to real democracy – have hit on challenging times. Once engines of growth, the chaebols are now barriers to further growth, so large and powerful that they’re capable of crushing, with little effort, the development of new firms and stifling the spirit of entrepreneurship.

Samsung headquarters, Seoul

As a result, in South Korea there is hardly any way to make a respectable career in business other than to find a job at one of the chaebols. And however talented and motivated one may be, there is no way to rise to the very top of one of the chaebols unless one happens to have been born into the right family. This state of affairs has led to growing resentment toward the chaebols – a resentment intensified by the corrupt ties between the chaebol dynasties and the country’s political elites, and, perhaps most bizarre of all, by the fact that the people who hold tight to the reins of power in these conglomerates are not necessarily the same people who own the lion’s share of their stock. On the contrary, it is rare indeed for the stockholders in the chaebols to have much say at all in their actual management.

Moon Jae-in

As we’ve discussed here, and as Kim Jaewon noted in a recent article for Nikkei, South Korean Moon Jae-in, upon his inauguration in May 2017, promised major chaebol reform. To be sure, it is a tradition for newly installed South Korean presidents to vow chaebol reform. But Moon spoke so insistently about the matter that he persuaded a good many citizens of his country that he really meant to do something. As the weeks and months have gone by since he took power, however, fewer and fewer have looked upon his assurances with confidence; and, as the usual arrests for corruption have taken place, followed by the usual pardons for the chaebol executives involved and the usual prison terms for the politicians, once again cynicism about the chaebols has been on the upswing.

Lee Kung-hee, chairman of Samsung Electronics

It is in this atmosphere that a few bold chaebol shareholders are finally standing up to the perverse power arrangement that they have quietly accepted for so long. These activist investors, observed Jaewon, “have scored minor victories at Samsung and Hyundai, while the parent of Korean Air Lines has been called to account by a domestic fund.” At the head of the list of these investors, wrote Jaewon, is the New York-based Elliott Management, the world’s largest activist fund, which has been campaigning “to force Samsung Electronics and Hyundai Motor to increase shareholder returns.”

Hyundai Motor Chairman Chung Mong-koo

This campaign by activist investors has already begun to bear fruit. In early December, Samsung Electronics “retired 7% of its common stock and 8.9% of its preferred stock worth 4.9 trillion won ($4.4 billion)” in an effort to provide shareholders with greater benefits. Hyundai Motor recently announced plans to “buy 2.8 million treasury shares worth 254.7 billion won by the end of February to boost its stock price and shareholders’ value.” In December, it even took the action – surprising within a South Korean context – of “promoting several foreign executives to senior roles, a first step toward the management diversification long demanded by minority shareholders.”

Marriage, chaebol style

 

Yes, they are royal families.

There’s nothing quite like them anywhere else in the world. The clans that run the South Korean chaebols – the relatively small number of sprawling, internationally famous conglomerates that have dominated that country’s economy since not long after the Korean War – have long been viewed as royal families. The top executive positions at these companies pass down from generation to generation; the men (they are almost invariably men) who hold these offices wield enormous power over the nation’s political class; and the sons and daughters of these bosses are celebrities, whose social lives are followed closely in the popular media, and who are often, indeed, described as princes and princesses.

Hyundai headquarters, Seoul

One thing that these chaebol families have in common with actual royal dynasties is the high level of intermarriage between them. According to a new survey, 49.3% members of the founding generation of the chaebol clans – the people who actually established these firms in the second half of the last century – are or were married to spouses who also belonged to families that founded chaebols. Among members of the second generation of chaebol ruling families,the figure is even higher: 52.7% of the people whose parents founded chaebols married other people who parents also founded chaebols.

In South Korea, just as the management of chaebols is almost universally dynastic matter, politics is also very often a family game. Former President Park Geun-hye, for instance, who is currently behind bars because of her involvement in chaebol corruption, is the daughter of former President Park Chung-hee. Many chaebol family members who do not marry into other chaebol families have, instead, married into powerful political families, which both reflects and reinforces the intimate ties that bind chaebol CEOs and Chairmen to officials at the highest level of the South Korean government. Among members of the first generation of chaebols, 23.4% were or are married to members of “powerful” political families; in the second generation, this figure declined to 7.4%.

Park Geun-hye

The survey produced some other interesting findings. Of all the chaebols, the GS Group, had the highest number of “in-law relations” with other chaebols, namely seven. GS, like most of these conglomerates, is highly diversified, although in its case there is a particular emphasis on oil, gas, and other energy-related products. The second chaebol on the list, with six “in-law relations,” was the LS Group, which manufactures power cables, electrical equipment, machinery, and other such products.

Why does any of this matter? Because these statistics serve to reinforce the perception, on the part of many ordinary South Koreans, that their country – in which democracy has, admittedly, made great strides over the last several decades – is still, to a deplorable extent, governed by a network of business and political kingpins, people who are tied to one another not only by shared financial interests and systematic corruption but, yes, by the most intimate of family bonds.

Cuba’s deadly disrepair

We’re so accustomed to seeing America’s mainstream media celebrating Havana as “exotic” and “quaint” and “unspoiled” that it came as something of a surprise to see USA Today, on December 2, running a piece headlined “How Havana is collapsing, building by building.”

A couple of Havana’s “architectural gems”

Reporters Tracey Eaton and Katherine Lewin didn’t pull any punches. They talked to one Rafael Álvarez, who “was up at 6:30 a.m. to warm milk for his baby daughter when he heard the sound of pebbles falling.” Next thing he knew, in his words, “the floor below us came loose. We were left hanging in the air, then fell into the abyss.” He ended up “buried in rubble to his waist.” But he was the lucky one. He lost his mother, daughter, and two others in the collapse of his apartment building. It was 101 years old.

Exotic Havana

They talked to Carlos Guerrero, who lives with his family in another building that looks as if it’s about to go any minute. “Neighbors tell them, ‘Get out of there! It’s going to collapse!’” They talked to Yanelis Flores, who says her own flat, where “daylight shines through terrifying cracks in the walls,” is “worse than a pig pen.” A staircase collapsed last year, stranding people on the upper floors. And they talked to Magaly Marrero, who “said her apartment is so bad that she showers in the kitchen and relieves herself in a bucket.”

And they talked to others. Plenty of others. They provided statistics showing that these anecdotes were only the tip of a massive iceberg. “In Havana,” they wrote, “some of the same architectural gems that draw tens of thousands of American tourists crash to the ground every year.” Their piece amounted to a powerful indictment of Communism.

Katherine Lewin

Except for the fact that Eaton and Lewin didn’t really focus on Communism as the ultimate cause of all this decay. No, when it came to causes they turned coy. Here, in fact, is how they put it: “Causes [for all these building collapses] range from weather and neglect to faulty renovations and theft of structural beams.” Well, yes, those may be the immediate causes. But the reason why these “architectural gems” haven’t been properly maintained over the decades – or torn down and replaced by safer structures – is, quite simply, Communism.

Tracey Eaton


If you’d taken a stroll around East Berlin just before the Wall fell, you’d have seen the same kind of miserable dilapidation – derelict blocks of flats that had pieces missing and in which you could still see bullet holes dating back to World War II. Venezuela, of course, is headed down the same road. Meanwhile in the U.S., we have a younger generation that’s been brainwashed into thinking that socialism is just dandy and that is sending the likes of Alexandria Ocasio-Cortez to Washington. Congratulations to USA Today, then, for documenting the dire consequences of Communism, but please: next time, be more up front about what’s really behind all this deadly disrepair.