William Pesek is an award-winning Tokyo-based journalist and author of “Japanization: What the World Can Learn from Japan’s Lost Decades.”
Lee Jae-yong does not, as far as I know, wear a cape. Nor does he have superpowers or futuristic gadgets. Yet to hear Seoul officials tell it, the Samsung heir is some amalgam of Tony Stark, Thor, Doctor Strange… choose your favorite Marvel-ous hero.
South Korea’s Justice Ministry did not phrase Lee’s second get-out-of-jail-free card in Hollywood terms, instead ascribing the controversial move to “various factors such as public sentiment and good behavior during detention.” Yet the clear subtext is that Seoul needs Captain Korea to swoop in and save the day.
What does it say about President Moon Jae-in’s legacy that Seoul is again rewarding bad behavior? Or, for that matter, what this adventure says about South Korea’s economic development?
Lee, remember, was imprisoned for effectively bribing a former South Korean president to help secure control of Samsung Electronics. That president, Park Geun-hye, is still wasting away in jail. Too bad for Park, she does not hail from a family dynasty that can help South Korea overcome a microchip shortage.
That, let us be frank, is why Lee’s bad behavior is being rewarded. At a moment of uncertainty, Moon’s government is gambling that returning Lee to Samsung will help keep South Korea atop the chipmaking rankings and hasten growth. It is likely a losing bet, though, ensuring Moon will be remembered less as a reformer than an apologist for the “Republic of Samsung,” a system he was elected to upend in 2017.
Samsung is by far the biggest character in the cast of family-owned conglomerates, or chaebol, towering over South Korea. When Moon took office, he pledged to restore faith in government after predecessor Park’s impeachment, and talked of altering the economic power dynamic. Rather than a handful of Samsung-like dynasties running the place, Moon favored catalyzing a startup boom to — as he put it — pursue a “trickle-up growth” model.
Sadly, though, Moon has pulled punches more than avenge the ways of tycoons hogging up much of South Korea’s economic oxygen. That, it seems, is a lot easier than biting the hands that generate the vast majority of national growth.
Park Geun-hye, pictured at a court in Seoul in August 2017: the former president is still wasting away in jail.
© Reuters
Park came to office in 2013 with her own bold talk of “democratizing” growth engines. When the going got tough, she turned to chaebol for help. The quid pro quo: You help me boost GDP, and I will go easy with antimonopoly policies. Park went quite a bit further and is now serving a 20-year sentence.
But Park’s about-face meant South Korea was little changed from the Lee Myung-bak years. Lee, president from 2008 to 2013 and now serving a 17-year prison sentence, was himself a product of the chaebol universe, rising to CEO of Hyundai’s sprawling construction unit.
In 2009, President Lee made the fateful decision to pardon Lee Jae-yong’s dad, then-Samsung Chairman Lee Kun-hee. Yet 12 years after his father’s release from prison, South Korea is preoccupied with Lee, the sequel.
To Seoul’s credit, Lee the younger is just getting paroled. Yet this decision smacks of the short-termism that helps the chaebol maintain their stranglehold over Korea Inc. In a June 2020 report, three years into Moon’s presidency, corporate analysis firm Korea CXO Institute said chaebol account for 84% of GDP. Yet these behemoths only provide about 10% of jobs.
The vast majority of employment comes from the small-to-medium-size enterprises operating in their shade. The scale and hold that chaebol has over virtually all sectors make it hard for SMEs to blossom. Count the ways this warps incentives. And perpetuates a monopolistic dynamic that hurts competitiveness and wage growth.
Prioritizing Lee’s supposed prowess at chip design and production over setting an example might seem wise now. It means, though, that just as one Samsung chieftain got a pass like the previous one, Seoul is stuck in a cycle in which it serves tycoons more than South Korea’s 51 million people.
Granted, South Korea is having a decent pandemic-era experience. Its success in containing COVID-19 saw the economy growing 5.9% year-on-year in the second quarter, the best showing in a decade. But the failure of three successive governments to use that 10-year window to wrestle power away from family dynasties raises fears about the next decade.
As Lee returns to his coddled life, he faces a variety of tests. One is doing something smart with Samsung’s $82 billion mountain of net cash. Shareholders hope Lee has strategic strengths beyond who his late daddy was and launches a burst of acquisitions and investments.
All these years of the Lee family juggling court appearances, after all, saw rivals Hyundai Group and SK Hynix, regional peers like Taiwan Semiconductor Manufacturing Co. (TSMC) and American giants like Intel make inroads in chipmaking, biotechnology, autonomous vehicles, fifth-generation, or 5G, telecommunications, you name it.
South Koreans have seen this movie before. But what is the endgame? With an election 209 days away, it is hard to see Moon having the political will or bandwidth to flip the script. South Koreans, sadly, find themselves cast as extras as the tycoons producing their economy do their worst.