The video explores the pervasive influence of chaebols, the colossal South Korean business conglomerates, in shaping the nation's economy and social landscape. It highlights how these family-run conglomerates, such as Samsung, Hyundai, and LG, represent a significant portion of South Korea's GDP and have played a vital role in its transformation from a developing country to one of the world's leading exporters. Despite their achievements, chaebols have been embroiled in scandals and controversies, raising questions about their political influence and economic control.

Experts interviewed in the video discuss the historical backdrop leading to the rise of chaebols, emphasizing government policies during Park Chung-hee's presidency that spurred industrial growth and economic progress. The discussion also touches upon the government's regulatory role through the Korea Fair Trade Commission, which oversees competition law and aims to curb the monopolistic tendencies of these business entities. Meanwhile, opposition towards chaebols grows, fueled by numerous corruption scandals involving these corporations' leaderships and perceived cultural biases favoring male successors.

Main takeaways from the video:

Please remember to turn on the CC button to view the subtitles.

Key Vocabularies and Common Phrases:

1. chaebol [ˈtʃeɪbɒl] - (noun) - A large South Korean conglomerate, typically family-owned, that exercises significant influence on the national economy. - Synonyms: (conglomerate, corporation, business empire)

I'm now in Seoul, South Korea to talk to some experts to really understand the significance of the chaebol

2. conglomerate [kənˈɡlɒmərət] - (noun) - A large corporation that owns a collection of companies operating in various industries. - Synonyms: (corporation, multinational, business group)

What do these big brands, including Samsung, Hyundai and LG have in common? Theyre all chabals, which are large south korean conglomerates...

3. scandal [ˈskændl] - (noun) - An action or event regarded as morally or legally wrong, causing public outrage. - Synonyms: (controversy, disgrace, affair)

There have been a lot of high profile scandals, high profile controversies, almost all Korean Chablis.

4. bureaucrat [ˈbjʊərəkræt] - (noun) - An official in a government department, particularly one perceived as being concerned with procedural correctness. - Synonyms: (civil servant, administrator, official)

The political check imbalance has been loosened due to the financial liberalization. Korean big jabo can finance by themselves using the insurance companies and security companies, etcetera, etcetera. And so they became very independent from the influence of the policy itself was a bureaucrats control.

5. monopolize [məˈnɒpəˌlaɪz] - (verb) - To obtain exclusive possession or control of a trade, service, or commodity. - Synonyms: (control, dominate, take over)

Despite chabals monopolizing much of the country's wealth, startups in South Korea are catching up due in part to an increase in government investment.

6. pervasive [pəˈveɪsɪv] - (adjective) - Spreading widely throughout an area or group of people, often with a negative connotation. - Synonyms: (omnipresent, prevalent, widespread)

This kind of tunneling and related party transactions are so pervasive in Korea.

7. succession [səkˈseʃən] - (noun) - The action or process of inheriting a title, office, property, etc. - Synonyms: (inheritance, accession, progression)

Certain traditions such as only male members of the family being allowed to leave the company still persist. One of the things that we noticed that is, there's this family succession.

8. transform [trænsˈfɔːrm] - (verb) - To change in form, appearance, or structure; metamorphose. - Synonyms: (change, convert, alter)

These sprawling business dynasties have helped transform South Korea's economy from one of the poorest in the 1960s to one of the largest exporters in the world.

9. reckoning [ˈrek.ə.nɪŋ] - (noun) - The action or process of calculating or estimating something; also, a time when one is called to account for one's actions. - Synonyms: (accounting, judgment, calculation)

However, there might be an economic reckoning taking place.

10. promote [prəˈmoʊt] - (verb) - To support or actively encourage (a cause, venture, etc.); further the progress of. - Synonyms: (encourage, support, foster)

Export is promoted, but no imports in the same sector.

Can South Koreas untouchable chaebols change?

What do these big brands, including Samsung, Hyundai and LG have in common? Theyre all chabals, which are large south korean conglomerates that are usually run by one single family with total assets that exceed ₩5 trillion. There are more than 80 chabals in South Korea in 2023, and the revenue of the ten biggest accounted for almost 60% of South Koreas GDP in 2021. Thats more than a trillion dollars.

I'm now in Seoul, South Korea to talk to some experts to really understand the significance of the chaebol. It's very powerful, this conglomerate chabols. There have been a lot of high profile scandals, high profile controversies, almost all Korean Chablis. There are huge lists, too many to identify. These right here are the top five tribals in South Korea right now. Samsung leads the pack. These sprawling business dynasties have helped transform South Korea's economy from one of the poorest in the 1960s to one of the largest exporters in the world. Despite this remarkable growth, there are calls for change and innovation to propel South Korea forward.

I reached out to multiple chaebols for comment, but none have replied to me. Hi, my name is Sangim Para. I'm a professor of economics at graduate school public administration. You have been a very vocal critique. A lot of big corporations. Have you had any backlash so far? I wouldn't receive any physical or other kind of threat from them. Instead, they offer me a lot of carrots. A lot of carrots instead of the steak. Would you be comfortable telling us what is that in the form of? Well, in terms of helping out some set up certain institution, or offering some position as a director of certain organizations, something like that. What has your response been?

I basically told them there might be a lot of people who were interested in that kind of position or shop. I'm not one of them. The average korean citizen's perspective on chaebols is very different from the international perspective. The general korean people has a very mixed feeling about korean jebu. All except that Korean Jebu became the de facto political power and the gatekeeper of our society. For one thing, they did a good job for the country. They also create many jobs for the people.

Tae Ho bak is a trade expert who served as South Korea's trade minister in 2011. The history origin of our korean conglomerate started with the government management. At that time, the leader of the country, Park Jung hee. He asked all the ministry, even directly to the general public. If you export anything, we can do. The first manufacturing item was a wig to someone in New York. Yeah, made of real hair. So people start to export anything. And then later more light manufacturing sector like clothing and shoes and hats. We did that for ten years. Sixties. We are quite successful, still very poor.

So Park Jung hee, the president at the time, thought that maybe we cannot continue like this. We have to do something heavy. Many international organizations laugh at this. How can you do this in so poor country? Hyundai, Samsung LgD the leaders coming in and they meet with the president. Park Chung hee, South Korea's third president, implemented a plan to pull the country out of poverty. He selected five export oriented sectors available for government. Electronics, shipbuilding machinery, petrochemicals and non ferrous metals. This was called the heavy chemical industry drive and it planted the seed for companies in South Korea to grow.

The government intervened the financial market as a kind of intermediary. They borrow the money from abroad with guarantee and etcetera. And then they allocate the money to the big business group or big firms with some industry targeting. Where was this money coming from? Usually private foreign banks. Uk Akli, for example. They lend the money to chairman Chung of Hyundai so that they can build a shipbuilding yard. Korean Jambo became very big as a consequence of successful rapid economic growth in sixties and seventies. Government doesn't allow foreign investment to come in the sector. These firms are operating. Export is promoted, but no imports in the same sector.

In 1960, South Korea's GDP was less than $4 billion. By 1979, that number had monumentally jumped to almost $67 billion. However, in October 1979, Park Chung hee was assassinated. There was a big movement for political democratization in Korea. Korean jebu became more powerful because the political check imbalance has been loosened due to the financial liberalization. Korean big jabo can finance by themselves using the insurance companies and security companies, etcetera, etcetera. And so they became very independent from the influence of the policy itself was a bureaucrats control.

In 1981, the country's regulatory authority for economic competition, the Korea Fed Trade commission, was established. That's in the middle of Han river, so it's basically the heart of korean business and finance and politics. Sang bok jo is a finance professor at the Seoul National University. Except the three year period that I was serving as a chairperson for the Korean Fair Trade Commission during the Moon Jae in presidency. What is the main role of the Korea Fair Trade Commission? Basically in charge of competition on law. It is governing the big business group and also some of the SME related issues and consumer protection related issues.

What have been some high profile challenges during your tenure? One of the cases involved large business groups such as Samsung or SK. And also we have multinational corporation cases, Google, Apple and GTT. At the same time, because of the economy changing and transforming to digital economy, we also have cases regarding these big platform companies, labor and kakao and coupon.

Despite chabals monopolizing much of the country's wealth, startups in South Korea are catching up due in part to an increase in government investment. It's creating more jobs and competition within the economy. Between 2020 and 2023, the number of non real estate startups in South Korea grew by 12% to hit more than 581,000 companies. Some recent startups are putting South Korea on the map as well like messaging platform kakao and e commerce website coupangous. Each year, FTC discloses the large business groups and now coupang and kakao and labor. They are considered to be kind of large business groups.

Throughout 60 70 years, Korea has been growing fast and developing very fast. And during this development process, SEbr actually helped a lot. We invested a lot in technological advancement and also created many talented human resources. However, there might be an economic reckoning taking place. Anti chabot sentiment here has been brewing for years, filled by several corruption and financial scandals that involved heads of these south korean corporations.

A lot of these chiefs, they have been pardoned for their crimes. Why does this keep happening? They can influence the decision making of the court, media and the policy. I have a korean book and I you keep track of all the navies that have been pardoned. More than two page role to see that book. It is called in Korea three five rule. So that means whatever the crime, it is, the family of the korean jabbo will be sentenced to three years in prison with five year probation. Because in the law of Korea, three year imprisonment is the maximum amount of the imprisonment year to get suspended sentence. This means that a convicted person can serve his sentence through a probationary period.

Each chair ball were saying there are so many different subsidiaries. A few of them have over 100 affiliated companies and none of them have anything to do with what the chairball began with in the first place. They use those unrelated business and company for the controllers on private benefit taking.

Basically exploit the minority shareholders money in certain company and they try to tunnel them profit to the other company in which the owner family has bigger cash flow. Right? This kind of tunneling and related party transactions are so pervasive in Korea. So now, despite there being some reforms within troubles, certain traditions such as only male members of the family being allowed to leave the company still persist.

One of the things that we noticed that is, there's this family succession. Don Sutherton is a consultant specializing in korean companies and business culture globally. There are many other models around the world where there are families that are able to go multi generational. The states we could look at at one point, IBM or Ford, or if you look at the Porsches in Germany, in the average korean household, families prefer sons over daughters. But things could be changing.

Important thing is, whoever becomes the head of these big business groups, whether the person will be actually serving the best interest for the company and how the company's long term sustainability will be achieved. As we moved into the third generation, many of these are very successful, and they have taken the group and they've been able to transform that into something new that is very applicable today in the world. With Hyundai as a case study, they're moving what we call into the smart mobility. What is that going to be in the future? Develop your brand in Korea, have a high success level, and take it overseas. And we see that with Samsung with electronics and LG with appliances.

The korean government also wants to see job creation, moving into new sectors to have more green companies meet their carbon reduction goals. It's in line with the korean government. When I left the korean bio Trade Commission, I felt that I did my best. There is a political pressure, media attention, and these companies hire lawyers who know how to delay legal proceedings. I think we have showed that we do not give in outside pressure.

What is your hope for the korean economy? I want korean economy and korean companies to grow and flourish, not abusing their market power, not self serving actions, so that they can attract talented people around the world to work for them. We have the maturing of the korean population. So a lot of startups today are people who have worked in their career for one of the other major big groups, and they want to go and use their knowledge and their expertise. We see that occurring along with a new generation who really don't want to work for the large groups. General reform of Korea is necessary for Korea to move into that direction in the future, in the next five years. Do you see that happening? There is a big question, and it depends on the political situation, but for now, I am not optimistic.

Economics, Entrepreneurship, Leadership, Chaebol Influence, South Korea Economy, Business Scandals, Cnbc International