ASSESSMENTS

Blood Runs Thicker in the South Korean Economy

Feb 28, 2017 | 09:15 GMT

The family-run conglomerates that made the country rich are at the center of its current political crisis.

The involvement of Samsung and other chaebols, sprawling, family-controlled conglomerates that form the backbone of South Korea's economy, in the scandal engulfing President Park Geun Hye have intensified calls for their reform.

(CHUNG SUNG-JUN/Getty Images)

Forecast Highlights

As South Korea's presidential election approaches, calls for the reform of the country's scandal-prone chaebols, or family-run conglomerates, will probably get louder.
As chaebols expand beyond their core industries, they are pushing out smaller businesses that provide much of the country's employment, adding another incentive for reform.
The economic pain that would come with meaningful chaebol reform will make it unlikely to occur without a constitutional amendment expanding the presidency beyond one term.

For better or worse, the story of post-war South Korea is inseparable from that of the chaebol. Since their emergence under military strongman Park Chung-hee, who took power in 1961, South Korea's enormous, family-controlled conglomerates have formed the backbone of the country's export-dependent economy, driving and sustaining what came to be known as the “Miracle on the Han River." Today, the sales revenue of the five largest chaebols constitutes almost 60 percent of South Korea’s gross domestic product, and their brands – Samsung, Hyundai and LG, for example – are household names. The chaebols that dominate South Korea's political, economic and social life dictate the country's economic trajectory and fortunes. With their overwhelming importance to South Korea, chaebols have long been targets of domestic and foreign criticism, and calls for their reform are nearly as old as the conglomerates themselves. Since South Korea’s transition to democracy in the early 1990s –...

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