The Chaebol
The government needed to eliminate traditional obstacles and to establish an incentive for industrial production in order to make the accumulation regime for industrialization to emerge and work successfully. To that end, Park conducted industrial policy and nurtured chaebols as developmental partners. Chaebol means "business family" or "monopoly" and is often used the way "conglomerate" is used in English.
The chaebols received government subsidies mainly through bank credits and were encouraged through financial and fiscal means to support the two-pronged industry policy. This industrial policy was combined with financial repression. The state’s financial control became an effective means to “guide” chaebols toward productive investments in areas of national property. Protected by the state’s firm guarantee, moreover, the property rights and governance structure of chaebols were virtually untouchable for outsiders as well as workers.
When the military government first came to power it attempted to penalize the chaebols that had accumulated illicit fortunes under the Rhee government. The endeavor was not continued, however, and the governmentsoon changed its position, having come to the conclusion that the chaebols would be essentials partners in fostering the heavy chemical industries and in putting into effect its broader industrial strategies. The United States, which communicated with the chaebol families, also pressured the Korean government not to penalize illicit speculators insensitively for fear that there would be related socialist developmental strategies
The regime demanded that companies meet given export targets by building large factories and achieving economic efficiency so that they could repay the interest and principal on the loans they had received. Chaebols that could not meet government standards were not allotted to enter new business fields and, as a
consequence, tended to fall further behind in performance and favor (Lee, 2003).
By using cash flow from their core businesses, the chaebols expanded their subsidiaries to such extent that the Korean chaebol structures became immensely sophisticated and complex. In addition, chaebols were family-owned businesses with intra-group crossshareholding and transactions and octopus-like diversification. In a less-developed market, they could utilize the intra-group transfer of money and personnel. With state subsidies, a diversification structure, and intra-group transfer, they were willing and able to undertake investment risks.
The cost of his economic achievements was high and included such deleterious effects as a government-led economy, government-led lending, abuse of power by the chaebols, institutionalized corruption, the collapse of community, mistrust throughout society, dehumanization, and social injustices (Han, 1993). Thus Park’s regime had some characteristics worthy of praise and some characteristics worthy of criticism.
The chaebols received government subsidies mainly through bank credits and were encouraged through financial and fiscal means to support the two-pronged industry policy. This industrial policy was combined with financial repression. The state’s financial control became an effective means to “guide” chaebols toward productive investments in areas of national property. Protected by the state’s firm guarantee, moreover, the property rights and governance structure of chaebols were virtually untouchable for outsiders as well as workers.
When the military government first came to power it attempted to penalize the chaebols that had accumulated illicit fortunes under the Rhee government. The endeavor was not continued, however, and the governmentsoon changed its position, having come to the conclusion that the chaebols would be essentials partners in fostering the heavy chemical industries and in putting into effect its broader industrial strategies. The United States, which communicated with the chaebol families, also pressured the Korean government not to penalize illicit speculators insensitively for fear that there would be related socialist developmental strategies
The regime demanded that companies meet given export targets by building large factories and achieving economic efficiency so that they could repay the interest and principal on the loans they had received. Chaebols that could not meet government standards were not allotted to enter new business fields and, as a
consequence, tended to fall further behind in performance and favor (Lee, 2003).
By using cash flow from their core businesses, the chaebols expanded their subsidiaries to such extent that the Korean chaebol structures became immensely sophisticated and complex. In addition, chaebols were family-owned businesses with intra-group crossshareholding and transactions and octopus-like diversification. In a less-developed market, they could utilize the intra-group transfer of money and personnel. With state subsidies, a diversification structure, and intra-group transfer, they were willing and able to undertake investment risks.
The cost of his economic achievements was high and included such deleterious effects as a government-led economy, government-led lending, abuse of power by the chaebols, institutionalized corruption, the collapse of community, mistrust throughout society, dehumanization, and social injustices (Han, 1993). Thus Park’s regime had some characteristics worthy of praise and some characteristics worthy of criticism.