A New Institutional Economics Perspective of the Chaebol
Chapter 1: The Chaebol Problem and the Economic Policy Dilemma
CHAPTER 1 25/9/03 9:11 AM Page 1 1. The chaebol problem and the economic policy dilemma 1. WHAT IS THE CHAEBOL? The Chaebol. Quickly browse through any magazine or newspaper article on the modernization of Korea’s economy and it is highly probable that this word will appear not once but repeatedly. But what exactly is the chaebol? A reader may well consider the chaebol as synonymous with the modern conglomerate, often having in mind an image of a huge US or European or Japanese corporation such as IBM, BMW or Sony, of course, with some minor reservations. Many people, including academics, policy-makers and the layman, often have a very unclear understanding of the chaebol. This book is meant to de-mystify the chaebol by bringing together, in a concise and simple manner, important facts and analysis accessible to all those who may be interested. One of the most remarkable features of Korea’s modern history is the extremely rapid pace of economic development experienced during the four decades following the Korean War, as evidenced by a series of recordbreaking growth rates. Much of this phenomenal feat was initiated by the government’s active industrialization policy that focused on accelerating the growth of the heavy and chemical industries, which also led to the formation of the big businesses or the so-called chaebol in the 1970s. The governmentinitiated and managed growth strategy, however, was not free from problems. Various economic and socio-political problems appeared such as economic concentration, underdevelopment of markets, moral hazard, cronyism,...
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