In my previous blog about Samsung an introduction is given into the term ‘Chaebol’. If you are totally new to the concept of Chaebol, I recommend reading that blog first. As the largest Chaebol today Samsung makes the perfect example to start understanding the concept of Chaebols through a real-life example. If you don’t want to read that blog, this TikTok will provide you with the essence of the role of Samsung in South Korea: “only three things are inevitable in life: taxes, death and Samsung”.
In this blog I want to give you a more in depth explanation of the term Chaebol, all that it encompasses and the influence these Chaebols have in- and outside of South Korea.
If you are interested in Korea, Korean culture and K-products like K-dramas and K-pop, and would like a better understanding of related topics (like Chaebol) to understand the country and its cultural products better, then you have come to the right place. If you are looking for less superficial or introductory information for other purposes than understanding the country and culture better, I kindly advise you to look elsewhere.
I will explain:
- The term Chaebol
- The development of Chaebols
- How many Chaebols are in South Korea?
- The impact of Chaebols for South Koreans
- Miky Lee: an example of international presence of Chaebols
@stephaniesooytSamsung literally controls everything in South Korea! ♬ original sound – StephanieSoo
1. The term Chaebol
Chaebol is spelled in the Korean Hangeul as 재벌 (chae-bol). Literal translations of the word would be: “rich family” or “financial clique”. The word is often followed by either:
- business, organization, conglomerate
- family
1.1 Chaebols as businesses
Let’s start with the first of the two. The term ‘Chaebol’ is most commonly used in relation to organizations. Some translations of the word ‘Chaebol’ that are named when referring to organizations are financial clique, plutocracy, rich business family, or monopoly. Thus, Chaebol are not only the conglomerates themselves, but the term and its translation also refer to the business structure.
Furthermore, these organizations are business conglomerates, which means they are a corporation, under which several (independent) businesses fall. All Chaebols are vital for South Korea’s economy, taking up more than half the country’s export and half of South Korea’s stock market. Take for example Samsung. You are probably most familiar with the Samsung Electronics part of the conglomerate, but Samsung Group, as it’s fully called, exists of several 10s of businesses in among other biologics, engineering, shipbuilding, insurances and even a hotel chain (Hotel Shilla).
So, more specifically a Chaebol when referring to an organization is a
Large South Korean conglomerate industrial business that is run by one individual or family.
The term ‘Chaebol’ was used for this meaning for the first time in 1972.
1.2 Chaebols as families
The term ‘chaebol’ is also used in reference to the families that lead the Chaebol conglomerates. This happens for example in the news or in K-dramas. Often there is a split or comparison between ‘Chaebol’ and ‘Seomin’ (서민), a fairly derogatory term referring to ‘ordinary citizens. A textbook example of this is the romantic K-drama Boys Over Flowers, in which the fictional characters Chaebol inheritor Gu Jun-pyo and Seomin Geum Jan-di are the main characters.
For the rest of this blog the term ‘Chaebol’ will refer to a Chaebol conglomerate, unless stated otherwise.
2. The development of Chaebols
Back in the 1920s South Korea’s economy was quite small and based on agriculture. The start of Chaebols and the reason most Chaebols are connected to the South Korean government, stems from the 1960s.
2.1 The history
During the tumultuous period from 1945 – 1960, after the Japanese colonial occupation and in which the Korean War took place, not many businesses survived or thrived. However, some of the businesses established back then, became Chaebols during the 1990s.
In 1961 military general Park Chung Hee seized power in South Korea. He initiated rapid industrialisation in South Korea through his Five-Year Economic and Social Development Plan, which covered a variety of economic development projects. I won’t bore you with all the details, but this plan guaranteed chaebol businesses of having special loans, subsidies, and tax incentives, especially in the construction, steel, oil, and chemical industries.
In the 1980s an extra push was given to Chaebols due to channeling funds from foreign loans to specific companies to help them develop. Due to this, by the late 1980s Chaebols could be financially independent.
2.2 The goal
The goal here was to make South Korea one of the Four Asian Tigers by developing new industries, markets and export production. It also protected Chaebols from international competition, or rather leveled the playing field for Chaebols as an in essence less developed country, as international companies did not have this kind of support from their government.
The Four Asian Tigers are the developed East Asian economies of Hong Kong, Singapore, South Korea, and Taiwan
2.4 The criticism
Criticism of Chaebols is that South Korea might have become too dependent on them. Large international conglomerates that can be compared to South Korea’s Chaebols often don’t invest in the country and its people itself, but rather export work and products. This is also the case for Chaebols. Of all South Korean workers only 10% are employed by these Chaebols, compared to 90% working for smaller organizations. There also seems to be a lack of creativity in the market due to the domination by large Chaebols, partially by an unfair playing field for smaller companies.
However, not much can be done by the government against this as Chaebols are responsible for about 20% of the Gross Domestic Product (GDP) in the country and obstructing them politically would negatively affect Korean citizens and the country as a whole. This overall brings the South Korean government in a tight spot where they often have to work with these Chaebols. Even though additional laws were instated, Chaebol culture is vulnerable to bribery and corruption.
GDP is the total value of the goods and services produced in a country during (usually) a year or another specific period of time. This is also used to measure the health of a country’s economy
That this can be problematic has already been proven during the Asian Financial Crisis in 1997. Between 1997 and 1999 eleven of the then twenty-six Chaebols went bankrupt due to their focus on export overseas (and the connected dependency on those markets that comes with it) and even neglecting the domestic market.
3. How many Chaebols are in South Korea?
Simply said there are about 45 Chaebols, of which Samsung, LG, Hyundai, SK Group and the South Korean press are the largest. These 4 Chaebols are named as ‘The Big Four’.Others you might know are:
- Lotte that is active in the fields of construction, food, energy, hospitality, retail
- Hanjin Group (maybe you don’t know that name, but read on) known from Korean Air and Jin Air, active in shipping and heavy industry
- Kumho Asiana Group known from Asiana Air and Air Busan, active in construction, petrochemical and tires
4. The impact of Chaebols for South Koreans
What most non-Koreans don’t understand is how influential these Chaebols are. You can not know the name of the president of South Korea, but if you live in South Korea you automatically know most Chaebols by name. This is partially due to their enormous size, as described above, but also because they sell a lot more domestically than internationally. For example, did you know LG, yes the phone company, also sells diapers? A lot of Chaebols are active in industries you wouldn’t immediately think of.
To sketch an image: Chaebols produce a lot of products that are consumed. You might immediately think of Samsung and LG technology like phones, but they are also active in the food industry, own tv networks, hotels and restaurants and even cinemas. So everywhere you look Chaebols are responsible for the food you can buy, the movie you can go to and what you see on TV.
5. Miky Lee: an example of international presence of Chaebols
And the Chaebols are not only present in South Korea. I’m going to take Miky Lee as an example here. Miky Lee is a South Korean film producer, vice chairwoman of CJ Group and the descendant of Samsung founder Lee Byung-Chul. CJ Group was one of the first investors in DreamWorks on the recommendations of Miky Lee. This is the studio of Steven Spielberg, Jeffrey Katzenberg and David Geffen, which you might know of some of the movies it has produced like “How to Train Your Dragon,” “Shrek” and “Kung Fu Panda”.
CJ Group is also the organizer of KCON, a celebration of Korean music and culture, that now runs 4 days each year in Los Angeles and additional places all over the world.
Miky Lee’s Oscar-acceptance speech for the movie Parasite, which CJ Group was the producer for, is also proof of her international presence and influence. As a movie lover, it’s not astonishing that Miky Lee and CJ Group have more movies under their name as producers, but did you also know she is responsible for over 300 international musicals? Among these was Kinky Boots, which was performed on Broadway.
Lee herself has said that the Oscar for Parasite opened many doors for Koreans filmmakers, but it would definitely not have been possible without her international achievements as well.
@etchaskej Miky Lee has forever changed the landscape and impact of Korean entertainment throughout the world. #mikylee #이미경 #kdramas #parasitemovie #hallyu #samsung #cjgroup #chaebol #koreanwave #squidgames #asianschangingtheworld #asiantiktok #dreamworks #motherofhallyu #mnet #koreanmovie #korean ♬ original sound – Ed
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