South Korea: A typical East Asian paradigm

Author: Qinghe, President of Zhibensha

South Korea became independent from Syngman Rhee and developed from Park Chung-hee.

In 1961, Park Chung-hee, who was a military man, launched a coup and overthrew the regime established by Syngman Rhee. Under the pressure of US President Kennedy, Park Chung-hee ended the military rule and became the third president of South Korea. He was re-elected as president for five consecutive terms and held the Blue House for 18 years.

The South Korea that Park Chung-hee took over was much poorer and weaker than North Korea at that time. Fortunately, Park Chung-hee was not a mere warrior. He was good at judging the situation and working hard to prosper the country, creating the "Han River Miracle".

Park Chung-hee absorbed the aid dividends from the United States under the general pattern of the US-Soviet hegemony, and at the same time he got the best of both worlds in the Japan-US trade war.

In 1965, with the help of the United States, Japan and South Korea finally achieved diplomatic normalization after seven rounds of negotiations. Japan and South Korea signed the "Japan-South Korea Claims Agreement". According to this agreement, Japan provided South Korea with $500 million in economic aid.

After Nixon came to power, the United States showed signs of fatigue in the Vietnam War. On July 5, 1969, Nixon, who was good at diplomacy, proposed a new US policy in East Asia in Guam, which was called "Nixon Doctrine" (Guam Doctrine). Nixon hoped to ease the situation in East Asia, form a "partnership" with Japan, bring South Korea, win over China, and jointly balance the Soviet Union.

In this way, South Korea is now in Vietnam, in an extremely favorable international situation.

This article takes the chaebol economy as an entry point to analyze South Korea's path to modernization and think about the East Asian paradigm behind it.

The logic of this article:

1. The Miracle of the Han River and the Chaebol Economy

2. The Fall of the Military and Political Power and the Historical Leap

3. The President of the Democratic Movement and the Chaebol Politics

01 The Miracle of the Han River and the Chaebol Economy

On January 12, 1973, Park Chung-hee issued a "Heavy Industrialization Declaration" at a New Year's Press Conference, declaring that South Korea's per capita national income would reach $1,000 in the early 1980s.

On the 31st of the same month, Park Chung-hee listened to the report of Wu Yuanzhe, the second chief secretary of the economy, which pointed out that it was necessary to transform the industrial structure and expand the industrial base; develop the chemical industry, shipbuilding, and machinery industry, as well as sensitive defense industries such as atomic energy; introduce new technologies, build large factories, and catch up with North Korea.

The meeting lasted for four hours, and Park Chung-hee finally gave an instruction: "Introduce necessary foreign investment!"

This was a meeting that changed the fate of South Korea.

Park Chung-hee inherited the won devaluation strategy of the Chang Myon government, restricted foreign investment, and established a science and technology research institute to improve the competitiveness of export manufacturing.

Park Chung-hee's secretary general Kim Jong-ryeon and heavy chemical industry planning director Wu Yuanzhe proposed that one or two private enterprises be selected in each field and given full support in terms of site selection, roads, funds, etc. The Park Chung-hee government held regular export policy meetings with entrepreneurs every month to clear policy obstacles for export manufacturing.

This is the beginning of South Korea's chaebol economy.

The chaebol economy, the biggest feature of South Korea's economy today, originated in the Japanese occupation period and rose in the Park Chung-hee era.

On July 3, 1973, the Pohang Steel Plant in South Korea was completed and put into production. When the first molten iron flowed out, its general manager Park Tae-jun shouted long live and tears filled his eyes.

In 1978, Pohang Steel's output reached 5.5 million tons, and increased to 8.5 million tons in 1981. This benchmark enterprise supported by the South Korean government has now become one of the world's largest steel groups. The output of its Gwangyang Steel Plant and Pohang Steel Plant ranks first and second in the world respectively.

This steel plant, established in 1968, is the beginning of South Korea's heavy chemical industry, a symbol of South Korea's industrial economy, and one of South Korea's top ten chaebols.

At that time, Park Chung-hee had a bad start. Just after the industrialization started, he encountered the first oil crisis and the export industry was in danger.

In October 1974, Samsung and Daewoo proposed to establish a comprehensive trading company based on Japan, and submitted a plan to cultivate a Korean comprehensive trading company to the Ministry of Commerce and Industry of South Korea. The Park Chung-hee government approved the comprehensive trading company, which was equivalent to establishing the chaebol system and directly pushed the Korean economy into a chaebol economy.

Park Chung-hee hoped to form a large group to resist the crisis and rise rapidly. The South Korean government gave export loan concessions to comprehensive trading companies to support them in merging small and medium-sized enterprises. Samsung C&T was registered as the No. 1 general trading company, followed by Daewoo, Ssangyong, Samwha, Kumho Industrial, Hyundai, etc., and quickly developed into cross-border chaebols.

At that time, the loans obtained by financial institutions from major chaebols such as Hyundai, Samsung, LG, and SK once exceeded 70% of South Korea's total credit. From 1970 to 1975, the growth rates of Hyundai, Daewoo, and Ssangyong reached 33%, 35%, and 34%, respectively. [1]

A typical example is the Hyundai Group. At that time, Hyundai Group's president Chung Ju-yung tried to abandon the shipbuilding plan in view of the severe situation of the oil crisis.

But Park Chung-hee pushed hard and said to Chung Ju-yung: "How can this be possible? Is the person sitting in front of me the same person who built the Gyeongbu Expressway?"

At that time, the core business of Hyundai Group was infrastructure, and it built the Gyeongbu Expressway, Pattaninarasiwa Expressway in Thailand, and a port in Vietnam. Park Chung-hee asked the government to allocate a loan to Hyundai Group to support its shipbuilding business.

In 1975, Hyundai Shipyard was completed, but the international shipping market was sluggish. Therefore, Park Chung-hee ordered the National Assembly to enact a law to give special preferential treatment to companies that use Korean cruise ships to transport oil to South Korea. Hyundai Group took this opportunity to further expand its international shipping business and gradually became a large group integrating shipbuilding and shipping. Today, South Korea has become a global shipbuilding power.

Another ambitious plan of Hyundai Group: car manufacturing.

In 1967, Hyundai Motor cooperated with Ford Motor Company of the United States to introduce Ford technology to produce "Gotila" brand cars. In 1974, Hyundai Motor's first mass-produced independent model "Pony" came out and was exported abroad for the first time. The core technology of Hyundai's first car and the first assembly line were provided by Ford Motor Company of the United States.

"Pony" is the second independently developed model in Asia after Japan. Its appearance marks South Korea's entry into the ranks of automobile industrial countries.

Benefiting from the US-Japan trade war, Hyundai Motor first cooperated with Toyota and then formed an alliance with Mitsubishi Motors to produce Pony cars and export them to the United States. In the first year (1986) when Hyundai Motor entered the US market, it achieved a sales miracle of 160,000 vehicles, which established Hyundai Motor's international status in one fell swoop. Today, Hyundai Motor is the largest automobile brand in South Korea, one of the world's top 20 automobile manufacturers, and one of South Korea's top ten chaebols.

However, it should be the electronics industry that really brought prosperity to South Korea.

In the 1970s, Japan's color TVs surpassed the United States in all aspects. At its peak, exports to the United States accounted for 90% of color TV exports, accounting for 30% of the US market share. In the 1980s, Japan's semiconductor and electronics industries had a huge impact on the United States.

The United States launched trade wars against Japan's color TV, semiconductor and electronics industries, restricted the number of Japanese color TV exports, launched a 301 investigation on Japanese chips and related products exported to the United States, imposed anti-dumping duties, and set US semiconductor market share indicators in Japan.

In 1987, Toshiba Corporation of Japan sold prohibited machine tool products to the Soviet Union. The United States imposed sanctions on Toshiba Corporation and banned its products from being exported to the United States for three years.

As a result, Japan's home appliance, semiconductor and electronics industries gradually declined and eventually fell into decline; while South Korea's electronics industry rose rapidly and became the leading industry.

In the cracks of the US-Japan trade friction, South Korea seized the historic opportunity of industrial transfer and trade substitution by using the chaebol model.

The four major chaebols in South Korea, Samsung, LG, Hyundai and Daewoo, first actively absorbed and imitated Japanese and American technologies, and then strengthened investment in equipment and talents, thus establishing a competitive advantage in technology.

With the help of the United States, the Korea Institute of Science and Technology (KIST) was established in May 1965. The South Korean government promoted direct investment from advanced European and American countries by establishing joint ventures. Komi, Fairchild Semiconductor, Signetics and Motorola successively invested in South Korea, and South Korea's semiconductor packaging and testing equipment business rose rapidly.

In August 1967, Kim Wan-Hee, a professor of electronics at Columbia University, visited South Korea and suggested that the South Korean government attach importance to the development of the electronics industry and called on South Korean companies to join the grand strategy of the development of the global electronics industry.

This is a transcendent suggestion.

The South Korean government soon positioned electronic products as one of the six strategic export industries; and in January 1969, it passed the "Electronics Industry Promotion Act", which provided a series of subsidies and export stimulus measures.

At this time, Samsung founder Lee Byung-chul captured this opportunity to change South Korea's national destiny, established Samsung Electronics, and immediately announced its entry into the electronics industry. LG's predecessor GoldStar was a pioneer in South Korea's electronics industry, and Samsung was a master.

When Samsung had only 137 employees, Lee Byung-chul sent many people to Japan to learn television and vacuum tube production technology. In the second year of Samsung's establishment, with the help of Japanese partners, Samsung Electronics designed and produced the first vacuum tube and the first 12-inch black-and-white TV.

What really established Samsung's dominance in the semiconductor field was Hankook Semiconductor. Just as Samsung Electronics was founded, Dr. Kang, a Korean engineer from Motorola (one of the world's largest discrete transistor companies at the time), founded a company called Integrated Circuit International or ICII with his classmate Harry Cho and Professor Kim, a famous radio network operator.

The chips designed by ICII were extremely successful and even in short supply. In order to solve the problem of insufficient production capacity, the three decided to move chip manufacturing to South Korea and set up a new company called Hankook Semiconductor.

However, when Hankook Semiconductor's wafer fab was being planned, the world oil crisis broke out and Hankook Semiconductor was in urgent need of funds.

At this time, Lee Byung-chul and his son Lee Kun-hee observed the company's technical strength, bypassed the hesitant Samsung leadership, and rushed to Hankook Semiconductor in the name of the family, completely swallowed Hankook in 1977 and renamed it Samsung Semiconductor. A few years later, Samsung Electronics integrated Samsung Semiconductor.

In 1979, the South Korean government tried to build a huge chaebol system around the VLSI wafer fab that produced 16K DRAM, including Samsung, Daewoo, GoldStar and Hyundai.

In order to obtain advanced technical support, Samsung set up a branch in California, USA, specifically seeking licenses for DRAM technology. However, Motorola, Hitachi, Toshiba, and Texas Instruments all rejected Samsung. Fortunately, Micron Technology opened its doors to Samsung and agreed to license its 64K DRAM design to Samsung.

This is a key step for Samsung to become the world's largest chip manufacturer.

Today, Samsung has surpassed Intel to become the world's largest semiconductor company. South Korea has a 22% global semiconductor market share, second only to the United States as a semiconductor manufacturing power.

In the Park Chung-hee era, South Korea's economic take-off was deeply tied to the chaebol. In 1979, South Korea's GDP jumped from 101st in the world in 1962 to 49th; per capita GDP jumped from US$108 in 1965 (US$10 more than China) to US$1,783 (nearly 10 times that of China); televisions, refrigerators, and washing machines are extremely common in urban households in South Korea.

In 1980, the revenue of the top ten chaebols in South Korea accounted for 48.1% of GDP. The chaebols were deeply rooted and rich enough to rival a country.

In 1979, when South Korea's economy was booming, Park Chung-hee was shot and killed by his confidant, Kim Jae-gyu, the Minister of the Central Intelligence Agency.

After Park Chung-hee's death, Chun Doo-hwan, the commander of the South Korean military security and lieutenant general of the army, launched a coup to seize power. Chun Doo-hwan and Roh Tae-woo successively took charge of South Korea. Both of them were once Park Chung-hee's guards. After they came to power, they still followed Park Chung-hee's economic ideas.

02 The fall of the military and the historical leap

During the era of the Guards, the Korean economy and chaebols continued to advance rapidly, creating the "Han River Miracle" that shocked the world. South Korea's per capita GDP increased from US$1,715 in 1980 to US$5,817 in 1989, and the disposable income of residents in 1992 was 9 times that of 1963.

How should we evaluate the Han River Miracle?

Is it the victory of political strongmen and chaebol economy, or the result of the free market?

The Park Chung-hee government and the Korean chaebols are important forces in the launch of the Korean market economy. But the internal driving force of the Han River Miracle comes from the transfer of international technology and capital.

Under the general pattern of the US-Soviet hegemony and the US-Japan trade war, the Asian industrial economy presents a "flying geese industrial development pattern" (Japanese economist Akamatsu Kaname), Park Chung-hee understands the way for small countries to survive and obtains a large amount of ready-made technology and international capital transferred from the United States and Japan.

However, the background of the Han River Miracle is still the state capitalism supported by the military government. After the fall of the political strongman, the contradiction between South Korea's reform system and the free market intensified. This is a hurdle that any traditional country will eventually face in developing a free market.

In 1972, Park Chung-hee announced the Reform Constitution, prohibiting all political activities of political parties and all citizens, implementing news censorship, and promoting the reform system.

After the release of the Reform Constitution, students at Korea University broke out in demonstrations. Park Chung-hee signed the "Emergency Measures No. 7" Order, sent troops to occupy Korea University, banned student demonstrations, arrested students who resisted, and directly sentenced them to more than three years but less than ten years in prison without going through the court.

After Park Chung-hee was assassinated, Choi Kyu-ha served as acting president, and the Korean democratization movement rose, and the "Seoul Spring" appeared for a time. However, more than a month later, Chun Doo-hwan launched a military purge coup and successfully seized power. Kim Dae-jung and Kim Young-sam led democrats to issue the "National Declaration to Promote Democracy", which triggered a large-scale demonstration and demanded that Chun Doo-hwan step down.

In May 1980, Chun Doo-hwan declared an emergency martial law, banned all political activities, arrested Kim Dae-jung, Kim Young-sam and others, and caused more than 4,000 casualties. This is the famous Gwangju Incident.

Despite continued economic growth, both Park Chung-hee and Chun Doo-hwan's governments faced challenges to the legitimacy of their regimes. In order to strengthen national identity and national glory to cover the issue of legitimacy of the regime, Chun Doo-hwan successfully applied to host the 1988 Seoul Olympics. However, what Chun did not expect was that the Seoul Olympics gave South Korea's democratization movement a once-in-a-lifetime opportunity.

In June 1987, due to the torture and death of Seoul University student Park Jong-chul, South Korea set off a climax of the democratization movement. The international media paid close attention to it, and the Chun Doo-hwan government was under great pressure. The International Olympic Committee issued a warning to the South Korean government to cancel South Korea's hosting rights for the Olympics.

At this time, Chun Doo-hwan had to retreat behind the scenes and nominated Roh Tae-woo to calm the incident and run for the next president.

On June 29, Roh Tae-woo, who had no way out, announced a series of compromise measures to reporters. These included amending the constitution to implement direct presidential elections; pardoning Kim Dae-jung; protecting civil rights; and advocating freedom of speech. This was the Eight-Point Democratization Declaration (June 29 Special Declaration).

This Olympic Games changed the fate of South Korea.

The 1988 Seoul Olympic Games were held as scheduled. In this year, the Korean Constitution was amended to stipulate economic liberalization and democratization. This challenged the chaebol economy.

1988 was the most important year in South Korean history, and it can be said to be "a great change that has not happened in a thousand years." In human history, the evolution of each country has faced a historic leap, that is, from a natural country to a rule of law country. Around 1990, the international situation was turbulent and many countries faced this opportunity. But at present, most countries have not completed this feat. South Korea is lucky. They changed the history of the country with the help of the Olympic Games.

The experience faced by the South Korean military government is the same as that of the Pahlavi dynasty in Iran, namely, the modernization reform paradox of an authoritarian government.

In 1962, American sociologist Davis proposed the "Davis J Curve" on "when revolution breaks out". Davis believes that poverty itself is not enough to trigger a revolution. The countries most likely to experience revolution are not closed countries or open countries, but countries in the process of modernization.

I have previously pointed out that the path of national modernization under an autocratic monarch is a process of self-destruction. The reforming autocratic monarchy is only a temporary system in the process of national modernization. [2]

With the reform and opening up of such a country, social stability has decreased, and the economy has continued to grow. Once the economy stalls, it may lead to a disharmony between reality and expectations. This psychological frustration and low tolerance for unfairness after opening up are the soil for the birth of revolution.

However, the South Korean military government and South Korea's national destiny are completely different from those of the Pahlavi dynasty and Iran. Roh Tae-woo chose to revolutionize himself, while Pahlavi was revolutionized. One country is moving towards a rule of law, while the other is regressing to a theocracy.

This difference is worth our deep reflection. From an economic perspective, although the state capitalism promoted by Park Chung-hee is based on the chaebol economy, it is also an export-oriented economy, and the economic benefits are more extensive. The oil economy developed by the Pahlavi dynasty has little to do with the interests of the Islamic people, and most Iranians do not make a living in the international market. In comparison, South Korea's trend towards an open economy is difficult to reverse.

In 1990, Roh Tae-woo tried to suppress the chaebol economy to ease political pressure. However, the chaebol forces resisted fiercely. On January 8, 1992, Hyundai Group's Chung Ju-yung announced that since the Park Chung-hee government, Hyundai Group has paid billions of won in political funds to the authorities every year. This political scandal severely hit the prestige of Roh Tae-woo's government. Two days later, Chung Ju-yung announced the establishment of the Korean Nationalist Party and personally participated in the Korean general election.

In the 1992 general election, Chung Ju-yung lost and Kim Young-sam was elected president.

This election is of symbolic significance. Kim Young-sam is the first non-military president of South Korea, and it is a victory for the democratization movement. However, South Korea has just seen off the military president and ushered in direct competition from the chaebol political party. Chung Ju-yung is the first chaebol to run for president in South Korea. Chung Ju-yung's founding of a party and running for election marks that the Korean chaebols have directly participated in the struggle for the highest power in the country through legal means.

From then on, the civilian forces and chaebol forces in South Korea have been nakedly confronted and bloody on the presidential stage, and the "Blue House Curse" has been staged again and again.

The opening of public opinion has put chaebol politics in a passive position, and the political scandals and sex scandals of the chaebols have been exposed and even made into film and television dramas. After Kim Young-sam came to power, he thoroughly investigated the political funding issues during the Chun Doo-hwan and Roh Tae-woo periods and put the two of them in jail.

At the same time, Kim Young-sam promoted the globalization of South Korea's economy, gradually opened up the financial market, and joined the Organization for Economic Cooperation and Development (OECD); abolished the "economic plan" and promoted the transformation of national capitalism to an international free economy.

03 Civil Movement President and Chaebol Politics

In 1997, the Asian financial crisis broke out, severely damaging the Korean economy.

The following year, the Korean economic growth rate plummeted to -5.13%. It should be noted that during the Jianghan Miracle era, the Korean economic growth rate exceeded 8% in most years.

This crisis almost bankrupted the country of Korea. In 1998, the leverage ratio of the non-financial corporate sector in Korea reached a historical high of 110%, and the average corporate debt ratio exceeded 400%. The number of defaulting companies in Korea reached 22,828, and the debt risk spread to the banking system, causing the bank's non-performing loan ratio to rise rapidly. [3]

When the crisis broke out, Korea's foreign exchange reserves were only US$5 billion, while its short-term foreign debt was as high as US$58.37 billion, and the exchange rate market was in jeopardy.

The Korean government urgently sought assistance from the International Monetary Fund (IMF). The latter provided the South Korean government with a package of loans worth 57 billion US dollars, pulling South Korea back from the brink of bankruptcy.

However, the conditions of the International Monetary Fund were to reform the chaebol system, rectify the financial system, and open up foreign investment.

At that time, Korean public opinion sparked a fierce debate on this. Some people believed that economic opening could end the chaebol monopoly and eliminate economic problems with the help of external forces; others believed that this was a humiliating cooperation.

The cooperation between the South Korean government and the International Monetary Fund seriously damaged the vested interests - the chaebols, who tried to use the stick of nationalism to resist reform and strongly criticized Kim Young-sam's liberal reforms.

This financial crisis is a spillover risk. The reason why South Korea suffered a heavy blow was not the problem of open economy and free market, but the root cause of the chaebol economy and its debt-based economy.

The relationship between South Korean commercial banks and chaebols is complicated. They provide large-scale loans to chaebol enterprises, and the prevention and control system is extremely fragile. In 1997, the debt-equity ratio of the top 30 chaebols in South Korea was as high as 518%, and 5 of them even exceeded 1000%.

The International Monetary Fund asked the South Korean government to close commercial banks that transferred profits to chaebols to cut off the crisis of chaebol economy from the root. The International Monetary Fund asked South Korea to raise interest rates to 30%, and foreign banks took the opportunity to enter, and chaebol enterprises suffered a blow.

The crisis led to the bankruptcy of a large number of chaebol enterprises, and half of the top 30 chaebols were liquidated, merged and acquired. Among them, the second largest chaebol Daewoo Group fell, ending the history of chaebols being "too big to fail".

South Korean economist and current ambassador to China Zhang Xiacheng wrote a book called "Korean Capitalism". Regarding the debate caused by this crisis, Ambassador Zhang pointed out in the book: "If the problems of Western developed countries are the product of market-orientedism, then the problems of South Korea are caused by the failure to correctly establish market economic norms." 【4】

He believes that Korean capitalism is similar to what Max Weber called "pariah capitalism", characterized by nepotism, cronyism, small groupism, local protectionism, corruption and bribery.

Ambassador Zhang believes that the Korean economy needs to be more open and free, and should not miss or return to the "Park Chung-hee era" when the government highly intervened in economic production and dominated everything.

After Kim Young-sam stepped down, Kim Dae-jung came to power. Both Kims were civilian presidents and continued the liberalization and internationalization reforms. The Kim Dae-jung government amended the financial law, cleaned up 600 financial institutions, closed 11 banks with equity ratios of less than 8%; prohibited chaebol companies from providing loan guarantees to each other; injected public funds to help the financial system detoxify; cut off government credit intervention in commercial banks; opened up the financial market and implemented foreign exchange trading liberalization.

In 1999, South Korea's economy rebounded strongly, with economic growth reaching 11.47%, and maintained at 9.06% in 2000, avoiding national bankruptcy and the economy emerging from the crisis.

Foreign capital entered the banking system, and American capital successively acquired Korea First Bank and Korea Exchange Bank, limiting the control of banks by chaebol forces and improving the risk control level of banks. In 2001, the non-performing loan rate of South Korea's financial system dropped to about 3%.

In 2003, another civilian president came to power, and he was Roh Moo-hyun.

This year, South Korea's economy began to bid farewell to high growth and fell to a medium-speed growth platform. President Roh inherited Kim Dae-jung's sunshine policy and promoted social democratization and economic liberalization.

However, the Roh Moo-hyun government encountered the global financial crisis in 2008, and the foreign exchange market and stock market plummeted. This crisis provided the chaebol forces with a good opportunity to turn defeat into victory and vigorously criticized the liberalism promoted by Kim Dae-jung and Roh Moo-hyun.

In the election of that year, Lee Myung-bak successfully entered the Blue House. Lee Myung-bak joined Chung Ju-yung's Hyundai Group in 1965; at the age of 36, he served as the executive president of Hyundai Construction and worked for Hyundai Construction for 27 years. Chung Ju-yung failed in the presidential election that year, and 16 years later, Lee Myung-bak helped the chaebol forces regain power. The main task of Lee Myung-bak's government is to save the market, and the rescue based on loose policies is most beneficial to the chaebol forces.

After Roh Moo-hyun stepped down, he was investigated and admitted to some of the bribery charges. In May 2009, Roh Moo-hyun jumped off the Owl Rock behind his private residence and committed suicide.

The "Blue House curse" escalated. After Lee Myung-bak stepped down, the conservative Park Geun-hye took over. Park Geun-hye is the daughter of Park Chung-hee and the first female president in South Korean history. Park Geun-hye changed the name of the party, trying to get rid of Lee Myung-bak's "pro-chaebol" image and put up the banner of "economic democratization and welfareism." After 2008, South Korea's economy continued to be sluggish, and some people expected Park Geun-hye to lead South Korea to restore the "Ganghan Miracle".

However, in 2016, Park Geun-hye was impeached by the National Assembly for her bestie's interference in politics.

In the 2017 general election, civilian President Moon Jae-in won the election, and the democracy movement regained political power again. Moon Jae-in was thrown into prison by Park Chung-hee during college, so he was expelled from school. Moon Jae-in is also a political ally of Roh Moo-hyun and hates conservatives.

After Moon Jae-in came to power, he quickly launched a judicial investigation into Park Geun-hye. The case was confusing, and the procuratorate prosecuted Park for bribery and abuse of power. The court sentenced Park Geun-hye to 25 years in prison in the second instance, and the final instance revoked the second instance verdict a few days later. In July 2020, Park Geun-hye was finally sentenced to 20 years in prison.

While investigating Park Geun-hye, Moon Jae-in also successfully dealt with former President Lee Myung-bak. Lee Myung-bak's family and cronies were involved in a series of corruption cases, and Lee Myung-bak believed that he was subjected to political retaliation. In February 2020, Lee Myung-bak was sentenced to 17 years in prison.

Moon Jae-in presented himself as a person who eliminated harm for the people. He ordered investigations into the Zhang Ziyan case and the Lee Seung-ri nightclub incident. He emphasized: "If we cannot find out the truth of these incidents that occurred in the privileged class of society, we cannot talk about a just society."

The Park Geun-hye case and the Lee Myung-bak case led to a large number of chaebols. Nine chaebols, including Samsung, Hyundai Motor, SK, LG, Lotte, and Hanwha, were collectively investigated. Lee Jae-yong of the Samsung family was sentenced to five years in prison for bribery. However, the second trial was changed to two and a half years, suspended for four years, and released in court.

Behind the "Blue House Curse" is the game between chaebol forces and civilian forces, and the struggle between conservatives and democracy activists.

Since Kim Young-sam, South Korea has embarked on the path of political democratization and economic liberalization. Chaebol forces are also constantly adapting to challenges from politics and internationalization. In 2017, the total revenue of the six largest chaebols in South Korea was approximately US$942 billion, accounting for more than 60% of South Korea's annual GDP, of which Samsung Group's annual revenue alone accounted for more than 20% of South Korea's GDP. [5]

In line with global trends, the gap between the rich and the poor in South Korea is widening, and the growth rate of residents' real disposable income and real wage growth are both lower than the growth rate of per capita GDP.

Koreans have a contradictory attitude towards chaebols. They are eager to enter chaebol companies to earn higher incomes, but at the same time they hope to break the chaebols' control over the economy.

Will South Korea decline?

In The Rise and Decline of Nations, economist Mancur Olson believes that the existence of a large number of profit-sharing alliances (interest groups that lobby the government and intervene in policies) may become a necessary and sufficient condition for a country's decline, but the absence of a large number of profit-sharing alliances does not seem to be a sufficient condition for a country's prosperity. At best, it can only be a necessary condition. [6]

However, despite the naked "Blue House Curse", Korean society is progressive. South Korea has achieved a historic leap and obtained a ticket to developed countries. It is an outstanding representative in the East Asian cultural circle.

Is South Korea a typical path for modernization of East Asian countries?

Japan follows the British conservative route. South Korea's development is obviously more in line with East Asian culture. Iran and India do not have East Asian cultural roots.

South Korea's modernization is driven by East Asia's "proactive politics". First, economic reforms were carried out, and policies were used to support economic forces and absorb foreign capital and technology. Then, there was a conflict between open economy and conservative politics. Under external pressure, it promoted liberalization of speech and political democratization, achieving a historic leap (most of them could not be completed). Finally, the vested forces and the democratic movement forces launched a protracted political struggle.

South Korea (Park Chung-hee), Singapore (Lee Kuan Yew) and Taiwan (Chiang Ching-kuo) have similar paths to modernization, but the degree of chaebol power and vested power is different. In addition, will Vietnam, which is rapidly moving forward in economy and politics, break this East Asian paradigm?

Last week, Seoul Mayor Park Won-soon, who was considered the best candidate for the next president, committed suicide. Moon Jae-in and the democracy movement lost a key political figure. The "Blue House curse" will continue, but South Korea is still lucky. Involution halfway through the journey is the real cruelty.

References

[1] The chaebols are permanent, but the presidents are changing: the lessons of South Korea's chaebol economy for China, Mu Feng, Poker Investor;

[2] Iran, why is it here, Zhibenshe;

[3] How did South Korea deal with debt default in 1997, Zhao Wei's team, Changjiang Macroeconomics;

[4] Korean capitalism, Zhang Xiacheng, CITIC Press;

[5] The foggy and shady South Korean political arena, Ah Hui, Xinmin Weekly;

[6] The rise and fall of nations, Mancur Olson, Shanghai People's Publishing House.