The Remarkable Rise of South Korea: The Samsung Story

Geographical Challenges

South Korea, a nation slightly larger than the state of Indiana, faced significant geographical challenges that should have hindered its economic growth. Unlike Indiana, South Korea’s terrain was rugged and steep, with only 22% of its land suitable for agriculture. Furthermore, it lacked significant mineral wealth, ranking low in coal reserves and having no oil. Despite these domestic challenges, the region was surrounded by powerful neighbors, making its economic prospects seem grim.

The Birth of Samsung

Before the Republic of Korea and the Korean War defined the nation’s economic path, there was a small grocery trading shop in Daegu, South Korea, named Samsung. Founded in 1938 by Lee Byung-chul, this unassuming shop would play a pivotal role in one of the most remarkable economic transformations of the 20th century, later known as the “Miracle on the Han River.”

The Miracle Explained

The transformation of South Korea’s economy from poverty to prosperity was not a miracle in the mystical sense. Rather, it was the result of careful long-term planning and opportunism. The devastation wrought by the Korean War created an opportunity for South Korea to rebuild its industries. Lee Byung-chul pivoted by establishing businesses like a sugar refinery and a wool mill, capitalizing on international aid provided by President Syngman Rhee.

The Chaebols’ Dominance

Under President Park Chung-hee’s leadership, South Korea’s economy saw significant growth driven primarily by the conglomerates known as chaebols. Instead of dismantling these conglomerates, Park entrusted them with the vital task of exporting Korean-made products worldwide. Samsung, LG, Hyundai, and SK Group expanded rapidly, contributing significantly to the country’s economic development.

Chaebols’ Societal Impact

The chaebols not only drove economic growth but also improved living standards in South Korea. Life expectancy doubled, and infant mortality plummeted, thanks in large part to their influence. Samsung, in particular, became a powerhouse, accounting for a substantial portion of the nation’s GDP.

Samsung’s Overwhelming Influence

Today, South Korea’s deep connection with Samsung is unparalleled. Approximately 20% of the entire nation’s GDP is generated by Samsung Group revenue. This level of economic concentration is unheard of, even in the global context, surpassing the influence of other major corporations in other countries.

Aspiring to Be a “Samsung Man”

In South Korean society, achieving a position at Samsung is considered the pinnacle of success. Young people prepare their entire lives to take the challenging Samsung Aptitude Test, competing with thousands for a coveted spot. Working for other chaebols like Hyundai or LG is seen as a lesser achievement, and smaller companies are often viewed as a sign of failure.

Samsung’s Ubiquity in Daily Life

Samsung’s presence in South Korean life is all-encompassing. Whether buying a smartphone, seeking life insurance, taking a ferry, or visiting a theme park, Samsung plays a central role in various aspects of daily life.

Samsung’s Complex Ownership Structure

Samsung’s ownership structure is complex, with multiple affiliates and convoluted control mechanisms. The Lee family’s grip on power relies on soft, subjective control rather than outright ownership.

The Challenge of Inheritance Taxes

South Korea’s high inheritance tax rate of 50% poses a significant challenge to passing control of Samsung from one generation to the next. This hurdle prompted the Lee family to devise a plan to maintain control after Lee Kun-hee’s health crisis.

The C&T and Cheil Merger

To ensure family control, the Lee family proposed merging Samsung Construction and Trading (C&T) and Cheil Industries. The merger was structured to favor the family’s control over the newly combined holding company.

The Influence of Choi Soon-sil

The Lee family’s plan involved influencing President Park Geun-hye, who could, in turn, sway the South Korean National Pension Service. They enlisted Choi Soon-sil, a confidant of President Park, who held sway over the President’s decisions.

The Scandal and Its Aftermath

The scandal involving Choi Soon-sil’s influence and Samsung’s donations to her foundations came to light. President Park was impeached and jailed, and Lee Jae-yong, the heir to Samsung, was indicted and jailed. However, both were eventually pardoned, and Lee Jae-yong was appointed chairman of the Samsung Group.

The Ongoing Influence of Samsung

Despite the scandals and legal troubles, Samsung’s influence remains substantial in South Korea. The company continues to play a pivotal role in the country’s economic landscape, and its relationship with the government endures.

The Future of South Korea’s Power Balance

South Korea’s reliance on Samsung for economic stability raises questions about the sustainability of this power balance. As public dissent against Samsung’s influence grows, it remains to be seen whether the conglomerate or the nation’s societal structure will face challenges first.

South Korea’s remarkable journey from a war-torn nation to an economic powerhouse, largely attributed to Samsung, is a testament to the complex interplay of economics, politics, and culture in shaping a country’s destiny. However, the concentration of power in one corporation’s hands and its influence over the government pose potential challenges for the nation’s future

Originally published at https://wetalk4u.blogspot.com on October 2, 2023.