The South Korean Chaebol System Essay Example | Topics and Well Written Essays - 2000 words

The South Korean Chaebol System - Essay Example The chaebol is the leading type of business group in South Korea. It can be defined as a business group which is owned and controlled by a person and that person’s family – a definition that coincides for the most part with Morikawa’s definition of zaibatsu, which is that the business group exclusively owned and controlled by the family’, and probably also fits the rest of the definition, ‘diversified industrial firms’, since it is a business group. (Shiba and Shimotani, p. 31) The chaebol concept encouraged the formation of conglomerates under a single holding company, usually controlled by a family. It was fashioned after the Japanese keiretsu. However, unlike the latter, chaebol’s do not have their own financial institutions and that they require the government’s approval of financial backing since South Korea’s banks are nationalized. (Dubois, p. 42) From the late 1950s, it has emerged due to favorable import license concessions, access to scarce foreign exchange and governmental properties seized from the Japanese formed part of the Korean state policy. Samsung, Korea’s oldest chaebol, and the four other biggest conglomerates were established during this period. It was in the 1960s when the chaebols forged its strong partnership with the government. The Korean government identified talented entrepreneurs and systematically sponsored them by credit, trading licenses, tax advantages, and other measures. (Richter, p. 73)Â   The nature of this alliance between the state and the chaebols is fundamental in the Korean impressive economic performance seen from thereon. The government support, encouragement, and intervention resulted to what was called as the guided economic development wherein the government involvement enabled chaebols to monopolize spheres of activity and accumulate capital in order to finance diversification of production. According to Kong, democratization and economic liberalization policies did not break the interdependence of state and chaebols and that it even had the effect of strengthening the chaebols and generating new forms of collusion.