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Impeachment, Collusion and the Economic Future

Steven Borowiec
by Yvonne Kim
24 January 2017

By Steven Borowiec

January 2017 – The news out of South Korea nowadays makes the country sound like a somewhat chaotic place. The president has been impeached, Samsung’s top leader stands accused of crimes, and every weekend thousands of protesters fill public squares for spirited protests.

This past weekend, the numbers of protesters increased, despite the onset of colder weather, apparently out of discontent with a court’s decision to reject a prosecutor’s request to arrest Samsung’s de facto number one, Lee Jae-yong. Lee faces accusations that he provided a bribe to President Park Geun-hye’s confidante Choi Soon-sil in exchange for Park’s help in facilitating a merger that would help him take tighter control of Samsung Group.

In a column about the case, a Seoul-based journalist colleague of mine wittily described Samsung as “too big to jail,” playing on the old idea that the heads of South Korea’s corporate conglomerates are too important to the economy to be locked away. This sentiment, which has been used to justify pardons or light sentences for business leaders, rankles many regular people who end up feeling like the rule of law doesn’t apply to the wealthy elite that anyone with enough clout can get away with crimes.

With Park out of office and likely to have her impeachment upheld by the Constitutional Court, how to regulate the chaebol will be an important question for the next leader of this country, alongside the bigger question of how to improve a slow-growing economy.

While no clear frontrunner has emerged, candidates are beginning to jostle for position ahead of a probable presidential election in the spring of this year. Ban Ki-moon has returned to South Korea, to great fanfare, after a ten-year term as United Nations Secretary General, and is expected to seek the presidency. Left-wing stalwart Moon Jae-in is currently leading in the polls, and a handful of liberal hopefuls, among them Seongnam Mayor Lee Jae-myung, are throwing their hats in the ring.

The next president will take office amid some of South Korea’s most serious economic jitters since the foreign exchange crisis of the late 1990s. Near term projections indicate little reason for optimism. In mid-January, both the International Monetary Fund and the usually optimistic Bank of Korea lowered their 2017 growth projections to between 2.5 and 3 percent.

Mainstay industries like steel and electronics are feeling the heat from Chinese companies that offer lower prices for increasingly competitive products. Many of the biggest South Korean companies, including Samsung, are carrying large amounts of corporate debt, and household debt is a growing problem. In South Korea’s affluent southwest, middle-class communities could be decimated if major shipbuilders such as Hanjin carry out large-scale layoffs.

Some signs of economic despair are subtle. In what could be an indication that more people are desperately grasping for a way out, in January the lottery industry announced its largest earnings ever.

Young people are suffering disproportionately amid the downturn. According to Statistics Korea, youth unemployment stood at 9.8 percent in January, the highest figure ever recorded, and much higher than the overall rate of 3.7 percent. And among those who do find jobs, more are ending up in temporary positions that offer low rates of pay, alongside meager benefits and job security.

All over South Korean cities it is possible to detect another subtle indication of this underutilization of young people, a huge portion of whom are university-educated. In the coffee shops found on nearly every street one tends to find people in their early or mid-twenties, seated amid piles of textbooks, studying foreign languages or for company recruitment exams. Most young South Koreans spend their time preparing to seek jobs at the big conglomerates that dominate the economy, sometimes spending years applying each time the companies recruit.

Competition for these well-paying, stable jobs is intense, and many never make it, creating the unfortunate phenomenon of the career test taker, South Koreans who well into their 30s live in small rooms near test prep facilities, spending their days studying and living off their parents.
This protracted studying for tests has always struck me as a misuse of energy and potential ingenuity. Surely many of these young people, if given the right kind of support, would have ideas that could propel the South Korean economy forward. A recent Bloomberg editorial posited that, “South Korea’s continued economic success depends on the cultivation of a more entrepreneurial culture, one that rewards companies for their ideas and their energy, not their size and political connections.”

Though presidents are often credited or blamed for economic changes that take place under their watch, a president’s power over the economy is limited. Indeed, South Korea’s next president will have little power to control some of the forces reshaping the South Korean economy, such as the decline in the working age population and falling demand for exports.

But in addition to implementing some firmer controls on collusion between the top tiers of society, he or she would be wise to find some way of putting the country’s young people to some more productive task than preparing for jobs most of them will never be offered.

*Steven Borowiec is a journalist based in Seoul.