hankyoreh

As ministries and government agencies go about briefing the presidential transition team, the new administration is explicitly revealing its pro-chaebol tendencies. The transition team has announced a series of chaebol-friendly policies, such as the separation of financial and industrial capital, abolishment of the restrictions on barring chaebols from holding a controlling stake in other companies or its subsidiaries, reduction of tax audits on companies, corporate tax cuts and suspension of comprehensive investigations on firms. President-elect Lee Myung-bak pledged to ease social polarization and support smaller businesses during the campaign, but nobody mentions them. Many observers worry that the next administration will become a spokesperson for the large conglomerates.

Preserving the separation between finance and industry is the biggest problem. This system is essential to realizing economic justice and maintaining the order of the market economy by preventing family-run conglomerates from controlling banks. There is no country in which companies can own banks of their own free will. Only four out of the world’s 100 largest banks are controlled by industrial capital. Under these circumstances, a policy diminishing the separation between finance and industry in order to allow chaebol to own banks will only benefit the chaebol, instead of easing regulations. A system restricting chaebol from holding a majority of shares in other companies is a minor device used to stop the excessive expansion of family-owned chaebol conglomerates. If it is unavoidable that these regulations be abolished, the nation should first devise alternative measures.

We also should ask for whom the corporate tax will be reduced. South Korea’s corporate tax rate is 25 percent for companies with a tax base of more than 100 million won, compared to 35 percent in the United States, Japan, and France, and 30 percent in Germany and England. Only a few states like Singapore, Hong Kong and Ireland have lower rates than Korea. Besides, just 15.6 percent of the nation’s firms will benefit from the corporate tax reduction. As a result, large companies will get richer. The nation will have to consider ways to dramatically lower tax rates for smaller companies instead.

The presidential transition team’s coercion of the prosecution and the National Tax Service is also of concern. Both need to be freer from political influence than are other government agencies. They need to be able to make independent decisions based on professional convictions. It should not be told to do only a few tax investigations so as to keep companies afloat, or to refrain from conducting investigations that might lead to other companies. It must not be forgotten that it is because the United States is strict about enforcing the law on crimes of tax evasion or doctoring of account books that it is able to be globally competitive.

It is quite a spectacle to see government agencies trying to win the new administration’s fancy by jumping on the Lee Myung-bak policy bandwagon. The Ministry of Justice says it wants to see the adoption of a “law abidance mileage system” in which companies that go without having labor disputes and strikes for a certain period get reduced criminal punishment, government subsidies, and benefits in credit appraisal and taxation. There is no basis for being able to give citizens lesser criminal punishment if they never once in their lives break the law. There is even less legal basis for reducing their taxes. No one should be able to receive special treatment under the law. That kind of thinking hurts social order.

Mid-sized companies need to be made stronger, and the middle class and ordinary people need to have a stronger income base if we are going to resolve socioeconomic disparity and increase our economy’s growth potential, because by doing so there will be more domestic consumption and our economy can grow in a healthy manner. Chaebol policy that pours on the generosity for the big conglomerates is not the way to go about pumping life into the economy. That will not be one bit effective. You cannot criticize Lee Myung-bak for saying he is going to create a pro-business government. However, the country should not move towards having an economic system in which a small number of big chaebols receive all sorts of benefits while getting to corner the whole economy.

Please direct questions or comments to [englishhani@hani.co.kr]