The paradox of new traditional confucian economics in the two koreas

South Korean New Traditional Confucianism

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South Korean New Traditional Confucianism

There is no disagreement that South Korea has exhibited one of the most successful growth stories in the world economy, coming off of deep poverty in the post-Korean War period when massive destruction had left both parts of Korea in deep poverty, with per capita incomes substantially less than $100 US per person (Kim, 1992).13 During the 1982-1992 period it had the most rapidly growing economy in the world, and one of the highest growth rates ever seen (Rosser and Rosser, 2004, p. 555). It was not initially obvious that the ROK would arrive at such an outcome as the immediate post-Korean War regime under Syngman Rhee was very corrupt with very slow growth easily outstripped by North Korea’s. Only after he was overthrown in a coup by military leader Park Chung-Hee in 1960 did South Korean growth take off, particularly after the introduction of indicative planning in 1962 (Kuznets, 1990), which would end in 1996. Park would be assassinated in 1979 by his intelligence chief in 1979, but it was only in 1988 that the ROK really began to move towards democracy with a two party system now functioning more or less well, and the current president the daughter of the late dictator Park.

The South Korean economy under Park was strongly centrally directed, with its system of indicative planning arguably the closest to command planning of any observed in the world (Japan, India, Iran, and France were other prominent nations that practiced indicative planning). It was largely capitalist in the sense of private ownership of the means of production, although banks were state-owned until the 1990s, and it was through them that the central planners exercised their direction of the economy by prioritizing investment in certain sectors at different times. While a degree of centralization is consistent with traditional Confucian doctrines (Boyer and Ahn, 1991; Rozman, 2012), Park’s approach to economic development policy was much more based on imitating the model found in Japan, which also has Confucian elements to it.

The institutional element of the ROK economy that exhibits strong Confucian influence and still dominates that system is the conglomerate style chaebol (or jaibul) corporations. These were essentially modeled on the pre-WW II Japanese zaibatsu. In contrast to the chaebol, the zaibatsu had banks at their centers, and starting in the late 1960s many of the former zaibatsu effectively reemerged as groups known as keiretsu of closely associated and coordinating firms in different sectors related through their bank, with some such as Mitsui and Mitsubishi very much resembling their former selves, if remaining technically a set of independent firms. In contrast, the chaebol have been full conglomerates like the old zaibatsu, but lacking a bank for any of them, with those nationalized under Park, but privatized and independent from the 1990s on.

Their position in the ROK economy has fluctuated over time. They were without question the leading force in that economy from the 1960s until the mid-1990s, as the ROK engaged in a variety of reforms associated with joining the OECD, including opening up its capital markets along with ending central planning and privatizing its banks. They came under sharp criticism and legal attack after the ROK suffered badly during the East Asian financial crisis of 1997, which many thought they played a negative role in bringing on. The largest of them, Hyundai, was broken into three parts, and a variety of restrictions were placed on them. It seemed that their day was done, and indeed their output as a percentage of the ROK economy declined for a few years according to some sources and much publicity (Chang, 2003). However, this has turned around, and the chaebol have returned to their leading position in the ROK economy more recently (Cheong, et al., 2010). The supreme sign of this is the emergence of Samsung as not only the most famous company in in Korea, but as the chief competitor at the global level of Apple for dominance in some of the most technologically advanced industrial sectors, and Samsung is a chaebol.

Rosser and Rosser (2011) argue that the chaebol embody crucial aspects of Confucian influence within the ROK economy, and that in this case one sees the confluence of the new traditional and the new institutional economy: the Confucian influences are associated with transactions costs-reducing elements. Among these are the emphasis of family and harmony within the firm, whereas the other major Confucian influence in the ROK operates throughout the economy, the emphasis on and respect for education. Most of the chaebol remain family firms with the CEO the patriarchal leader of the family. Kee (2008) documents the blood succession of control in leading chaebol, including Samsung, Hyundai, Lucky Goldstar, and the Ssangyong Group. To quote Cumings (1997, p. 327): “So these large kingdoms, [are] said to be run by men of unimpeachable morality and integrity in good Confucian fashion, expecting loyalty and distributing beneficence, even more than [in] the old court system.”

Nevertheless, for all the rhetoric regarding how workers and management should relate, the South Korean chaebol have been less successful than their Japanese counterparts in achieving workplace harmony. Whereas after the 1950s and until quite recently, the Japanese management system involved setting up docile company unions with few strikes or open conflicts appearing for decades, this has not been the pattern in the ROK. Under Park Chung-Hee there simply was an authoritarian suppression of all labor activity, with protests and strikes breaking out from time to time. While relations have improved since then, relations are not as harmonious as in Japan, although more so in the chaebol sector than in other parts of the ROK economy (Koo, 2001).

More broadly, this failure to fully follow Confucian ideals of harmony in labor-management relations carries over to other aspects of management in chaebol firms. Hierarchical structures have undermined the ideals leading to problematic outcomes. As Kee (2008, p. 14) puts it referring to these failures, “This has created the problem of favoritism as well as the unfairness and inefficiencies in Korean management.” As it is, this can be argued to show a possible negative outcome of Confucian influence in firm management: that the tendency to keep control within a family may lead to the “favoritism” that can lead to the “unfairness and inefficiencies” noted above, which may offset gains from trust that might otherwise lower transactions costs.

It must be noted that some argue that the Confucian influence in the ROK is declining, with it being strongly associated with a backward looking conservative tradition that seeks the suppression of women and defense of an anachronistic approach to education. Boyer and Ahn (1991, p. 58) report surveys of rural migrants to urban areas who seem to discount the influence of elders, with Chang (1997) reporting on the changing role of the family in the society. The issue in education has been quite controversial, with strong movements away from rote learning that many associate with traditional Confucianism (Chang, 2009). Even as Confucianism may be declining in South Korea, one of its darker sided, the downgrading of the position of women, remains strongly in place, with the nation getting rated 111th among 130 nations in the world on having reduced its gender gap, with nearly all the lower 19 nations being Muslim (World Economic Forum, 2013).

Thus, we are left with the paradox for South Korea of the role of Confucian influence in its economy. On the one hand it is officially unrecognized14 and in retreat in influence in various parts of the increasingly open and cosmopolitan society, particularly within families as women gain rights and in education where innovative thinking is increasingly emphasized over rote learning. On the other hand, along with the general respect for education, the leading organizations in the economy, the chaebol firms, continue to show strong Confucian influence in their structure and management. That these issues are controversial within South Korea may be the surest sign of the ongoing strength and significance of the Confucian influence in that society.

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