Implications: The rapid growth in housing cost and other socio-economic burdens may contribute to domestic conglomerates becoming even more “too big to fail” than before. While per capita income increased by a mere 4% between 2017 and 2019, average real estate prices in the Seoul region grew by 20% in 2020 alone. In this environment, many young people believe that they will never earn enough wages or interest on their savings to purchase a home. These burdens have pushed many people into the stock market with the aim of growing their assets more quickly. Successful flagship companies like Samsung have received the most attention. The resulting increase in the importance of conglomerates to these retail investors may constrain policymakers and elected officials from taking actions that could negatively affect the company’s market position.
Context: Adverse economic conditions created by the COVID-19 pandemic is also helping Korean conglomerates evade public scrutiny. Although investigations revealed that Samsung was involved in ex-President Park Geun-hye’s influence-peddling scandal, the company’s legal team argued that harm to the company could damage the national economy. Public polling suggests that many people are also hostile to pursuing harsher criminal convictions for leaders of major corporations. This might be reflected in the court’s decision to punish the Samsung leadership with a lighter sentence. Similarly, the COVID-induced recession also allowed conglomerates to justify layoffs without consultation with labor unions.
This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.
Korea View was edited by Yong Kwon with the help of Melissa Cho and Alexandra Langford. Photo from user 어진 김 on flickr.