THE NEOLIBERAL STRATEGY OF SOUTH KOREAN CONGLOMERATES

Author(s): Kyung-Pil Kim

Source: World Review of Political Economy , Spring 2022, Vol. 13, No. 1 (Spring 2022), pp.
97-117
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 THE NEOLIBERAL STRATEGY OF SOUTH
KOREAN CONGLOMERATES
Kyung-Pil Kim

Kyung-Pil Kim is lecturer in the Department of Sociology at Korea University. His research focuses
on neoliberalism/neoliberalization, capital accumulation of the chaebols, and civil-military relations.
He has published his research in some journals, among which are Monthly Review and Japanese
Journal of Political Science. Email: kpkim0713@gmail.com

Abstract: Neoliberal strategy, which was adopted and implemented after 1987, lies behind
the success of South Korean conglomerates (chaebols), and it was strengthened during the
Asian financial crisis in 1997. Faced with new spatio-temporal conditions and the massive
struggle of workers, the chaebols started a project to restore capitalist power. To this end,
the chaebols actively supported the political powers who represented them and adopted
American and Japanese strategies for globalization and flexibilization. After enduring
the 1997 crisis, the chaebols shifted from growth- to profit-orientedness due to external
pressures, and neoliberal strategy intensified due to an emphasis on globalization and
flexibilization. However, the chaebols’ neoliberal strategy should be defined as distinctly
Korean. They still maintain corporate governance in which the ownership and management
are combined, mobilize resources for the owners’ objectives, and conduct unrelated
diversification. In addition, the chaebols have accumulated capital by transforming
themselves into industrial, commercial, or financial capital since the 1950s.

Key words: chaebol; neoliberalism; crisis management; globalization; flexibilization;

South Korea

Introduction

Many South Korean1 conglomerates, known locally as “chaebols,” have grown

into global economic powers. A chaebol is a diversified and large-scale conglom-
erate form of capital governed dynastically by an owner and the owner’s family.
The chaebols have grown quickly in Korea, dominating the market and contribut-
ing to the economy. Some chaebol affiliates grew into leading corporations in the

World Review of Political Economy Vol. 13 No. 1 Spring 2022

DOI:10.13169/worlrevipoliecon.13.1.0097
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98 Kyung-Pil Kim

global market. Samsung Electronics is the world’s second-largest manufacturer of

smartphones and memory chips. Another Korean conglomerate, the Hyundai
Motor Group, competes with leading enterprises in the global market, with its
affiliate Kia Motors. According to the 2020 Fortune Global 500,2 Samsung
Electronics and Hyundai Motors ranked 19th and 84th, respectively, and eight
other affiliates were also named on the list. After being structured in the 1970s,
some chaebol affiliates have grown into leading corporations in the global market
in 30 to 40 years.
How did the chaebols accomplish such remarkable achievements? I argue that
a neoliberal strategy, which they adopted and implemented after 1987, lies behind
the chaebols’ global success, and this strategy was strengthened during the Asian
financial crisis in 1997. Traditionally, neoliberalism has been understood as a
macro-societal concept, often equated with the retreat of the state and free-market
ideology or a set of liberalization and deregulation policies. However, when
viewed from the perspective of capital, neoliberalism can be regarded as a strategy
to counteract labor and obtain greater profit to cope with the accumulation crisis.
In 1987, the chaebols began to pursue a neoliberal strategy, one that presents a
unique pattern over time. The chaebols’ strategy was fundamentally identical to
that of the US and the UK, as it was a response to the accumulation crisis, and a
resurgence of capital against labor. But the way it was implemented was different,
so can be defined as a neoliberal strategy with Korean specificities. I will analyze
why and how the chaebols implemented and developed this neoliberal strategy. In
addition, I will reveal the similarities and differences between their strategy and
conventional neoliberalism, as well as internal contradictions in the Korean
methodology.
In this article, I will question the conventional conceptualization of neoliberal-
ism and argue that it can be considered a strategy of capital. This article can con-
tribute to current research on the chaebols by explaining why and how the chaebols,
which became the world’s leading capital, implemented this unique neoliberal
strategy. Moreover, I will discuss contemporary global capitalism, including spatio-
temporal conjuncture, historical heritage, and the variegation of capital accumula-
tion strategy.

The Neoliberal Strategy of Capital

As the chaebols grew into global leaders, many began explaining this phenome-
non. First, those who support the chaebols and the chaebols themselves attributed
their growth to the owners’ risk-taking and innovation (LG 1997; Samsung 1998;
Samsung Electronics 2010; SK 2013; Song and Lee 2014). But there are some
problems with this conventional view. Rather than taking risks, the chaebols in

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THE NEOLIBERAL STRATEGY OF SOUTH KOREAN CONGLOMERATES 99

fact attempted to create an environment in which risk-taking was unnecessary by

mobilizing resources and power. In addition, while their intention was to encour-
age innovation, the chaebols’ techniques tended to suppress innovation, and there
were many cases where the chaebol owner became a risk.
Second, many scholars also attribute the growth of the chaebols to collusion
between government and business, so-called “crony capitalism” (Kang 2004; Kwak
2012; W-B. Lee 2015). This approach was even substantiated by Samsung’s politi-
cal influence scandal that ensnared the former president Park Geun-Hye. However,
collusion between the chaebols and the government dwindled significantly after
democratization in 1987 and the Asian financial crisis in 1997. If crony capitalism
theory was correct, the chaebols would have had to face significant difficulties in
growth since 1987, but this did not happen. As a result, this relationship has played
a minimal role except for in the succession of management rights.
Third, labor unions, progressive NGOs and some intellectuals argue that the
growth of the chaebols was due to the exploitation of labor (Kwak 2012; W.-B.
Lee 2015). While workers did suffer from low wages and long hours in poor con-
ditions, labor exploitation did not happen only in Korea, so this argument cannot
explain the chaebols’ capital accumulation entirely. Labor exploitation works with
other factors, which at certain times were more important to the chaebols. If the
labor exploitation argument was valid, chaebol growth would have slowed consid-
erably since the 1980s, when wages rose rapidly and working conditions improved,
but it continued to increase.
Beyond the existing theories, I argue that the chaebols have launched a system-
atic capital accumulation strategy since 1987. The chaebols’ growth and global
success is fundamentally attributed to the accumulation of capital, which is a pro-
cess or relationship that continually moves and circulates due to competition and
the pressure for profit. Moreover, the capital accumulation strategy can be viewed
as neoliberal.
Neoliberalism is usually considered a macro-societal concept that includes
ideas, theories, and a set of policies (Munck 2005, 60; Mudge 2008; Braedly and
Luxton 2010; Amable 2011, 5–6; Venugopal 2015; O’Neill and Weller 2016,
86–87; Fine and Saad-Filho 2016, 686; Kim 2019a, 180–183). In this context,
neoliberalism means promoting individual freedom and competition, minimizing
the role and territory of the state, and replacing the state’s power with a so-called
free market. In many cases, neoliberalism involves abolishing various regulations
and promoting liberalization and privatization policies.
However, neoliberalism should not be defined only as an idea, theory, or set of
policies. Neoliberalism involves varied combinations of ideology, theory, policy,
and practice, with connections but not necessarily coherence across and within
these elements (Chang 2002; Mirowski and Plehwe 2009, 14–15; Peck 2010; Ji

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100 Kyung-Pil Kim

2011a; Dardot and Laval 2013; Fine and Saad-Filho 2016, 694; Cahill 2018; Kim
2019a, 180–183). Neoliberalism has never existed in a pure form implied by an
idea or theory. Neoliberal ideas and theoretical systems often portray the ideal of
neoliberalists projected and thus differ from reality (Peck 2010; Crouch 2011;
Mirowski 2013). In addition, neoliberal policies were implemented inconsistently
and opportunistically even in the US and the UK (Pierson 1994; Prasad 2006;
Crouch 2011; Mirowski 2013; Fine and Saad-Filho 2016).
Given its nature and origins, neoliberalism is fundamentally a political-eco-
nomic project. As some have noted, neoliberalism aims to restore capitalist class
power and accumulate capital by counteracting labor in response to the accumula-
tion crisis in the 1970s (Gowan 1999; Panitch and Gindin 2004; Dumenil and
Levy 2004; Harvey 2005; Macartney 2011; Overbeek and Apeldoorn 2012;
Pradella and Marois 2015; Davidson 2018). The ideas and policies considered as
the core of neoliberalism are in fact only manifested when a political-economic
project is working. This is why ideas and theories were not supported until a cer-
tain time. In this context, when viewed from the perspective of capital, neoliberal-
ism is a capital accumulation strategy to counterattack labor and obtain greater
profit to cope with the accumulation crisis.
In the process of this strategy, capital should provide a large amount of resources
for political parties and politicians to represent their interests (Edsall 1984;
Clawson, Neustadtl, and Weller 1998; Boggs 2000; Smith 2000; Crouch 2004;
Hacker and Pierson 2011). This allows them to receive direct or indirect support
from state power or influence a market in a favorable direction. In addition to tak-
ing advantage of the structural forces from their investment capabilities in capital-
ist societies (Block 1977), capitalists can be liberated from state control or
discipline by cultivating these political forces. In competing with political forces
to gain autonomy from the state, capital can profit by applying its neoliberal strat-
egy according to its own will and judgment.
When focused on corporate governance, spaces and forms of capital accumulation,
and labor management, neoliberal strategy consists of the following elements. First, it
is a departure from the existing way of management, which prioritized restraining
shareholder value and emphasized retainment and reinvestment (Lazonick and
O’Sullivan 2000; Jensen 2002; Soederberg 2004). The new strategy has provided
executives with stock options and aimed to maximize shareholder value, which
emphasizes short-term profits and dividends. Second, it is a globalization of produc-
tion and finance (Helleiner 1994; Gowan 1999; Panitch and Konings 2008; Panitch
and Gindin 2012). Capital has sought to secure new labor power, production processes,
distribution networks, and markets through the expansion of production space.
Through financial globalization, firms invested in more profitable overseas assets to
eliminate existing excess capital, manage risks at a global level, and gain profits.

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THE NEOLIBERAL STRATEGY OF SOUTH KOREAN CONGLOMERATES 101

The third element of neoliberalism is financialization (Epstein 2005; Bryan and

Rafferty 2006; Becker et al. 2010; Krippner 2011; Lapavitsas 2013).
Financialization refers to the growing reliance of non-financial firms on financial
activities to subsidize profits generated through more traditional activities
(Krippner 2005). In other words, as cash flow becomes more important and the
profitability of the financial sector increases, many companies will make profits
like financial companies. The last element is labor flexibilization (Harvey 2005;
O’Connor 2010; Kotz 2015; Jackson 2016; Fine and Saad-Filho 2016, 693–694;
Davidson 2018, 65). Under the previous Bretton Woods system, capital gained
high profits in a stable environment while compromising with labor and the state.
In return, they could not implement labor flexibilization. However, after the 1970s
crisis, capital tried to adjust the wages and employment patterns according to their
own interests in procuring and managing the labor force.
Thus, the neoliberal strategy of capital consists of maximizing shareholder
value, globalizing production and finance, implementing financialization, and
enforcing labor flexibility. Neoliberalism can evolve according to internal contra-
dictions of the strategy and spatio-temporal conditions. Based on these points, the
next chapter will examine the rise of chaebol’s neoliberal strategy.

The Rise of Neoliberal Strategy

The chaebols in the 1960s and 1970s had to circulate capital in the form of
industrial capital in accordance with the discipline of a military regime that
wielded considerable state autonomy. However, they did not have the capacity
to accumulate capital. The chaebols of the 1950s earned money largely in two
ways: commerce and receiving and processing US aid materials such as wheat,
raw sugar, and cotton. Thus, the chaebols did not have the technology and capi-
tal goods needed for production and could not finance investments due to a lack
of domestic savings. It was also difficult to find markets to sell goods due to
poverty in rural areas and low wages. As a result, they organized the circuit of
capital with a dependence on the military regime and foreign capital. This was
possible because, unlike Hong Kong (China’s SAR) and Singapore, the military
regime chose chaebols rather than multinational corporations as partners for
economic development (Castells 1992). Through the regime, chaebols procured
money capital, labor forces, and means of production, controlled labor pro-
cesses, and dominated the domestic market. They also formed an international
division of labor with Japanese capital. Thus, chaebols received equipment,
technology, and production know-how, exported through the Japanese, and
developed vertical and horizontal diversification (Castley 1997, 82–83; Chibber
1999, 330; Ji 2011b, 37; Kim 2019b, 24–25).

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102 Kyung-Pil Kim

Chaebols exhibited strong growth-orientedness with the objective to increase

the size of the enterprise in order to consistently receive resources such as money
capital—which was essential for the circulation of capital—from the military
powers. Therefore, they increased their size by accumulating affiliates regardless
of profits and invested heavily in industries supported by national resources. The
rapid growth of chaebols’ funding, investment, and debt ratio since the 1960s
demonstrates this trend (Korea Development Bank 1995; Kim 2017, 243–244).
By the 1980s, chaebols needed to gradually change their strategy. Since the
1980s, the regime began to weaken due to the emergence of economic bureaucrats
who studied neoclassical economics, the liberalization pressure of the US (Bello
1994; Evans 1995, 51–52), and the growth of chaebols. Due to democratization in
1987, the government could no longer target development, allocate most of its
resources to chaebols, nor protect the domestic market as before. However, this
arrangement in fact benefited chaebols. Due to increased capacity, chaebols no
longer needed governmental support. In the 1980s, capital accumulation and con-
centration increased dramatically, especially since 1985 when chaebols secured
vast funds. They raised their own capital based on their profits, scale, and foreign
credit rating, dramatically increasing their accumulation capacity (K.-P. Kim
2018, 193). As a result, the government that emerged after democratization could
no longer impose discipline on the chaebols.
In addition, chaebols faced a more competitive environment. The intensifying
competition between capitals had increased profit pressure at the global level, and
price competition intensified as Japanese capital entered Southeast Asia after the
1985 Plaza Accord.3 As the growing chaebols became competitors for Japanese
and other foreign capital, it was impossible to continue to cooperate, and they
needed to win the intensified price competition (Kim 2019b, 25).
Yet contradictions within existing accumulation strategies began to arise.
Before democratization, chaebols managed labor forces similar to the Japanese
Meiji army4 through a governmental alliance. However, when the alliance between
the chaebols and the government deteriorated after democratization in 1987, chae-
bols faced unprecedented resistance from laborers. These workers could no longer
tolerate military-style control, poor working environments, high intensity of labor,
and low wages, so they organized protests led by heavy and chemical industry
affiliates. The chaebols accepted their partial demands since they were enjoying
an economic boom after the Plaza Accord and suffered from a lack of workers
(K.-P. Kim 2018, 191). The government did not directly intervene in the conflict
between capital and labor because of the imminent presidential election. The most
meaningful gain from this confrontation was a wage increase for employees. They
also achieved recognition for unions, easing of labor intensity and physical and
psychological violence, and a stronger seniority system.

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THE NEOLIBERAL STRATEGY OF SOUTH KOREAN CONGLOMERATES 103

However, the end of the economic boom coincided with the 1988 Seoul Olympics
in Korea. Chaebols developed a new accumulation strategy, which I refer to as a
neoliberal strategy, to meet rising competition among capitals at both the global and
regional levels and to deal a counterblow against labor. Unlike the experiences in the
US and Western Europe in the 1970s, the rate of profits in Korea in the late 1980s
did not sharply decline (Jeong 2004; Hong 2013). The chaebols’ sales and net profits
recorded positive growth,5 but the chaebols reacted sensitively to their employees
and the intensification of competition between the capitals.
The chaebols enlisted some elites to represent them in the ruling party, while
actively promoting their opinions in the political arena, using their interest group, the
Federation of Korean Industries (FKI). In some cases, they made their own political
parties and attempted to win the election as a candidate.6 Due to the pressure from
civil movements, the newly democratized government tried to control chaebols,
induce investment in the production sector, prohibit real estate speculation, and
impose market discipline on chaebols simultaneously. These measures against the
chaebols’ interests compelled them to publicly confront the government in the
media. In addition, the chaebols did not provide the government with political funds
as readily as before (Cho 1996, 197–199, 202; K.-P. Kim 2018, 193). In the pre-
democratization period, chaebols gained a profit from the regime if it paid political
funds, and in turn the regime had the power to ruin the chaebols, but that was no
longer the case. In the end, most of the government’s actions failed and the chaebols
were free from democratic control to implement neoliberal strategies.
The chaebols’ neoliberal strategy consisted of the following factors. First, chaebols
aimed to globalize the circuit of capital, which previously occurred at the national level
(K.-P. Kim 2018, 194–197). Even though chaebols engaged with the global market in
the circuit of capital—such as procurement of money capital or means of production,
the introduction of technology, and exports—it was primarily based on relationships
with the Korean government or foreign capital. Furthermore, the circuit was mostly
built on domestic structured coherence.7 However, after 1987, chaebols tried to
retrench expenses, weaken labor, and increase profits by procuring accumulation ele-
ments, producing, and distributing across broader regions. The chaebols sought an
easier and less expensive way to procure money capital and invested in foreign assets
and resources for faster value realization. According to the Export-Import Bank of
Korea, foreign direct investment by Korean companies had increased sharply since
1987, and the trend has accelerated since 1993.8 They tried to reduce labor expenses,
secure cutting-edge technology, and avoid trade conflicts through the establishment of
an international production base, an alliance with international capital, or a merger and
acquisition. Moreover, chaebols began to establish their own channels of distribution,
sales, and services in the global market (Hobday 1995, 71; Kim 1997, 153; Samsung
1998, 323–326; Gray 2008, 488; Y. Lee 2015, 185–187).

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104 Kyung-Pil Kim

Second, chaebols adopted a flexibilization of labor. They introduced a Japanese-

style production method and began to automate production by purchasing new tech-
nology. At the same time, chaebols attempted to control wages as well as the form
of labor and tasks for their own interests in regard to procurement and management
of labor (Park 1997, 172; Burkett and Hart-Landsberg 2003; Gray 2008, 487–488;
W.-B. Lee 2015, 185–187). These changes involved retracting the initiative of wage
determination from employees and adding meritocracy to the existing seniority sys-
tem. Regarding employment, chaebols put pressure on labor and adopted quantita-
tive flexibilization such as dispatching, in-house subcontracting, outsourcing, and a
layoff system for greater profits. They pursued functional flexibilization for tasks of
labor. As a result, tasks were rearranged and the intensity of labor worsened through
scientific management or tools (K.-P. Kim 2018, 202–204). Laborers, on the other
hand, did not conform to chaebols’ flexibilization attempts. Labor unions coped
with the attack by trying to block the introduction of flexibilization and by improv-
ing their economic conditions (Jeong 2013, 305). In the 1990s, capital and labor
experienced continuous strife, which caused a labor strike in 1996, resulting in the
postponement of flexibilization and layoffs. However, after the economic crisis the
following year, capital began full-scale flexibilization.
As noted earlier, neoliberalism can be seen as a political-economic project to
restore capitalist class power. More specifically, neoliberal strategy includes
embedding shareholder value maximization to emphasize dividends and short-
term revenue gains, which globalizes production and finance, implements finan-
cialization, and enforces the flexibilization of labor. From this point of view, the
chaebols’ strategy after 1987 is a late version of neoliberal strategy. Overall,
with this new strategy, capital aimed to beat the competition at the global and
regional levels and deal a counter strike against laborers who collectively
resisted capital in 1987.
However, chaebols’ strategy differs from conventional neoliberal strategy in a
few notable aspects. First, chaebols did not pursue shareholder value maximiza-
tion, which places emphasis on cash flow, short-term revenue, and dividends.
Chaebols maintained a system that mobilizes the resources of the group to support
the owners,9 but shareholder value maximization would have gone against the
owners’ interests. Thus, chaebols prioritized growth over dividends and short-
term revenue. The administration, with the president elected in 1988, tried to insti-
tute policies related to transparency in the corporate governance and control over
economic concentration of chaebols while advancing liberalization. Because at the
time, people considered the chaebols and military dictatorship as a package and
voiced the view that both economic and political democratization were needed
(Kim 2019b, 27). However, the chaebols strongly opposed the government’s poli-
cies and eventually neutralized the policies (FKI 2011, 260–275). They could

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THE NEOLIBERAL STRATEGY OF SOUTH KOREAN CONGLOMERATES 105

finance capital more easily due to steady growth from the past 20 years and the
economic boom after 1985 and became more growth-oriented to survive intensi-
fied competition. In effect, they increased financing and investment at the local
level as well as globally and expanded the scale of their affiliates despite a high
debt ratio10 (Korea Development Bank 1995, 2002).
Second, the chaebols failed to realize globalization of finance or financialization.
The fact that the Korean financial market was not as developed as the US or the UK,
and that adequate financial techniques and engineering were absent, hindered the
chaebols from financialization. However, the chaebols did not solely pursue indus-
trial capital. Instead, they have earned profits from industrial, commercial, and
financial capital from the 1950s through to the present day. For example, Samsung
(1998) has earned a profit and raised funds through financial affiliates since 1957.
For most of this time, the top three affiliates with the highest operating profit have
been in electronics, trading, and finance. According to the Korea Fair Trade
Commission, the three major sectors that generate sales and profits for most of the
other chaebols were not comprised solely of industrial capital affiliates; the chae-
bols’ financial and commercial capital affiliates also accounted for a large propor-
tion (K.-P. Kim 2018, 200–201). The chaebols continually financed capital and
earned a profit by running financial affiliates in the domestic market after 1987. This
trend expanded as the national disciplines collapsed and liquidity increased rapidly
in the late 1980s. As a result, in the 1990s, the chaebols began to acquire or establish
general finance companies and credit-card companies.

The Outcome and Contradictions of Neoliberal Strategy and the

1997 Economic Crisis

After 1987, the chaebols gradually accumulated capital in a neoliberal way while
struggling with labor, but their focus was still on the heavy and chemical indus-
tries. Production and sales of semiconductors, motors, petrochemicals, ships, and
steel played a primary role in capital accumulation, and these industries allowed
the chaebols to become leaders in the global market. From 1987 to 1997, although
the rate of profit in the Korean manufacturing sector declined (Jeong 2004; Hong
2013), the 30 largest chaebols made five times more profit than in the previous
period. Concentration of sales exceeded 40% in 1989 and even increased after the
mid-1990s. The net profit of the five top chaebols—Hyundai, Samsung, LG,
Daewoo, and SK—reached 292 million USD in 1987, then exceeded 735 million
USD in 1989, followed by 6,579 million USD in 1995.11
However, circumstances changed after 1995. The Reverse Plaza Accord marked a
watershed moment in Korea. The US bailed out the Japanese manufacturing econ-
omy that was slowing due to the ascent of the Japanese yen, and Korean capital

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106 Kyung-Pil Kim

rapidly lost its competitiveness in the export market in the aftermath of the exchange
rate regulation (Kim 2019b, 29). Moreover, as instability in the Southeast Asian
economy and global economy deepened due to financial globalization, the Korean
government announced drastic financial liberalization and deregulation in late 1994.12
In these circumstances without governmental disciplines, the enforcement of liberali-
zation and deregulation policies stimulated the chaebols’ neoliberal strategy. Yet this
process also created contradictions of capital, which exploded into a crisis in 1997.
Among the chaebols’ neoliberal strategies, the most troublesome during this
period was strong growth-orientedness and globalization. Due to enlarged capa-
bilities and the absence of governmental disciplines, the chaebols raised short-
term capital directly from the global financial market for aggressive investments
at home and abroad. They also invested some of their capital into the acquisition
and establishment of non-bank financial institutions to accumulate financial capi-
tal. As liquidity expanded and the stock market grew rapidly due to the Olympics
and elections in the late 1980s, the chaebols invested intensely in the financial
market, despite high debt, and were able to earn a profit or finance investment
through these institutions.13 However, after the economic recession and Southeast
Asia’s financial crisis, the chaebols’ high level of debt caused a maturity mismatch
and eventually led to an economic crisis (Chang, Park, and Yoo 1998, 738–739).
The globalization of the chaebols was only possible through massive financing
due to internal and external loans but, since it did not result in profits, this globaliza-
tion triggered a deeper crisis. Korean corporations did not have any dominance in the
global market besides the capability to invest heavily in the short term (Song and Lee
2005, 51; K.-P. Kim 2018, 206). They focused on exports and exhibited a high
dependence on certain products based on a volume increase, which forced them to
bear sizable risks as the global market became unstable. As the price of semiconduc-
tors plummeted after 1996, some chaebols and the Korean economy suffered greatly.
The Korean government failed to implement appropriate measures, despite clear
symptoms of the economic crisis in late 1995. This resulted in many chaebols declar-
ing bankruptcy. At the same time, the financial crisis in Southeast Asia in 1997 sig-
nificantly affected Korea. As the Korean government failed to receive bilateral
financial support from the US, Japan, and China, it had to apply to the International
Monetary Fund (IMF) for a bailout as desired by the US (Kim 2019b, 29–30).

The Intensification of Neoliberal Strategy

The IMF program was created as a result of the bailout negotiations between the
Korean government and the IMF. This program reflects the interests of three main
participants (Ji 2011b, 248–250). The first was the IMF, whose standard policies
included a tight monetary and fiscal policy and the decrease of debt as well as

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THE NEOLIBERAL STRATEGY OF SOUTH KOREAN CONGLOMERATES 107

governmental intervention. The second was the US Treasury and Wall Street,
which required liberalization of financial and capital markets along with trade.
Wall Street’s intention was to accumulate capital in the Korean market more eas-
ily (Wade and Veneroso 1998). The economic bureaucrats of the Korean govern-
ment were the third participants, who learned neoclassical economics in the US
and considered the US economy to be a global standard. Since the 1980s, they
have been attempting to change the Korean economy according to the US model.
For example, they want chaebols to resemble US corporations by pursuing finan-
cial reform, decreasing debt ratio, and setting an institutional limit on owner gov-
ernance as well as unrelated diversification. They also ordered the introduction of
layoffs and dispatch-work systems (Ji 2011b, 248–250). Similar to the IMF and
the US, Korean economic bureaucrats blamed the chaebols for the crisis, insisting
that their mismanagement and corruption, caused by collusion between the gov-
ernment and businesses, gave rise to the crisis. Thus, the bureaucrats suggested a
transformation of the chaebols and labor reform as solutions.
The IMF program was implemented, and the cost of crisis management was
passed on to the laborers unilaterally. Most of the Korean economy was newly cre-
ated or reorganized. The financial market shifted rapidly, and the chaebols had to
adapt. They did not agree with the program yet could not resist as they had already
lost social legitimacy and the government had authority (Kim 2019b, 29–30). The
chaebols could go bankrupt unless they followed the government’s program. After
democratization in 1987, the government could not control the chaebols, but since
the government was managing the crisis, it temporarily was back in power.14
However, as time passed, select chaebols revolted against the government. The
chaebols succeeded in serving their own interests, especially in the factors directly
related to the owners such as the transformation of corporate governance (FKI 2011,
615–621). But the chaebols had to accept core policies, including the improvement
of the financial structure for a decrease in debt and unrelated diversification.
Eventually, the government and the chaebols reached a compromise. They decided
to maintain the existing governance system and accumulation process for the most
part, in return for strengthening management transparency, lowering the debt ratio,
valuing cash flow, and increasing short-term profits.
The chaebols had to reorganize their existing strategies primarily by retreating
from strong growth-orientedness. The new financial market and business environ-
ment forced them to value profit (cash flow) and lower the debt ratio. Now, the
chaebols’ success was not guaranteed by high debt on loans, a competitive advan-
tage created by facility investment based on massive funding power, and a long-
term profit strategy. Daewoo, which once was a symbol of globalization and the
third biggest chaebol in the 1990s, went bankrupt because it failed to reorganize its
strategy as quickly as others. Reorganization from growth- to profit-orientedness

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108 Kyung-Pil Kim

meant that the chaebols’ neoliberal changes yielded progress. However, the chae-
bols preserved the mobilization of resources to protect the owners’ interests. The
power of the owners strengthened in the process of crisis management, while the
status of financial affairs improved.
In fact, the ownership shares of foreign capital increased after the crisis. In par-
ticular, those shares of the top chaebol affiliates with the highest profits reached
almost half of the entire share. Initially, foreign capital criticized the owner domina-
tion of the chaebols. However, since the chaebols could guarantee a certain amount
of stock margin and dividends, they could not find a reason to assert transparency of
corporate governance and transformation (Yoo 2004, 218–219). Even though there
was strong external pressure to change the owner governance system into a share-
holder governance system, the chaebols could maintain the former by continuously
resisting the government and providing stock margins and dividends to sharehold-
ers. The chaebols were managed in a way that prioritized the interests of the owner
and major shareholders among various stakeholders (Kim 2020, 283).
During this period, the chaebols deepened their globalization and flexibiliza-
tion. Even though the contradictions of globalization had produced negative con-
sequences, globalization and flexibilization were the best ways to lower costs and
increase profit when sales plummeted and competition among capitals intensified.
The chaebols financed, produced, and distributed more broadly and weakened
labor more aggressively. In production and distribution, the chaebols implemented
active localization, deepened vertical integration, and established a global produc-
tion base while taking the lead in the East Asian production network (Lin 2009;
Nam 2019). According to the Export-Import Bank of Korea foreign investment
statistics survey,15 the chaebols invested not only in East Asia but also in North
America and the EU to develop and adapt technology. Moreover, after overcom-
ing a general strike in 1996 through an alliance with the government, the chaebols
could turn the crisis into an opportunity for the proliferation of flexibilization.
They adopted management tools from US capital, such as business process reen-
gineering (BPR), 6-Sigma or enterprise resource planning (ERP) and spread dis-
course that allowed workers to identify themselves with capitalists (Seo 2011, 82).
Furthermore, income, employment status, and labor tasks that could not be
fully implemented due to the resistance of the labor force before 1997 became
more flexible (Cho 2011; Jeong 2013, 315; W.-B. Lee 2015; Kim 2020, 284).
First, the chaebols attempted to reduce the share of wages in production costs by
implementing an annual salary system and payment based on production. Second,
they reduced the coefficient of employment through layoffs and legalization of
dispatch-work systems, and increased outsourcing and irregular workers. The
chaebols increased spinoff, subcontracting, and cut delivery prices in the process.
Third, in order to deepen functional flexibility, the chaebols intensified the

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THE NEOLIBERAL STRATEGY OF SOUTH KOREAN CONGLOMERATES 109

integration of the job and imposed long work hours. Laborers lost their voice and
failed to resist effectively because of the “divide and rule” of the capital, which
can be seen in Samsung’s labor control. Samsung classified employees into regu-
lar or irregular workers, headquarter or subcontractors, domestic/international
affiliates, or international subcontractors, giving preference to the former through
central positions while placing the latter in marginalized positions with poorer
treatment (Chang 2006; Choi 2008).
Even though the chaebols’ neoliberal strategy intensified after the 1997 eco-
nomic crisis, their distinct method of capital circulation and accumulation has
largely remained the same through the present day or become variegated in some
cases. The chaebols still mobilize their resources for owners’ families. At the same
time, however, they have greatly increased dividends and self-tender and retained
earnings to handle any sudden increase in foreign shares and risks. Dividends of
listed corporations reached almost 10 billion USD in 2004 and 13 billion USD in
2007; among these, 5.4 billion USD belonged to foreign investors. Foreign divi-
dend income among national investment income rapidly increased from 9.9% in
1990 to 45.8% in the 2000s (Seo, Kim, and Lee 2011, 139). Self-tender also grew,
with the top five chaebols’ purchases of treasury stock increasing almost six times
from 1998 to 2001. In the case of Samsung Electronics, dividend payments and
self-tender increased from 30 to 50% after the crisis (Lee, Jeong, and Choi 2014,
150). Retained earnings present a similar tendency, increasing steadily after the
crisis. In the case of the top 30 chaebols, the retained earnings increased 275%
from 2006 to 2015.16 These characteristics are a result of changes in owner gov-
ernance and shareholder value maximization, and therefore can be considered the
most distinct characteristics of the chaebols today.
Another characteristic is that chaebols are flexible in terms of forms of capital;
they take different forms of industrial, commercial, or financial capital according
to the circumstances. The chaebols had procured capital and made a profit in the
domestic market by running financial affiliates rather than pursuing financial glo-
balization. However, they refrained from running financial affiliates after the cri-
sis, unlike the US capital that competitively stepped into financialization. Yet for
many chaebols, managing financial affiliates was not conducive to debt and profit.
However, as the regulation of the division of finance and industry weakened in
2009, the chaebols began to step up. The number of financial affiliates in the top
ten chaebols rapidly increased from 36 in 2008 to 55 in 2015.17 At this point, the
chaebols resembled the US capital according to the level of financialization, as
industrial capital began to accumulate capital in the form of financial capital. It is
true that the level of financialization in Korea remained similar to the US in the
1980s, but the financial profit of the chaebols’ manufacturing affiliates increased
steadily (Park, Cho, and Cha 2017, 117–119). In this context, the chaebols

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110 Kyung-Pil Kim

resembled US capital at least partially in financialization, while still circulating

and accumulating capital regardless of the form as in previous years.
In addition, the chaebols’ neoliberal strategy exhibits their distinct approaches to
diversification and labor management. Unlike the capital of advanced capitalism, the
chaebols earn a profit through continuous unrelated diversification. The IMF pro-
gram put a hold on unrelated diversification, but as the government weakened regula-
tions in 2009, the chaebols expanded this approach again. The number of sectors
engaged in the chaebols has increased since 2009, with the average of the top four the
chaebols soaring to 23.25 in 2010 and 28 in 2012. This trend can also be seen in the
top 20 chaebols.18 As in the past, a few key affiliates created most of the chaebols’
sales and profit. However, new affiliates were established in the service industry—
which was dominated by small and medium enterprises or the self-employed—for
the owners’ families to inherit the businesses and assets (Kim 2020, 283–284). Lastly,
in the case of labor management, the chaebols failed to eradicate the traces of authori-
tarian militarization. Unconditional obedience to the boss, a rigid organizational cul-
ture, and a strict hierarchy are still widely reported as chaebol characteristics. Table 1
summarizes the neoliberal strategy of the chaebols.

Table 1. The Chaebols’ Neoliberal Strategy

Conventional Chaebols’ Chaebols’ Chaebols’
Neoliberal Strategy Strategy Neoliberal Strategy Neoliberal Strategy
before 1987 after 1987 after 1997

Corporate Shareholder Value Owner Value Owner Value Owner/Shareholder

Governance Maximization Maximization Maximization Value Coexistence

Spaces and Globalizing – Globalizing Globalizing

Forms of Production Production Production
Capital
Accumulation Globalizing Finance – – –

Financialization – – Partial
Financialization

Labor Flexibilization – Partial Flexibilization

Management Flexibilization

The Outcome and Contradictions of Intensifying Neoliberal

Strategy

Although one-fourth of the 60 largest chaebols collapsed before or after the 1997
crisis, some survived by responding quickly to the crisis and restructuring. Moreover,
based on their neoliberal strategies, a few affiliates, including Samsung Electronics,
LG Electronics, Hyundai Motors, and Hyundai Heavy Industries Group, experienced

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THE NEOLIBERAL STRATEGY OF SOUTH KOREAN CONGLOMERATES 111

success in semiconductors, motors, mobiles, computers, and shipbuilding. As

Samsung emerged as global capital, chaebols became super chaebols, now dominat-
ing the Korean economy. The fact that many referred to the Korean economy as the
“Republic of Samsung” after the mid-2000s reflects these circumstances. In many
economic sectors such as sales, capital, exports, and investments, the concentration of
a few chaebols, including Samsung, Hyundai, and LG, increased dramatically after
1997, further solidifying the dominance of a few chaebols in the Korean economy
(Lee 2012, 96, 126; Park 2013, 362–363; Wi 2018).
Moreover, neoliberal strategy caused a rapid increase in total sales and return on
assets (ROA) of the chaebols. On the other hand, the ratio of labor costs to total sales
failed to recover from the crisis. It even decreased after 2007, reaching an all-time
low of 2.2% in 2011. This figure reveals that the profit increase of the chaebols is
closely related to flexibilization. Labor’s contribution to corporations’ profit fell sig-
nificantly across fields of business, while the distribution index worsened due to a
controlled wage increase and extended wage difference. Moreover, capital’s portion
of newly created wealth after the crisis increased, so that the ratio of the corporate
profit in national disposable income tripled from 4.2% in 2000 to 13.8% in 2010 (Lee
2012, 91, 124; Lee 2011, 184–185; Park 2013, 361). Since 1997, the rate of profit of
the Korean manufacturing sector has also increased (Hong 2013; D. Kim 2018).
Some contradictions arose in the intensifying of the chaebols’ neoliberalism
after 1997, but it did not result in an economic depression like in 1997. The 2008
financial crisis, which could have been a threat to the chaebols and the Korean
economy, was not as severe since the government-led Korean financial market
was not securitized enough (Jun 2011); the chaebols implemented profit-oriented
management but less financialization. However, the contradictions still exist and
could lead to a crisis through a specific event or spatio-temporal conjuncture. An
increase in dividends, self-tender, and retained earnings can reduce real invest-
ment and cause inequality in investments among corporations, thus possibly dam-
aging future business engines. Moreover, as a small minority enjoys more profits,
the purchasing power of domestic consumers could decrease, and collective dis-
content toward the chaebols may develop. Finally, globalization and flexibiliza-
tion could lead to a decreased domestic demand, increased instability, reduction in
the formulation and innovation of a firm/industry-specific skills, and a growing
probability of labor resistance.

The Chaebols’ Neoliberal Strategy with Korean Characteristics

The Chaebols’ strategy after 1987 can be referred to as neoliberal, because it is

a project to restore capitalist class power and counteract labor. To this end, the
chaebols adopted American and Japanese strategies and implemented

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112 Kyung-Pil Kim

globalization and flexibilization. The chaebols actively promoted their opinions

to political parties and the government and challenged policies until the govern-
ment could no longer impose disciplines. After enduring the 1997 crisis, the
chaebols shifted from growth- to profit-orientedness due to external pressures,
and neoliberal strategy intensified due to an emphasis on globalization and flexi-
bilization. However, the chaebols’ neoliberal strategy should be defined as dis-
tinctly Korean. The chaebols have conducted shareholder value maximization
and have been profit-oriented since 1997. However, they still maintain corporate
governance in which the ownership and management are combined, mobilize
resources for the owners’ objectives, and conduct unrelated diversification. In
addition, the chaebols have accumulated capital by transforming themselves into
industrial, commercial, or financial capital since the 1950s. Even though indus-
trial capital has been the foundation for the chaebols since the 1960s, they also
ran commercial and financial capital affiliates. In Korea, the chaebols resembled
US capital at least partially in financialization due to merging different forms of
capital that already existed.
Neoliberalism has been regarded as a macro-societal concept identified as ideas,
theories, and sets of policies. However, neoliberalism may also be a capital accu-
mulation strategy to counteract labor and obtain greater profit to cope with the
accumulation crisis. The neoliberal strategy of the chaebols was significantly
affected by how the chaebols understood and participated in the dynamics of global
and East Asian capitalism. Their relationship with the government was another key
element since the nature of the government is usually determined by the power
relationship between social forces. The chaebols wanted to implement their strat-
egy with complete autonomy from the government. Moreover, the complex rela-
tionship of power and conflict among stakeholders—including the owner, CEO,
shareholders, and labor—also played a significant role in creating such distinct
characteristics in Korea. In short, the chaebols’ circulation and accumulation of
capital occurred in complex environments involving struggle, not in a vacuum. The
Korean characteristics of the chaebols’ strategies are also deeply affected by the
historical context. Korean capital was created in a distinct spatio-temporal conjunc-
ture with unique social relations. However, by examining the neoliberal strategy of
the chaebols, we can find a form of unleashed capital and reconsider the dynamics
and contradictions of neoliberal capitalism.

Notes
1. Unless otherwise indicated, references to Korea in this article refer to South Korea.
2. See https://fortune.com/global500/2020/search/. Accessed October 1, 2020.
3. The 1985 Plaza Accord was an agreement among the G5 nations (France, Germany, the US, the
UK and Japan) to depreciate the US dollar against the Japanese yen and German Deutsche mark

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THE NEOLIBERAL STRATEGY OF SOUTH KOREAN CONGLOMERATES 113

by manipulating exchange rates. As the value of the Japanese yen had risen, Korean companies
had the opportunity to increase their international price competitiveness.
4. The way of the Japanese Meiji army entails (please check this sentence) unconditional obedience and
fidelity, competition among departments, and control of private activities. See Maruyama (1963).
5. See http://www.niceinfo.co.kr/business/DataCert.nice. Accessed November 5, 2014.
6. The most representative example is the presidential bid of Chung JuYung, the owner of Hyundai
Groups, in 1992.
7. As Harvey (1985, 146) notes, structured coherence embraces the forms and technologies of
production, the technologies, quantities, and qualities of consumption patterns of labor demand
and supply and of physical and social infrastructures. The territory within which this structured
coherence prevails is loosely defined as that space within which capital can circulate without
limiting profits within a socially necessary turnover time being exceeded by the cost and time of
movement.
8. See https://stats.koreaexim.go.kr/main.do. Accessed September 10, 2020. Between 1981 and
1987, the amount of foreign direct investment by Korean companies exceeded about $1.3 billion.
From 1988 to 1992, this figure increased to over $5.9 billion, and from 1993 to 1997, it surged to
over $22.7 billion.
9. The chaebols established a framework where the owner and owner’s family own and control
the corporation and built a system in which all the resources of the group are mobilized for their
domination and interests with the secretariat at the core. An interesting point is that the organ-
izational form of the chaebols echoes that of the military regime where all societal resources
were mobilized and distributed by the former military president and his followers for economic
development, forming the foundation of survival and legitimacy of the administration (Kim 2017,
239–240).
10. From 1990 to 1996, the average investment ratio of Korean companies to total domestic expendi-
ture was 30–40%, and the debt ratio of the top 30 chaebols was 362.5% in 1990, 362% in 1995,
and increased to 412.2% in 1996.
11. See http://www.niceinfo.co.kr/business/DataCert.nice. Accessed November 5, 2014.
12. At this time, the Korean government (Globalization Committee 1998) used liberalization and
deregulation policies as a tool to overcome the drastic collapse of the approval ratings of the presi-
dent and to pursue rapid development and growth (please check this sentence). This discourse of
competitiveness argued that Koreans are confronted with global competition and must survive by
working industriously.
13. See http://www.niceinfo.co.kr/business/DataCert.nice. Accessed November 5, 2014.
14. The pressure was not only from the Korean government, IMF, US Treasury or Wall Street but also
from Korean NGOs (Park and Kim 2008).
15. See https://stats.koreaexim.go.kr/main.do. Accessed September 10, 2020.
16. See https://www5.ajunews.com/view/20160724101318941. Accessed July 25, 2020.
17. See https://www.egroup.go.kr/egps/wi/stat/easyStatPage.do. Accessed April 5, 2020.
18. See https://www.egroup.go.kr/egps/wi/stat/easyStatPage.do. Accessed April 5, 2020.

Acknowledgements
This article is based on the author’s doctoral dissertation, entitled “A Study on the Capital Accumulation
Strategy of Chaebol,” submitted to the Department of Sociology at Korea University (2017). I am very
much indebted to Yoon-Ki Hong and two anonymous reviewers for their thoughtful comments and
suggestions. I take responsibility for any remaining misunderstandings.

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114 Kyung-Pil Kim

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