The Political Economy of Capture and Reform in South Korea: The Case of Samsung
(KIRL Working Paper 2019-2, Accepted for Publication in Review of International Political Economy)
The Choi Soon-sil scandal, which led to the arrest of Lee Jae-yong, de facto leader of the Samsung group, and the impeachment of President Park Geun-hye, exposed the ugly features of state capture by chaebol in South Korea. The country used to enjoy the reputation of a developmental state characterized by high levels of state autonomy and state capacity. Although the 1997-98 financial crisis highlighted the problems of crony capitalism, it has been widely recognized that South Korea overcame the crisis by implementing far-reaching reform of chaebol’s corporate governance. This article explores why the post-crisis reform failed to end the practices of crony capitalism and why global companies like Samsung engaged in such corruption. It employs a historical case study of Samsung group, starting from its early capital accumulation to its growth as a global conglomerate. It analyzes the continuity and changes in institutional incentives for Samsung to pursue both global competitiveness and domestic capture. It highlights how increasing inequality and chaebol concentration have produced both popular pressures for institutional reform and incentives for chaebol to capture the policy-making process in the context of changing state-business-civil society relations in the democratic post-developmental state era.
Key words: chaebol, Samsung, capture, inequality, corporate governance, state-business relations, developmental state, South Korea