"SMEs Are Modern-Day Serfs"... Democratic Party Breaks Down Large Corporations' Tyranny and Monopoly Structure

Lee Hae-chan, leader of the Democratic Party of Korea, is attending the Supreme Council meeting held at the National Assembly on the 7th and delivering opening remarks. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Park Cheol-eung] "Small and medium-sized enterprises (SMEs) are like modern-day serfs. They maintain a system of exclusive transactions that only shares enough profit to avoid starving to death. They are told to keep turning the wheel diligently without allowing any additional plus alpha beyond three meals a day. This structure is holding back South Korea's growth, and it must be broken."

This is what Lee Hak-young, chairman of the National Assembly's Industry, Trade, Energy, Small and Medium Enterprises and Startups Committee (SanJaWi) and a member of the Democratic Party, said in a phone interview with Asia Economy on the 7th. The Democratic Party has a policy to break the tyranny of large corporations and monopolistic structures under the name of economic democratization or economic justice and to foster SMEs.

The Democratic Party's platform clearly states this direction. It explains, "The country achieved compressed growth through a state-led economic development strategy. In the process, the chaebol-centered economic structure became entrenched, and cronyism and moral hazard led to difficulties during the 1997 foreign exchange crisis. Furthermore, the growth myth immersed in neoliberalism resulted in the concentration of economic power in chaebols and an unfair economic structure, causing social and economic polarization to worsen."

Jo Jung-sik, chairman of the Democratic Party's Policy Committee, also proposed a revision to the Act on Promotion of Mutual Growth between Large Enterprises and SMEs in June, which includes a profit-sharing system for cooperation. The profits of large corporations generated through joint efforts with partner companies are shared according to prior agreements. Jo said, "SMEs, which account for 99% of companies and 88% of workers in our country, known as '9988,' are the most important pillar supporting the South Korean economy. However, the polarization between SMEs and large corporations in terms of wage levels and employment conditions continues to deepen. Especially due to the COVID-19 pandemic, the waves of worsening business management and sharp declines in profitability have a greater impact on SMEs, making it more urgent than ever to establish cooperative measures for mutual growth between SMEs and large corporations."

This clearly shows the Democratic Party's perspective. With an overwhelming numerical majority in the 21st National Assembly, they intend to push forward economic reform bills that have not been realized so far. The Fair Trade Act and Commercial Act amendments proposed by the government and effectively pursued as party policy by the Democratic Party ultimately target large corporations. The aim is to pressure and prevent collusion, known as "jjamjjami," by expanding the right to file complaints, and to address chronic issues such as preferential subcontracting, "tricky succession," and controlling management rights by minority shareholders.

From the Democratic Party's standpoint, the recent decline in approval ratings makes it burdensome that this could escalate into a full-scale confrontation with the opposition and business circles. A Democratic Party official said, "Everyone agrees on the necessity of economic reform bills, but the key is how to adjust the pace during consultations with the opposition."

The business community strongly opposes these measures, calling them anti-market policies that reduce jobs and economic vitality. The five major economic organizations?the Korea Employers Federation, the Federation of Korean Industries, the Korea Association of Mid-sized Enterprises, the Korea Listed Companies Association, and the KOSDAQ Association?requested the Fair Trade Commission last month to "carefully" review the Fair Trade Act amendments. These organizations stated, "The regulations include provisions that suppress overall economic activity," and "If the mandatory shareholding ratio for subsidiaries and grand-subsidiaries under holding companies is increased, the cost of acquiring shares when transitioning to a holding company system rises, reducing the capacity for new investment and job creation."

They also said that regulations on preferential subcontracting could lead to the sale of shares held by the founding family, resulting in business downsizing or abandonment, ultimately causing stock price declines and harm to minority shareholders. Regarding the abolition of the Fair Trade Commission's exclusive right to file complaints, they warned, "There could be considerable confusion due to indiscriminate complaints by competing businesses and overlapping investigations by the Fair Trade Commission and prosecutors," adding, "This amendment could pose significant risks, especially to SMEs with insufficient legal response capabilities." The Korea Chamber of Commerce and Industry also pointed out that if the Commercial Act amendment introduces separate elections for audit committee members, the voting rights of major shareholders would be limited to a maximum of 3%, which undermines the basic principle of electing management based on majority voting according to shareholding."

This content was produced with the assistance of AI translation services.