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Jitters in the C-suites

Moon must understand the difference between reforming and taming.
June 02,2017
Kim Young-bae, vice chairman of Korea Employers’ Federation (KEF), is in the hot seat after publicly irking a highly popular new president. In a forum last month, Kim raised concerns about President Moon Jae-in’s economic agenda, whose keystone is to help the economy by adding a large number of jobs in the public sector and upgrading contract workers to salaried employees on the permanent payroll. Kim warned that confusion and conflict could arise in the corporate sector if contract workers all demanded their jobs become permanent. He ended his address by vowing that the lobbying group for employers will take initiatives to correct various unfair and discriminative practices against various types of non-salaried workers.

What he said was not unreasonable. But Kim’s timing was poor. He tossed a bucket of cold water on a new administration eager to solve both unemployment and fairness issues. Kim ended up being made a scapegoat for rich and heedless employers — meaning the chaebol or Korea’s big conglomerates — whom the new government blames for income inequalities and injustice in the business community.

Moon singled out the group, pouring withering scorn on the KEF for being unapologetic despite its contribution to income inequalities and social polarization. The group did not respond. It can’t afford to lose more favor with a president who had vowed “chaebol reform” and placed outspoken critics of conglomerates in top policy-making roles such as the head of the antitrust Fair Trade Commission.

Companies got the message loud and clear. The new government, however, was not satisfied. Kim Jin-pyo, head of the planning and advisory committee that serves as a transition team for Moon, bluntly told the chaebol “to feel the pressure.” Woo Won-shik, floor leader of the ruling Democratic Party, joined the chorus by lashing out at the interest group, saying it was its members that exploited contract workers. The flogging persisted throughout the week.

Watching the drama, I felt that the liberal administration had not learned much from past mistakes. The liberal Roh Moo-hyun administration’s clampdown on the business community backfired. It accused employers of undermining the government when they cut hiring and investment. Touchy responses from Moon and other members of the party who served in Roh’s administration seemed to reflect their inherently negative attitudes towards business.

Businessmen typically are humbled before political power. This is a common state around the world, including the mature democracy of the United States. The chiefs of technology giants Apple, Tesla and Amazon, who had been openly disapproving of candidate Donald Trump, all became docile when Trump became the president. Amazon CEO Jeff Bezos promised to create 100,000 jobs over the next 18 months to help Trump’s campaign to increase hiring. Apple’s Tim Cook pledged to build a factory in the U.S. and Elon Musk said Tesla would be expanding its factory in California.

Winning favor with people in power — who have regulatory power in their grasp — is a life-and-death matter for Korean businesses. “Political power is more fearful than the law,” a representative of the corporate world said. Even as the DP does not hold a majority in the legislature, it lost many members to the cabinet and presidential office. The administration is likely to use executive and administrative power to introduce new measures instead of going through legislative approvals. Law enforcement authorities — prosecutors, the National Tax Service and the Fair Trade Commission, to name a few — can use their power to put pressure on the business sector. They could target a certain group to make an example of.

Business circles are nervous about the president’s obsession with jobs. “Employment data comes out monthly and quarterly. But imagine the pressure if the president is checking the electronic scoreboard every day,” a businessman said.

The business community fears that companies will be stigmatized as targets for reform. There are signs that labor reforms could be led mostly by unions and the government. The planning and advisory committee recruited two senior officials from the Federation of Korean Trade Unions — and none from the corporate side. The management and union of Incheon International Airport Corp. met earlier this week after Moon promised to put 10,000 contract workers on its regular staff. The union leader warned that the president and people are watching when its CEO asked for cooperation.

Moon’s economics are Keynesian. He champions bigger spending and a greater role for the public sector to stimulate the economy. But John Keynes warned that the government should know what to do — and what not to do. The Moon administration must understand the difference between reforming and taming.

JoongAng Ilbo, June 1, Page 34

*The author is a columnist of the JoongAng Ilbo.

Yi Jung-jae