South Korean Politics: The Scandals within the Scandals (Part 3)



In two previous posts (Part 1; Part 2), I looked at the scandals roiling South Korea; here, I step back a bit drawing on work done by Jong-sung You (ANU). You has written a first-class book recently published with Cambridge called Democracy, Inequality and Corruption: Korea, Taiwan and the Philippines Compared. In it, he outlines the multiple channels through which inequality breeds corruption, noting that land reform in Korea and Taiwan set the stage for cleaner politics—at least over the long-run—than in Philippines where inequality is higher. Yet he also notes that the chaebol form differentiates Taiwan from South Korea and that the extraordinary concentration of assets—and the industrial structure more generally—may help explain the better success in controlling corruption in Taiwan than in Korea.

Some data, updated from his book, tells the story. First up is Transparency International's Corruption Perception Index from its inception in 1995 through 2014. Figure 1 shows that Korea has slightly lagged Taiwan, with the Philippines fluctuating, and only showing more sustained improvement under the Aquino government since 2010.

Figure 1. Historical perceptions of corruption compared for Taiwan, Korea, and Philippines

Korea corruption index time seriesSource: Transparency International Corruption Perceptions Index (CPI)

Yet the story is somewhat different when we look at data from the World Economic Forum’s Global Competitiveness Report. The survey has a question that asks businesspeople what they see as the most significant problem facing their business, with an ample of menu of over 15 choices. However one item is whether they see corruption as a problem. Figure 2 below charts developments since 2003 in five countries: Japan and the first tier of industrialized countries that followed in Japan’s wake: Korea, Taiwan, Hong Kong and Singapore (the Philippines is off the charts, ranking below Cambodia and Bangladesh over the entire period). What is interesting about this index is that it captures private sector perceptions. Not only does Korea have a higher share of respondents citing corruption as the major problem facing their business, but there does not appear to be any marked trend in improvement.

Figure 2. Percent businesspeople who cite corruption as biggest problem for business

WEF Korea corruption biggest problem for doing business

Source: World Economic Forum, Global Competitiveness Report

Similar findings appear when looking at corporate governance measures. In its 2012 rankings of corporate governance in the region, the Asian Corporate Governance Association ranked Korea not only behind Japan, Taiwan, Singapore and Hong Kong, but behind Thailand, Malaysia and India as well. At issue: not only the law but lack of attention to enforcement.

Corruption is not just an issue of personal venality, but of broader features of business-government relations: from the extent of business power, to the transparency of relationships with officials and politicians, to underlying systems of corporate governance that provide discretion to corporate officials. The Korean scandals should not be seen as something transpiring in the political sphere alone but hopefully will invite reflection on what is going on in the corporate sector as well.

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