CORRUPTION Syndromes of Corruption

110 Syndromes of Corruption
German firm the likely winner of a $2.1 billion contract to provide
locomotives and rolling stock, but on the final round the French combine
Alsthom won. Investigations revealed large bribes and lobbying expenditures;
Ho Ki-Chun, wife of Alsthom’s Korean branch manager, was
charged with receiving nearly $4 million, and a Los Angeles lobbyist
named Choi Man-Sok put his connections in Seoul and Kyongsang to
work for a commission of $11 million. The locomotives produced
by Alsthom eventually proved unable to perform up to standard
(Blechinger, 2000).
Predictability – at a price
Corruption not only enriched key figures in politics, the bureaucracy, and
business, but also helped protect their sometimes shaky hegemony. In
economic development terms the result was both early benefits and
deferred costs. Corruption integrated political and business elites into
durable and extensive networks of reciprocities (Cheng and Chu, 2002:
34). Those who cooperated could win power, become wealthy, and
reduce political and economic uncertainties for themselves and their
followers or businesses. Those who did not could be punished or frozen
out. Particularly during the Park years government-aided, chaebol-driven
growth enabled Korea to lay down an industrial and trade foundation and
exploit niche opportunities in international markets. Cheap capital
and labor costs and light regulation were available to those who paid
up, and the biggest favors flowed to successful exporters. Investors both
foreign and domestic could depend upon political continuity.
By the 1980s several chaebols had become global economic powers, but
capital for diversification, a predictable business environment, and checks
upon ‘‘excessive competition’’ still bore price tags. Policy remained politicized
and new competitors faced major barriers. As Korea shifted to a more
mature economy and took on more global competitors the drawbacks of
that strategy became more apparent. Overcapacity and overextension of
chaebols’ product lines were rewarded; environmental and labor regulations
were weak and poorly enforced. Corporate governance was opaque (Beck,
1998), with many chaebols’ balance sheets existing mostly in the minds of
family executives. The practice of underwriting each others’ loans turned
corporate debt – which often exceeded assets by spectacular margins – into
a house of cards. These accumulating risks added to Korea’s troubles
during the 1997–8 Asian crisis.
In politics too Elite Cartel corruption bought predictability but raised
problems for longer-term development. Before the transition of 1987
state officials ran dictatorial regimes yet faced periodic challenges to