RESOLVED: On-balance, the policies of the South Korean government to demonopolize mega-corporations do more harm than good
PRO Arguments
Contention 1: Income inequality
Currently, there are many problems stemming from large conglomerates. There are income inequality problems which is leading to severe social distress. The income inequality is also leading to higher debt rate which could actually slow down the Korean economy, since the middle-income households have to borrow huge loans from the financial groups because their wages are too low and the unemployment rates are way too high. According to the Mckinsey Global Institute’s study released in April 2013, South Korea’s GDP increased over 3 times but the actual citizens’ income has only increased half that rate. Also, over 50 % of the middle-income households are paying much more than they earn. This shows that although our economy is becoming richer, the revenues are not being distributed equally and the actual people living in our society is not wealthy or happy at all. Furthermore, the middle-income household saving rate plunged from 19% in 1988 to 4% in 2012, and the household deficits jumped from 15% to 25%. These evidences clearly show that the middle-income households are suffering hugely to provide necessities out of deficits because of the wide wealth gap that the conglomerates are creating. Consequently, since the middle-income households are suffering so much from high debts and low incomes, the social distress and even suicide rates are evidently increasing over time. 31.7 per 1 million people have committed suicide in 2011. South Korea’s suicide rate is the highest of all OECD economies, while the fertility rate is the lowest, since educating a child takes a lot of time and money. Furthermore, the divorce rates of Korea tripled up since 2012, which evidently shows that the social distress caused in Korea is increasing. This devastating situation is all caused by the mega-corporation widening the gap between the rich and the poor and us, as the con team, strongly suggest that we should implement (..policies..) to solve this critical social and economic problem.
Contention 2: Unfair competitions from mega corporations Currently, South Koreans are witnessing a lot of unfair competitions from mega corporations. This problem is divided into two different parts, price collusion and focus of supplies from affiliates. Due to price collusion happening in our domestic market, SMEs are loosing its chances to sell products to its consumers. According to Economist article, Bakers and Chaebols written on February 4th 2012, it stated that consumers and SMEs are suffering from Chaebols price colluding. From the same source, Korea’s Fair Trade Commission (FTC), detected over 3,000 cases of price colluding in 2010 however, it only led to 60 fines. The average penalty was amounted to 2.3% of unfairly earned money. There were several mega corporations that were caught for more than 3 years straight but never paid its fine the amount that they were supposed to. Another problem that leads to unfair competitions of mega corporations is the focus of supplies from affiliates. According to article written on February 29th, 2012, by Chosun Ilbo it stated that Korea’s 35 major mega corporations increased 50% of subsidiaries over the last 4 years, according to government statistics. In other words, this means that these companies have increased its subsidiaries about 2.3% per year. Since these companies have increased its subsidiaries, the focus of supplies naturally went over to these subsidiaries. If the focus of supplies stays within subsidiaries, SMEs would soon die and would not be able to maintain its companies. According to Chung Joong-won, who oversees competitive policy at the FTC, said, "It's a problem in itself if major conglomerates boost the number of subsidiaries, but the real concern is that big businesses are encroaching on the territories of small and mid-sized companies." This devastating situation where mega corporations are having unfair competitions with SMEs should be solved by implementing the policies of South Korean government to demonopolize mega corporations. Contention 3: Unemployment / low wages for SMEs Mega-corporations’ dominance of the South Korean economic market is causing lack of labor force and wages for the SMEs. According to the Korean Federation of small and medium businesses, 23% of SMEs are currently facing severe labor shortage and 17% is estimating that sooner or after they will be suffering from labor shortage as well. Also, according to the Mckinsey global institute's report on 2013, the SMEs have only 35~40% of the productivity of large conglomerates, which clearly shows that SMEs have much less work force, and therefore is harder to produce massive amounts of products. Also, according to 조선일보, the SMEs and the mega-corporations’ income difference is as much as 100 million dollars, which is not trivial. This means that the SMEs are not getting as much income as needed, and is therefore having to give less wages to their workers. More straightforwardly, the share of domestic employment in Korea by mega-corporations fell by one third from 18% to 12%, and Korea has the 2nd highest unemployment rate in OECD. Because the full-time jobs in mega-corporations are such a minority, in fact only 10% of all job spaces in Korea, the unemployed workers try to work as part-time workers to earn money. However, the part-time workers earn only 65% of full-time pay, so the unemployed workers cannot earn a high, stable wage anyway. This unfair case caused by the mega-corporation’s dominance over the economic market is resulting in a focus of work population only for the mega-corporations, deterrence of productivity of Korea, and furthermore, in a biased society where people who have the equal amount of potential doesn’t have the same number of opportunities given. As the government responsible for justice and fairness over their people, the South Korean government should implement the policies (...specific..) to de-monopolize mega-corporations.
CON Arguments
Contention 1: Deters Productivity
The policy to restrict the business areas of conglomerates were first intended to give space for the SMEs to set a foot in. However, as my evidences will show later on, this economic ambition is working the other way round and casting a rather cataclysmic effect on the Korean economy and causing productivity decreases. Currently, the productivity level of South Korean services is only 40% of that of manufacturing industries, according to the MGI report in 2013. Overall, our service-sector productivity, measured as value added per employee, is 30 to 57% below levels in the United States, the United Kingdom, and Germany. In total, services account for 60% of South Korea’s GDP, far below the OECD average of 70%. These evidences clearly show that our services productivity is very small and slow growing. To make matters worse, by 2030, the Mckinsey Institutes project that a third of exports from advanced economies will be in services, ranging from tourism to business services. If we don’t expand our productivity in services now, Korea’s future is very dark. However, the Korea government barred mega-corporations entering into certain industries and limited their abilities to help increase the lacking productivity. According to the Economist, in 2010, nine representatives of the conglomerates (including Lotte and Samsung electronics) who had plans to invest in the service sectors cancelled them and was restricted to only tread lightly in about 100 designated sectors. Then who is working in the service sector for Korea now? Well, of course, the SMEs are. However, as you would have noticed in my previous evidences, the SMEs are being very inefficient in terms of productivity, even with 70% of Korea’s labor force. Inefficiency will slow down the Korean economy and hamper job growth, when we should be reforming the service industries and pulling economic growth for our bright future. In fact, Korea needs more of mega-corporations entering into the service industry and reforming. According to the Corporate armistice, if South Korea is to sustain productivity growth, its chaebol may have to spread themselves even wider. Services may be lagging because the chaebol have not paid enough attention to them, argues Richard Dobbs of the Mckinsey global institute in Seoul. The chaebol still attract the country’s best minds, managers and workers, so the service sector misses out on these. The Economist also agrees with our point, strongly suggesting that the Korean government should push the chaebol to expand into services, which they have diplomatically refrained from doing. Retailing, tourism, local transport: all these need some chaebol clout and efficiency. Without the mega-corporations’ help, our economy will start to decline and South Korea’s future will be as miserable as ever.PRO Arguments
Contention 1: Income inequality
Currently, there are many problems stemming from large conglomerates. There are income inequality problems which is leading to severe social distress. The income inequality is also leading to higher debt rate which could actually slow down the Korean economy, since the middle-income households have to borrow huge loans from the financial groups because their wages are too low and the unemployment rates are way too high. According to the Mckinsey Global Institute’s study released in April 2013, South Korea’s GDP increased over 3 times but the actual citizens’ income has only increased half that rate. Also, over 50 % of the middle-income households are paying much more than they earn. This shows that although our economy is becoming richer, the revenues are not being distributed equally and the actual people living in our society is not wealthy or happy at all. Furthermore, the middle-income household saving rate plunged from 19% in 1988 to 4% in 2012, and the household deficits jumped from 15% to 25%. These evidences clearly show that the middle-income households are suffering hugely to provide necessities out of deficits because of the wide wealth gap that the conglomerates are creating. Consequently, since the middle-income households are suffering so much from high debts and low incomes, the social distress and even suicide rates are evidently increasing over time. 31.7 per 1 million people have committed suicide in 2011. South Korea’s suicide rate is the highest of all OECD economies, while the fertility rate is the lowest, since educating a child takes a lot of time and money. Furthermore, the divorce rates of Korea tripled up since 2012, which evidently shows that the social distress caused in Korea is increasing. This devastating situation is all caused by the mega-corporation widening the gap between the rich and the poor and us, as the con team, strongly suggest that we should implement (..policies..) to solve this critical social and economic problem.
Contention 2: Unfair competitions from mega corporations Currently, South Koreans are witnessing a lot of unfair competitions from mega corporations. This problem is divided into two different parts, price collusion and focus of supplies from affiliates. Due to price collusion happening in our domestic market, SMEs are loosing its chances to sell products to its consumers. According to Economist article, Bakers and Chaebols written on February 4th 2012, it stated that consumers and SMEs are suffering from Chaebols price colluding. From the same source, Korea’s Fair Trade Commission (FTC), detected over 3,000 cases of price colluding in 2010 however, it only led to 60 fines. The average penalty was amounted to 2.3% of unfairly earned money. There were several mega corporations that were caught for more than 3 years straight but never paid its fine the amount that they were supposed to. Another problem that leads to unfair competitions of mega corporations is the focus of supplies from affiliates. According to article written on February 29th, 2012, by Chosun Ilbo it stated that Korea’s 35 major mega corporations increased 50% of subsidiaries over the last 4 years, according to government statistics. In other words, this means that these companies have increased its subsidiaries about 2.3% per year. Since these companies have increased its subsidiaries, the focus of supplies naturally went over to these subsidiaries. If the focus of supplies stays within subsidiaries, SMEs would soon die and would not be able to maintain its companies. According to Chung Joong-won, who oversees competitive policy at the FTC, said, "It's a problem in itself if major conglomerates boost the number of subsidiaries, but the real concern is that big businesses are encroaching on the territories of small and mid-sized companies." This devastating situation where mega corporations are having unfair competitions with SMEs should be solved by implementing the policies of South Korean government to demonopolize mega corporations. Contention 3: Unemployment / low wages for SMEs Mega-corporations’ dominance of the South Korean economic market is causing lack of labor force and wages for the SMEs. According to the Korean Federation of small and medium businesses, 23% of SMEs are currently facing severe labor shortage and 17% is estimating that sooner or after they will be suffering from labor shortage as well. Also, according to the Mckinsey global institute's report on 2013, the SMEs have only 35~40% of the productivity of large conglomerates, which clearly shows that SMEs have much less work force, and therefore is harder to produce massive amounts of products. Also, according to 조선일보, the SMEs and the mega-corporations’ income difference is as much as 100 million dollars, which is not trivial. This means that the SMEs are not getting as much income as needed, and is therefore having to give less wages to their workers. More straightforwardly, the share of domestic employment in Korea by mega-corporations fell by one third from 18% to 12%, and Korea has the 2nd highest unemployment rate in OECD. Because the full-time jobs in mega-corporations are such a minority, in fact only 10% of all job spaces in Korea, the unemployed workers try to work as part-time workers to earn money. However, the part-time workers earn only 65% of full-time pay, so the unemployed workers cannot earn a high, stable wage anyway. This unfair case caused by the mega-corporation’s dominance over the economic market is resulting in a focus of work population only for the mega-corporations, deterrence of productivity of Korea, and furthermore, in a biased society where people who have the equal amount of potential doesn’t have the same number of opportunities given. As the government responsible for justice and fairness over their people, the South Korean government should implement the policies (...specific..) to de-monopolize mega-corporations.
CON Arguments
Contention 1: Deters Productivity
Contention 2: Hinder Investment
Another few backfiring policies of the South Korean government are: the unwinding of cross shareholding, high corporate taxes and the business area restrictions of conglomerates. With 70% of Korea’s workforce working in the service sector, ironically, they are producing less outcomes than the 30% conglomerates working in the manufacturing sector. This critical loss of labor force for nothing is causing our economy to drop. As I explained in contention 1 earlier, we need conglomerates to back up the SMEs businesses in the service sector, but the policy to limit business areas are restricting them from giving help. Also, the high corporate taxes towards mega-corporations are holding them back from developing their businesses, although the mega-corporations take up 77% of our GDP, and is doing a vital role to keep our economy out of recession, according to 조선일보. Along with the loss of labor force and incomes from conglomerates, the unwinding of cross shareholding is creating even more problems by preventing the mega-corporations to provoke entrepreneurships by setting up new businesses using their shares, which leads to higher unemployment rates and concentrated economy. This whole vicious cycle about to occur in South Korea is causing the investment to drop hugely, both domestically and internationally. Without the investment, the companies in South Korea, small or big, will suffer hugely, and without innovation, productivity, exports and consumptions from the companies, South Korea will soon lose our national competitiveness.
Contention 3: Foreigners take over mega - corporations
Currently, cross shareholdings between mega corporations and its subsidiaries are being a big issue since the government announced the new policy where new cross shareholdings should be banned later in July 2014. Yet, according to DongAIlbo, Trade Watchdog chief issues strong warnings against conglomerates, written on June 10th, 2013 23:38, stated that banning cross shareholding policy will increase the possibility for foreign corporations to take over Korea’s mega corporations which could encounter insufficient funds for mergers and acquisitions, and that it could cause a serious loss of national wealth as a result. This example is clearly showing what would happen if the foreign companies take over Korea’s mega corporations. Therefore, we as the pro team strongly believe that our choice is to keep Korea away from the outflow of Korea’s national wealth and know-hows.
No comments:
Post a Comment