In a little more than half a century, South Korea managed to produce one of the most remarkable economic turnarounds imaginable: transforming itself from one of the world’s poorest developing countries with an economy devastated by war, into a technological and industrial powerhouse, a veritable wunder economy. But recent political events, including the jailing of the country’s president and its top corporate executive amid corruption allegations, stand to halt what has been a steady economic march forward.
It’s often said that there are no miracles for those who don’t believe in them. The Korean people today are fast losing faith in their government and in the companies that have made it an economic leader, and that erosion of trust is now threatening to turn “the miracle on the Han River” into an east Asian debacle.
This uncertainty has created a unique opportunity for American companies.
{mosads}While any tumult within the borders of one of the United States’ closest trading partners may at first seem worrisome, the chaos in Korea creates a rare and valuable opportunity for American companies to compete with the peninsula in a way that was never before possible. This is especially true in industries like consumer electronics where Samsung, South Korea’s largest and most important company, has long sought to dominate an increasingly competitive sector.
For months, the world has watched as hundreds of thousands of Koreans demonstrate in the streets of Seoul and throughout the country, demanding the removal of President Park Geun-hye from office and justice for corruption charges and the embarrassment she brought upon the country. But as President Park now sits in a jail following her unanimous impeachment and subsequent arrest, the more potentially impacted but often overlooked story is surrounding one of her fellow prisoners in the same detention facility: Jay Y Lee, the vice chairman of Samsung and de facto company leader.
It’s impossible to imagine an American corporate leader whose indictment could have as anywhere near the negative impact on our economy as the arrest of Samsung’s head will have on South Korea. South Korea is often referred to as “the Republic of Samsung” to denote just how powerful the conglomerate is within the nation — accounting for more than 20 percent of the nation’s GDP.
Simply put, the success of Samsung and the success of South Korea are inextricably linked. Despite this, the country’s leaders are nearing closer and closer to imposing a serious self-inflicted wound on its long term economic prospects. Instead of addressing the root of the problem that led to the scandals — the entwined relationship of government and big business — the misplaced focus on high-profile prosecutions is a missed opportunity. In this case, what’s bad for Korea, could be good for American companies.
As Mr. Lee’s fate continues to add to the uncertainty over the near future of the company, one thing is clear: this shocking development couldn’t have come at a worse time for Samsung. It remains to be seen how the company will deal with being distracted further, but even a quick look at the problems Samsung has had in recent months — from exploding Galaxy smartphones to a humiliating washing machine recall — shows us that it’s easy to see why American companies should get ready to pounce.
Microsoft, Google, Motorola, and most significantly, Apple, will have the opportunity to fill this void. I’ve written before about the impact the smartphone wars have had on innovation in the mobile space, but the damage being done to Samsung at the hands of its own government pales in comparison to any legal threats from Apple. The implications of this turmoil will extend far beyond just the consumer electronics market and will be felt by nearly every industry if the Korean economy slows.
The miracle on the Han river for decades has sustained the Korean economy and transformed it into a global force, but as this scandal of historic proportions continues to unfold, it appears now that the government’s actions against Samsung while ignoring the institutional issues may soon become a lesson in history.
Ken Blackwell is a public policy writer and consultant in Washington, D.C. He is a former State Treasurer of Ohio and was a Domestic Policy Advisor to the Trump Presidential Transition Team.
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