South Korean President Moon Jae-in will let Samsung Vice Chairman Lee Jae-yong out of prison on Aug. 13. Lee’s case is the highest-profile element of what seems to be a grab for the commanding heights of the South Korean economy by the country’s leftist government.
The power struggle has implications far beyond the Korean Peninsula and could compromise the United States’ position in the region and Washington’s plans for a global “clean tech” alliance to counter Huawei.
Lee is effectively Samsung’s boss and his family has a controlling interest in the company. He has been in and out—and in and out—of prison since he was first sentenced to five years in August 2017 in part for allegedly bribing former President Park Geun-hye. In February 2018, that sentence was suspended and then shortened. In January, he was reimprisoned. Now he is due to be released again.
Samsung is more than just another Korean company. While best known for its smartphones, Samsung also makes semiconductors and has units engaging in shipbuilding, construction, bio-pharmaceutical production, and insurance.
The Samsung group is responsible for about 17 percent of South Korea’s GDP, one-fifth of the country’s exports, and, depending on how you calculate, it’s the 16th largest company by market value in the world. Samsung is literally an engine of the South Korean economy, a major employer, and a source of national pride and prestige.
What’s the American equivalent? Maybe if you combine Apple, Intel Corp. (the major semiconductor company), and General Motors, you might be in the ballpark.
The Case
Study the charges and the evidence and one thinks Lee probably shouldn’t have been in jail in the first place. Since President Moon took office in 2017, he’s been muscling in on Samsung—and trying to take control of the company.The Moon administration launched dozens of investigations; Moon’s front men arrested and imprisoned top executives, including Lee.
Lee isn’t being released as an act of mercy, but because Moon needs to have Samsung firing on all cylinders to give the South Korean economy a boost before next March’s presidential election—and thus improve Moon’s ruling Democratic Party’s prospects.
Additionally, Korea’s main business lobby, the Federation of Korean Industries, and a large majority of the public also want Lee released.
Samsung Story Is Ultimately About Political Power
Moon and his “jusapa” associates are former, but unrepentant, student radicals with both pro-North Korea and pro-China affinities. And many of them have no great love for the United States. Read what they have written and listen to what they said, and what they still say—especially when they think the Americans aren’t listening. Their approach to power and control is definitely a certain sort of leftist.Moon has forced Samsung to accept the appointment of something called the “Samsung law surveillance commission.” These are outsiders (except for one Samsung representative) and are what some would call “progressives.” But these aren’t the sort who are interested in better food in the employee cafeteria or time-and-a-half for overtime. Rather, they’re the type who would prefer to string management up from a lamppost.
The idea is to ensure that pro-Moon labor unions have a major role in running the company. It’s sort of like Chinese leaders ordering that Communist Party branches be put into every company in recent years. It’s all about control and intimidation.
Samsung executives were made to conduct something akin to “self-criticism” sessions of the Chinese Cultural Revolution sort—perhaps not wearing dunce caps, placards, and facing a howling mob, but not far off. Moon even extracted an apology from Lee for violations of “compliance obligations.”
Some official Samsung statements made over the past few years—including by Lee—sound like forced confessions from prisoners in the Chinese or Soviet gulags.
Moon is also changing laws to allow South Korea’s National Pension Service (NPS)—in other words, “the government”—to take the controlling interest in Samsung away from the Lee family. He’s used the NPS like an activist investor—controlling or influencing who moves into management positions.
So what’s the big deal? Isn’t this just sharp-elbowed domestic politics?
Not quite.
It raises fundamental questions about rule of law, commitment to free markets, and the safety of investment in South Korea. If the government doesn’t like you, or if you’re too successful, it comes after you—just like the Chinese regime.
But even more, there is the adage: “financial power equals political power.”
One understands the Moon administration for going after Samsung.
Get control, and Samsung becomes a piggy bank to fund Moon’s Democratic Party and its political activities. Moon can reward cronies with jobs and sinecures, effectively pay off labor unions, and ensure their votes—and their muscle against regime opponents.
There’s even money to buy off enough of the opposition to keep it weak.
All this brings to mind Venezuela’s leftist dictator Hugo Chavez taking over PDVSA (Petróleos de Venezuela)—the state oil company—that was comparable to Samsung in terms of economic and political clout. Chavez and his successor ran PDVSA into the ground, where it remains.
Some critics claim Moon and his leftist associates want to establish perpetual one-party rule in South Korea. And Moon’s efforts to control the major levers of power in South Korea—the judiciary, the prosecutors, the National Election Commission, the intelligence service, and even the military—add credence to these charges.
What’s the Problem for the United States?
A South Korea dominated by these sorts of leftists doesn’t, over the long term, bode well for the U.S.-South Korea alliance and the U.S.-led security architecture in Northeast Asia.In the more immediate term, the U.S. government is counting on Samsung to be a reliable supplier of semiconductors—having belatedly realized it doesn’t produce nearly enough chips in the United States.
But there’s another worry for Washington ... or at least there ought to be.
The U.S. government is trying to keep Chinese hardware (and Chinese surveillance) out of the free world’s 5G (and future 6G) networks. The United States is counting on vetted, reliable companies to produce hardware for this so-called clean network—and thus provide a worldwide alternative to Chinese-dominated networks.
Washington expects Samsung to play a major role in this effort.
South Korean leftists’ leanings toward Beijing (not to mention Pyongyang) alone ought to raise concerns about those plans. But should Samsung come under “leftist” control, especially given their pro-Beijing predilections, confidence in the company as a trusted source of hardware for the “clean network” plummets. Or at least it should. China would like nothing better than a new “clean skin” for its tech.
What’s the Good News?
Despite having had almost four years to reel in Samsung, Moon hasn’t quite succeeded. One can thank COVID-19 and the disruption it caused for that. But also, Moon’s popularity has waned as his economic policies have caused more harm than benefit to the population. And a stream of breathtaking corruption scandals involving Moon’s party hasn’t helped.Releasing the vice chairman early is something of a last-ditch effort to have Samsung boost the economy before South Korean voters select a new president in March 2022.
The outcome of the election just might determine Samsung’s future. As South Korea goes, so goes Samsung. Should the leftist Democratic Party retain control, Samsung might be on its way to becoming a quasi state-owned enterprise—and the state itself increasingly aligned with Pyongyang and Beijing. In which case, expect a lot more “self-criticism” sessions, imprisonments, and politicization of the economy—all to better serve the larger goals of one-party rule, uniting with North Korea, and ultimately getting the Americans off the Korean Peninsula.
And that ought to worry both South Koreans and Americans.
