|Type of paper:||Research paper|
Externalities are the effects of economic ventures experienced by third parties in the production and consumption schemes. They can be positive or negative. Positive externalities are experienced when there are good implications for production and consumption of goods and services in the industry. Positive economic effects are realized by the members of the public and the government. On the other hand, negative externalities include effects such as pollution which affect third parties adversely. South Korea is popularly known for its transformation in the economic sphere as a result of the Chaebol, and for the development to be realized, it follows then that positive externalities outweigh the negative externalities in the economy of this industrial nation.
South Korea has realized modernization in the past three decades, and this development is attributed to the development of powerful Chaebol. The large cluster of industries in the country is controlled by powerful families and individuals who are powerful even in the face of the government (Batabyal and Nijkamp, 1-17). These institutions have been developed over time, and they are organized in such a way that they work together with the government in developing the nation. Modernization ranges from good access transport facilities and improved financial institutions which facilitate economic integration. From the 1970s, Chaebol has made a positive contribution to the development of the country considering the many ventures it has made towards achieving the country's development goals. Modernization has been actively used to increase the output of different sectors, and many inventions have made the processes easier. In comparison with the negative implications of externalities, positive externalities in modernization have been used to make a positive impact on third parties in South Korea such as consumers of different industrial products.
Positive externalities which result from Chaebol have been used to achieve free trade and increased market growth rates. The Seoul government in collaboration with different classes of Chaebol have created a free market in the country that is open to external investors. Business people are free to do business in the country with fewer restrictions, and this has improved the economy of the country ("Economic Development of South Korea). Low costs are incurred in the goods and services' delivery, and the influence of Chaebol in the provision of financial investments have impacted positively on the economy. This is one of the reasons why the GDP in the country has been rising over the years. Economies of scale realized from the innovative market structure in the country have brought together willing investors and consumers of products such as machinery and mobile phones, e.g., Samsung. The price of the commodities which are produced in the country is relatively low to South Korean citizens, and this creates loyalty in purchasing these products. Research has shown that the mobile phones widely used in South Korea are produced by Samsung. Lower cost of production and higher market growth rates in the country cancel out the negative externalities in trade such as high taxes by the government. This has made South Korea compete with other established economies such as China and Japan.
Chaebol has played an important role in the South Korean Politics. The political systems developed by these Chaebols have led to the increased implementation of the rule of law in the country and the economy of the country has been developed as a result of this outcome. Members of Chaebol families such as Chung Mong-Joon who is the president of Hyundai industries was chosen to represent citizens in the national assembly in South Korea (Fendos). Since then, positive externalities have been put in place to impact on the social institutions of life. This has led to the degradation of different negative externalities in the country such as harsh industrialization laws and pollution. Hyundai has been trying to increase the relationships with the North, and it is likely to achieve its objectives. The rule of law in recent years was compromised, and when Chaebols were included in the governance of the country, a dramatic rise in the adoption of positive laws has been witnessed in the country. Based on their economic powers, the Chaebols have also influenced other arms of the government such as the executive and judiciary.
The positive externalities have reduced negative externalities such as high unemployment rates in the country as a result of Chaebols in the economy of the country. Different industries have been developed in the country by the Chaebol in South Korea. The aim of developing these industries is to produce finished goods and services in the country so that the domestic and foreign markets are supplied with these goods and services (Schneidewind, 15-52.). This has resulted in the provision of employment opportunities in the country. Many people have benefited from these opportunities, and the living standards of many families have been improved. Economic integration requires customers and third parties who are satisfied with the goods and services produced.
The positive externalities from Chaebols have helped the country in times of financial crises. These organizations provide the government with financial aid when there is a crisis in the government such as insufficient resources to facilitate the development of sustainable food supply in South Korea. This is the reason why these Chaebols have immunity when it comes to legal and political matters. For instance, Samsung controls about 20% of the country's overall gross domestic product. The Chaebols have been accused over the years of investing additional resources and profit overseas instead of improving the domestic economy. The government cannot, therefore, engage in conflicts with these organizations since many financial restrictions will arise. It's therefore evident that the negative externalities such as famine and insufficient government funds on the South Korean citizens cannot arise. The market power which is created by these organizations is a big ground for bargaining when the Chaebols require assistance from the government such as legal issues.
The Chaebols have developed different strategies which are aimed at increasing the social effects of the organizations on the population of South Korea. They actively engage the public through different ventures which are aimed at protecting the environment. Samsung and Hyundai are actively involved in global warming issues, and they have developed a useful technology in their industries to reduce the effects of harmful wastes produced.
All in all, Chaebols in South Korea are involved in economic integration by increasing the effectiveness of the positive externalities and discouraging the negative externalities in the country. The Chaebols are stronger than the legal system of the country, and this offers them additional influence in the economy of the country. Domestic investments are encouraged by the Chaebols, and this is due to the legal formalities of the country. A high economic growth rate has been achieved in the country, and the organization of the Chaebols is well structured to improve the efficiency of output.
Batabyal, Amitrajeet A., and Peter Nijkamp. "Positive and Negative Externalities in Innovation, Trade, and Regional Economic Growth." Geographical Analysis, vol. 46, no. 1, 2014, pp. 1-17.
"The Economic Development of South Korea." 2018.
Fendos, Justin. "Recommendations for improving international study programs in South Korea: a literature review." postdoc journal, 2017.
Schneidewind, Dieter K. "The Historical Development of Korea." Economic Miracle Market South Korea, 2016, pp. 15-52.
Youm, Yoona, and Jennifer J. Griffin. "CSR Programs in South Korean Firms: The Influence of Chaebols and CEOs." Academy of Management Proceedings, vol. 2016, no. 1, 2016, p. 15056.
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