How One Corporation Forged and Now Controls South Korea

By all accounts of geography and history, South Korea should be a poor nation. It is a small country, just a fraction larger than the American state of Indiana, but without its vast, fertile plains. The Korean peninsula is a rugged, mountainous land, so steep and rocky that a mere 22% of its surface is suitable for farming. This challenging terrain offers little consolation in the form of natural wealth. The country has some coal, but not enough to matter, and its reserves of natural gas and oil are practically nonexistent. 

Zoom out, and its strategic position seems less like an advantage and more like a curse, squeezed between the historical and modern behemoths of China, Russia, and Japan. Plagued by a history of invasions and limited in resources, South Korea’s destiny seemed written in stone: it was destined for poverty. 

And yet, it is anything but. Today, South Korea boasts the tenth-largest economy in the world by nominal GDP. This staggering transformation, often dubbed the “Miracle on the Han River,” is not a story of geography or luck. It is the story of ambition, ruthless planning, and, more than anything else, the story of a single company: Samsung. 

From Humble Noodles to a Nation’s Backbone 

Before there was a modern Republic of Korea, before a devastating war would cleave the peninsula in two, there was a small grocery trading shop in the southern city of Daegu. In 1938, a man named Lee Byung-chul started a modest business dealing in locally sourced noodles and dried fish. He called it Samsung. Little could he have known that his humble venture would become the central pillar upon which one of the 20th century’s most dramatic economic miracles would be built. 

The term “miracle” is perhaps a disservice to the calculated strategy that unfolded. The 100-fold explosion in South Korea’s GDP over forty years was the product of savvy opportunism meeting deliberate long-term government planning. But this incredible ascent was forged in the crucible of absolute destruction. In 1950, the Korean War erupted, and by August of that year, communist forces from the north had pushed South Korean and UN troops into a tiny corner of the peninsula. The nation was on the brink of annihilation. 

From these ashes of war, however, came opportunity. In the wreckage-strewn landscape, Lee Byung-chul saw a path forward. With the remnants of Japanese colonial assets being sold for pennies on the dollar and the country’s industrial base in ruins, he pivoted.

In 1953, he founded Cheil Jedang, a sugar refinery. A year later, he opened Cheil Mojik, a wool mill. These were the first major industrial ventures of what would become the Samsung Group. 

It was a brilliant move. The war-torn populace was desperate for basic goods, and South Korea’s first president, Syngman Rhee, was eager to rebuild. The government began channeling international aid to friendly industrialists, hoping to create domestic industries and reduce the nation’s reliance on imports. Rhee’s administration funded Lee’s facilities and the importation of raw materials. With virtually no competition and a powerful political ally, Samsung took flight. The group quickly became the nation’s fourth-largest borrower, acquiring insurance companies and banks, and cementing its position as the most powerful conglomerate on the peninsula. Within a decade, Lee Byung-chul’s personal wealth was estimated to represent an astonishing 19% of all the wealth in South Korea. 

The Chaebol Pact: A Deal for Economic Salvation 

While Samsung was a resounding success, the country was not. South Korea remained overwhelmingly agricultural and impoverished. This simmering discontent culminated in a 1961 military coup that brought a new leader to power: Park Chung-hee. 

Park had a singular, laser-focused vision: transform South Korea into an industrial export powerhouse by maximizing its most abundant resource its people. He initially vowed to crush the powerful conglomerates, or chaebols, that had risen through cozy, often corrupt, political dealings. But once in power, he took a radically different, pragmatic approach. 

Instead of dismantling the chaebols, Park weaponized them. He saw Samsung, Hyundai, LG, and others not as a problem, but as the engine for his national project. The government made a pact with these family-controlled giants. In exchange for their loyalty and their focus on exports, the chaebols received a flood of government support: cheap steel, massive subsidies, low-interest loans, and significant tax breaks. They were tasked with one mission: get Korean-made goods onto the world stage. 

And they delivered. Throughout the 1970s and 80s, the chaebols dominated, dragging the entire South Korean economy upward with them. Samsung began exporting TVs, then semiconductors, and eventually mobile phones. Hyundai sold cars across the globe. LG opened factories in the United States. The results were undeniable. From 1950 to 1990, life expectancy in South Korea doubled, and infant mortality plummeted. The chaebols had lifted a nation out of poverty, and Samsung was leading the charge. 

Life Inside the Samsung Republic 

Today, the line between Samsung and South Korea is almost impossibly blurred. For the average citizen, the corporation’s presence is as pervasive and powerful as the government’s itself. This is not hyperbole; it is a statistical reality. Year after year, the revenue of the Samsung Group accounts for roughly 20% of South Korea’s entire GDP. 

To put that staggering figure in perspective, consider the largest companies in other major economies. In Japan, Toyota accounts for about 5% of the national GDP. In the United States, Walmart’s share is a mere 2.5%. A single family-controlled company making up one-fifth of a major, advanced economy is globally unprecedented. 

This economic dominance has profoundly shaped the country’s culture and social fabric. For generations of young Koreans, success has been defined by a single, narrow path: becoming a “Samsung Man.” Landing a job at the nation’s premier company is seen as the pinnacle of achievement. This ambition is so ingrained that it’s a common plot point in Korean films and television dramas. The journey begins in childhood, with years of relentless preparation for the bi-annual Samsung Aptitude Test.

Each year, over 100,000 of the nation’s brightest minds pack into testing centers, hoping to catch a recruiter’s eye.

Hundreds of thousands more are not even deemed worthy to sit for the exam. For the vast majority who don’t make the cut, a clear social hierarchy awaits. They move on to the “lesser” chaebols like Hyundai or LG. Those who fail there must settle for small or medium-sized enterprises, a perceived failure that is often hidden from family and friends. 

This singular focus is understandable when you realize how inescapable Samsung is in daily life. When you buy a smartphone, it’s a Samsung. When you need life insurance, you turn to Samsung. When you visit a theme park or board a ferry, you are often paying your money to Samsung. This sprawling empire is a direct result of the company’s history of seizing every opportunity, which has been key to the Lee family’s enduring grip on power. 

A Tangled Web: The Secrets of the Lee Family’s Control 

The Samsung empire today consists of 59 major affiliate companies, but this is a soft number. The true genius and the great controversy of the Lee family’s control lies in a deliberately convoluted web of cross-shareholdings that can baffle even the most seasoned financial analysts. 

The system works something like this: imagine the Lee family directly owns 51% of Company A. Company A, which they now control, can then be instructed to buy a 30% stake in Company B. Meanwhile, the family might use another company they control, Company C, to buy another 25% of Company B. Now, even if the Lee family owns zero shares of Company B directly, they control 55% of it through the companies they do own. 

By repeating this process across dozens of affiliates, the family can command a vast, multi-billion-dollar empire with a relatively small direct investment. This structure allows them to pass control down through generations and insulate themselves from outside investors. But this intricate house of cards is incredibly vulnerable to one major threat: South Korea’s inheritance tax. 

At 50%, it is one of the highest in the world. When a chairman dies, their heir must find a way to pay the government half the value of their inherited shares. Often, the only way to raise that kind of cash is to sell a large portion of those very shares, thereby diluting the family’s voting power and threatening their control over the entire empire. 

Crime, Corruption, and a Presidential Pardon 

This threat became terrifyingly real in May 2014, when Samsung chairman Lee Kun-hee suffered a debilitating heart attack. As he lay comatose in a hospital bed for years, his son and heir apparent, Lee Jae-yong, scrambled to devise a plan to consolidate control before the inevitable inheritance tax bill came due. The solution they landed on was creative, audacious, and deeply corrupt. 

The plan centered on merging two key Samsung affiliates: Samsung C&T (Construction & Trading) and Cheil Industries. The Lee family had much stronger control over Cheil than C&T. The strategy was to propose a merger that massively overvalued Cheil and undervalued C&T. This would effectively gift the Lee family a larger stake in the new, combined entity, shoring up their control of the entire empire without spending a dime. 

It was a terrible deal for C&T’s other shareholders, who stood to lose hundreds of millions of dollars. Because a merger requires a two-thirds supermajority vote, the Lee family couldn’t push it through alone. They needed to convince a major outside shareholder to vote against its own financial interests. Their target was the largest one: the South Korean National Pension Service, which held an 11.6% stake and was controlled by the government of then-President Park Geun-hye. 

The family found their backdoor to the president through a shadowy figure named Choi Soon-sil. A close confidante of the president and the daughter of a cult leader, Choi held no official position but wielded immense influence, reportedly editing presidential speeches and dictating policy.

Under the direction of Lee Jae-yong, Samsung “donated” $36 million to two non-profits run by Choi, which were later exposed as fronts for a money-laundering scheme. 

Shortly after, the National Pension Fund cast the deciding vote in favor of the merger. The deal went through, and the Lee family’s control was secured for another generation. 

The secret eventually spilled, erupting into a massive scandal that rocked the nation. Millions of Koreans took to the streets in protest. President Park Geun-hye was impeached and jailed. Lee Jae-yong was indicted and also sent to prison. But in a move that has become tragically familiar, the status quo was soon restored. President Park was pardoned in 2021. One year later, so was Lee Jae-yong. In October 2022, he was officially appointed chairman of the Samsung Group. 

This was history repeating itself. Lee Jae-yong’s father, Lee Kun-hee, was sentenced to prison for bribery in 2008, only to be pardoned a year later by the president, who argued that his leadership was essential for South Korea’s Olympic bid. It was later revealed that the pardon itself was secured through another bribe. The justification for Lee Jae-yong’s recent pardon was strikingly similar: President Yoon Suk-yeol argued his leadership was vital to help the nation’s most important company navigate the post-pandemic economy. 

A Nation Held Hostage? 

This endless cycle of crime and forgiveness reveals a troubling truth: South Korean politicians cannot survive without Samsung’s economic engine. Yet, Samsung could, in the long term, survive without South Korea. This fundamental power imbalance, where a corporation is seemingly more powerful than the state that nurtured it, feels increasingly untenable. 

Public anger, especially among younger generations who did not witness Samsung’s role in lifting the nation from poverty, is growing. They see not a national savior, but a symbol of cronyism and corruption that stifles competition and perpetuates an unequal society. 

The question now is which house of cards will crumble first. Will it be the convoluted ownership structure that keeps the Lee family enthroned atop their empire? Or will it be the fragile social contract between Samsung and the South Korean people, finally torn apart by a generation unwilling to accept that any company no matter how powerful is above the law? The future of the Samsung Republic hangs in the balance.