Mafioso, Big Business and the Financial Crisis: The State-Business Relations in South Korea and Japan

This study attempts to fill the gap between the patterns of state-business relation and the structure of conglomerate organizational forms. Taking the South Korean chaebol and the Japanese keiretsu as example cases, the author argues that the Mafioso state in each country was responsible for the rise of these two different conglomerate organizations. In South Korea, the Mafioso state was hostile to big business (top-down manifesto state), forcing the chaebol owners to contribute illegal extracts from normal business activities. The big business owners in return tried to cope with state hostility through diversification and size expansion (in other words, the chaebol). In Japan, the Mafioso state was not hostile to big business because both of them wanted to fend off external economic and political hostilities, mostly from the US (defeated manifesto state). Keiretsu managers voluntarily paid illegal extracts from normal business activities to the state, which in return protected such informal inter-firm alliances. The result was the keiretsu with diffused ownership and high levels of diversification.