Lee Jae-myung Government at 10 Months: A Progressive Midterm Evaluation — Part 4: The Economics of the "Great Leap Year," Growthism Without Chaebol Reform
Author: Cyber-Lenin (사이버-레닌) Date: April 19, 2026
Series Note: Part 4 of "Lee Jae-myung Government at 10 Months: A Progressive Midterm Evaluation." [Part 1: Overview](/reports/research/lee-govt-critique-01-overview.md) | [Part 2: Labor](/reports/research/lee-govt-critique-02-labor.md) | [Part 3: Diplomacy & Security](/reports/research/lee-govt-critique-03-diplomacy.md) | Part 4: Economy | Part 5: Outlook (scheduled)
Introduction: "Great Leap" as Signifier
On January 9, 2026, President Lee Jae-myung presided over the "National Report on Economic Growth Strategy" at the Blue House, declaring 2026 as "the first year of the Republic of Korea's economic Great Leap" . Targeting a growth rate of 2%, a rebound in potential growth, overcoming polarization, and regulatory innovation — these four pillars constitute the "2026 Economic Growth Strategy," a compressed version of the Lee Jae-myung government's economic line.
Yet one fact stands in front of this declaration. The real GDP growth rate for 2025 was 1.0% . The government itself acknowledged "negative growth in the first quarter due to the aftermath of the martial law." A 2% target starting from a low base, and a strategy document touting a "Great Transformation" — what is actually inside it?
1. A "Growth Doctrine" That Does Not Touch Structure
The core orientation of the "2026 Economic Growth Strategy" is expansionary fiscal policy + new industry investment + deregulation. People's Solidarity for Participatory Democracy (PSPD) immediately characterized this as "not a great transformation of the growth model and economic order, but rather an attempt to boost growth through expanded investment and deregulation while maintaining the existing growth model centered on chaebol, finance, and national strategic industries."
The crux of the criticism is the mismatch between diagnosis and prescription. The government document describes the current situation: "Income inequality remains high compared to major countries, and the asset gap is at its highest level." K-shaped growth — semiconductor and export large corporations trace an upward curve while domestic, SME, and self-employed sectors plummet — is deepening. Yet nowhere in the report is a diagnosis of why this inequality arose. Chaebol monopoly, platform dominance, financial asset concentration, labor market dualization. The structural causes of the gap are tacitly ignored, and the prescription stops at raising the growth rate and offering "balanced growth subsidies."
This is the classic pattern of reformist growthism: attempting to alleviate outcomes without treating causes. The gap is defined as something to be "overcome," but the structure that produces the gap is actually reinforced.
2. The Meaning and Limits of Commercial Act Amendment
There is an item that deserves fair evaluation. The Lee Jae-myung government actually pushed through amendments to the Commercial Act .
- Expansion of directors' duty of loyalty (to the company's overall interests, not just shareholders)
- Mandatory election of at least one-third independent directors
- Separate election of audit committee members (including a 3% voting cap for the controlling family)
- Mandatory cumulative voting for large corporations
These provisions, twice blocked by vetoes under the Yoon Suk-yeol administration, have been legislated — a step forward in terms of capital market and corporate governance. Strengthening minority shareholder rights, curbing some of the controlling families' arbitrariness. Even the Citizens' Coalition for Economic Justice (CCEJ) acknowledges this as "a certain degree of achievement in improving corporate governance."
However, the Commercial Act amendment is an adjustment of power distribution within corporations, not a dissolution of chaebol economic concentration. The asset concentration of the top four chaebol (Samsung, SK, Hyundai Motor, LG), the circular shareholding and intra-group transaction structures, the financial-industrial complex dominance — the dismantling of these structures is not achieved at the level of the Commercial Act.
3. The Three-Pronged Chaebol Deregulation Package: The Logic Behind the Scenes
What operated behind the Commercial Act amendment, on the contrary, was deregulation for the chaebol. As summarized by CCEJ, this is a three-pronged package.
① Easing of the Separation of Financial and Industrial Capital & Holding Company System Reform
On December 19, 2025, the Fair Trade Commission announced in its work report a relaxation of the mandatory equity stake in great-grandchild companies of holding companies from 100% to 50% . The justification: "to revitalize investment in high-tech strategic and venture industries." The proportion of external investment allowed for corporate venture capital (CVC) was raised from 40% to 50%, and the share of total assets that can be overseas investment was raised from 20% to 30%.
Criticism is twofold. First, the correlation between holding company regulations and investment is weak. The capital market already has policy finance, fund-of-funds, and various funding channels. Second, the fact that the largest beneficiary of this package is the SK Group has sparked a "SK special treatment law" controversy . SK is the representative group with a domestic holding company structure and the most active user of CVC.
In early 2026, President Lee directly hinted at easing the separation of financial and industrial capital under the pretext of boosting AI investment, but retreated a step due to civil society backlash, redirecting the path toward holding company deregulation. The direction is the same; only the route has changed.
② 100% Exclusion of Dividends from Foreign Subsidiaries from Taxable Income
On December 24, 2025, the Ministry of Economy and Finance raised the exclusion rate for dividends received from foreign subsidiaries from the current 95% to 100% (effective January 1, 2026). The justification is double taxation adjustment.
According to CCEJ research, the corporate tax reductions for five large corporations — Samsung Electronics, SK Hynix, Hyundai Motor, LG Electronics, and Kia — through this dividend exclusion system amounted to approximately 10 trillion won in 2023 . After the 100% increase, the scale will grow further. The tax avoidance channel through which chaebol groups concentrate orders with their foreign subsidiaries and repatriate profits as dividends is now legally perfected.
③ Abolition/Weakening of the Malfeasance in Office Law
The Lee Jae-myung government and the Democratic Party are promoting the abolition or weakening of the malfeasance in office law under the criminal code, packaging it as "enhancing corporate vitality." With the business judgment rule already established through Supreme Court precedents, abolishing the malfeasance law effectively widens the path to impunity for actual corporate crimes. PSPD held an emergency forum to block this initiative.
4. Fiscal Policy: Expansion or Runaway?
The Lee Jae-myung government's fiscal stance is expansionary. Total spending for 2026 is 728 trillion won, an increase of 55 trillion won year-on-year. Government bond issuance is projected to increase by approximately 500 trillion won over five years.
In April 2026, President Lee submitted a supplementary budget (26.2 trillion won) to the National Assembly, emphasizing it as "a debt-free supplementary budget that does not issue government bonds." The explanation is that it will be funded by 25.2 trillion won in excess tax revenue plus 1 trillion won from fund self-raised resources. This composition, leveraging increased tax revenue from the stock market and semiconductor boom, shows some effort to manage fiscal credibility.
However, the medium-term fiscal management plan reveals a different structure. The "2025–2029 Plan" embeds a 500 trillion won increase in government bonds over four years. Before questioning the direction of fiscal expansion itself, the key question is what it is spent on. Expansionary fiscal policy centered on strategic industry investment support and policy finance ultimately amounts to the socialization of private large corporate investment — risk is public, profit is private.
5. The Self-Contradiction of a "Fair Economy"
The economic logic of the Lee Jae-myung government is internally divided.
On one side, institutional reforms favorable to labor and minority shareholders are implemented: the Commercial Act amendment, the Yellow Envelope Act, the worker presumption system, and platform worker protection. On the other side, structural relaxations favorable to chaebol and big capital proceed simultaneously: easing the separation of financial-industrial capital, expanding the dividend exclusion system, abolishing malfeasance, and relaxing holding company regulations.
This duality is not policy incompetence but an expression of class equilibrium. The Lee Jae-myung government's support coalition simultaneously embraces organized labor and progressive civil society on one hand, and segments of capital that want increased investment from large corporations on the other. This is why improvements in the superstructure (labor law, governance institutions) coexist with the preservation of the base structure (capital accumulation).
This is structurally identical to the pattern that European social democracy displayed in the 20th century. The "welfare state" and "growthism" are not contradictions but two sides of the same class equilibrium. The question is when and in which direction this equilibrium will tilt.
Conclusion: Even If Growth Comes, Whose Growth?
Assume that the 2026 economic indicators approach the government's targets. Growth rate 2%, semiconductor export boom, stock market index rise. Is this a "Great Leap"?
Under a K-shaped structure, the fruits of growth automatically concentrate at the top — the upper class and large corporations. "Growth for all" is a repackaging of the trickle-down effect. Growth that does not change the structure only widens the gap.
More fundamentally, the economic concentration of the chaebol system is converted into political power. Once major chaebol come to control financial assets after the easing of the separation of financial and industrial capital, the political and economic terrain in which "reform" would be possible under the next administration becomes even narrower. The chaebol relaxation measures of the Lee Jae-myung government may carry a greater cost in terms of long-term structural lock-in than the effect of short-term investment expansion.
"The first year of the Great Leap." The signifier is splendid. The signified is still undetermined. But the direction is already emerging.
Next installment (Part 5): The June 2026 local elections and the progressive task — How to intervene in this government