The Chaebol Returns To The Presidency 1967 [EN]: Chapter 24

24. Freezing Private Loans! Real-Name Financial System! (1)

The aftershock was immense.

Nam Duck-woo, the Deputy Prime Minister and Minister of the Economic Planning Board, who had spearheaded the introduction of the value-added tax (VAT) system, along with Finance Minister Kim Yong-hwan, and Chief Presidential Secretary Kim Cheong-ryeom, all resigned.

Except for the Minister of Commerce and Industry, who oversaw the real economy and exports, all economic ministers were replaced.

The introduction of VAT became a major factor in the Park Jung-hee regime’s downfall.

The October 26 Incident, in which President Park was assassinated amidst growing national resistance such as the Busan-Masan Democratic Protests, was partly fueled by disagreements over the suppression of public dissent that began with the value-added tax.

Nevertheless, the President was determined to introduce VAT early because it was undeniably a tax with low public resistance and it strengthened national finances.

Resources were desperately needed for investment in key industries and national welfare programs, such as medical insurance.

So, the President devised a plan to minimize negative side effects by learning from past mistakes.

“If we impose a 10% tax all at once, the market will be shaken. Instead, let’s raise it by 1% each year over 10 years.”

“Ah, that way the impact on the market will be less severe.”

“Another crucial element of economic democratization is the real-name financial system.”

“Real-name financial system!”

The Deputy Prime Minister was taken aback by the fact that the President was articulating more sophisticated economic policies than many professional economists.

“Isn’t that a system that even developed countries haven’t been able to fully implement yet?”

“Instead of implementing it gradually, we need to push it through aggressively and quickly, so it takes hold firmly. If we’re indecisive, we’ll only encourage capital flight [the balloon effect, where money moves to avoid regulation].”

“That’s the right decision, Your Excellency!”

“The success or failure of this economic democratization hinges on security. If word leaks out prematurely, all the *Imoogi* [mythical serpent-like creatures] will escape. Don’t let the Central Intelligence Agency, the Prime Minister, or even the Chief of Staff know.”

“Ah, not even the Prime Minister?”

The establishment of a value-added tax required parliamentary approval (due to tax legalism), but the real-name financial system and the freezing of private loans were to be enacted directly by presidential emergency decree, bypassing a vote in the National Assembly.

Most of the local lawmakers were either local power brokers themselves or were sponsored by them, so if these two laws were debated in the National Assembly, it was highly likely they would be stalled indefinitely or disappear altogether, like in the Bermuda Triangle.

Moreover, since the opposition party, led by Assemblyman Cha, held the majority, they would likely obstruct the process, making passage impossible if the ruling and opposition parties were at odds.

“Yes. Ironclad security is essential. Disguise a few KDI (Korea Development Institute) researchers and Ministry of Economy and Finance officials and have them work at the Gungjeong-dong safe house.”

“Ah, in Gungjeong-dong!”

“There’s no better place than Gungjeong-dong to prepare meticulously and secretly.”

* * *

Even amidst the political turmoil, economic democratization was gaining momentum.

They were secretly preparing for the freezing of private loans and the real-name financial system through a presidential emergency decree, which didn’t require the National Assembly’s approval.

Gungjeong-dong safe house.

Eight employees had been secretly working there for two months, spearheading the ‘freezing private loans’ and ‘real-name financial system’ projects.

They were working around the clock, barely sleeping, and their beards were unkempt and their shirts were rumpled.

The Deputy Prime Minister encouraged the staff.

“You’ve been through a lot. It must be difficult sneaking into work, isn’t it?”

One employee complained.

“My wife is constantly nagging me about why I’m going on so many business trips. She suspects I’m having an affair. It’s a family crisis.”

“I understand your difficulties. This work is crucial for maintaining absolute secrecy, so there’s nothing we can do about it. All misunderstandings will be cleared up when the announcement is made. Let’s push through a little harder. The economic democratization of Korea is in your hands. I will personally call and smooth things over with any employees whose families are at risk due to these ‘business trips’.”

* * *

Presidential office.

The Deputy Prime Minister reported to the President.

“Your Excellency, everything is ready.”

“You’ve all worked incredibly hard.”

“The employees who were sneaking into work really suffered.”

“Let’s have a drink with the hardworking staff tomorrow.”

“Ah, that might be a little difficult.”

“Really? What’s the problem?”

“It seems best to let them sleep for two or three days first.”

“Ah, I see! Sometimes, when I’m just signing off on things, I don’t fully appreciate the sacrifices of my subordinates. Then let’s consider it after they’ve had enough rest.”

“I understand, Your Excellency!”

The President made a direct call to the Minister of Public Information.

“It’s me.”

– Your Excellency!

“I’m going to make a special address to the nation myself today.”

– Are you referring to a special address?

“That’s right. Secure some time for a live TV broadcast at 7:40 p.m.”

– I understand, Your Excellency!

The President hung up the phone.

“Now all I have to do is finalize the manuscript.”

Beep~

The intercom came on.

– Your Excellency, the Prime Minister has arrived.

“Ah, tell him to come in.”

Kim Jong-pil came in.

“Your Excellency, did you call for me?”

“Yes, I have something important to tell you. Sit down.”

Kim Jong-pil sat on the sofa and said to Deputy Prime Minister Kim next to him.

“Deputy Prime Minister, I haven’t seen much of you lately. Are you plotting something behind my back?”

It was a joke, but the President and Deputy Prime Minister were unnerved by his sharp intuition.

The Deputy Prime Minister tried to deflect the suspicion.

“I’ve been swamped with allocating the budget these days.”

The President smiled and said.

“I’ve scheduled a live TV broadcast of the President’s special address at 7:40 p.m. today.”

“A special address? Has something urgent happened?”

“Don’t misunderstand. This operation is so secret that I didn’t even inform the Prime Minister. Not even the Central Intelligence Agency or the Chief of Staff know.”

Kim Jong-pil became tense at the word ‘secret’.

The President explained the two emergency orders in detail.

Kim Jong-pil’s jaw dropped as he listened.

Goosebumps appeared on the back of his neck.

The content of the economic democratization, which was fundamentally reshaping the economy, was shocking enough, but he was even more stunned that such a massive reform was being carried out without the Prime Minister’s knowledge.

How could this be! Was this a demonstration of power, showing that the government could be run without the National Assembly or even the Prime Minister! Am I just a figurehead! Oh, and what about my money?

The immediate problem for him was managing his vast slush fund, not the country’s well-being.

* * *

The Speaker of the National Assembly’s official residence.

The Speaker of the National Assembly was watching TV and having dinner.

The announcement of the President’s emergency address had been broadcast on TV from 7 p.m.

“What’s going on that he’s announcing an emergency address? Is it about the election fraud investigation?”

Finally, at 7:45 p.m.

A large caption appeared on the TV screen.

– President’s Special Address

The President sat at his desk in his office and read the manuscript himself.

– Dear citizens! The first year of economic democratization has begun. We will issue two presidential emergency orders to break the chain of collusion between politics and business that stems from illicit funds and to promote healthy industrial activity.”

“Emergency order? What’s this now?”

The Speaker of the National Assembly stopped eating and put on his gold-rimmed glasses.

– By Presidential Emergency Financial and Economic Order No. 14, the Republic of Korea will fully implement the real-name financial system. From this moment on, all financial transactions will be conducted only under real names.

The Speaker of the National Assembly’s spoon clattered to the table.

“Real-name financial system? This is a bolt from the blue!”

– Next, by Emergency Order No. 15 on Economic Growth and Stability, all private loans will be frozen for one year from this moment, and the private loan interest rate will be fixed at 16% per annum. After one year, the loans will be repaid in installments over three years, and all private loan businesses must be reported and registered with the tax office.

This emergency order meant that borrowers didn’t have to repay their private loans at all for one year, and the interest on those loans would be capped at a significantly reduced rate for three years.

At the time, the inflation rate was about 16%, so the 16% interest rate mentioned in the measure was virtually equivalent to no interest.

The Speaker of the National Assembly jumped up.

“Freeze private loans!”

– In order to minimize the side effects of the full-scale introduction of the real-name financial system and the freezing of private loans, a two-week reporting period will be granted, and the source of funds for private loans and financial transactions reported during this period will be exempt from investigation.

During Chairman Wang’s era, the freezing of private loans was implemented on August 3, 1972 (the August 3rd Measure), and the real-name financial system was implemented on August 12, 1993, during the Kim Young-sam administration. This initiative was a revolutionary measure, advanced by 5 years and 26 years, respectively.

The Speaker of the National Assembly sank back into his chair, bewildered.

Ring~ Ring~

The gold-decorated dial landline phone began to ring urgently.

* * *

Tap, tap!

Newspaper boys with heavy bundles of tabloid-sized newspapers under their arms ran through the streets.

Extra, extra!

Although it was past 10 p.m., newspaper boys were scattering extras with the President’s special address on the streets like snow.

Citizens who were leaving work and workers who were having a drink at a street stall picked up the extra, wondering what it was.

“Has the 38th parallel [the border between North and South Korea] collapsed or something?”

“I don’t know. Let’s see… the white is paper, and the black is letters….”

“Is there anyone here who’s illiterate!”

“Illiterate! I just don’t know Chinese characters, only Chinese characters.”

“What’s there to understand in the newspaper if you take out the Chinese characters?”

“Well. Do you know what it means?”

“Um, um, sir, what does this mean?”

The worker asked a company employee who was drinking *soju* [Korean distilled beverage] next to him.

The tipsy company employee took the extra and read it.

“Presidential emergency order… all private loans frozen… private loans frozen! This sobers me up!”

“What does ‘freezing private loans’ mean?”

“It means you don’t have to pay back your private loans!”

Why~~!

The midnight siren announcing the curfew blared, but the newspaper company kept the rotary press running all night, printing tomorrow’s special edition, oblivious to the approaching dawn.

* * *

The early morning streets were covered with extras.

Citizens going to work all had extras in their hands.

There was no morning TV broadcast, and only one or two households in the neighborhood had TVs, so newspapers were by far the main source of information for the common people.

Citizens gathered in groups of three or five and had a lively conversation.

“Do we really not have to pay back our private loans?”

“It’s not that you don’t have to pay it back, it’s a one-year grace period.”

“If it’s a three-year installment repayment with a 16% interest rate after one year, it’s as good as not paying it back. My back was breaking from paying off private loan interest as soon as I earned it, but now I can finally relax and sleep well. The world has truly become a better place to live. Long live the Republic of Korea!”

“Oh, this is a disaster. I took out a bank collateral loan and invested in private loans, but if this happens, I’m ruined! How am I supposed to pay back the bank interest?”

“Hahaha, now is the era when rich people are getting nervous.”

“Are you rubbing salt in my wounds!”

“That’s the national law, is it my fault?”

The happiest people were the companies that had been relying heavily on large-scale private loans.

* * *

The Federation of Korean Industries (FKI) Hall in Yeouido.

The FKI represented the interests of *chaebols* [large family-owned conglomerates] among the five major economic organizations.

Presidents of major companies gathered from early morning.

Hyunse Group President Jung was notably absent.

“I shouted cheers after listening to yesterday’s special address, hahaha.”

“We did too. We’ve been freed from the constant threat of promissory note defaults that come back to haunt us every day.”

“If I had known this would happen, I would have taken out even more private loans, hahaha.”

“I was even considering closing down due to political fund contributions to the private loan ring, but this day has finally arrived.”

“Since this is suddenly working out so well, I’m also a little uneasy. Do we really not have to pay tribute to the Blue House [the Korean presidential residence]?”

“That’s what I’m saying. There must be a hidden slush fund route.”

Businessmen cheered with relief, but on the other hand, they were also anxious about how to proceed.