Samsung Electronics' 300 Trillion Won Profit Sparks Debate, Shaking Economics

A fierce debate over profit sharing at Samsung Electronics, spurred by the company's record-breaking profits driven by the global artificial intelligence boom, is forcing a re-examination of long-standing economic theories on the distribution of production gains between labor and capital.

Mainstream neoclassical economic theory, particularly the Cobb-Douglas production function, posits that labor and capital receive shares of output proportional to their marginal productivity. This model suggests a harmonious distribution where 'exploitation' is logically impossible. Thomas Piketty noted in 'Capital in the Twenty-First Century' that the popularity of this function after World War II stemmed from its presentation of a stable and peaceful view of capital-labor income distribution.

“

The Cobb-Douglas production function gained immense popularity in economics textbooks after World War II. The reason for its popularity was, above all, that the stability of the capital-labor income distribution presented a rather peaceful and harmonious view of social order.

However, the immense profits generated by Samsung, estimated at 300 trillion won annually, raise questions about who truly deserves these gains. The current dispute echoes earlier critiques, such as the 'labor theory of value' proposed by the late economic commentator Jeong Un-yeong. He argued that the perceived higher value of intellectual labor, like university lectures, over manual labor, like taxi driving, is often a confusion between 'value transfer' and 'value production.'

“

University lectures are more scarce in terms of supply and demand conditions than taxi driving, and are evaluated higher in the traditional value hierarchy, so we often mistakenly think that a professor's labor produces more value than a taxi driver's labor. That mistake arises from confusing 'value transfer' with 'value production' in the process of receiving taxi fares (and paying tuition for the taxi driver's child to attend university).

While applying such theories directly to determine shareholder and worker shares is complex, the profits at Samsung are generated through a hierarchical structure involving numerous suppliers, in-house subcontractors, and temporary workers. The demand for fair profit-sharing by workers is therefore not revolutionary but a historical product of collective bargaining and negotiation between labor and capital. Furthermore, the societal justification for higher returns to shareholders often relies on the expectation that their profits will be reinvested, ultimately benefiting a wider group, including workers.

Economics, as a field aiming for 'more and more efficient production,' has historically treated distribution as a matter of ethics rather than scientific inquiry. The Samsung profit-sharing dispute, however, transcends mere production functions. It represents an attempt by all stakeholders, labor, capital, society, and politics, to redefine the ethics and methods of distribution. As Piketty observed, the history of wealth distribution is inherently political, shaped by perceptions of fairness and the power dynamics among economic actors, leading to collective choices.

“

The history of wealth distribution has always been very political. It cannot be reduced to purely economic mechanisms. The history of inequality depends on the representations formed by economic, social, and political actors about what is just and unjust, the dynamics between these actors, and the collective choices derived from them.