Workers in an ever-leaner world
The large work stoppages led by the Korean Confederation of
Trade Unions (KCTU) in June and July are the most visible
South Korea
Ate
888 crisis, which has seen the forced closure of five banks and a credit crunch on the rest in order to meet internationally expressions of the enormously varied class struggle currently gripping South Korea. Lee Oh-wol and Terry Lawless report As the effects of the economic crisis continue, small business and working people are confronted on a daily basis with the problems of insecurity and uncertainty; unpaid wages; the difficulty of securing loans or goods on credit; bankruptcies; inflation; and layoffs.
The falling currency makes Korean exports cheaper (but less profitable) in a market that has contracted sharply but unevenly because of the generalised Asian crisis and the continuing boom elsewhere, particularly in the USA.
But that same falling currency has increased the prices of imported goods, particularly semi-finished products earmarked for the manufacturing sites of this former Asian Tiger. This sharp rise in costs has prompted the Korean Institute of Finance (KIF) to speak openly of "an industrial base on the verge of collapse".
The economic situation in Korea is complex, but one of overall gloom. Some industries, such as the export sector, have remained competitive because of the currency devaluation. This is particularly true of those industries that do not rely too heavily on imports of semi-finished goods in their overall manufacturing process. In this respect, the simultaneous weakness of the Japanese yen is a small source of 20 International Viewpoint #305 November 1998 comfort for many of the major manufacturing industries faced with the sudden collapse of the Korean won's purchasing power — although the yen's weakness also poses problems for those large conglomerates (chaebols) that compete head-to-head with Japanese industry. Nonetheless, this sector is vulnerable to potential shocks from currency instability elsewhere in the world. The devaluation of the Chinese currency early next year, for example, would be disastrous for the manufacturing export industry.
Most Korean workers face economic difficulties similar to those in South East Asia as a result of the massive currency devaluations in the summer and fall of 1997. They are faced with the prospect that their future will be far less secure and probably worse than that of any generation since the mid-1960s.
In all industries, but perhaps especially in the large non-unionised sector of the economy, wages can remain unpaid for months on end. Unpaid wages are the main cause behind most of the wildcat strikes that have erupted since the IMF bailout. However, since the alternative to working for no money is often unpaid unemployment, many workers feel they have little choice but to continue working and hope for the best.
The accompanying severe banking acceptable liquidity standards, has virtually dried up credit to small and medium-sized businesses. Many healthy companies are going under for no other reason than a lack of credit.
The absence of unions in many sectors of Korean industry serves to mask the severity of the economic crisis, which is only partially reflected in steep increases in workplace actions, unemployment and homelessness.
Women face particular difficulties and pressures in Korea's traditionally patriarchal society. Some companies. like Samsung Everland and Daewoo Motors, have simply fired women en masse. Because there is virtually no independent women's movement in Korea, there is little co-ordinated protest
The suicide rate has also risen dramatically, especially among the middle-aged. Many cannot bear the idea of joblessnes. Others have been unfortunate enough to extend loans that have gone bad. Some have acted as guarantors for friends, family or local businesses, and are now unable to meet repayment demands. One recent survey reported that 30% of Koreans have experienced suicidal urges. The currency crisis
The main change in Korea since the currency crisis began has been the wholesale dismantling of the various protectionist measures that were a neces-
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sary component of the country's long economic boom. The role of international speculative capital has increased sub-
Thus far, however, there has been little or no real new investment in productive capital on the part of foreign multinationals. The first attempted auction of the bankrupt Kia and Asia Motors was a failure, with all the bidders, including Ford and General Motors, asking for too many concessions and write-offs from the government. A second auction will be arranged soon.
The Korean stock market, on the strength of IMF money alone, briefly rallied in the early months of 1998 before dipping to a new low at the end of June. It has since stabilised somewhat, conditional on the continuing absence of major shocks elsewhere in the world.
Somewhat surprisingly, the won has rallied to around 1,300 to the US dollar (up from an absolute low of 2,000 won). This has served to create divisions in the government over the optimum level for
A strong won among a host of weak Asian currencies is a liability in terms of an export-led recovery. On the other hand, a weaker won creates problems for many of the chaebols that import manufactured parts to finish their products, especially from Japan.
It also creates a discontented populace who have become used to a relatively high level of consumption.
Most industries have seen their operations contract sharply. The KIF reported in June that the leather industry's output had shrunk 110.9% in the first three months of the year; and wood and furniture also contracted by 100% in their overall business activities (production, sales, inventory, factory operations and wages). The fabricated metal industry, automobiles and trailerassembling all contracted by roughly 95%; while rubber and plastic declined transportation equipment industry, on the other hand, surged by 78% and the telecommunications and audio-video equipment sector posted a 56.7% increase. Facility investment has contracted by 40.7%, construction investment by 7.7% and private spending
Korean GDP shrank by 6.6% in real terms in the second quarter of 1998, the worst quarterly negative growth since the second Oil Shock of 1980.
Some private economists are now predicting an overall negative yearly growth of 7%, although maintaining that there will be 1% real growth in 1999.
In its report, which was released before the full extent of the GDP contraction was made public, the KIF had already called on the government to take "revolutionary measures to jump start the sinking economy"
State and industry in the '90s
The paradox is that the Kim Daejung government, both in its stated economic philosophy and in its actual real leverage power, is not really suited to carry out such measures. Since the mid1980s, the largest chaebols have grown to the point where they do not need to take orders from the central government, and in fact resent doing so.
Although in practice the Korean economy continues to involve a good deal of central co-ordination, the basic engine for economic growth designed by former Army General and President Park Chung-hee has become outdated.
Under the previous hugely inept administration of the arrogant Kim Young-sam, this engine began to experience severe difficulties. The growing political freedom won by the working class, especially after the Great Struggle of 1987 to end the military dictatorship, has also undermined the dictatorship's secretive system of bribes, kickbacks and guaranteed state contracts.
Membership in the OECD, granted in December 1996, forced Korean business to open itself up to greater scrutiny if it wished to receive the large foreign loans it needed to compete internationally — causing many of the more dubious financial practices to come to light.
Finally, the increasingly international orientation of many of the chaebols means that it is next to impossible for the state to guide and manipulate the domestic economy to avoid the disorienting effects of crises of overproduction.
The election of Kim Dae-jung has merely given these contradictory tendencies an ideal expression. Elected by voters who still see him as a symbol of anti-authoritarianism, Kim has completely accepted the autocratic economic regime implied by the IMF bailout
He has covered himself by suggesting that he is in favour of both IMF-style free markets and democracy, but this potent mixture leaves little room, philosophically at least, for state intervention in the economy. But active state intervention has been what has guided Korea's economic development for 30 years as it has sought to join the ranks of the most industrialised nations.
When Kim Dae-jung took office six months ago, he loudly proclaimed the need for the radical restructuring of the chaebols. This call has basically been ignored by the major chaebol owners, and they have mostly ceased even showing up to the regular monthly meetings with the President.
The real balance of power between industry and the state in Korea can be seen in the nine-point agreement signed on July 4 between the government and the leaders of the Federation of Korean Industries. This agreement frees the chaebols to solve the crisis as they see fit by pursuing their own interests.
In the months since his inauguration, Kim Dae-jung has basically given up attempting to order the chaebols to engage in "radical restructuring" and instead has accepted the idea, raised by the chaebol families themselves, of so-called "big deals". In other words, the chaebols have committed themselves to rationalising their debt by eliminating the more reckless forms of competition among themselves. It is not even clear that the bad debt that the chaebols are currently carrying among their many interests will be cleared up by these deals or merely redistributed for tax purposes.
According to one report, these big deals will include Samsung giving up its auto business, perhaps to Hyundai, while itself taking over the LG Group's semiconductor business. Samsung will thereby establish a near monopoly in semiconductors. Hyundai will also transfer its petrochemical unit to LG. LG will take over Samsung's home appliance business and Hyundai's communications Restructuring" and discontent
The whole vocabulary of "economic restructuring" did not exist in the Korean language before the exchange rate crisis began. For the eternal optimists among the chaebol owners, the crisis is simply a short-term wake-up call to reform some of their more glaring bad practices. Once this is done, the situation will return to normal, perhaps in two or three years.
A more pessimistic view sees the present crisis as necessitating an entirely new model of economic modernisation, perhaps complete with higher real levels of unemployment to put a break on wages and worker militancy in order for Korea to meet the challenges of the 21st
"Restructuring" , therefore, still encompasses a whole gamut of meanings, ranging from closing inefficient industries through workplace speed-up, rationalisation, mass layoffs, financial transparency and general corporate modernisation and onto genuine chaebol reform, including forms of democratisa-
"Restructuring" in this last positive sense is being promoted by a few civic groups such as the PSPD and the Civic Association for Economic Justice and some centre left intellectuals. Those Federation of Korean Trade Union (FKTU) bureaucrats who most closely align themselves with Kim Dae-jung and are the least willing to struggle, gravitate to this position, although often more or less unconsciously.
Whichever restructuring scenario seems most plausible, the question of the relationship between the chaebols and the labour movement, and more broadly, big business and the working class as a whole, is central. Will the chaebols try to use the crisis to break the back of the
International Viewpoint #305 November 1998 21
militant union movement through massive lay-offs and a new (economic) reign of fear?
Given the absence of a social safety net, it is unclear whether the present crisis is actually the ideal time to conduct such a fight. Korea has long been politically volatile - despite its position as a designated bastion of anti-
With this in mind, the basic strategy of the government is to minimise the absolute number of unemployed because of the huge potential risks of a social explosion in a country without an extensive social safety net. President Kim rather ruthlessly expressed this when he suggested that *20% of the people must suffer in order that 100% won't have to".
Korean economic reality is fast catching up with Kim's stated position. The unemployment rate for August 1998 hit 7.6%, the highest level since 1966. A private think tank suggested that it expects this rate to climb yet higher, anticipating a 10% peak in 1999. The situation appears to have worsened over the summer, with employment declining by 6.5% in July alone, the sharpest drop
The main venue of this struggle between the interests of the government in maintaining some level of social stability and business in remaining solvent, is in the large chaebols, especially those directly affected by the present crisis of
Hyundai became the first of the chaebols to put forward a concrete plan for lay-offs, indicating that it intended to give pink slips to 2,678 workers and ask a further 2,000 workers to stay at home for the next two years. Hyundai had previously announced that it expected the crisis to last for three and five years.
The agreement reached on August 24 to curb the number of permanent lay-offs at Hyundai is partially a reflection of a lack of long-term thinking. In a marathon session involving labour, management and representatives of the National Congress for New Politics, the parties agreed to lay-off 277 workers and to send 1,261 workers on an unpaid 18month leave, with six months of paid
Although 63% of the workforce subsequently voted against this agreement, it seems unlikely that this will result in anything more than the forced resigna22 International Viewpoint #305 November 1998 tion of the union leaders who worked out the deal. It is difficult to see the strike being resumed, and there is a of a strategic perspective The case of Hyundai represents the paradoxical nature of the decreasing intluence of government on business. Hyundai is currently involved in some delicate political negotiations to set up a number of business ventures in North Korea as a way out of its crisis of profitability. Outsourcing at least some of its operations to the North would enable Hyundai both to cut labour and transportation costs dramatically and minimise the risks involved in the current period of international currency
The use of political tactics to maximise dwindling political leverage over the chaebols is evident in the recent announcement of a committee to investigate the reasons for the currency crisis of last November. Government spokespeople have suggested that business leaders will not be exempt from possible investigation. The difference between Kim Dae-jung's limited power and that of the previous military regimes should be clear. President Park Chung-hee in the 1970s didn't need the threat of committees to get the chaebols to do what he wanted. He simply told them to do what he wanted or declared them bankrupt the
The bottom line then is that there seems to be broad agreement within the government that unemployment, especially of the more militant and organised sectors of the working class, must be minimised as much as possible. This was the official reason given for the government intervention in the Hyundai dispute, although authorities have since announced that there will be no further interventions. here on i use is rene, administration will use its shrinking political leverage to check the chaebols restructuring plans, particularly where it sees the potential for social explosions in chaebol recklessness.
Kim Dae-jung is attempting to tread the thin line between the interests of the chaebol families and the conservative wing of the organised working class. This is the result of his political and social distance from the majority of the chaebol families and his continued real base of support among key sectors of the organised working class and small business.
This uneasy middle way is the result of Kim's life history as a key player in the dissident movement in Korea.
Th middle way involves the government sometimes talking with and sometimes attacking workers involved in strikes to isolate the militants. The smashing of the Mando Machinery Strike, which had lasted 17 days, by thousands of riot police in the early hours of September 3, showed that the Kim Dae-jung administration will use violence when it feels that it is necessary to ensure continued industrial produc-
Beyond this, Korean economic planning for the future is still largely unclear. The state economists and the bourgeoisie for the most part did not see the Asian crisis coming, Moreover, in the few cases where economists did see potential problems in the burgeoning current account deficit, they believed that Korea was strong enough to weather a speculative attack. The Korean bourgeoisie shared the optimism of the World Bank and the various pundits of a coming Asia-Pacific Century. Membership in the OECD was proof of the strength of the Korean economy. Though it may be difficult to believe now, state economists presented a 25-year economic development plan to Kim Youngsam about a year before the Asian ecoThe labour movement today
The union movement has been recovering quite quickly since the badly handled signing of the Tripartite Agreement in the early days of Kim's administration.
The KCTU, the dissident union confederation that traces its roots back to the formation of independent labour groups during the period of the Great Struggle, has shown itself to have a fairly good understanding of the present period and the methods by which worker militancy and confidence can be re-ignited.
For the time being, elements of the KCTU leadership are probably in advance of the political consciousness, though not of the anger, of much of the rank-and-file. Since the rebirth of militancy on May Day, the KCTU has been channelling the many grievances that are now emerging, ranging from non-payment of wages, failure to live up to certain provisions in contracts, to the threat of protracted lay-offs and outright dismissal, to rebuild the confidence of the workers in class struggle.
This is a difficult process since most workers can see that the economic situation is rather hopeless. The problem is that most workers have reacted to the possibility of job losses with understandable fear and a desire to co-operate with management to save jobs.