Korean Economic crisis and People's reponses(Sep. 1999)
1. The Causes of Economic Crisis
I'd like to start my presentation from giving you an very famous example in
Korea.
Right after the IMF bail-out, many NGOs advocated chaebol reform. Because
they thought that economic crisis had been caused by the problems of
chaebol-dominated economic structure, i.e. corruption, collusion between
government and chaebol, and expansion of its business as an octopus spread
its arms etc. So their resolution to the crisis was focused on transparency &
democratization of the corporate domination structure, and elimination of the
illicit collusion between government and capital.
I think, this position is very similar to one of 'crony capitalism' argued by
many economists based on imperialist countries. However, they came to face
very contradictory situation that IMF & the government's demands on the
chaebol reform were the same as theirs. I will give you a symbolic example on
their contradiction. A NGO in Korea, has led a small-sum shareholder movement
as a core measures of chaebol reform. Even though setting from its
fundamental limitation and availabilities in chaebol reform, I'd like to
point out the fact that the movement, sometimes, cooperated with foreign
investors and even hedge funds such as Tiger Fund, in confrontation with the
owners of chaebol. This contradictory situation express the limitation of the
movement very symbolically.
It is because the NGO's analysis on the economic crisis were very limited.
That is, they didn't have an analystic space to reveal the role of TNCs and
imperialists countries as explaining the causes of crisis. So, they could
raise the problems of chaebol, but never understand their chaebol reform
movement could, under the specific conditions, paved the way for the TNCs. In
conclusion, I want to say, we have to look at the both sides, internal and
external factors as analyzing the crisis.
The economic crisis was a product of the combination of internal and external
factors. The former menas problems of chaebol-dominated economic structure
and collusion between government and chaebol, and the latter, the pressure
of TNCs and imperialist countries over the Korean economy.
The Korean capitalism is a kind of subordinate accumulation structure
fundamentally. It was fast integrated into the world economic system since
1970s. Especially, government and chaebols, Korean big conglomerates, have
pursued the liberalization & deregulation of Korean economy since the early
90s. It is because they couldn't maintain the profit accumulation structure
of 'long-working hours & low-wages' anymore due to the strong resistance of
workers since the Workers Grand Struggle in 1987. We call it "'87
accumulation structure".
So, the government and chaebol have tried to liberalize Korean economy both
national and international level. I can give you two important phenomena to
be able to explain it.
Firstly, Overseas investment of chaebols has increased at the average rate
of 50% a year since the late 1980s. According to the World Investment Report
1997 by UNCTAD, there are 4,806 multi-national companies based on Korea
-comparing with 3,967(Japan), 3,470(U.S.)-, in 1996, even though the size of
them is smaller than those of U.S.'s and Japan's.
Secondly, during the YS regime-former president-, the ruling class tried to
introduce lay off provision for economic reasons. Even though the provision
had to be postponed due to the General Strike from '96 to '97, it was enough
to recognize their strategy for more flexiblization and liberalization in
every sector of Korean economy.
In fact, as I mentioned before, chaebols have pursued to obtain freer access
to global financial & goods market since the early 90s. For its freer access
to global market, chaebols had to give up the advantages in 'domestic market'
to a certain extent. That's why, chaebols have admitted, in spite of some
loss in the domestic market, the stream of liberalization & deregulation
propelled by the government & transnational capital. And also, chaebols take
advantage of this trends of liberalization & deregulation in achieving its
goals, which are, on the one hand, to destroy trade unions and, on the other
hand, to be autonomous in their management & operation against intervention
of the government.
In conclusion, The accelerated integration provided the transnational
financial capital a full space in the Korean economy. The integration
provided opportunities for the Korean conglomerate business to borrow heavily
and freely from international financial concerns. This fuelled
over-production in Korea paralleling the world-wide over-production and the
particularly accelerated over-production in Asia. The race to over-production
led to the bankruptcies of large business concerns, accumulation of balance
of payment deficit and foreign debt. In addition, volatile transnational
financial capital fled Korea in droves when it saw the dangers in Korea. And
then, the Korean economic crisis erupted in the form of financial/foreign
exchange crisis."
2. What happened in the era of IMF in Korea?
2-1. Massive lay off and aggravation of the working condition
The restructuring process has led to massive lay off and aggravation of the
working condition. The government estimate for unemployment in 1998 averaged
1.7 million (7 to 8%), an increase of 1.2 million from the four to five
hundred thousand maintained prior to the economic crisis. Recently, the
government announced that the unemployment figures for months of April and
May had decreased to 1.4 to 1.5 million. But, this figure excludes some
400,000 unemployed people who are given odd and temporary work through the
workfare* programme as a part of the unemployment programme. But the KCTU
analysis, which takes account of discouraged unemployed*, unpaid family work,
calculated by the KCTU, indicates the real unemployment is closer to 4
million.
The massive unemployment is paralleled by a serious aggravation of working
conditions for those workers who managed to escape the fate of job loss. Work
intensity has increased drastically, wages have been slashed, and working
hour has increased for remaining workers. The management is attempting, also,
to introduce merit-based personnel management policy and wage system
(discriminate performance tested wage determination and annual salary system)
as a mechanism for labour control and attack on the influence and activities
of trade unions.
The crisis and actions of employers have accelerated the trend of
casualisation of labour, involving retrenchment of full-time regular
employment to be replaced by temporary and casual employment."
2-2. Privatization
The key national basic industries such as POSCO(Pohang Iron & Steel Co.),
Korea Heavy Industries Co, Korea Electric Power Co., Korea Telecom, Korea Gas
Co. etc are all included in the plan of public enterprises' privatization and
management renovation announced by the government last year. Additionally,
the government propelled the privatization of major public enterprises to
interest Foreign Direct Investment(FDI). In case of Korea Heavy Industry co.,
the government has promulgated joint venture with foreign capital from the
first-world countries(such as General Motors).
They opened the way for transnational capital to participant in privatization
pro cess, so the trend of dependence on foreign capital will be intensified.
More over, the area of privatization has become broader and broader. In
recent days, the government is trying to privatize the basic sector for
people's rights such as people's health, and education.
I can give you two examples. Firstly, the government is trying to privatize
the MokPo National Tuberculosis Hospital. Until now, the struggle against it
is going on. Secondly, the government announced that it will close the small
elementary schools which has students less than 100. The government is
undermining the people's basic rights under the name of "Privatization and
Introduction of Market Principle". However, the government haven't completed
the process of privatization according to its original plan due to people's
as well as public sector workers' resistances.
Public services and public expenditures which helped to meet the needs of the
people are being reduced or eliminated altogether. Public corporations are
being privatized and being sacrificed to TNCs & chaebols, and the people are
forced to spend more to get the same services. With their very basic public
services eliminated, the people of the world are forced into a 'race to the
bottom' at a national/international level for there right to survive. No
matter how dismal their working environment may be, no matter how meager
their wages, people cannot help but accept and work in these conditions.
This is because in the age of neo-liberalism, the purpose of the state is to
provide a set of conditions most favorable to the capitalists and most
oppressive to the workers, all wrappd in the ideology of gaining the
'competitive edge.' More rights and more privileges to 'foreign investors'!
Endless competition toward the bottom for the people of the world!
But we have some difficulties in organizing struggles against the
privatization. Because, Korean people have experienced corruption by illicit
collusion between government and capital from military dictatorship,
bureaucracy of public sector. The ordinary people feel disgust at this
situation. Because facing under this situation, 'expansion of public sector,
maintenance of public enterprises', that is the alternative of labor and
progressive sectors, can hardly persuade the public.
2-3. Increasing power of TNCs
As of this year, over 240 million stocks were already sold overseas, and
there are 12 corporations whose over-half shares are owned by foreigners:
Samsung Electronics, the Housing Bank, Korean Glassware, Madison, Ssangyong
Paper, Hanra, Godenshi Korea, etc.
In addition, foreign investors, who had led the increase in stocks since last
October, have transferred their stock investment profits amounting to 6,784
million dollar overseas: 635-934 million per month from last August to
November, 1,597 in last December, 1,621 in this January, 1,017 in this
February and 1,859 in this March. Foreign investors were revealed to be
yielding over 45.3% profits much exceeding the rise in composite stock
exchange index(27.5%).
As for bond markets, the opening of a specialized market for public bonds in
April 29, has raised bond transactions from 260 billion won a day(before
opening) to 3,028 billion won a day (at the rate of 11.6).
As for foreign exchange markets, the 'first-step liberalization of foreign
exchange transactions' was carried out, exposing Korean markets to the
speculation of transnational financial capitals. As the 'Real Demand
Principle'(The principle that only the derivatives connected with real
demands are allowed to get transacted) is abolished, nonresident foreigners
can also transact such derivatives as options through the transaction with
domestic foreign exchange banks. Especially, since the difference transaction
without the bargaining of real products is allowed for futures,
NDF(Non-Delivered Future) transactions have got possible, which raised up the
risk of speculations. In addition, short-term foreign loans by domestic
corporations and foreign real estate investment have actually got
liberalized.
The bilateral investment treaty(BIT) with USA, which came into a hot issue
through the debate on the screen quota system, is a clone of MAI,
transnational capital's bill of rights. Under the broad definition of
'investment', even 'speculation' should be protected, and no restriction on
domestic activities of transnational corporations can be imposed(the ban on
performance obligations). If a state imposes labor measures or environmental
measures, it is subjected to the claims of corporations on the ground of the
'loss of future profits' or 'indirect expropriation'; most claims would be
accepted for corporations.
What Japan demands during the BIT negotiation, is more frightening: the
abolition of the 'duty of wage pays to full-time unionists' and of the 'duty
of employing local persons at a certain rate' What is more, WTO Millenium
Round will arouse the debates on more far-reaching liberalization than
Uruguay Round, and MAI, the negotiation of which was suspended last year,
will be negotiated again under another title.
3. Recent issues in Korea
We can note that Korean economy is being transferred into the liberalized
and deregulated system, and that FDIs of transnational financial capitals,
the financializing trend of domestic capitals, and thus the fall in living
standards of people and workers has got serious. The trends of liberalization
and deregulation have become deepening and widening more and more. The ruling
class is try to apply the neoliberal programmes to every sector of Korean
economy and society.
Until now, Korean people's struggles including the KCTU has been focused
mainly on the defence of people's livelihood rights, especially employment
security. More and more, people come to recognize the essence of
neoliberalism both on the national and international level.
Today there are three social issues which Korean people are responding to.
One is on the National Security Law. People demand to abolish the law
entirely. The government tries to change the law partially. However, the core
provisions of 'pro-enemy organization' will not be abolished. Even until now,
hundreds of activists are imprisoned a year by the provision.
Another issue is on the privatization of basic public sectors and
corporations. As I mentioned before, the government is trying to put the
neoliberal principles even into the areas of education and people's
healthcare. Lastly, Korean people are preparing struggles against the
investment treaties and WTO millenium round. We have come to recognize the
direct impacts of them on the people's rights. KoPA will educate the people
on the impact of free trade and investment agreements and organize
demonstrations against them.
I hope all of us can meet the people's front against the neoliberalism.
Thank you.
* Financial Market Openness
Since the IMF bail-out, the government has focused on interesting Foreign
Direct Investment(FDI). For the purpose of FDI, the government has allowed
'hostile' M&A(Merger & Acquisition), enacted the law of FDI Encouragement,
and privatization of public enterprises.
by Changgeun Lee(international coordinator of KoPA)
* This paper was presented at the 'Alternative Forum to the APEC' held in
NewZealand, Sep.1999
