South Korea:
After the Financial Crisis, the Working Class under Attack

Apr 20, 1998

While the western media hail the fact that, despite the financial crisis in Southeast Asia, the stock markets of the rich industrialized countries have managed to achieve record highs in 1997, in Southeast Asia the social consequences of the crisis are still unfolding, with increasingly catastrophic results.

The region’s poorest countries, like Indonesia, Thailand and the Philippines, have already seen a rising tide of hunger riots and ethnic clashes fuelled by despair. Large-scale factory closures, brutal food price increases coupled with the ending of state food subsidies and the sudden collapse of most public utilities and services for lack of funds are pushing these countries decades back into the past. The mirage of their alleged "industrial boom" is melting away, revealing what was always beneath—impoverished Third World societies.

By contrast, in richer South Korea, the world’s 11th industrial economy up to last year, the consequences of the crisis have been slower to develop. But they are nonetheless dramatic. Gasoline, transport and food price increases, coupled with widespread wage cuts, have already reduced the standard of living of the working class by an estimated 30% compared to the fourth quarter of 1997. But this is for those workers who have been fortunate enough to retain their jobs. Since last year, the number of the unemployed has doubled, representing in March 6.5% of the workforce of 21 million. In fact, the situation must be worse than this. In March alone, government statistics showed a decrease of 873,000 people in the workforce. People go back to the countryside to try to survive.

So far, however, despite the spectacular bankruptcies of eight of the country’s 30 largest conglomerates (or "chaebols" as they are called in Korea), layoffs and closures have affected mostly the smaller companies. The 3.5 million or so workers employed by the large industrial chaebols, which are also the core of Korea’s export industries, have been relatively protected, partly because the existing legislation provided them with some protection and partly because of the fears of the capitalists and politicians that massive layoffs might trigger a backlash similar to last year’s general strike. Besides, a presidential election was planned for December 18th and no political party was willing to take the risk of a new confrontation in the period coming up to the election.

Now, however, the representatives of the chaebols are urging the government to let them go ahead with massive layoffs. They want to trim personnel costs by 50%. In auto, electronics and heavy industry alone they want to lay off 50,000 workers. During their April 28th meeting with the government, the representatives of the chaebols strongly criticized the government which had asked them to delay layoffs once again until after the coming June local elections this June. Hyundai Motor Company has already announced its determination to reduce its workforce of 46,000 people by about 20%, that is 9,200 workers, and to carry out layoffs before June.

The task of implementing the austerity measures demanded by the chaebols, making the industrial working class foot the bill for the crisis, now falls to the new Korean president, Kim Dae-jung.

Kim Dae-jung, the "White House’s Man"

Six or even three months before the election, hardly anyone would have believed that Kim Dae-jung would be the victor, if only because for the past fifty years, no opposition party has ever won a presidential election. Despite the series of corruption scandals which had rocked the regime, the ruling Grand National Party was expected to win the election once again. However, the financial crisis threw a wrench in the works. The anger it generated among the electorate against the blatant and corrupt profiteering of the chaebol capitalists and their political representatives in the main parties was the main factor which catapulted Kim Dae-jung to the presidency.

Kim Dae-jung occupies a particular place on the Korean political scene, as an unswerving opponent to every Korean dictator since the early 1960s. His record as a victim of the repression and dirty tricks of the KCIA, the Korean secret police, is unmatched by any mainstream politician. In addition to being tortured and jailed for six years, he survived an attempted murder by the KCIA in 1971, before being abducted two years later from Japan, where he lived in exile, and eventually sentenced to death for treason by a military court in 1979. U.S. intervention saved his life; he spent the following six years in exile in the U.S., before resuming his political career in Korea in 1985, as a maverick opposition figure who was heavily defeated in the two attempts he made for the presidency in 1987 and 1992.

Kim Dae-jung never claimed to be a radical, nor even a reformer. And he certainly proved it during the election campaign, by making an alliance with the United Liberal Party (ULP), a right-wing party. Ironically, the ULP’s leader, Kim Jong-pil, was none other than the former head of the KCIA during the early 1970s, that is when this respectable organization was trying to assassinate Kim Dae-jung! But this petty matter will not stop Kim Jong-pil from being appointed prime minister by Kim Dae-jung later this month.

Nevertheless, Kim Dae-jung’s impressive record in opposition, at least compared to that of other mainstream politicians, made him a popular figure whose hands were clean of all the corrupt wheeling and dealing revealed by the large-scale bankruptcies triggered by the financial crisis. And Kim Dae-jung certainly strove to make the best of these unexpected circumstances.

His election campaign was dominated by repeated pledges to fight corruption relentlessly in government and in business, to curb the greed and power of the chaebols and to ensure that the chaebols, not working people, would be made to pay for the financial crisis. Thus in November, when the giant Samsung chaebol announced plans to cut its workforce by 30%, Kim Dae-jung delivered keynote speeches at protest rallies organized by the trade unions. Subsequently, when the issue of the International Monetary Fund’s bailing out of Korea came to the fore, Kim Dae-jung adopted a very firm line, pledging that he would never bow to the dictates of the IMF nor make any concession which might weaken the Korean economy’s protection against foreign predator capital or undermine the standard of living of the Korean population.

This demagogy worked so well that the KCTU itself was split right down the middle between those in favor of supporting Kim Dae-jung in the election and those who backed the KCTU’s own president, who was standing as an independent candidate. In fact, even foreign business experts fell for Kim’s rhetoric, judging by the dismay and alarm of western financial papers after his victory was declared on December 18th.

Soon, however, Kim Dae-jung proceeded to reassure business, issuing a brief statement explaining how "appalled" he had been when he had "discovered the catastrophic state of Korea’s finances." Within days of his election he declared his determination to carry out the demands made by the IMF in exchange for its bail-out package; that is, elimination of investment and trade barriers, restructuring of business, and the introduction of labor flexibility. It was the turn of Kim Dae-jung’s supporters to be dismayed. And they were even more dismayed when, on December 22nd, Kim Dae-jung announced his decision to pardon two former dictators serving life imprisonment—Chun Doo-hwan, the butcher of the 2000 demonstrators killed during the 1980 Kwangju uprising, and his successor Roh Tae-woo—without bothering to even say anything about the fate of a number of more obscure political prisoners who had been jailed because of their support for Kim Dae-jung!

In any case, by the beginning of January, there was no longer any possible doubt as to the agenda of the new president. The fact that many of the key figures in the incoming government happen to have held responsible positions in various American agencies in the past is not mere coincidence. As many commentators are now saying in Korea, Kim Dae-jung turns out to be, and probably always was, the "White House’s Man" in the Blue House, as the presidential palace in Seoul is known.

The "grand compromise"

The new president wasted no time in preparing the ground for a wholesale attack against the working class of the large industries. The Tripartite Commission involving representatives of the bosses, the state and the unions, which had been set up in early December with few results so far, was revived, with the objective of sorting out the country’s economic collapse by implementing the measures recommended by the IMF. Both the FKTU, the old state-sponsored union confederation inherited from the days of the dictatorship, and the KCTU decided to take part in the discussions.

Out of this commission came, on February 6th, the so-called "grand compromise," which was agreed on by all participants, including the KCTU delegates. This was indeed a compromise, but one practically entirely at the expense of the working class. In Kim Dae-jung’s book, the word "compromise" did not apply to the Korean capitalist class.

In short, this agreement ended the need for companies to seek court and trade union approval in order to lay off workers for economic reasons, provided the workforce is given a sixty-day notice. The right of employers to impose layoffs was extended to cases where a company merged with or was bought up by another one, when they were facing commercial difficulties. Restrictions on the use of agency workers and other forms of temporary labor were lifted for certain industries and skills (although this seemed to legalize widespread existing practices since the government’s own figures show that, in the course of 1997, over 220,000 workers were hired by companies from "illegal" temporary agencies).

In addition, the agreement included measures which were presented as "concessions" to workers. Companies were required to discuss planned layoffs with the unions—but of course, the unions (let alone the workforce) were not given a say in the decision itself: they were only allowed to help the bosses iron out possible difficulties! Then there was a vague provision pledging more funds to extend unemployment benefits to a larger section of workers. The current system, set up for the first time in 1995, covers only a third of all wage workers, provided they have worked continuously for long enough. But the agreement did not include short-term and temporary workers, despite the fact that they already made up 45% of wage workers before the financial crisis.

Finally some concessions were made on the long-standing issue of union rights for teachers: teachers would be allowed to join trade unions (which they have done for years, despite the fact that it was illegal) which would be given bargaining rights from July 1999. But teachers would not have the right to strike, and other civil servants would have to be content with only a vague "consultative body." Finally, trade unions would be allowed to put up candidates in political elections, beginning with the local election planned for June this year. Here again this was essentially only the legalization of a de facto situation. After all, the KCTU president had been a candidate in Korea’s presidential election.

In other words, companies were given a blank check to carry out mass layoffs and extend labor flexibility, while the union machineries were granted a slightly higher status in terms of recognition both by companies and by the state. But for workers themselves there was no "concession" worth talking about.

Adding insult to injury, when the agreement was passed by the Korean parliament, on February 14th, in the shape of a set of 18 new labor laws, it was heavily amended. Some of the so-called "concessions" were scrapped—like trade union rights for teachers or the right for unions to put up candidates in political elections—while the attacks on the workers were aggravated. All restrictions on the use of temporary workers were lifted, for instance. This new legislation effectively cancelled the gains made by Korean workers in last year’s general strike.

Rebellion in the KCTU

Not everyone in the KCTU had been in agreement with the decision of the leadership to participate in the Tripartite Commission. A number of unions and regional bodies had criticized this decision on two grounds: first they believed the KCTU should not give the impression that it was prepared to condone in any way the mass layoffs planned by the chaebols; and second, the Commission’s agenda did not include any discussion on the responsibilities for the financial crisis, nor on the dismantling of the chaebols, the KCTU’s main demand in response to the crisis. Many of the critics also draw a link between the leadership’s eagerness to participate in what they saw as a talking shop designed to con the trade unions into condoning a wholesale attack against the working class, and the confusion the same leadership had created by calling off the January 1997 general strike, on the basis of a vague pledge to reopen discussions made by the regime.

Predictably the publication of the "grand compromise," triggered a storm of protest within the KCTU, and not just among those who had been initially opposed to participating in the Commission. That very same day, the KCTU unions organizing the 68,000 Hyundai workers in Ulsan—a stronghold of the militant tradition of the KCTU—released a statement condemning the agreement. Three days later, on February 9th, a representatives conference of the KCTU rejected the agreement by a three to one majority. Following this vote, the union leadership resigned, and a temporary emergency executive committee was elected to replace it, in which the traditionally more militant metal industries unions were heavily represented. The emergency executive committee was then mandated to demand a re-negotiation of the agreement on the basis of opposition to layoffs, to refuse any further participation in the Tripartite Commission should this re-negotiation be refused and to organize a general strike starting on February 13th if the government refused to cancel the passing of the new labor laws in parliament.

This mandate to call a general strike from February 13th did not come out of the blue. The idea had been at the top of the KCTU’s agenda since the beginning of January and during that month a number of local unions had already staged strikes in some of the chaebols over various issues related to those discussed in the Tripartite Commission.

Kim Dae-jung’s reaction was immediate. He issued a strident warning that the full weight of the law would be used against the unions and the workers who would participate in what was already being described as an "illegal" strike, before any court decision had been made to that effect. Everyone knows in Korea that these are not empty threats. During last year’s general strike, many rank-and-file activists experienced the heavy- handed tactics of the police and courts, often ending up in prison as a result. Eventually, the obvious failure of this tactic to break the strike led the government to soften its stance, but not before the general strike had entered its third week. Given the stakes involved this time, which are much higher for the Korean capitalists than they were a year ago, this threat had to be taken seriously.

Was it the fear of risking a head-on confrontation for which they felt that the KCTU was ill-prepared due to its current internal divisions, or some other reason, which prompted the emergency executive committee to cancel the planned general strike on February 12th? We do not know. In any case, this was what it did, with a terse statement saying that this decision had been made "out of consideration of public fear that the move might exacerbate the nation’s economic crisis." And the statement went on saying that the KCTU would "fight through other means such as massive rallies."

From afar, it is of course impossible to gauge what possibilities may exist for organizing a fight in the present context in Korea, and therefore impossible to judge the KCTU’s decision to cancel its call for a general strike. All one can assume is that this decision must have caused deep despair in the ranks of the KCTU, judging by the moving letter left by a 40-year old KCTU member at a Daewoo shipyard to his fellow workers, before setting himself ablaze as a protest against the planned laws: "When millions of workers follow the instructions of the KCTU," he wrote, "then the layoff attempts can be blocked. If the labor reform law is passed, just imagine how much businesses will harass workers."

In any case, those among the delegates at the KCTU representative conference who argued against helping Kim Dae-jung and the chaebol bosses to "manage" the crisis, and in favor of the working class bringing the chaebol bosses to account for their role in the financial crisis, and forcing them to use their private wealth, carefully stashed away over the years across the world’s tax havens and rich countries, in order to foot the bill of the economic mess they have created, were unquestionably right.

Since then, a new leader has been elected to head the KCTU. Lee Kap-yong, former head of the association of unions of Hyundai Group Companies, known as one of the more radical leaders of the KCTU, won the election in March over a more moderate candidate.

The day after his election, he declared: "I consider the tripartite agreement by representatives of government, labor and management to share the pains of economic difficulties as good as broken because it is only workers who are forced to bear the brunt of the ongoing crisis. In that sense, I will organize the power of workers to thwart attempts by management to introduce massive layoffs and to arbitrarily toss around workers from one workplace to another." He reasserted the demands of the KCTU, threatening to launch a general strike as soon as possible if they were not met.

Does it mean that the new leadership is ready to help the workers fight back to make the bosses pay for the crisis? Unfortunately, this is not so clear, if Lee’s subsequent statements have been reported correctly in the press.

When he met with President Kim, he asked that the government agree to renegotiate the agreement legalizing layoffs. In doing so, he commented, "I agree that we cannot revive the economy without ensuring cooperation among the three parties, [i.e., the unions, the big companies and the government] but the first tripartite agreement really led to an expansion of unemployment. We cannot revive the economy without solving the unemployment problem....We demand renegotiation of the allowance of layoffs and the hiring of temporary workers."

The KCTU also asked businesses to make more effort to reduce layoffs through paycuts and shorter hours. In other words, he was proposing simply to ask for a different kind of sacrifice from the workers.

The very idea that the union leaders would help manage the crisis, alongside the government and the bosses, is certainly a trap for the workers.

The South Korean working class has proved time and again its courage and dynamism and its ability to fight the capitalist class, even in the difficult conditions of repressive dictatorships. Let us hope that it will not allow itself to be diverted down a blind alley, in the name of "national interest" or similar traps and that, instead it will target capitalist profit and the profiteers, in an all-out counter-offensive, as the only way to defend its class interests in a situation of acute crisis.