Labor Resistance in Korea
By Jim Crotty &
Since our article in the July-August issue, Asia has fallen into a self-reinforcing regional collapse. It may be at the edge of a meltdown. East and Southeast Asia are highly integrated economically. Falling Asian demand has hurt Japanese exports and staggered its ailing banking system; at the same time, the Japanese governments inability to respond effectively to its crisis has depressed consumer confidence and further weakened domestic demand. In turn, falling Japanese demand and the drop in the Yen have blocked Asian, especially Korean, exports. Even Hong Kong and Singapore, until recently seen as insulated from the crisis, will spiral into recession this year. Taiwan and China will continue to grow, though at much lower rates than previously anticipated. If China devalues its currency in response to its growth recession, the meltdown might begin.
Most Koreans were overwhelmed by the speed with which the crisis broke, by its severity, and by the power of the IMF to dictate surrender terms to the Korean government. In contrast to this general passivity, we found that the leadership of the progressive and militant Korean Confederation of Trade Unions (KCTU) clearly understood that the full and permanent implementation of the IMF dealthe neoliberalization of Koreameant their destruction as an institution, the end of the 35-year-old economic miracle for Korean workers, and hard times for the Korean people. They believed that an organized, disciplined, and broad-based campaign of mass resistance to IMF restructuring, including nationwide strikes and public demonstrations, was the only way to threaten the government, the chaebol, and outside interests, forcing them to slow down the liberalization process. The formation of a united anti-IMF coalition incorporating the entire labor movement, students, and the broad middle class was seen as a precondition for the success of this strategy.
But the student movement was moribund, the middle class was afraid of conflict and hopeful that restructuring would be quick and relatively painless, and the largest organization of unions, the Federation of Korean Trade Unions (FKTU), was conservative, closely allied with the government, and not inclined to participate in any mass protest movement. The KCTU was the only organization capable of creating and leading resistance to IMF restructuring, but until it was able to convince most workers, students, and other citizens that the IMF plan would be disastrous for them and that it could be defeated, effective resistance was not possible.
To confront this dilemma, the KCTU adopted a careful strategy that combined an anti-IMF, anti-restructuring education campaign directed at workers, students, and the public, attempts to build cross-federation labor unity, and a series of demonstrations and strikes of increasing militance to demonstrate their power to their enemies.
By the end of April the economic situation had deteriorated badly. The official unemployment rate was near 7 percent, with 10 percent seen likely by years end. A think tank associated with the Korean Central Bank stated that a more inclusive measure of unemployment would show 20 percent of workers affectedin a system with the flimsiest unemployment compensation program covering no more that 20 percent of those officially unemployed. The KCTU kicked off its program of resistance with a May Day demonstration in Seoul that attracted 20,000 workers and a few thousand radical students. Government officials and foreign investors berated the workers for interfering with the progress of reform; many workers and students were arrested.
In mid May Hyundai Motor, part of a top five chaebol, accelerated the restructuring process by announcing plans for massive firings of 8,000 workers, almost 20 percent of its workforce with more job cuts to follow. The announcement came just days after President Kim Dae-jong announced that job protection had to be sacrificed to corporate downsizing. The Korean Employers Federation estimated that at least 500,000 to 600,000 jobs, about one-third of the chaebol workforce, would have to be eliminated. The employer group stated that Daewoo, Samsung, and LG conglomerates, also top five chaebol, were considering job cuts of 30 percent or more. Downsizing of this magnitude was said to be a precondition for sale of affiliated companies to foreign interests.
Still operating without the cooperation of the FKTU, the KCTU called for a national strike on May 27 and 28 to back up its demands that the government stop the restructuring process, punish companies cutting jobs without legally required due process, create an adequate social welfare system, and dismember the chaebol. They also repeated their key demand that the government renegotiate the IMF agreement. Over 100,000 workers participated in the strike and in mass demonstrations of strike support in Seoul on the 27th. Having declared all strikes over restructuring illegal, Kim Dae-jong ordered the arrest of KCTU President Lee Kap-yong, 18 other KCTU leaders, and 125 local union officials, effectively outlawing the only progressive union federation in Korea.
The good news was that opposition to the IMF program was clearly on the rise. As the New York Times observed, the demonstration and strike reflected widespread anger not just against the chaebol, but also against the International Monetary Fund, which made increased labor flexibilitya euphemism for layoffsa condition of its bailout (5/28).
The economy maintained its downward spiral in June. Domestic demand crumbled; estimates of 1998 GDP now suggest an unprecedented collapse of minus 7 or 8 percent. Although the Korean won has declined precipitously, exports will probably show zero growth this year due to the fall of the yen, the collapse of Asian demand for imports, and Korean firms continued inability to get adequate trade finance. Meanwhile, the credit crunch brought on by the high interest rates and destructive bank capital adequacy standards mandated by the IMF continue to bite: virtually no banks are lending because of inadequate bank capital/asset ratios. Only the top five chaebol continue to have access to credit. All of these trends forced small and medium sized businesses into bankruptcy at record rates. So, although one of Kim Dae-jongs key stated objectives was strengthening small and medium business relative to the top chaebol, neoliberal policies were producing the opposite result.
Internal tension tightened dramatically when, under pressure from the IMF, global financial interests, and neoliberal economists to accelerate the pace of reconstruction, the government took direct administrative control of the reform process. Three government decisions were of great moment. First, the governments Financial Supervisory Commission examined the books of 313 subsidiaries of Koreas 64 chaebol; it subsequently ordered banks to cut off credit to 55 of these firms. Given their high debt dependence, these firms cannot survive this credit cutoff: they will be forced to liquidate or to merge.
Second, the government announced the forcible closure of five of the commercial banks that failed to pass the IMF-mandated capital adequacy standards. This will cost many bank workers their jobs. It is important to note that the 8 percent capital-asset standard imposed by the IMF was created in 1986 by the Bank for International Settlements in the wake of large banks overexposure in the Latin American debt crisis. This standard was designed for Western banks that typically have much higher capital-to-loan ratios than Asian banks, and it was not imposed when the West was mired in depression and financial collapse. Under current depressed conditions, no Korean bank heavily involved in business lending could possibly meet the 8 percent benchmark except by raising foreign capital and drastically shrinking the amount of loans outstanding.
Third, the government announced in early July that it planned to sell the most profitable publicly owned companies to foreign interests and drastically downsize the rest. The firms for sale include, for example, Pohang Iron and Steel Co., the second largest, and one of the most efficient, steel companies in the world.
All three government decisions critically raised the intensity of capital-labor conflict. The first two moves involve firms and banks that employ nearly 40,000 workers; press reports indicate that another 20,000 jobs might be jeopardized by these actions. Further, 145,000 workers are employed in the companies to be privatized, with another 70,000 in the remaining public firms. A third or more of these jobs might be lost in this process of privatization and downsizing.
The KCTU was now under even greater pressure to demonstrate militance and audacity. Local strikes broke out around the country. Subway workers in Pusan held a sit-in strike in early July, trashing company property. Hospital workers went on strike in Seoul. Tens of thousands of workers at the five closed banks refused to leave the premises and sabotaged crucial hardware and software; most of them refused to go back to work under new management unless all jobs were retained. Eighty-one workers were arrested for deserting their workplace. Hyundai auto workers conducted a two-day strike in early July, promising to stay out permanently if the company went ahead with planned layoffs. They offered wage cuts, shorter hours, and job sharing as a substitute for firings, but the company answered by reiterating its intention to proceed with the layoffs.
Frightened by the prospect of huge firings at banks and in the public sector where it has many members, the KCTU and FKTU engaged in an historic act of cooperation: they issued a joint call for a national two-day strike starting on July 14. The leader of the conservative FKTU told union members that they had to stand up for their right to survive and called for the abolition of government-led forced restructuring. The government and management are suppressing workers ruthlessly, he said, lets fight together for our survival (Korea Herald, 7/13). The government, of course, declared the strike illegal, threatening to arrest all union leaders involved. It successfully pressured the FKTU to cancel its support for the strike at the last minute. Still, the strike was successful, involving about 100,000 workers. As promised, police launched a manhunt for 83 union chiefs [including the leader of the powerful Korean Federation of Metal Workers and the head of the Hyundai Motor Co. union], accusing them of masterminding the illegal strikes (Korea Herald, 7/17). Some sought sanctuary in Myongdong Catholic Cathedral in Seoul, a center of political protest since the 1970s, they were immediately surrounded by riot police.
The chaebol responded quickly. On July 16, Hyundai sent termination notices to 2,700 workersthe first by any large chaebol company, and announced that 15,000 workersone third of its workforcehad been identified as redundant. The Hyundai auto union announced that it would go on strike indefinitely unless the pink slips were withdrawn. When they began their strike on the 20th, management instituted a lock-out. Meanwhile, police arrested the KCTU secretary general for leading the mid-July strike. The KCTU called for a massive national strike on July 23 unless the chaebol and public sector layoffs were canceled.
Clearly, the intensity of the conflict between laborespecially the KCTUand the combined forces of the government and the chaebol is, at this time (in late July), rapidly escalating. A much higher percentage of the Korean people now believe that IMF restructuring is a disaster for Korea and the rest of Asia than was the case when we visited in late March. It is not just unionized workers who have suffered under IMF rule. Business organizations have begun to express their fear that the radical restructuring process will soon permanently destroy Koreas industrial base. An editorial in the business-oriented Korea Times in mid July calling for re-negotiation of the IMF agreement is a sure sign of an amazing transformation of public opinion in recent months. It asks whether it is the intention of foreign, primarily US economic forces to castrate our economic strength and to pave the way for their domination as a sort of design to divide and conquer? Is the IMF acting here as their surrogate wittingly or unwittingly to advance their interest? No answers to such questions are conclusive at this stage. What is gaining new ground, however, are the views of influential analysts who are skeptical of the IMF directives on such Asian economies as Korea....
In addition, recent demonstrations of unity between the FKTU and KCTU are impressive, though obviously much greater progress is needed. On the other hand, three powerful impediments to KCTU victory remain. First, there is still little evidence of widespread student support for the KCTU agenda, in spite of the fact that economic opportunity for university students has virtually disappeared. A recent survey showed that business expects to hire just hundreds of the 190,000 expected college and university graduates this year. A resurgent, radical student movement would be an enormous help to labor. Second, no important political party or movement has articulated to the public a sensible alternative set of anti-neoliberal economic policies for dealing with the crisis. Thus, at this stage, resistance appears to many in the middle class to be wholly negative, perhaps ultimately generating political chaoseven military intervention.
Third, the KCTU confronts a hostile government that has demonstrated its willingness to unleash severe political repression against it, huge business conglomerates determined to destroy it, powerful foreign economic and political interests that see it as the only serious obstacle to their domination of the Korean economy, and an oncoming tidal wave of layoffs that may well threaten its existence. Meanwhile, the accelerating economic crisis in Asia continues to poison the economic and political context within which the KCTU must operate.
It is still too early to tell if the KCTU will succeed or fail in its crucial battle. It is not too early to recognize, however, that the neoliberal orderthe triumphal Washington consensusis now under serious attack from many and diverse quarters, perhaps on the brink of its own crisis. It is not just Korean workers who have refused to take their restructuring punishment lying down. General Motors is currently contending with a significant slowdown in production due to strategic strikes by aggrieved UAW workers who have clearly articulated their understanding that globalization under neoliberal guidelines is threatening their lives and livelihoods. This modest sign of rising labor militancy in the U.S. serves as a reminder that reversing the Korean crisis will depend in the end on progressive class struggle in the U.S. and throughout the North, and not just on the valiant resistance of the workers of Korea. Z