Labor Resistance in Korea


Labor Resistance
in Korea

By Jim Crotty
Gary Dymski

    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 government’s 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 deal—the neoliberalization of Korea—meant
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.

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.

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.

the end of April the economic situation had deteriorated badly. The official unemployment
rate was near 7 percent, with 10 percent seen likely by year’s end. A think tank
associated with the Korean Central Bank stated that a more inclusive measure of
unemployment would show 20 percent of workers affected—in 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.

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.

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.

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 flexibility”—a euphemism for layoffs—a condition of
its bailout” (5/28).

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-jong’s key stated objectives was
strengthening small and medium business relative to the top chaebol, neoliberal policies
were producing the opposite result.

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 government’s Financial
Supervisory Commission examined the books of 313 subsidiaries of Korea’s 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.

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.

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.

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.

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

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, “let’s 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.

chaebol responded quickly. On July 16, Hyundai sent termination notices to 2,700
workers—the first by any large chaebol company, and announced that 15,000
workers—one third of its workforce—had 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.

the intensity of the conflict between labor—especially the KCTU—and 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 Korea’s 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 chaos—even military intervention.

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.

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 order—the triumphal
“Washington consensus”—is 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