Class composition in South Korea since the neoliberal economic crisis

1. Preface
South Korea, a newly industrialized, influential country with an important emerging market, has been held up as a living specimen of success that gives pride in the potential energy of capitalist development. However, the gravitational shock of an economic crisis emanating from Thailand into East Asia at the end of 1997 hit Korean society particularly hard. At this crucial moment, the IMF shifted its focus from short term politics to long term control of society, in exchange for concessions such as the prolongation of debt expiration and the offering of additional loans. 50 years after the end of the American trusteeship lasting from 1945 to 1948, a new form of entrustment emerged.

Four years after the onset of the economic crisis, the Korean Government announced, on August 23, 2001, that South Korea had repaid all IMF loans and had graduated from the IMF’s guidance 32 months earlier than the initial target date. Indeed, economic indicators point to the success of the IMF’s policies. By 2002 South Korea had risen to the 4th largest foreign-exchange-holder-country; its stable-growth economy has recovered vigor, while stabilization in employment and price indices continues. Aside from this economic success, however, the IMF’s trusteeship has unleashed significant, rapid changes in the social structure, class relations, and modes of thought dominating Korean society.

It is clear that the South Korean society of today as compared with the pre-1997 formation has experienced thorough-going change. This essay will both question how South Korean society has changed and explore the forces that sustained the changes. The Korean Government wants, of course, to insist that South Korean society changed from a bad state to a good state. In order to make this argument, however, the Government has, we must notice, reduced South Korean society into a unified organism completely identical with a single national economy. From this perspective, the Governement argued that the power behind this favorable turn was due to ‘the national opinion wanting the supersession of crisis and the strong political leadership based on that opinion’ (from the IMF’s South Korean official in charge).

In contrast to the government’s top-down viewpoint, I am going to observe the social changes in South Korea formed over last 5 years from a responsible perspective that sees how the struggles of labor and the proletariat, i.e., struggles from the bottom-up, are the main motors of social change. To that end, I shall employ the concept of class composition to refer the self-organization process of this central force-that is, the ceaseless self-organizational process of the constituent power of the proletariat. Through this concept, we will see a reduction in the leadership of state power, asserted by government, to the subordinate and passive variables in the process of class composition. In addition, this perspective also provides a vantage point from which it may be possible to define the actual limits of the major left-wing currents in South Korea, which have largely argued that the economic crisis in Korea could have been superseded by compromise with capital. In this argument, which takes the form of social-corporatism, they consider the crisis as a product of the co mpetitive movement of individual capital; hence, the working class struggle, in their analysis, was considered irrelevant to economic crisis.

2. Class situation before the economic crisis
Capitalist development in South Korea during the pre-1997 period was heavily dependent on the induction of foreign capital from transnational banking organizations, such as IMF or the World Bank. This foreign capital was part of the transnational financial capital that sought a profitable place of investment that could avert the insubordinate power manifested by the working class in Western Europe during the revolutionary processes of 1968. The total amount of transnational financial capital invested in the South Korea from 1990 to 1997 reached 60 billion dollars, of which 43 billion dollars were withdrawn in one action at the end of 1997. The economic crisis that exploded in November of that year was largely catalyzed by that sudden withdrawal.

We will want to know what is the reason that caused transnational financial capital to be withdrawn from South Korea in 1997? The answer to this question, without a doubt, can be found in precisely the same principle that had previously attracted inward flow of transnational financial capital in the first place. In brief, the withdrawal movement was due to the radical decrease in the rate of capital profitability in South Korea. The resistance of the militant proletariat in South Korea since 1987 meant that high interest rates could no be secured. Profit rate in all industries reached 49% in 1986, but began to fall incrementally thereafter, hitting a low of 18.6% in 1997. This level was far lower than the profit rate (29.7%) during the economic crisis of 1980 that brought the collapse of the Park Jeong Hui government. In the uneasy situation, transnational loan capital refused to defer the expiration date of loans, and thus began the exodus of capital searching for stable interest rates in a different country. The sudden economic crisis in South Korea that ensued is well known.

The South Korean economic crisis of 1997 was brought about by the global movement of transnational financial capital, i.e., the institution of neoliberalism at a global level. It is further significant to observe that although capital composition at a global level could be termed neoliberal, the corresponding Korean capital composition was not. Capital composition in Korea had to pass through several stages until it accomplished neoliberalization commensurate with the global level.

Until 1979, the year in which the Park Jeong Hui government collapsed, it was the state-form of military and authoritarian fascism which contained the resistance of the working class and promoted accumulation in conspiracy with transnational financial capital. This state-form forced laborers to accept low-wage/long-hour working conditions by introducing the exceptional state of martial law and special law. As Korean mass workers, increasing in number, gradually chipped away at this state-form by cooperating with students and religious circles. Since the beginng of the 1970s, the Park Jeong Hui government began to introduce a new phase of heavy-chemical industrialization designed to induce restructuring that could neutralize the bastion of resistance that labor power had formed in the light industrial sectors.

After cracking down on the ‘spring of Seoul’ movement in May 1980, the government of Jeon Du Hwan assumed state power and began to try to solve the economic crisis by abandoning the objective of an independent economy and by inviting transnational financial capital flow into Korea on a scale of unprecedented proportions and renumerative terms. This policy was made possible by suppressing the people’s armed resistance that had spread over Kwangju to other regions since May 18, 1980. The Jeon Du Hwan government violently imposed order based on the authority of exceptional measures such as the National Security Law, the Law of Social Safety, and so on. However, this oppressive authoritarian order ran against both the people’s political aspirations and the exigencies of the neoliberal movement of transnational capital. Hence, the Korean government could not but adopt the flexible policies beginning 1984 that enabled the level of profit to recover the high rate of 1979. Korean mass workers toook this opportunity to unleash a series of struggles against the authoritarian regime of Jeon Du Hwan.

The struggles of 1987 seemed to draw to a close with the post-authoritarian reforms of direct presidential elections. But the changes that they brought to South Korean society were, in fact, much more profound than first appeared. On the one hand these struggles demonstrated the growth of the militant power of the Korean mass workers. On the other hand they also showed the new subjectivity emerging outside the factory. The No Tae Uoo government which took over state power in 1988, and the Kim Yeong Sam government which succeeded it in 1993 through a coalition of the Min Jeong (Democratic-Justice), the Min Ju (Democratic), and the Kong Hwa (Republic) Parties had to overcome the economic crisis that began to coalesce at the end of the 1986~1988 boom. Nothing less than the invention of a new sovereign form of government distinct from the fatally damaged authoritarian system was needed. These successive administrations took action on a twofold scale. First, the government consciously tethered the economy to transnational financial capital in order to obtain wider freedom of movement and to help the domestic monopolistic capital escape the resistance of the Korean working class by relocating to overseas markets such as Southeast Asia, Russia, China and so on. Secondly, in order to control bottom-up demands for power, theses successive administrations attempted to co-opt the democratic trade union movement that had emerged as a distinct social power during the struggles of the 1980s and to make it an accomplice in capitalist development. Mutual agreements between FKTU (Federation of Korean Trade Unions) and ANB (Association of National Businessmen) in 1993, as well as the Committee for Reform of the Employer-Employee Relation in April 1996, were all parts of the attempt to construct a social consensus apparatus.

To achieve this goal, capital attempted to induce the working class organization which had been constructed around a shop floor into a centralized structure that would enable upper echelon negotiations between labor and capital. Capital intervened at a juridical level, using the demands of the working class for a revision of the Trade Union Act as the pretext for a neoliberal revision. The Kim Yeong Sam government rushed the revised neoliberal Trade Union Act through the National Assembly by surprise in December, 1996. Against this action, the working class of Korea launched a general strike.

Nevertheless, the general strike that spanned more than 3 months from December 1996 to March 1997 did not interdict the neoliberal reform of capital. A revision of the Trade Union Act arrived at through mutual agreement between the ruling coalition and the opposition party still contained various measures that supported the neoliberal reform of capital: flex-time, work-sharing, No-Wage-for-No-Labor, and the restrictions on legal sites for strike demonstrations were all designed to make the labor market more flexible and amenable to neoliberal capital.

Although the revised Trade Union Act contained such articles of neoliberal reform, it also contained the articles that concretized a consensus around the politicalization of the working class (e.g., the recognition of multiple trade unions and their legitimate forms of political activity). Clearly, the revised Trade Union Act was the result of compromise between labor and capital. Actually, in early 1997, the Korean Confederation of Trade Unions (KCTU) chose the path of compromise with government, a line characterized as a ‘labor movement moving in step with the people.’ From this perspective, 1997 can be seen as a turning point that generated within the main current of democratic trade union movements a switch to a line based on social mutual agreement.

But the consensus could not be actualized immediately because of the resistance of shop floor workers. The revision of Trade Union Act lowered the wage rate increase to 7% for the first time since 1987 and heightened the attack of capital. In response, the opposition of workers became violent and the gathering of shop floor organizations began to appear. It was in this transitional situation that an economic crisis, the first signs of which had been seen in the bankruptcy of Hanbo steel Corporation in January 1997, struck all of South Korea.

3. Capital recomposition and class decomposition under the Kim Dae Jung government
Elected in December, 1997, the Kim Dae Jung government inherited a crisis-ridden national economy. Upon the withdrawal in one single action of 43 billion dollars in loan capital, the South Korea economy fell into liquidity crisis and the ensuing bankruptcy of enterprises. This shock was followed by a rise in interest, a dramatic, unexpected rise in the exchange rate, and a sudden fall in the price of real estate. The government of Kim Dae Jung utilized this crisis as an opportunity to deepen the neoliberal reform that had been deferred by both a rigid authoritarian residue and the resistance of the working class. A series of reform acts were to concretize the ‘neoliberal reform on the base of social consensus’ which was defined by the general strike in 1996~7 into the all areas of investment, possession, administration, banking, finance, administration, labor and so on.

First, the government of Kim Dae Jung, upon securing an additional loan of 55 billion dollars from the IMF, duly promised a program of neoliberal restructuring that would be propelled by IMF’s the leadership. This proposal of restructuring targeted two areas for change. The first one aimed to reorganize domestic corporations, banking, administration, finance, technology, and education in order to be more in line with the free movement of transnational financial capital (in short, the recomposition of capital). The second one aimed to displace the democratic trade unions that had been weakened by the revision of the trade union acts in 1997 (in effect, the decomposition of working class).

Let us examine first the changes which were made at the level of capital recomposition.
What must be initially taken into account is the reform of financial markets. This reform was designed to remove all obstacles to the free movement of transnational financial capital. Reform of the banking sector, based on the Basel principle (that is, the unified international standard for the regulation of equity capital), included the extension of the limit of foreign investment in stocks, a wider range of M&A allowed to foreigners, the opening of short term financing and company bond markets, and the liberalization of foreign borrowing by corporations. Together, these measures spelled the maximum extension of the market opening that had been underway since 1980, and the removal of national limitations imposed upon it.

The second important change was the dissolution of the Jaebeol (large conglomerate cooperations characteristic of the South Korean economy). The five principles that the government of Kim Dae Jung forced the Jaebeol to accept were: 1) enhancing corporate transparency; 2) dissolution of mutual payment guarantees; 3) epoch-making improvement of financial structure; 4) establishment of a core sector and the reinforcement of its relation to smaller enterprises; and 5) strengthening of the responsibility accorded to large stockholders and management. The three tasks to supplement these principles were: 1) the interception of banking control over industrial capital; 2) the restraint placed upon circulation investment and the injustice of inside trading; 3) prevention of irregular inheritance. These acts were propelled by wide support from people who had been exploited by the Jaebeol and those who had been oppressed by previous authoritarian governments. However, in this process, many corporations owned by Jaebeol fell under the control of transnational capital.

The third change came in the form of the privatization of public enterprise. The main goal of privatization was to implement manpower reduction and thereby enhance the transition to profitable capitalist operations. Its secondary goal was to secure the financial income needed both for the exchange of the IMF loan and for the neoliberal reform of South Korea. According to this plan, the government: completed the privatization of 6 public enterprises, including Pohang Iron & Steel, KHIC, etcÅc; sold off to foreign corporations the state interests in Korea Telecom, the tobacco-ginseng monopoly, the public gas corporation, and the government-authorized textbook industry, etcÅc; and propelled the privatization of energy field corporations connected with regional heating, the public industrial complex, public energy administration, electricians, and electric power technology. Accordingly, the government reduced the number of public servants sharply, resulting in a decline in the quality of public services, dismissals of laborers in the public sector, and the growth and consolidation of the control power accruing to transnational financial capital.

The most salient point was the offensive against labor conducted under the pretext of ‘labor market flexibility’. While a grand number of lay-offs had already been witnessed in the process of the privatization of the public sector, the dismissal of workers in the private sector was considerably more bloody than that. Within the space of a single year, from the end of 1997 to 1998, capital de-manned 23% of the employees in the financial sector. General corporations de-manned 10% of their employees. Then in 1999, about 4,500,000 persons, 19% of the total working population, fell into unemployment.

As the forms of employment were transformed into the °ßflexibility°® of the irregular, we can assume that the number of unstable workers such as part time workers, temporary workers, contract and subcontract workers has surpassed that of full-time workers. This situation can be expected to be further exacerbated by the induction of ‘the system of controlling employment by reason of management’ that prescribes the possibility of dismissal through the negotiation with the trade union or its representative.

It is, significantly, not only the relationship of employment that became unstable. The neoliberal reform was accompanied by a conversion of wage relations from the seniority wage system to the annual pay system. This conversion had the effect of aggravating the competition among laborers much more than before.

This flexiblization of the employment relationship and the wage relationship was to be promoted by the ‘law of special economic zone’, jointly passed on November 5th, 2002, by agreement between the ruling and opposition parties. The regulations regarding the establishment of such special zones were quite relaxed and they could be established anywhere in Korea. Within the confines of the zone, businessmen could use despatched workers without any restriction. The monthly leave system was abolished and salaries need not be paid for weekly holidays. This law represented the most important effect of neoliberal reforms that had been gradually deepening over the past 5 years such that most of the working class power constructed in the shop-floor level through the struggles since the mid-1980s has been utterly neutralized.

4. The dynamics of working class recomposition since the economic crisis
The flexiblization of the labor market mitigated the burden upon capital through the reduction or irregularization of employed workers. Also, it seriously dissolved the political composition of mass workers, that is, the militant trade unionism which had been constructed since the 1980s. The current feeling of defeat located deep in the heart of working class is the psychological aftermath of such class decomposition. How could the working class in Korea come to be so severely decomposed in spite of the power accruing to it since 1985 in struggles that shook the stability of capital accumulation?

The government of Kim Dae Jung arranged to make the democratic trade union movement a sub-partner of the neoliberal reforms by granting negotiation rights to the upper levels of the trade union leadership. To achieve this goal, the dissolution of militant power constructed in the shop-floor was necessary. This is the background of the establishment of the committee of Labor-Employer-Government. It is ironic that this committee was established as a form of accommodation by government of the KCTU’s proposal.

The KCTU (and FKTU) came to an agreement with the government and employers concerning ninety items in the first committee held on Jan. 15th 1998. Among those ninety, however, only the ones unfavorable to working class interests, such as the lay-off law and despatched workers law, were legalized. The items favorable to the working class, such as the guarantee of fundamental labor rights of public servants and teachers and the expansion of social security, were delayed. In response to this development, the shop-floor workers within the KCTU raised sharp objections. This split led to the general resignation of the KCTU leadership and its substitution by a committee formed by extraordinary measure. However, after the general strike was withdrawn for reasons of national opinion and the intrinsic capacity of the struggle, the second leadership of the KCTU, elected on April 1st 1998, proclaimed a refusal to recognize the committee, and turned instead to the ‘tactic of direct negotiation with government on the base of mass struggle’.

On June 3rd, 1998, the second session of the committee was opened by the government to promote favorable conditions for foreign capital. At first, the KCTU did not participate in it. Within a few days, however, the KCTU caved in to worries about the unilateral restructuring of capital. In this process, the government promised the KCTU to protect unions against neoliberal reforms and take measures to substantialize the social consensus between labor and capital. But, in contradiction to such promises, the unilateral restructuring of capital was enforced all the same. After announcing its refusal to participate in the committee, the KCTU began the second general strike over 14th ~ 16th July. Ahead of the third general strike planned for 23th July, some agreements were reached about economic reform, employment, labor-capital relations, social security, etcÅc. But while the enforced lay-offs by capital were continued, the legalization of the agreed items was delayed. The KCTU left the committee on February, 1999 in protest of the situation.

The third session began in September 1999 without the KCTU. Because of a conflict about the wages of trade union predecessors, finally even the FKTU left the committee in December 1999. As a result, the committee has essentially become defunct.

In spite of having experienced this process, the KCTU (and FKTU) are still trying to construct substantial conditions for a mutual consensus between labor and capital. For this end, while they endeavor to reconstruct the trade unions industrially, they are trying to politicalize their power through party action. For example, the KCTU-supported Democratic Labor Party obtained 960,000 (3.9%) votes in the last president election.

While the main stream of the labor movement is pursuing social consensus and social democracy in this way, the remnants of the militant tendency are endeavoring to preserve, reconstruct, and extend the field power of shop-floors. They are pursuing the traditional object of constructing a socialist society by the industrial working class. Recently, some of them have been criticizing the limits of the trade union movement inasmuch as it depends too much on leadership, and we can now observe a tendency toward the council movement in which mass workers themselves have responsibility for their determination.

6. Dynamic of new social subjectivity in South Korea
Up to this point we have been investigating class composition since 1987 around the industrial labor class. However, our research must also take into account the sprouts of new subjectivity that cannot be reduced to the industrial labor class. These are the so-called ‘citizens’ composed of women, students, artists, intellectuals, technicians, scientists, and so on. Based on them, a different movement called the ‘citizen’s movement’ has been developing rapidly since the 1990s. The movement has proposed new agendas continually over economic justice, social democratization, environmental protection, gender equality, human rights etc..

Significantly, the citizen’s movement is having difficulty to define the concept of a ‘citizen’. Recently the main current tends to define the citizen as a non-class subject. In contrast, I propose that the ‘citizen’ needs to be defined in the context of recomposition of working class accomplished by the industrial restructuring of capital since the 1980s. The industrial restructuration centered upon high-tech and informational industries since the 1980s have figured a different form of labor power. This different form of labor power has acquired a more scientific-technological character and, as a result of it, the school, home, and society have all been transformed into factories of reproduction. We should consider the weakening of the traditional labor movement as the effect of this process. The relative ratio of industrial laborers has been reduced as a result of the diversification of the working class. Therefore, ‘citizen’ is but an old label to which have been attached new labor subjects composed of plural and heterogeneous multitudes.

Unfortunately these new subjects have not been able to connect themselves to the struggles of the traditional labor movement. While the labor movement attacks the neoliberal reforms, these new subjects tend to attack the remnants of authoritarian rule. Because of this split, neoliberal reformism has had a field day in Korea. But little by little, the structure of the problem is being recognized and a solution to it is being groped after. Some activists of the citizen movement are trying to actively oppose positions that allow the anti-authoritarian struggles to be appropriated by the interests of transnational capital.

Bureaucratization is the key problem of the citizen movement. At a moment when the No Mu Hyun government has begun to co-opt the citizen movement, in spite of the fact that it won the December 2002 election because of strong support from it, the crucial problem remains: how should the multitudes connect the traditional labor movement and the new citizen movement into a network of anti-neoliberal struggle? Innumerable communities acting through internet and the council movements in shop-floors are suggesting the way. They are now pouring over the street holding candles in their hands and protesting the brutality of the American Army (which murdered two young students under a tank), crying ‘don’t attack Iraq’; by the same token, they are now also criticizing the result of the neoliberal reforms of last 5 years, focusing on the suicide of Bae Dal Ho, a laborer who protested against the oppressive neoliberal measure that allows for provisional impounding of wage and property as a punishment for strike actions.

Jeong Hwan Joe

Représentant de l'éditeur Galmuri Editing Inc et professueur de sociologie à l'Université Sungkonghoe Il a écrit .les ouvrages suivants : Spartacus in 21st Century (Korean, Galmuri, 2002), Global Empire (Korean, Galmuri, 2002), Logic of the Literature of Labor Liberation (Korean Nodongmunhaksa, 1990) etc. Il est le traducteur en coréen du Labor of Dionysos (A. Negri & M. Hardt, Galmuri, 1996), Change the World Without Taking Power (J. Holloway, Galmuri, 2002), Zapatista (Harry Cleaver, Galmuri, 1998). jhjoe@galmuri.co.kr