25 September 2009

Korea 'A militant tendency': A critique

This post has been sent in by Hee-Young Shin of New School for Social Research, who has also sent it to the  FT as a comment.

In a recent article featured on Financial Times ("A militant tendency," September, 18, 2009), a longtime Financial Times' Korean correspondent, Christian Oliver completely distorted the image of legitimate Korean trade union activities. He argued that militant trade union activists had been the number one obstacle to foreign investments in Korea. In addition, he cited recent tragic incidents and other anti-government protests as if they were stirred by a number of radical trade union activitists behind the scene.
But as any astute observer of social issues in Korea quickly recognizes, the example that Mr.Christian Oliver enumerated had nothing to do with trade union activities. First, a recent tragic accident that killed 6 urban poor was the result of brutal police suppression of those who struggled to protect their basic human rights in the face of terrifying urban gentrification.
Second, the massive protest against American beef import was also unrelated with what Christian Oliver called 'militant trade unionism.' The protest against the government decision to import American beef originated from some female high school students' peaceful candle light vigil. Their silence campaign performance turned into massive political protest against the incumbent President, Lee Myung-Bak, and other government officials because students' message and legitimate concerns for the food safety issue resonated among many ordinary Korean peoples including babycarrying house-wives. Thus, citing these examples as if they were incited or plotted by militant trade unionists' activities in some systemic ways is a complete distortion of the basic facts, and renders the credibility of this journalist's argument in serious doubt.
Even when we put aside this type of distortion of recent social issues, the remaining article only shows how Christian Oliver lacks of sufficient knowledge of Korean economic development and related social history.
First of all, a relative low record of Foreign Direct Investments (FDIs) in Korea was not due to what he called 'militant' tendency of labor unions but to historical path dependency in which FDIs had played a substantially minimal role from Korea's early industrialization. From the beginning, the rapid industrialization in Korea was not driven by FDIs but by 'induced investment' guided by the State's industrial and trade policy financed by high domestic saving. Thus, citing 'militant union' activities as if they were the root cause of relatively low FDI flows is completely misleading.
Second, unlike the article's claim, foreign portfolio and equity investment have been incredibly high, causing huge volatility in currency and asset markets. Many economists including Nobel Laureate Joseph E. Stiglitz, Paul Krugman once correctly pointed out that this volatile capital flows, its sudden stop, and subsequent rapid reversal caused the Asian Financial Crisis, with Korea being the latest victim a decade ago. The problem associated with this unregulated financial capital flow was later acknowledged even by the then Managing Director of the International Monetary Funds (IMF) Michel Camdessus and the then US Treasury Secretary Robert Rubin who vehemently advocated capital market liberalization in Asia during the early 1990s and end up with prescribing the failed Latin American type of structural adjustment program. After the financial crisis, Korea's capital market was further liberalized by a series of policies imposed by the IMF as parts of its loan conditionality. Since then foreign equity flows substantially rose, potentially increasing the vulnerability of the economy to the vagary of foreign investors. Thus, if Christian Oliver meant portfolio and speculative equity flows by indicating 'foreign investors being shy away from Korea because of militant unionists,' the trend has been completely opposite to what he seems to worry. The problem in Korean economy is not lack of foreign investors but rather too much speculative inflows of portfolio investment.
Third, the seeming 'radical' or extremely violent resistance on the part of Korean trade unionists (even if it were true) was a deplorable result of the authoritarian government's – long-lasting military dictatorship during the 1970s and 1980s, which was ideologically backed by Milton Friedman type of Chicago School at that time and incumbent right-wing conservative Lee government's overwhelmingly brutal suppression of basic union activities. How can socially marginalized trade unionists with less than 15 percent of union membership record nationwide become such a destabilizing force in Korean economy? The journalist simply failed to recognize the apparent fact that the root cause of the radicalization of unionists lies in the authoritarian government's mismanagement of labor relation and brutal suppression of basic trade union activities, something that should not happen in most OECD countries and Western European context.
Finally, the article shows how Christian Oliver naïvely think about the controversial issue such as the labor market flexibility in Korea. Unlike the incumbent Korean government's propaganda, the policy targeted toward improving labor flexibility simply has meant increasing the number of workers who can be easily fired and dismissed without having necessary social safety net. These 'nonregular' workers have had to face explicit discrimination in terms of wage compensation and job security. Even though they work the same working hours engaging in the same skilled task, their wages and salaries have been less than two third of their 'regular' counterpart. The increasing number of non-regular workers, which was a byproduct of drastic corporate restructuring during and after the Asian financial crisis, already soared to near 60 percent out of total workforce as of 2005. In addition, since most of these workers are women and young college graduates, the wage discrimination and increasing job insecurity sorely borne by them are no longer simply a matter of minor reservation of labor rights amid emergent economic crisis but became a serious infringement of basic human rights.
Considering all of these facts, it is certain that the journalist failed to convey accurate information about Korean labor relation today. In doing so, he selected a handful of extremely conservative government officials or those who represent the exclusive interest of Korean conglomerates for his interview, without even mentioning that some of them explicitly argued that the basic labor rights provisions should be dropped from the Constitution. Ironically, that interviewee, whose name is Park Ki-Seong, is the guy who is now heading Korea Labor Institute, a government-funded institute, which is supposed to engage in various researches for improving backward labor conditions and advancing labor relation in Korea. On balance, any journalist has a freedom to choose to have a certain ideology and perspective. But it is too sad to see a foreign-born journalist residing in Seoul Korea blindly swallowed what mistrusted government officials propagandized, without paying due attention to what other stakeholders demand and what basic facts reveal.

Ph.D candidate in Economics
New School for Social Research
New York, USA

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