Spartan utilitarianism builds foundation for strong growth security

"Look at my shoes," says Kim Ip Sam, raising his foot for closer inspection by his visitor. "They're 15 years old.I had them resoled last year . . . only a synthetic sole, mind you, not leather . . . and I'll wear them for another 15 years.

"You see this suit I'm wearing? It's 10 years old and it's only chemical fibers . . . but it's fine. I'm just not going to have any new clothes made.

"We Koreans have got to live within our means. We're not living in America. There are things we have just got to accept we cannot afford right now."

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Mr. Kim is the deputy chairman of the Federation of Korean Industries, and he was talking about the austerity drive, or business purification campaign, ordered last August by President Chun Doo Hwan.

Business leaders were told to give up such types of conspicuous wealth and consumption as playing golf (except when entertaining foreign guests), expensive restaurants, parties, and luxury imported cars. The amount of entertainment expenses allowed as a company tax deduction was sharply reduced.

The men who sit on the boards of major banks and corporations had to attend a three-day retreat to discuss how they could best contribute to the new spartan era envisaged by the President. Their wives and daughters had to leave home for four nights to undergo similar training.

The most spectacular contribution was that of Kim Woo Choong, founder and chairman of the Daewoo conglomerate, who announced he was donating to the public his entire personal fortune, estimated at over $34 million, to show that he was "not interested only in getting rich."

To some extent the austerity drive derives from the military background of Korea's political leaders. The late President Park Chung Hee, himself an Army general when he seized power in 1961, continuously battled ostentatious displays of wealth to reduce criticism that economic growth was helping only the upper class, as it certainly was. But, in part, there was little alternative. The country couldn't have achieved its remarkable sustained economic growth of more than 10 percent a year throughout the Park era without giving the rich entrepreneurs their head, because they were the only ones with the expertise to get the economy moving.

President Chun is taking this a step further, believing that stronger curbs on the rich are necessary if a geniune welfare state is be created in South Korea.

Businessmen have had little choice but to go along with the campaign. Earlier, a government anticorruption purge removed nearly 9,000 bureaucrats and employees of government corporations. At the end of January 1981, Government Administration Minister Kim Yong Hyu announced that 8,182 would be allowed to be reemployed in government offices or related private firms after expressing repentance, but the rest would remain under the ban for a few more months.

The government is also considering a law requiring senior public officials to register their personal assets and properties as part of an effort to stamp out official corruption. The business community was allowed to put its own house in order, resulting in a long list of recommendations to improve conduct: including an end to price cartels and other illegal price fixing, no more nepotism and the transfer of management control to descendants of the founder, an end to real estate speculation, and other efforts to earn profits through nonsales or nonproduction activities, a ban on personal use of corporate assets, and a halt to attempts to corner markets and hoard merchandise.

The government's desire to stop business leaders flaunting their wealth, however, is not just a military dislike of ostentation. Kim Ip Sam argues that "business leaders must show their employees by sacrifice that we are doing our best to cope with the difficulties faced by each company -- not only in streamlining management but also in private life."

After explosive wage increases averaging over 30 percent in the overheated economic boom years from 1975 to 1978, both government and business say that last year's disaster means that wage increases in 1981 must be kept within 10 percent. This will hurt the work force severely, considering inflation last year was over 40 percent and this year may, if the government is lucky, be reduced to 20 percent. So good labor relations, good understanding between the management and the work force will be essential in negotiating the wage holddown.

Some foreign businessmen have criticized the austerity drive as forcing Korea's corporate leaders to give up the sort of rewards that make it fun to do business. Kim Ip Sam acknowledges the problem -- "It's a constant worry. Of course, I want to make money by all means and enjoy spending it.

"But we're living in the late 20th century, not the 18th or 19th. Sometimes at meetings of our federation we read and talk about the American capitalists of the 19th century, the robber barons, the stock market manipulators, etc. If we acted like that we'd be hanged immediately.

"So it is very difficult: how to keep alive the strong incentive to business leaders in a way that doesn't offend the ordinary people.

"If we fail in this, you know, our society will blow up" (as it did last year in the violent Kwangju riots).

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