In Korea: Goodbye, Confucius
Whoever is elected president Dec. 18 will have to shed the old business ways for Western approach.
SEOUL, SOUTH KOREA — Park San Kee may run a grimy, nondescript telephone-cord plant on the industrial fringes of South Korea's capital, but he sees himself as a visionary. "I studied more," he says, explaining what gave him the fortitude to ignore one of the tenets of "Korea Inc.": no layoffs.
This spring, Mr. Park fired 15 of his 25 subordinates when he consolidated his company's business. Many people told him he was "cold like ice," he says, rather coolly. "They don't like me, but this company shall live."
No matter who wins South Korea's presidential election on Dec. 18, the new leader will have to oversee the wholesale restructuring of this country's economy. The old model, South Korea's system of state-guided private enterprise and powerful unions, will have to be dismantled in favor of a more market-driven economy. As in Park's factory, there will be costs.
"Political instability, unemployment, social unrest - many things are possible," says Lhee Ho Jeh, a political scientist at Korea University in Seoul who nonetheless accepts the long-term necessity of the transition. While it's no surprise that change is causing anxiety, many South Koreans are especially worried because the reforms are being dictated by an outside entity, the International Monetary Fund.
In exchange for a $57 billion bailout, the IMF and member governments such as the US are requiring that South Korea adopt an austerity program that economists say will put thousands of people out of work as bloated companies struggle to become leaner.
This process heralds the march, for better or for worse, of economic sameness. Just as the rise of the global economy has meant the emergence of a worldwide consumer culture, it also means the economies of the developed world are looking more and more like each other. If they don't conform, in other words, they don't get to play.
In this instance, the world is coming to South Korea's rescue at the cost of some of the country's economic values. Companies here are paternalistic entities that reflect a Confucian heritage. Managers are reluctant to lay off workers on the theory that companies should take care of their workers in hard times, rather than jettison them.
This formula, of course, means that Korean companies aren't as efficient - in economic terms - as their global competitors. The IMF reforms will ensure that they follow increasingly universal, market-oriented policies, meaning that Korea must say goodbye to its 2.2 percent unemployment rate.
The East Asian economic model, which prizes government guidance and a happy labor force over shareholder profits, is also under siege in Japan. Japanese leaders say they are trying to reform their financial industry - lately the scene of some impressive bankruptcies - but they are moving at their own pace, not the IMF's.
"The American way of capitalism has prevailed for the time being," says Lee In Hyung, financial-markets research director at LG Economic Research Institute in Seoul. "We'll see more and more advocates of that capitalism, even here in Korea. We have to face up to reality."
He recognizes that some individuals will be forsaken as companies downsize or go bankrupt, an allocation of suffering that will be new for Koreans. "We've never had that kind of responsibility [fall] upon the people," he says.
The Korean case also shows that when the world rides to a country's aid, the country has to get out of the way. "There is a tension between national sovereignty and international interests," says Yi Dae Hoon of People's Solidarity for Participatory Democracy, an independent watchdog and human rights organization based in Seoul.
In this instance, Korea has little leverage with which to preserve elements of its economic system. Without the IMF bailout, its private financial institutions would go bankrupt in droves.
"One of the clear realities of the modern age is that national sovereignty is eroded by interdependence," says a senior US official in Seoul, who asked not to be named. He adds, "No country is an island.... When you borrow money from the rest of the world ... you take on some obligations and some loss of independence."
Professor Lhee of Korea University believes that despite the homogenizing influence of the IMF and other international institutions, it will be possible for economies to preserve their national characteristics. The positive elements of Asian economies - a high concern for employees, hardworking labor forces, a strong emphasis on education - will survive on their merits, he says.
The IMF's reforms will ultimately benefit South Korea, he says. "In the long term, it's good for my country - we have to reconstruct our economic system.... But it's no good to push too hard."