South Koreans Confront Their Broken System
Belt-tightening sinks in as voters eye Thursday's election.
SEOUL, SOUTH KOREA — 'Let's talk about something else," sighed a teacher and mother of two here the other day. "The economy is so depressing." But the conversation turned inexorably back to South Korea's economic crisis, back to the stories of children pulled from private school, of vacations canceled, of an atmosphere where conspicuous consumption, until very recently a national pastime, is suddenly considered unpatriotic.
South Koreans, who refashioned the rubble of the Korean War into skyscrapers and microchip factories in just two generations, are proud of their rapid march into the ranks of the industrialized countries. Now the world's 11th-largest economy is on the receiving end of the biggest bailout in history - $57 billion from the International Monetary Fund (IMF), the international agency that rescued Mexico in 1995 and is now trying to keep Thailand and Indonesia from collapse.
For the moment, it is mostly rich people who are feeling the impact of South Korea's reversal of fortune. Despite a burst of recovery in financial markets yesterday, plunging stock prices have shrunk the worth of their domestic investments, and the plummeting value of the currency has doubled the costs of trips abroad and the size of tuition bills for sons and daughters studying overseas.
But many Koreans worry that once the rescue plan of the IMF takes hold here, the suffering will be meted out much more widely. IMF economists are requiring that South Korea streamline its inefficient and collusive corporations and financial institutions, a process that has already begun to yield layoffs and bankruptcies.
The crisis is causing an increasing amount of introspection and reappraisal - at least in private. Oddly enough, the public discourse is comparatively shallow, partly because the leading contenders in Thursday's presidential election see no benefit in harsh assessments of recent economic and political history. And most media outlets are considered too beholden to big business to tell it like it is.
"On a personal level, when we meet on the street or at dinner parties, really we are blaming our system," says Koo Bon Ho, a university president in the industrial city of Ulsan. "We are blaming our bankers, our labor unions, our politicians."
Under this system, sometimes known as "Korea Inc.," autocratic leaders gave bureaucrats power to guide private enterprise according to a master plan. Manufacturers prospered, banks lent to whom they were told to lend to, and everyone buckled down to make the economy work.
It did, for a time. But the system also bred inefficiencies and corruption. In recent years, Koreans have discovered how politicians extorted huge sums from the country's leading conglomerates. The businesses that contributed found favor and were entitled to expand into new areas and to receive vast amounts of credit.
Failure rarely produced bankruptcy. If companies ran out of money, they borrowed more. In the midst of these riches, labor unions demanded to share the success; wages rose and unemployment stayed low under the threat of strikes.
But since late last year, some of the conglomerates have gone bust, revealing the mountains of bad debts in financial institutions and prompting an international erosion of confidence. While the criticisms of Korea's system have been around for years, it has taken the foreign-exchange market to drive the message home.
In mid-November, fewer than 1,000 Korean won bought a dollar. A month later the ratio is 1,700 won to the dollar. The economic crisis has prompted a national frugality drive, with the government urging Koreans to put foreign currency in the bank and to refrain from buying imports.
These efforts make for quiet days on the second floor of Seoul's trendy Midopa department store, where Park Soon Duk is trying to sell Liz Claiborne clothes. Sales have dropped 50 percent, she says. "Customers ask if the clothes are imported, and when I say 'Yes,' they just leave."
The most profound reevaluations are taking place behind closed doors, although some public figures are becoming outspoken. On Sunday, the Rev. David Yonggi Cho stepped across red carpeting to his Lucite podium and told thousands of Koreans they have no one to blame but themselves.
THE pastor of one of Korea's largest Christian congregations said the country must endure "bone-grinding sacrifice" in order to revamp the economic system. In front of his packed Yoido Full Gospel Church in Seoul, Dr. Cho attacked the collusion between government and big-business leaders. "Without any real competition and because of this buddy-buddy system, they've wasted all the money through bad investment," he said.
Some Koreans, reflecting a mistrust of foreigners ingrained by centuries of domination, have blamed the United States and Japan for precipitating the crisis in order to open this country's markets. Others have labeled the stagnation the "IMF crisis" and protest against the reforms.
A day earlier the leading presidential candidates had announced that they would carry out the IMF reform program, abandoning hints that the winner might try to renegotiate the deal. That endorsement of the IMF's package gave financial markets some renewed confidence Monday.
"Over the last several days there has been a trend toward accepting the inevitability of [the IMF bailout] ... and less of a tendency than there was initially to search for a scapegoat," says a senior US official in Seoul.