Social, political and spatial dimensions of Korean ...

Journal of Contemporary Asia

ISSN: 0047-2336 (Print) 1752-7554 (Online) Journal homepage: http://www.tandfonline.com/loi/rjoc20

Social, political and spatial dimensions of Korean industrial transformation Michael Douglass To cite this article: Michael Douglass (1993) Social, political and spatial dimensions of Korean industrial transformation, Journal of Contemporary Asia, 23:2, 149-172, DOI: 10.1080/00472339380000101 To link to this article: http://dx.doi.org/10.1080/00472339380000101

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Social, Political and Spatial Dimensions of Korean Industrial Transformation Downloaded by [NUS National University of Singapore] at 22:38 23 August 2017

Michael Douglass* Abstract:. Undedyingthe currentprocess of industrial restructuringin Koreais the weakeningof the

social and political cornerstones of Korea's "miracle" economy:low wages maintained through labor market segmentationand suppressionof labormovements,state leverageoverthe chaebol and labor, the containmentof the middleclass througha state-of-warmentality,and the decentralization of industry away from the capital city through the creation of countennagnets and growth poles. Korea's success in generating its own versionof a post-fordistregimeof acc°amulationwill depend as much on changes in social and political institutions as it will on pursuing an industrial path of flexible specialization. Political economic models of North-South dualism and dependency popularized in the 1960s and 1970s were iU-equipped to explain either the massive deindustrialization of high-income economies or the parallel emergence of newly industrializing countries in the Third World over the past two decades. At the same time, and in view of the generally slow and, in some cases, reversing economic growth rates of many Third World economies, mainstream neoclassical economic models have been excessively optimistic in their expectations for a worldwide diffusion of industrialization under export-oriented production regimes. In response to the explanatory inadequacies on both fronts, recent rethinking of theories of capitalist development has sought to allow for a much more varied texture of historical experiences at national and local levels which, in accepting the context of globalization of local development, neither substitutes a set of imperatives for the actual playing out of history nor asserts a single, irreversible development path for all societies. This article seeks to join in these efforts at rethinking the international-local interface by exploring recent social, political and industrial transformations in the Republic of Korea. In differentiating the Korean experience from those of other Asian newly industrializing economies (NIEs), it also seeks to demonstrate that future scenarios in any of these countries cannot be subsumed under the "flying geese" version of trickle-down and industrial diffusion through technological and structural change flowing fi'om Japan to East and Southeast Asia (Yamazawa, 1990). The discussion that follows has three main themes. First, (global) capitalist development has experienced major transformations, or episodes, which have followed the emergence and dissolution of social and political institutions that during their periods of hegemony have served to construct successful regimes of accumulation at specific historical junctures. Second, in accepting that internal variations in socio-politieal institutions are crucial to understanding the processes of structural *Dept. of Urban and RegionalPlanning, Univenity of Hawaii Journal of Contemporary Asia Vol. 23 No. 2 (1993)

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150 JCA 23:2/Dotazlass

change emanating from the international scale, the argument is put forth that prevailing thinking about the prospects for Third World industrialization and development have suffered from overly-generalized models of social formations that tend to dissuade investigations of the variant roles played by the state and non-state socioeconomic institutions, including the organization of economic enterprises as well as pre-existing ethnic and cultural practices. Third, the spatial patterning of development is a crucial dimension in the construction and reconstruction of regimes of accumulation, both as a "tool" to sustain the dominance of capital over labor (Glassmeier, 1985) and communities and local states (Clark, 1989), but, more generally, to overcome crises in the accumulation process (Stilwell, 1978). The spatial switching of capital in this regard is an active tool of accumulation that is neither unidirectional nor has the probability of effectively working toward a spatial equilibrium (Storper and Walker, 1989). It has also become increasingly internationalized and, in the case of Korea, less contingent upon resolving tensions or contradictions within a single national territory. Taken together, the above themes point toward a fourth, namely, that just as the contemporary contexts vary significantly among Third World countries, so do the future prospects for development. The Asian "miracle economies" are no exception; they have not only followed distinct paths of development but the specific pressures and opportunities facing each are sufficiently different to suggest that future trajectories will also vary greatly. Moreover, as experiences in Latin America suggest, there is no imperative that current crises will be overcome in any particular setting. It is therefore paramount to go beyond highly generalized North-South and core-periphery world systems models of development to consider the specific social and political moments at national and local levels in any effort to overcome the current crisis. The purpose of this article is to elaborate each of the above themes by focussing on the social and political dimension of economic growth and structural change in East Asia with particular reference to South Korea. The discussion is divided into three major sections below. Section 2 places the discussion of regimes of accumulation in the Asian NIEs in the context of changing dynamics of the global economy. Section 3 looks specifically at the key dimensions of the Korean experience. Section 4 focuses on contemporary issues related to structural change in the Korean economy. Regimes of ,4ccumulation and the Asian NIEs In an effort to move away from the overly stylized models of capitalist development m whether neoclassical or neo-Marxist - - much attention has been given in recent years to the variations in social and political institutions that have served to regulate processes of accumulation and economic development (Aglietta, 1979; Lipietz, 1987; Boyer, 1987; Dunford, 1990). Explicit attention is given by these theories to episodic transformations within capitalist development that follow from the formation and breakdown in historically specific social, political and economic institutions. Although these transformations are driven by structural crises that dissolve and generate


Dimensions of Korenn Indnstrinl Tr~nsformstion

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new accumulation-institution relationships, the collapse of one regime of accumulation does not automatically lead to some type of more advanced regime. Capitalist development in a given social formation is neither predestined to recover from crisis nor inexorabl~, bound to a socialist or any other alternative transition. Thus there is no single capitalist development per se;, there are, instead, "regimes of accumulation. "1 Most attention in this realm of theory has been given to the transition from fordism, which dominated capitalist development in the OECD countries up to the late 1960s, to posffordism, which is used to cover the current phase of capitalist development, z Explanations for the collapse of the fordist regime of accumulation involve several key interrelated crises: declining rates of profit from the assembly line system which were exacerbated by the increasing rigidity of unions in resisting technological changes (Aglietta, 1979; Lipietz, 1986); falling real wages leading to market gluts; switching of capital from production-related investments to finance, real estate and other speculative investments (Bluestone and Harrison, 1982); debt crises of the state that resulted in austerity drives that drastically cut state expenditures on production as well as welfare-related programs. Most important with regard to the Asian NIEs, modes of regulating fordism in the U.S. and elsewhere were undermined by the full development at the global scale of all circuits - - commodity, productive and finance - - of capital. In particular, revolutionary advances in communications and transportation technologies seriously diminished the leverage of labor unions and governments alike over capital as offshore movement of production in search of low-cost supplies of labor began to accelerate (Lash and Urry, 1987). Unlike the major wave of transnationalization beginning in the early 1960s, which reflected product cycles and oligopolistic competition for market shares, the wave in the 1970s began to respond to international differences in costs of production, propelling the emergence of a "new international division of labor" and the rise of "newly industrializing countries" in the Third World (Frtibel, et al., 1980). The resulting deindusla'ialization of manufacturing heartlands in Europe and North America was, in part, a manifestation of the increasing spatial mobility of capital. More systemically, it was one element of the collapse of the fordist regime of accumulation as high income economies were unable to sustain either the factory system, the welfare state, organized labor or. by the end of the 1980s, mass consumption of commodities from the increasingly globalized assembly line. The demise of fordism has reportedly moved the high-income economies into the search for a "post-fordist" regime of accumulation and mode of regulation. Much has been written about the contours of the industrial structure and orientation of this new regime: the displacement of the factory system by "Marshallian industrial districts," "flexible production complexes" and "technopoles" composed of small, flexibly specialized fh-ms linked by inter-locking sub-contracting arrangements with leading finns that are (re-)organized to respond to market instability by targeting smaller, more rapidly changing and more specialized market segments (Hore and Sabel, 1984; Harrison and Kelly, 1990, Hirst and Zeitlin, 1991; Storpor and Scott, 1989; Scott and


1~2 JCA 23:2/Douglass

Drayse, 1991).3 These changes have also redrawn the map of industrial geography at lmemational as well as sub-national levels (Storper and Walker, 1989; Moulaert and Swyngedouw, 1989). In the high-income economies, traditional manufacturing regions began to rapidly deindustrialize, and new industrial regions began to appear in areas with accommodating local states, eager labor and "flexible communities" (Clark, 1989). International border regions, such as the "transfrontier urban regions" appearing along the Mexico and the U.S. border (Herzog, 1991) or the "growth triangle" promoted by Singapore as a means of incorporating the Malaysian State of Johor (Clang, 1989) and the Indonesian island of Batam in its orbit, began to take on increasing importance in industrial location, and "world cities" become the vortices of control and accumulation at the global scale. At the international scale, the emergence of a handful of newly industrializing countries (NICs) seemed to signal a long-awaited diffusion of manufacturing away from the North. Yet the absence of pronounced process of such diffusion beyond the first generation of NICs and, in fact, the stagnation and near collapse of some of them, gave indication that spatial diffusion at the international scale would be less straightforward than the call of cheap labor seemed to imply. On the one hand, automation and technological change occurring in high-income economies, which made labor costs of decreasing importance in production, has begun to work toward a reconcentration of manufacturing in OECD economies. The collapse of the Soviet Union and the opening of low wage economies in Eastern Europe have further threatened the relative attraction of countries in the Third World. Equally important, many societies appear to be unable to successfully construct the social and political institutions and conditions to attract and retain internationally mobile investment in manufacturing. Even at the lower end of light manufacturing, such as in textiles and garments or the assembly of micro-electronic components, evidence over the past decade shows a decreasing rather than increasing number of would-be NICs (Athukorala, 1989; Douglass, 1991). The reasons for this failure go beyond import quotas and technological change in the North to focus on political and social instability related to rising Third World indebtedness, the collapse and nearcollapse of the state under massive impoverishment and chronic social unrest, and the physical deterioration of cities and the built environment for both industrial production and the reproduction of labor. In the case of the Asian NIEs, the current processes of structural change are doubly problematic. First, rising levels of income and living standards as well as increasing demands for democratization and political reform have made them unable to use either low labor costs or strong-state enforced socio-political stability as a means of retaining their export-oriented "peripheral fordist" regimes of accumulation. They are at the same time without either the indigeneous technological capacities to readily move toward a post-fordist regime of "flexible specialization" or domestic markets sufficiently large to act as a counterbalance to declining prospects for exporting labor-intensive manufactured goods on the world market.

Din~nsions of Korean Industrial Transformation

1~3


The pressures and conditions for maneuvering through the imperatives for structural change vary greatly among the Asian NIEs. These variations include the organization of capital, the structure and segmentation of labor markets, the role of the state, the relative level of mobilization of labor and social movements, and the spatial patterns of development. As the discussion below argues, Korea faces unique problems in each of these areas. Korea and the Asian NIEs Korea has come to hold a special place in mainstream economic literature as a model of successful market-driven, export-oriented industrialization. There is, in fact, little evidence to support this view (Bello and Roseufeld, 1990; Levy, 1991). As noted by Amsden (1990), a major preoccupation of the Government of Korea has not been to get prices right, but rather to get them wrong through tariffs and import restrictions, subsidies to large oligopolies (chaebol) and transfers of surpluses from the countryside to promote urban-industrial growth.4 As with governments of other Asian NIEs, it also acted to severely control labor movements and to intimately involve itself in the structuring of labor markets and the internal division of labor. Industrial transformation in the Asian NIEs has been contingent upon the capacities of governments and other social actors to create the institutional framework for constructing an export-oriented regime of accumulation. Such a task in the Third World has encountered a substantially different problem than that faced in Europe and North America. The immediate problem to be solved in creating an export-led manufacturing economy in the Third World was not underconsumption or (domestic) market failure, but international competitiveness which had to be gained by raising labor productivity while maintaining attractively low wages (Amsden, 1990). Generating high rates of accumulation therefore required an inversion of the method of regulation that was established in Europe and North America. Instead of acquiescing to unionization and constructing welfare systems to generate mass domestic markets, success in export-oriented manufacturing was achieved by restraining income increases and labor movements.5 Creating and reproducing a large proletarian segment of the labor force to accomplish this end required a strongly interventionist state to assist in the rapid construction of the economic, social and physical environment necessary for the factory system and, at the same time, to actively move against and regulate attempts by labor to increase wage and employment benefits. The fact that wages in Korea's manufacturing sector, which makes up more than 90 percent of its exports, have been consistently lower than those for industry as a whole, attests to the success of such state interventions as restrictions banning strikes in enterprises with direct foreign investment (Koo, 1984). In addition to critical interventions into the labor market, accumulation also rested on the capacity to ensure high rates of private reinvestment for industrial expansion. In the case of Korea the state moved decisively to ensure this process by munipulating intcrest rates and restricting access to credit, which were made possible


154 JCA 23:2/D~._al.L..

by nationalization of the banking system in the early years of the Park regime. In a related manner, the state also used its autonomy to make timely investments in urban and industrial infrastructure to accommodate demands placed on the built environment by sustained double-digit indus~al growth rates. The simple view put forth by much of regulation theory and alfied post-fordist literature has tended to lump these and other features of successful industrialization in the Third World into a single type, "peripheral fordism," which is portrayed as having little variation among the newly industrializing coun~es. Complementing Fr~bel's (1980) thesis on the new international division of labor, industrialization of the Third World is characterized as one of labor-intensive, deskilled assembly segments of production that are controlled from and produce for core countries either through ownership or dislxibution networks. While useful as a point of departure for contrasting the context of First with Third World industrialization in the late twentieth century, a more revealing observation is that in moving their economies from agrarian and merchant capital bases to export-oriented manufacturing, the ANIEs each followed strikingly different paths in creating institutional mechanisms to guide the accumulation process. State interventions, for example, have taken divergent avenues among the ANIEs. Whereas the governments of Korea and Singapore promoted the rise of large-scale enterprises, those of Hong Kung and Talwan fostered a process of international sub-contracting by indigenous, small-scale fLrms. Singapore, through an exceptionally heavy reliance on wansnational capital, also created parastatal and state enterprises while bypassing and, through massive reconstruction of the built environment, undermining the integrity of traditional forms of industrial organization. These differences stem not only from variations in outcomes of more contemporary (post colonial) social struggles over the economy, but also from variations in the long precapitalist and colonial historical development of the institutions framing these struggles. Noting, for example, Korea's 600 years of isolation from active interaction with other social formations prior to colonization by Japan in the early twentieth century is sufficient to suggest that markedly different social and cultural institutions underlie contemporary processes of industrialization in Asia. Concerning the interplay of historically developed social institutions and the conslruction of (peripheral) fordist regimes of accumulation, Deyo's (1989) analysis of labor systems in the Asian NIEs clearly reveals how the adaptation of ~aditional social institutions has worked in strikingly contxasting ways to segment labor markets in a manner compatible with the requirements for accelerated growth in exportoriented manufacturing. 6 In addressing the need to simultaneously generate very large supplies of unprotected low-wage labor and prevent overt competition for scarcer supplies of skilled labor, companies in Korea developed an elaborate recruitment system for higher status technical and white-collar workers in large-scale corporations (and in the civil service) based on bureaucratic paternalism: assurance of long-term employment and advancement, and worker dependency on a wide range of eraployer provided benefits not directly linked to individual economic performance.


Dioaensionsof Korean Industr~a~ T~a~s~orm,~tion 155

Through these mechanisms, higher-skilled labor becomes dependent upon individual enterprises for non-wage benefits and advancement. The shift of government attention from light to heavy industry in Korea, which generated demand for more skilled, male workers, further segmented labor markets by creating a "blue collar" segment which, instead of maintaining the impersonal relations between manager and workers and discipline at the point of production common to the proletariat at large, tied employees to the discretionary powers of superiors over all work conditions and advancement to create dependency bonds that were isolated from larger social constraints. According to Deyo (1989, page 23), such controls are made possible by the "greater organizational and spatial concentration of production in large finns and urban centers wherein traditional community controls no longer buttress organizational authority." As noted, the state played a crucial role in the regulation of and transformations in the division of labor in each of the Asian NIEs. In both Korea and Singapore, the state assumed a critical role in the creation of a "hyperproletadan" segment of the labor market that has been largely filled by women and is characterized by high labor tumover, institutionalized job insecurity and low wages. The absence of either state or community restraint on exploitation of workers in Korea has been manifested by extremely poor working conditions for this segment. Even in the early 1990s Korea continues to have one of the worst factory safety records in the world, with 2,336 workers killed and 132,893 seriously injured in workplace accidents in 1990 alone, a result of what some observers term "a twisted form of Confucian paternalism" which "actively discourages workers from relying on formal legal rights" when employers disregard safety and other welfare standards (Far Eastern Economic Review, Nov. 21, 1991, pages 64-65). At the same time, labor laws are arbitrarily enforced and favor the prerogatives of employers over workers, particularly in the case of heavy industry and automobile production, the sectors which have experienced the most entrenched labor struggles. Unions have never been allowed into political parties, and, in Japanese fashion, some of the largest are actually "paper" unions set up by the companies themselves as a strategy of avoiding pan-industry unionization. In contrast, the colonial government of Hong Kong focussed its attention on stabilizing labor supply through investments in public housing and the built environment, leaving the economy and the division of labor to large British and smaller domestic trading houses linked through sub-contracting to transnational production and distribution networks. In Taiwan, small companies were organized to produce commodities for export substantially through subcontracting arrangements with large Japanese trading companies. The resulting pattern of production was not only more spatially decentralized in Talwan than in Korea, but also more imbedded in traditional labor systems, namely, communal paternalism and patriarchal systems in which labor is linked to employers through multi-stranded work and non-work-related relationships reaching into communities and covering major life-cycle events of the employee. Such a system was allowed by the relatively decentralized, small-scale source


156 JCA 23:21 DouMass

of manufacturing growth which, instead of by-passing smaller-scale indigenous producers as it did in Korea and Singapore, linked the smaller firms as sub-contractors and joint ventures with small fn'ms and used the continuity of linkage to local community and familial organization as the mode of regulation (Cheng, 1990).7 In all cases, however, the proletarianized segment of labor experienced forceful state intervention to depress workers' wagesbelow market rates in order to make exports competitive on the international market (Amsden, 1990). But the emphasis on this aspect varied. In Taiwan, the state tightly controlled unions and proscribed strikes, but more important was its encouragement of effective employer controls through policies of industrial decentralization, legally mandated enterprise pensions and welfare programs, and sustained resistance to popular demands for national social security or unemployment compensation protection. Thus employers played a greater direct role than the state in the formation of the labor system for export-oriented industrialization. In addition, whereas Korea's industrialization involved alliances between the military cure political leaders and large-scale enterprises, Talwan was marked by looser coalitions of technocrats, fragmented local capital, foreign investors, labor and farmers (Gereffi, 1990, page 25). In Hong Kong high reliance was placed on small fLrms and their ability to call upon traditional social relations and kinship authority to enhance their discipline of labor and thereby reduce the need for state intervention in labor affairs (Deyo, 1989). This raises the question of how governments in the ANIEs were able to gain the autonomy from traditional and emerging class relations to enforce the types of interventions which many other Asian governments have been found to be too "soft" to implement (Yoshihara, 1988). In Korea, the answer to this question might begin with the agrarian land reform of the early 1950s, which effectively reduced the power of traditional rural landed elite, a class that has proved to be an enlrenched countervailing force to urban-industrial development in many Latin American countries as well as in the Philippines. At the same time, the small size of urban and industrial capital classes in the 1960s allowed the state to boldly carry out such steps as nationalization of the banking system, giving it great leverage over the as yet small chaebol-dominated industrial sector (Bello and Rosenfeld, 1990). In addition, factionalism among elites has been dampened by long confrontation with North Korea and, unlike the experience in Taiwan with the more encompassing organization of the KMT, the absence of a mass base for the ruling party fostered an exceptionally narrow path of access to state power (ParL 1987). The continual state-of-war mentality promoted by the government also contributed to the ideology of sacrificing in the name of "free markets" and the practice of suppressing any and all dissident movements. In sum, the Asian NIEs each constructed substantially different modes of regulation of their respective industrializing economies. These not only affected the


Dimensions of Korean Industrial Transform.at/on

157

nature of industrial organizations and the division of labor in each, but also directly influenced the nature of insertion and prospects for sustained accumulation in the international economy. Levy (1991), for example, shows how the resulting differences in labor systems in Korea and Taiwan affected the ability of each to respond to changes in international markets in the footwear industry, which was introduced in both countries by Mitsubishi's decision to relocate its shoe production outside Japan in the late 1960s. In Taiwan production expanded by increasing the number of small firms; Korea did so through fostering the concentration of production into large finns. As Levy observes (page 156), the organization of production around small f'Lrrnsas "a way of doing business appears to be deeply rooted in Taiwan." By 1985, as the Taiwan footwear industry became more diversified, the Japanese share of footwear exports had been reduced to an insignificant fraction. In Korea, however, oligopolistic competition, with no entry of new firms, resulted in the expansion of a narrow band of footwear exports rather than product diversification. Similar contrasts between Korea and Taiwan, as well as with oth~ Asian NIEs, have been noted in a wide range of industries (Gereffi and Wyman, 1990). In automobile production the government in Korea played a much larger role than the Taiwan govemment in controlling imports and subsidizing producers and. later, in targeting automobile exports as a national priority, a policy that was implemented by setting minimum size of production lines, as well as maximum size of car engines, and a requirement of state approval for any model design changes. Subsequent developmerit of the automobile industry in Korea has been heavily regulated through policies to force cooperation among the three principal producers, to ban imports of components made in Japan, to set export targets for firms, and subsidize export production to allow for the sell of cars abroad at below production costs (Wade, 1990, page 251). The result has been that Korean producers have been able to establish a worldwide market for their automobiles, while Taiwan has continued to be the component producer and auto assembler for Japanese and American automobiles. All of the factors discussed above - - centralization of capital in the form of chaebol, labor market segmentation and anti-labor regulations, urban-industrial biases and a high spatial concentration of industrial ~owth - - have also worked to generate rather than ameliorate internal economic and social disparities. Popular treatments of Korean successes have portrayed its model of economic growth as one that has also been able to achieve and maintain narrow income inequalities between classes and regions (Kim, 1988). Commenting on this widely-held belief, Koo (1984) argues that the tendency toward increasing inequality was imbedded in the division of labor from the beginning of the Korean export miracle in 1960s, but were initially disguised by the effects of land reform and falling unemployment. As these dampening effects diminished relative to the emergence of new forms of social stratification, inequalities increased, particularly from the 1970s onward. He identifies state control


158 JCA 23:2/Dour, lass

of industry and the export-oriented industrialization policies as a major source of these inequalities. By 1978 the top 20 chaebol accounted for one-third of Korea's GNP, up from about one-fifth in 1973. The five largest chaebol increased their combined shares from 8.8 to 18.4 percent between 1973 and 1977. In the 1980s the top 10 chaebol increased their share of exports by annual leaps: 43 percent in 1981, 58 percent in 1982, and 67 percent in 1983 (Koo, 1984). The result at the top of the income distribution was the emergence of "a new privileged class composed of large business owners, top corporate managers and the government elite" (Koo, 1984, page 1032). Disparities emerged at lower le.v.els as well. In 1971 wage earners with college education earned more than three times the income of those who terminated studies at the primary school level, and almost twice that of high school graduates. By the mid-1970s college graduates were receiving more than four times the earnings of primary school graduates. Workers in the most openly competitive segments of the labor division, particularly women in unskilled piece and assembly-line work, fared the worst. ~Z is important to underscore the observations that, contrary to much of the literature on income inequalities in developing countries, rising inequalities in Korea emerged neither from a process of agricultural involution (Geertz, 1963) nor from the expansion of an imagined urban informal sector (ILO, 1972). Throughout the 1960s and 1970s, employment growth proceeded ahead of population growth. Furthermore, Korea was the only Asian developing country to experience an absolute decline in rural population in the 1970s. In the cities, manufacturing employment also expanded faster than the service sector, although this trend would be reversed in the 1980s. The major source of inequality proved to be within the export-oriented manufacturing sector rather than between it and other sectors. This inequality cannot be reduced to simple supply and demand equations because the division of labor underlying it has been the result of a complex of state interventions and capital's translation of social practices to both structure the export-manufacturing sector and to create and differentially reward various segments of labor. The spatial dimension of industrial and economic growth was similarly a product of implicit and explicit state involvement in the transformation of an agrarian society to a manufacturing miracle. A principal feature of this transformation has been the polarization of urban and industrial growth in the Seoul metropolitan region. Despite its awkward location near the border with North Korea and on the "wrong" side of the country for international trade, the rapid growth of Seoul has been so extreme that it has been deemed to be "the product of the most intense and compressed process of urbanization in the world" (Yeung, 1988). The impacts of this concentration have been manifold. As previously mentioned, it has allowed for a breaking of communitylabor relations and a particularly Korean labor market formation. It has also generated unprecedented population and traffic congestion, massive environmental deteriora-


Dimenslo~ of Korean lndastrial Transformation

159

tion, housing shortages generated principally by intense land-use competition, and inadequate public services (Douglass, 1992). The Korean government has also been noted for its wide array of efforts to counter this process through the adoption of green belt policies, the construction of industrial growth poles throughout the nation, and limits on the expansion of educational opportunities in Seoul. The results have been a simultaneous process of continued concentration of political and economic power in Seoul and a decenwalization of plant operations, particularly to the southeastern coastal region centering on Pusan (Douglass, 1988). While the centralization of industrial capital in the hands of the chaebol and the extreme concentration of state power in the capital city combined to generate extraordinary concentration of political and economic power in Seoul, peripheral regions experienced a rapid, but narrowly specialized, process of industrialization. In a study by Park (1985), more than 96 percent of all firms spatially separated from production and assembly operations were found to be headquartered in Seoul, a degree of concentration found to be much higher than that of even Japan. Since "decision-making authority is almost negligible at plant level," and "plants have little authority on decisions such as R and D investments, marketing, new investments on plant or technology, promotion and salary increases for personnel at plants" (Park, 1985, page 329), the control over the Korean space-economy from the capital city remained unchallenged through the period of rapid industrial expansion lasting up to the early 1980s. Polarization reversal, to the extent that it occurred, was largely the product of the location of raw material import-dependent heavy and chemical industries supported by state policies of the 1960s and 1970s. Decentralization of manufacturing in other sectors has, in fact, been substantially contained within the ever-expanding Seoul metropolitan region rather than being a stimulus of growth in other cities or regions. In the 1980s, takeovers, mergers and high business failure rates resulted in increasing centralization of capital and, in parallel, heightened concentration of industry in Seoul. In addition, since technology-intensive industries favor the Seoul metropolitan region, where almost all research and development takes place, structural change added to ate'activeness of Seoul. During the 1981-84 period studied by Park (1985), most medium-size cities and rural counties outside of the capital city region experienced more plant closures than opening. The continuing concentration of industry in Seoul is shown in Figure 1. Whereas the share of manufacturing in the southeastern Pusan-Kyongnam region remained more or less constant in the 1970s and 1980s, the share accruing to the mega-urban region of Seoul continued to increases at a precipitous pace. Other regions of the country wimessed falling shares. More recent processes of structural change toward services, particularly information and international finance and business, have accentuated this trend (Lee, 1990).

160 JCA 23:2/Douglass

Figure 1: Share of Manufacturing Firms Seoul and Pusan Mega-Urban Region.~ and Rest of Nation, 1973-1980

(%) Downloaded by [NUS National University of Singapore] at 22:38 23 August 2017

60

I

Seoul-Inchon-Kyonggi

/ 3 0 "4-

.% _

..;, .... • ..... •

Rest of Nation *~,,,~*

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,L,,.D,,,,,~ ......1:1-,.4],.,.13.,.O,,.,,t:1.,'~.~0,, ' v 20 ~

Pusan-Kyongnam ...... B n., ~.....¢

10| | : l : 1973 1974 1976

I I 1984

l I I t l l 1978 1980 1982

l I 1986

I 1988

Source: Korea Statistical Yearbook (1976- 1990).

Figure 2 shows that even in the context of falling national population growth rates, the growth of the Seoul region has remained above 3.5 percent per year. The sustained expansion of the Seoul metropolitan region crossed a new threshold in 1988 when its population surpassed that of the combined population of all other provinces outside the Pusan-Kyongnam region (Douglass and Digregorio, 1991)o The increasing population shares accruing to Seoul are mirrored by increasing population densities in the capital city (Figure 3), which has become a central feature in social movements and the contemporary political economy of Korea° The concentration of almost half of the national population in a single metropolitan region has exacerbated conflict over collective consumption, access to land and housing, and the general quality of urban life and the environment. This has mixed with demands for increased political rights and genuine democratic processes° Under such widespread anti-statist sentimem, the practices of massive police mobilization, imprisonment and torture of dissidents, and unwillingness to recognize the legitimacy of political community outside of the state are no longer possible on the scale of the past, particularly in an international era of crumbling socialist regimes, the existence of which had been used as the justification for political and social repression.

Dimensions o f Korean Induslrial Transformation

161

Figure ~ Average Annual Population Growth Rates Seonl and Pusan MegaUrban Regions and Rest of Nation, 1955-1990

(*/,/yr.)


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uI-Inchon-Kyonggi

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GrowthRate

I.

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.

,

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,

Source: Korea Statistical Yearbook (1976- 1990).

Figere 3: Change in Population Density by Region in Korea. 1955-1990

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Pusan-Kyongnam , ,o .............a

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1975

Source: Kore~ Statistical Yearbook(1976- 1990).

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162 JCA 23:21 Dou~,la~l~


Korean Post-fordism?

In recent years it has become increasingly apparent that the regimes of accumulation that have propelled the ANIEs to industrialized export economies cannot 1Je sustained. Internationally, the slowing down of the world economy, reconcentration of formerly labor-intensive production in the North through automation and flexible specialization, rising protectionist sentiments, and the potential opening of Eastern Europe and former regions of the USSR all cast doubt on the possibilities for continuing high rates of accumulation through export-oriented manufacturing in labor-intensive segments of production in the Third World. Inside Korea, the contradictions of inducing productivity increases through the coercive control of labor alongside widening income inequalities produced by the partitioning of labor have reached a plateau of severe social dislocation that has been manifested in a continuous series of middle class protests for democratization and worker strikes for increased wages and benefits. Unlike the OECD countries and most of the rest of Asia, unionization has experienced substantial growth in Korea in recent years? Yet the Korean government seems unwilling to remove itself from direct control of labor. As shown by the state crackdown which sent thousands of riot police to put down a strike at the Hyundai shipyard in April of 1990, the state continues to respond by applying methods of the past° In a vacuum of institutionalized means of collective bargaining, the unions, for their part, perceive open militancy as their only recourse ? The concentration of strike activities in male-dominated "bureaucratic patrimonial" segments of labor is also quite revealing of the ways in which the contradictions of the overall labor system are registered unevenly over the labor force. Whereas industrial expansion in the 1960s and 1970s drew rural (female) workers with low levels of educational attainment into unprotected and highly insecure occupations, heavy industries emerging in later years have recruited more highly educated males. The mechanisms used to shelter this segment - - internal promotional ladders, company-based unions, grievance procedures and seniority systems - - have shielded these workers from the vagaries of the slow-growing proletarian segments in which heightening competition for jobs has enhanced labor discipline and expropriation. Ironically, this greater job stability in the heavy industries has strengthened labor movements and reduced capital's power to exercise such proletarian controls as wage discipline, firing without explanation and the speeding up of piece or assembly work to force productivity increases. The persistent anti-labor posture of the state suggests its continued attachment to a strategy of maintaining low wages as the principal means of sustaining manufactured exports. Because economic growth in Korea has not been centered on the domestic market, but has instead become increasingly dependent on exports, the stakes in this game are high. As indicated by Figure 4, the ratio of exports to GNP has been exceptionally high in Korea and has experienced a general increase over time to reach an exluivalent of two-fifths of the entire economy in the late 1980s.

Dimensions of Korean Industrial Transformation

163

Fisure 4: Exports as a Percent of the GNP in Korea, 1970-1989


(billion

1980 won} 100,000. 90,000 80,000, 70,000" 60,000" 50,000' 40,000. 30,000. 20,000. 10,000" 0

~Percent~ 45 40

"'

. 1 111111" #"

30 25 20

GN~."l~i:ill~ili211J"2:l E~ xports III17,1

•

35

15 10 5 0

1970

1975

1980

1985

1989

Soaror~ Korea Statistical Yearbook (1990) and World Bank, WorldTables (1989/1990).

Figure 5 further warns of continuing dependence on the U.S. consumer market for Korea's economic growth. Although Japan has increased its absorption of Korean experts, the United States remains the major target. Yet as Korean corporations join other Asian NIEs in moving labor-intensive manufacturing to Southeast Asia (Douglass, 1991), this pattern of economic growth, and along with it the suppression of labor by the state, will be difficult, if not impossible to sustain. There are, of coarse, many recommendations for taking new directions. In Korea, which has the largest domestic population of the ANIEs, the apparent success of Japan in switching from an export-dependent to a more inward-looking, domestic-market basis for accumulation is seen as an attractive course. But to take it would require a fundamental overhauling of the Korean miracle. Increases in the real incomes of workers would have to be sustained, environmental deterioration would have to be reversed, high disparities in income distribution would have to be reduced, and largescale corporations would have to adopt strategies to channel surpluses into research and development for domestic rather than U.S. or European consumer needs. As a reflection of the political process, none of these outcomes are likely without legitirniration of political community outside of the state. Others have continued to focus on maintaining a competitive edge in exports by advocating the adoption of new industrial strategies of the post-fordist "flexible specialization" genre. Ideally, flexible specialization would lead to democratization

164 JCA 23:21 Douglass

of the shop floor, flexible work organization, re-skilling of the work force, and the ability to rapidly shift production to meet consumer needs - - all issues and possible responses to current labor demands. Thus Kim (1990) argues that flexible work organization is the most atlractive way to accommodating change in an internal labor market. His suggestion that Japan is a model for this transition, however, is more than


Figure 5: Value of Korean Exports by Destination

(1980-1989)

(Bn. Won)

2ST ! '5 t

United States

* •

herAs,a Eorope

] I

/

"

I

J

• ...& ............& ............ . ............

o~ 1980

I 1981

i 1982

I 1983

I' 1984

I 1985

, 1986

, 1987

I 1988

, 1989

Source: Korea Statistical Yearbook (1987 and 1990)

ironic. The Japanese model of flexible specialization appeared only in the 1970s and has been pointed to as the cause of continuing deterioration in the position of the Japanese working class~ as well as a substantial portion of the non-land-owning middle class (Douglass, 1989: ltoh, 1990), Kim also acknowledges this and suggests that a transition to "post-fordist" or "knowledge-intensive" industries in Korea will equally heighten skill polarization, structural unemployment and labor market segmentation. In response, he has signaled the need for economic development theorists to shift away from their emphasis on industrial organization and the firm, the technological and managerial side of flexible specialization, and toward a consideration of the socio-political institutions that regulate labor processes. Whether or not a regime of post-fordist flexible specialization is emerging in Korea can be partially assessed by statistics which show that while the majority of manufacturing workers have been in firms with more than 500 employees, both the very large and the very small firms have been increasing their absolute number of

Dimensions o f Korean Industrial Transformation

165

employees in recent years, but finns with less than 5 employees are the only group that has increased its share of manufacturing employment since 1980 (Figure 6). "Ibis represents, on one hand, the demise and/or absorption of intermediate size fLrms by large corporations, which is a trend widely reported in Korea.


Figure 6 : Share of Manufacturing Labor Force by Firm Size

% Firms

40 t

~

• ....... ~ . . . . • . . . . P • ~ ' - - , • . , ,

35 T I

F'mn Size (No. Employees)

]

....•'o............. •

30 ~ ] - a 5 - 49 " * " 100 - 199 " • ' " _>500 ] I I - O - 50-99 -O,,200-499 I

2.~ T I

,

20 -i~-...~.6,~_.

I n ~ l l m ~ l ~ .,.6.....a~_

_ ~ m m ~

-'~" ........,.m,~"

....