[OUTLOOK] Time for Unions to Change Their TuneThe financial crisis that hit the Korean economy at the end of 1997 took us unawares, striking as it did like a thunderbolt from a clear sky. Looking back at the circumstances that led to the crisis, however, it seems that we got no less than what we deserved. The tide of globalization that had been gaining momentum throughout the world in the late 1980s demanded a comprehensive and active adaptation to the changes characterized by international competition and capital movements. But the principals in charge of action and policies in Korea persisted in a response running counter to the demands of the times and caused the nation to lose its credence in the international capital market, which ultimately resulted in the financial crisis.
Globalization is an irrefutable tide of history that gathered force in accordance with new developments in modern technologies, including information and communications technologies plus the competitive liberalization of trade and investments. It is a tide that can magnify the instabilities of a capital market and create such ill effects as widening the distribution divide in wealth and income. But it generally accords individuals, businesses and national economies with the opportunities to benefit from an almost limitless prosperity. This is the key reason that the trend of globalization cannot be turned back.
Advanced nations and countless other countries actively adapted to globalization earlier on and partook in its proud and rapid flow. They brought down trade and investment barriers, abolished all kinds of domestic restrictions, and concentrated on attracting foreign investors. And what did we do? Despite the call for globalization, we refused to give up the innumerable restrictions that unfairly suppress corporate activities and foreign investments, and also maintained government-ruled financial systems. Morality became a scarce value in financial institutions and large enterprises as conglomerates continued to indulge in grandiose plans on business expansion while running up astronomical debts. We lost credibility in the international capital market, causing financial capital to flee from the nation. The outcome was the financial crisis.
Over the subsequent three years, we rigorously pursued economic restructuring through extensive reforms spanning four key areas, belatedly trying to adapt to globalization. In the process, tens of thousands of companies went bankrupt and the jobless once approached 2 million. But because the nation did not drag its feet in restructuring, it managed to recover international confidence and overcame the financial crisis earlier than anyone expected. As soon as the crisis seemed under control, however, restructuring centered on benchmark conglomerates began to stall and is now sparking concerns about the nation's economic crisis becoming entrenched as a chronic phenomenon.
One tangible example is the current status of Daewoo Motor's restructuring. After it came under a debt workout program in August 1999 due to exorbitant borrowing, the company held up its restructuring until recently, as a result of which it incurred a monthly average of more than 100 billion won ($75 million) in deficits last year and at last went bankrupt in November. On Feb. 18, the company gave layoff notices to 1,750 workers despite intense opposition from its unionists. Although the layoffs provided momentum for pursuing restructuring at the company's initiative, it was distressing that layoffs on such a massive scale had to be enforced.
Even so, we should consider this: if what has happened was unavoidable, then the labor union could have recognized the inevitability of layoffs in the initial stage of management crisis. It could have minimized the number of layoffs by seeking measures to cooperate with the management and completed the restructuring process earlier.
The government, conglomerates and combative trade unions are widely pointed out as the key culprits that pushed the nation's economy into a crisis. Such a negative perception of the nation's unions is said to be the greatest reason for international society's reluctance to invest in Korea even now. If the unions are really responsible for delaying restructuring, then they are having an adverse effect on increasing workers' chances of employment and of benefiting from greater welfare and income.
As we experienced during the last financial crisis, unreasonable resistance against globalization raises the costs of restructuring and increases the burden on workers as a result. In this age of knowledge-based economy and a market economy dominated by multinational corporations, which emerged in tandem with the flow toward globalization, trade unions should help workers adapt rapidly to the new paradigms, and encourage the government and businesses' structural reforms by actively participating in the tripartite dialogue among the government, labor and management. At the same time, they should demand productive expansions in welfare benefits. They have to take the initiative in pursuing restructuring efforts from a macroscopic perspective.
The writer, former Korean ambassador to the OECD, is a guest scholar at the Institute for Global Economics.
by Young Soo-gil