[VIEWPOINT]Can we live without smokestacks?

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[VIEWPOINT]Can we live without smokestacks?

During the industrial revolution, some scholars and laborers rejected the changes, voicing sentiments like, "How can man live by eating machinery instead of food," or "Those machines will degrade our values and increase unemployment."

Many workers in those years participated in the Luddite movement, which waged war on machinery. But no one could stop the revolution in technology. It changed the world from an agriculture base to an industrial base, and solved food supply problems with chemical fertilizer. The value added of the labor force also increased as machinery developed.

Since the industrial revolution, manufacturing has become the symbol of a nation's economic competence. Combining capital and technology, labor turns out high-quality products. That infusion of technology is especially important here, given our large numbers of inexperienced workers.

Our industries, sometimes disparaged as "smokestack industries," are at a critical juncture in maintaining competitiveness. Manufacturers have difficulty staying competitive; constant labor disputes drive up wages and government regulations and environmental problems make it difficult to invest. Financial incentives are focused on information technology, and government policy focuses on high-tech start-ups while ignoring manufacturing.

Skilled workers shun manufacturing. Under such circumstances, how can manufacturing be competitive?

Even under such conditions, there are some bright spots - some manufacturers who are still competitive in the global market.

This year, Hyundai Motors made its largest profits since the company was founded. Manufacturers such as Samsung Electronics, Samsung Electro-Mechanics and Pohang Iron & Steel still loom large in our economy.

But our industries still have not established and increased their competitiveness under stable conditions. Obviously, Korean companies' technological skills are the basis of their competitiveness, but how far ahead of other nations' technology is ours?

Technological superiority alone cannot make us truly competitive in global markets.

For example, an average worker at a manufacturing company receives wages of $5.17 per hour, which is 11 times higher than those of a Chinese worker who receives 47 cents per hour. The rate of wage increases here is also triple that in Taiwan, Japan and the United States over the last three years.

The relative high wage level does not necessarily imply that the phenomenon of frequent labor disputes has been settled. The number of strikes in our manufacturing industries has increased every year since 1997. Korea now has the highest ratio of labor disputes per thousand workers.

Moreover, although wages at large firms, with over 500 employees, are twice those of workers at small and medium companies, workers at big firms go out on strike more frequently than their counterparts at small firms.

Government restrictions on investment and society's sentiment toward manufacturing are far less encouraging toward those industries than is the case in other countries.

Yet our manufacturing companies are still operating and creating employment despite the problems. How have Korean manufacturing companies survived to this day under such negative circumstances? One of the reasons is because of a reduction in financial expenditures and the depreciation of the won. Corporate restructuring has also made our industries more competitive. But these factors cannot be expected to continue to be favorable. Foreign exchange and interest rates are always uncertain and corporate restructuring, which has been boldly reducing the number of employees, has reached its limits. Workers are nervous and their drive for higher wages has not yet subsided.

Should we neglect manufacturing industries, thinking they are outdated in modern society? Can start-up firms and professional service providers absorb all those workers? It is urgent that the problem of frequent labor disputes should be settled. Investment conditions should also be improved before it is too late. The government should relax restrictions. It is essential that a combination of information technology and manufacturing coexist as new technologies are developed.

If these conditions do not improve, our manufacturing industries will move their plants to other countries. How can we manage to overcome the so-called "China Shock"? In order to save our manufacturing industry, we need to look at it in an impartial manner.


The writer is a professor of economics at Yonsei Univeristy.

by Jeong Kap-young

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