Seoul upheavals signal end of Asian tiger's boom

By Gwynne Dyer

LONDON (JP): The days of rage in Seoul are over, and the trade unions are in full retreat. But what did the three-week outburst of rage on the streets of South Korean cities actually mean for the rest of industrializing Asia?

"Orientals possess a mysterious, unified and harmonious spiritual culture that can scarcely be understood completely by outsiders," said Gen. Park Chung-hee, who seized power in South Korea in a military coup in 1961, and was shot to death by his own intelligence chief in 1979. "It is clear," he added, "that oriental cultures have a certain gentle mild rhythm and harmony."

In the weeks since the current South Korean government passed a new labor law in a pre-dawn session of parliament on Dec. 26, the rhythm and harmony have taken the form of crowds chanting "Abolish the evil law," as thousands of protesters battled police amid a hail of stones and a fog of tear gas. But a planned national strike fizzled out on Jan. 13, and now the union leaders have cut back to striking one day a week, on Wednesdays.

The crisis in South Korea is over. The new labor law will stay on the books; there will not be a coup; the country will not go bankrupt; none of the silly things people predicted will come to pass. So what do these dramatic (or at least photogenic) events tell us about the evolution of Asia's new industrial economies?

There is no such place as Asia, of course. When you say "Europe" or "the Middle East", you are talking about places with a mostly shared culture and a long common history. When you say "Asia" -- a word invented by Europeans to embrace everything east of them -- you are referring to half of the human race.

"Asians" can be Buddhists, Hindus, Moslems, Christians or Marxist-Leninist-Maoist materialists. Koreans and Sri Lankans, as well as Afghans and Filipinos, are peoples who had virtually no contact with one another until the European empires overran most of the continent two centuries ago.

Asia is so huge and diverse that if all the other continents sank beneath the sea and it alone survived, there would be no significant loss of diversity in human affairs. Generalizations about Asia, therefore, are generally either banal or untrue.

But it is not futile to treat the new industrial economies of Asia as a group, for as they become "modern" and integrate into the global economy, they begin to resemble each other more and more. Since they are now the main motor for the globalization of the world economy, it matters a great deal what happens to them.

The Korean upheavals are a result of the fact that the boom phase of economic growth is over for the first wave of Asian "Tigers" (South Korea, Taiwan, Hong Kong and Singapore). In the 1970s and 1980s, they saw 8 percent annual growth as a birthright. In future, they will have to get used to a more modest 5 percent or 6 percent.

Even to maintain that pace, these countries are now being driven into the same kind of economic restructuring that Western economies have been forced to undergo since the early 1980s. For they too now face severe competition from lower-wage Asian economies, in places like Thailand, Indonesia, China, India and Vietnam.

The new legislation in South Korea was not even all that severe by recent Western standards. The new South Korean labor law is still at least as considerate of workers' rights as that in most Western European countries, and considerably more so than U.S. labor laws. It's just that Korean workers were used to job security for life, so they don't like the new law at all.

But why did the South Korean government feel it was so urgent to change the labor laws now? Because the South Korean economy is going through a hemorrhage of jobs and investment as the lower- wage competition from the next wave of industrializing countries cuts into its market share. Average income in South Korea has risen 140 percent in the past decade, and productivity has not kept up.

Something had to be done -- and it turns out that the favored remedy in harmonious, rhythmic Korea in the late 1990s, rightly or wrongly, was exactly the same remedy applied in Margaret Thatcher's Britain in the early 1980s. So much for profound cultural differences which outsiders can scarcely understand. But then the late President Park himself, in a less mystical mood, once remarked that "In human life, economics precedes politics or culture."

I am not echoing the triumphalism of the free-marketeers who believe that the "hidden hand" of the all-wise market will take care of everything. Politics and cultural values do matter, especially when it comes to deciding how the wealth will be shared out. But the emerging unified global market does impose quite severe restrictions on how you run your economy. If you don't remain competitive, you are in deep trouble.

This poses a special problem for East Asian countries, where the model for first-phase industrialization was really a kind of intelligent Stalinism: Giant state-sponsored corporations bring the peasants into the cities, work them for long hours at low pay, but guarantee them a basic living standard and jobs for life.

Beyond the first phase of industrialization, however, this is a formula for economic stagnation. And as the workers become more educated, they won't take the dictatorship that goes with it any more, either.

In Eastern Europe, where the Stalinists were notably unintelligent, the whole structure has already crashed to the ground, leaving economic chaos in its wake. In East Asia, the transition is much less disruptive, although there will certainly be more upheavals like the recent Korean events. But although the workers in South Korea have lost something of value to them, they do have two significant forms of compensation.

One is a standard of living second only to Japan's among all the countries of Asia (except for city-states like Hong Kong and Singapore). The other is democracy: If they can persuade enough of their fellow-countrymen to agree, they can vote the rascals out.