The repossession of South Korea's Economy

By Fred Goldstein, Workers World, 18 December 1997

The so-called bailout of south Korea is another in a series of predatory operations by U.S. and Japanese imperialism. They seek to stem the spreading financial crisis in Asia by pushing it onto the backs of the masses. At the same time, Wall Street and Tokyo are struggling with each other for the leading edge in taking over the world's 11th-biggest economy and, in the process, pushing out the south Korean bourgeoisie as a competitor in the saturated Asian markets.

The south Korean bailout differs from the bailouts of Thailand and Indonesia in several ways. In the first place, the south Korean economy--variously estimated at somewhere near half a trillion dollars--is as big or bigger than the economies of Thailand, Malaysia and Indonesia combined. It is an integrated industrial capitalist economy.

But more important, the ownership of the major industries in south Korea has largely been in the hands of the local bourgeoisie. Daewoo and Samsung are among the top 100 industrial corporations in the world. Thailand, Malaysia and Indonesia are more like off-shore facilities for big imperialist transnationals like General Motors, Ford, Intel and Motorola.

In fact, before this latest crisis south Korea's industrial strength had posed the question: Can an oppressed country in the era of imperialism lift itself up to the status of an independent capitalist power?

South Korea has a population of 45 million people. Yet it is really only part of a country--one arbitrarily and brutally divided by U.S. imperialism to halt the advance of socialism on the Korean peninsula.

It is the size of Indiana, yet its economy is bigger than those of many smaller imperialist countries such as Belgium, the Netherlands or Sweden.

Before its rapid industrial growth, south Korea was largely agricultural. It was known as an occupied satellite of the Pentagon and the CIA--burdened with a huge military budget, 36,000 U.S. troops and a thousand nuclear weapons. Yet despite its vassal military and political role, it attained the economic status of industrial competitor with its occupier as well as with its Japanese former colonial masters.

However, the current crisis reveals that its real masters are still in Wall Street and Tokyo. It developed only with their consent in the struggle against the socialist camp. Much has been written about the Reagan administration's "full-court press" to bankrupt and intimidate the Soviet Union through a $2-trillion military buildup. The USSR was undoubtedly the central target of Washington's strategic planning during the Reagan years.

But Washington never took its eyes off Asia for a moment. It particularly focused on the Korean peninsula.

There, the socialist Democratic People's Republic of Korea in the north was making great strides in development while the repressive puppet regime in the south was wracked by instability and crisis.

Gen. Chun Doo Hwan, head of the Korean Central Intelligence Agency, came to power in south Korea by assassinating Gen. Pak Chung Hee in 1979. Chun ruled with an iron fist. Mass protests and rebellions against the repression culminated in the 1980 Kwangju uprising--which the U.S.-backed regime drowned in blood.

However, military threats to the DPRK and repression in the south were inadequate in the struggle against the workers' state. Washington, undoubtedly with Japan's complicity, decided to stabilize the Seoul regime by allowing funds and technology to pass to the local ruling class.

The aim was to build up the economy as part of the struggle against the socialist camp--in the same way that West Germany and West Berlin became a showcase of Western capitalism in the struggle against the socialist German Democratic Republic.

Within a few years, millions of peasants were dispossessed and driven into the working class, but the south Korean economy was growing at a rate of 10 percent a year. The so- called "miracle" did not come about through the normal process of capitalist development in south Korea. And the present crisis has brought this out in bold relief.

The illusions of the south Korean bourgeoisie, which itself had minor imperialist aspirations, are dissolving rapidly as world imperialist finance capital moves in to show who the real master is.

IMPERIALIST BANKS BAIL THEMSELVES OUT

The foreign debt of south Korean banks and corporations is estimated at $110 billion: $100 billion to be paid back over the next year and $20 billion of that due very soon. As of early December, the south Korean central bank had only about $5 billion in foreign exchange left in its treasury to loan these indebted domestic corporations and banks.

In rushed the International Monetary Fund, ready to provide a bailout to the tune of $55 to $60 billion. But this bailout is to shore up the imperialist bankers and investors.

Louis Uchitelle explained in the Dec. 4 New York Times: "The bailout money ... will be channeled through the Korean government and its central bank in great measure to the private banking system. In some cases, foreign creditors will be paid off directly. Mostly, the money will go to salvage some institutions and to close others while paying off the creditors. The bailout will, in effect, repay the depositors and foreign lenders."

Among the foreign creditors, according to the Dec. 5 New York Times, "U. S. banks have $20.2 billion ... including loans, currency transactions, and derivative contracts. ... The largest piece belongs to the six huge money-center banks which carry $14.5 billion in exposure: the Chase Manhattan Corp., Citicorp, BankAmerica, J.P. Morgan f Co., the Bankers Trust New York Corp., and the First Chicago NBD Corp. "As long as the Korean economy seemed sound, even booming, the foreign banks were willing to roll over [their] short-term loans. Indeed, they were eager to do so because they were lending to Korean banks at much higher rates than they would charge domestic customers. But in the current crisis the American and Japanese banks, fearful of losing money, want quick repayment. And new lending from abroad dries up."

The terms dictated by the IMF are Draconian. They are aimed at imperialist repossession of the powerful and competitive south Korean economy.

The Dec. 5 New York Times quoted a front-page article in Joongang Ilbo, a major south Korean newspaper, saying that "the bailout agreement was designed to disband the big Korean conglomerates, which compete with U.S. and Japanese companies in electronics, automobiles and other industries."

Among the IMF's conditions are that south Korea raise taxes, raise interest rates, cut government spending, bankrupt some corporations and, above all, cut economic growth in half--from 6 percent to 3 percent.

Preparing for a complete economic takeover of its puppets by the masters, the IMF has forced the removal of a 25-percent upper limit on foreign ownership of commercial banks. It will also abolish the 26-percent limit on foreign owners of public corporations.

It has forced more openings for U.S. autos and the lifting of a ban on imported Japanese cars.

CAPITALIST OVERPRODUCTION

The attack on the south Korean economy is designed to relieve pressure on the giant monopolies from growing capitalist overproduction in Asia. Indeed, they are using financial strong-arm tactics to crush competition.

It is a theme of the capitalist media that "Asian corruption" and reckless investment by Asian capitalists are the causes of the problem.

But this is strictly a Wall Street perspective. From Asia's viewpoint, it looks just the other way.

Shortly after the Thailand and Malaysia crises--precipitated by the glut of automobiles and an 80-percent fall in the price of memory chips--the U.S. auto monopolies announced they had no intention of pulling back on investment.

"Even though some industry experts insist they should pull back," the Nov. 5 New York Times noted, "General Motors and Ford Motor are busy building huge new assembly plants in Southeast Asia and China. And Toyota and Honda are determined to keep their 15 local factories open." GM has opened 23 parts factories in the area since 1992. "You have to roll the dice," said J.T. Battenberg III, president of GM's auto-parts division. Maryann Keller, an auto analyst at Furman Selz, said, "This industry is suicidal."

So the "irresponsible investment" originates not with the tigers of Asia but in the lions' dens of Wall Street, London and Tokyo.

As far as cronyism and corruption are concerned, Asians see the $2.2 billion it took to elect the U.S. president and Congress in 1996 as a world record for corporate corruption. They see the giant U.S. transnationals financing political stooges so they can get juicy contracts and favorable legislation.

Then there are the 50,000 paid corporate lobbyists who, with their Washington cronies, write tax laws so generous to the rich or finagle Pentagon contracts for their clients. Cronyism, corruption, recklessness--these are not Asian products but a problem inherent in capitalism and imperialism.

The final chapter in the south Korean struggle has yet to be written. The crowning achievement of the industrialization of south Korea is the creation of a militant, organized working class which has a history of fighting back and defending itself.

Analysts estimate that the IMF program, if fully implemented, would raise unemployment in south Korea from 2 percent to 7 percent in 1998--putting 1.5 million people out of work. That would be the highest number since the Korean War of 1950-53.

But the south Korean trade unions have made known their intention to resist the IMF. Two years ago they carried out a heroic struggle to stop the government from legalizing mass layoffs.

The working class, 20 million strong, must be dealt with before the ruling classes can implement their predatory plans. And what is true for south Korea is true for the rest of the Asian working class--which is growing by leaps and bounds as capitalism spreads its system to every corner of the Pacific Rim.

The Asian crisis is bound to bounce back here. Wall Street and Washington are working overtime to shore up their system in Asia and Latin America. They publicly reassure the world that they are in command of the situation. But the anarchic forces of capitalism cannot in the long run be contained by bailouts.

The profit system is bringing Asia near depression now. And the fate of Asia, home of most of the world's people, cannot be separated from the fate of the United States. The ruling class here has opened an attack on the organized labor movement at the very moment its world financial system is in jeopardy. It is preparing for battle. The workers here must also prepare for struggles ahead.

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