Clinton administration & U.S. Banks: Trying to solve Korean crisis by making workers pay

By Fred Goldstein, Workers World, 8 January 1998

The Clinton administration/International Monetary Fund policy in south Korea has collapsed under the weight of the deepening financial crisis. Washington has been forced to reverse its position of letting south Korean banks and corporations fail as a way of regenerating investor confidence.

Secretary of the Treasury Robert Rubin--the much-hailed expert on the markets, formerly of Goldman Sachs--has had to reverse himself under pressure from the Pentagon, the State Department, and above all, the bankers. Meanwhile, all parties to the policy dispute are agreed on the need to attack the south Korean working class and middle class as a key to solving the crisis.

Rubin had to rush back to Washington in the midst of his fishing vacation to plunge into a frenzied series of meetings. This came after a month during which he insisted that the United States would not give an early loan to south Korea.

The Dec. 28 Washington Post reported: "Worries were mounting at the State Department, the Pentagon and the National Security Council that if South Korea went bankrupt, it would be plunged into a prolonged period of political and social unrest. ... At meetings in the White House Situation Room, Secretary of State Madeleine Albright, Defense Secretary William Cohen and National Security Adviser Samuel Berger sought to convey the urgency of their concerns to Rubin and his deputy, Lawrence Summers."

The United States has 37,000 troops and 1,000 nuclear weapons in south Korea. It has occupied the south since it divided the country at the end of World War II. Washington claims to be the great national benefactor. The occupation is predicated on the false, anti-communist premise that the enemy of the south Korean masses is the socialist government in the Democratic People's Republic of Korea in the north.

As Washington and its instrument, the IMF, twist the knife in the current crisis, it is becoming more and more obvious to people in south Korea that the real enemy is not the DPRK, as the United States and its political puppets in south Korea have maintained for decades. The real enemy is Washington.

The brass in the Pentagon are afraid that President Bill Clinton's confrontational financial policy will upset anti- DPRK military and political strategy by destroying all social support for the occupation--and eventually, for the U.S.-imposed division of the country.

The White House meetings in late December focused on the fact that south Korea was on the verge of default before the next scheduled IMF loan in mid-January. Rubin emerged from these meetings to reverse himself.

He said the United States would give $1.7 billion as part of an accelerated $10-billion emergency loan by the IMF and the G-7 governments. Rubin talked about "enormous security concerns" at his news conference.

MAKING KOREAN WORKERS PAY

But the predominant weight toward shifting position in the crisis came from the banks and the Federal Reserve Board. At the same time the meetings were taking place in the White House, New York Federal Reserve Board President William McDonough was meeting with representatives of Chase Manhattan, Citicorp, J.P. Morgan, Bankers Trust, the Bank of New York and BankAmerica.

The subject was rolling over loans to "buy time." This was to be coordinated with Japanese and European banks.

The key to the U.S. banks' decision to consider rolling over loans was an agreement that Washington imposed on the south Korean government on Dec. 22 and 23. "U.S. Treasury Undersecretary David Lipton made four requests in addition to the IMF guidelines at a meeting with President-elect Kim Dae Jung and his economic advisers on Monday and Tuesday," wrote the Chosun Ilbo newspaper in its Dec. 23 Internet edition.

"Specifically he asked for the revision of labor laws to give management the right to lay off workers, the effective repeal of the foreign-exchange control laws, the interest- rate limitation law and the guaranteeing of legal rights to small stockholders. ... Lipton warned that only honoring the IMF agreement would not be enough to satisfy Wall Street investors."

Kim Dae Jung agreed to comply. He is scheduling meetings for January to redraw the "social contract" so that workers will not press for wage increases. In February the south Korean government will detail a "worker dispatch law" that allows companies to replace striking workers.

Kim will push the National Assembly to pass a law allowing the immediate layoff of workers in the financial industry, including domestic banks--thus securing additional funds to pay off imperialist banks at the expense of bank workers. (Korean Herald, Dec. 26)

Despite anti-dismissal laws, it is estimated that 120,000 workers have been laid off already. Both the unions and capitalist economic analysts estimate a million more potential layoffs.

But the Dec. 25 New York Times wrote of these anti- working-class agreements that they "could easily turn into a major political problem for Kim. South Korea's enormously strong labor unions have already promised street demonstrations to protest layoffs, and American officials are concerned that much of the anger will be directed at the United States."

The head of the so-called official labor union movement, Park In Sang of the Federation of Korean Trade Unions, has pledged to cooperate. However, the more militant Korean Confederation of Trade Unions, which earlier in 1997 led the successful general strike against the legalization of mass layoffs, has pledged to fight the agreement and will bring enormous pressure to bear on the FKTU.

Thus, the emergency $10-billion interim bailout will not be enough to squelch the class struggle. In fact, the circumstances are bound to increase hatred of the United States as part of that struggle.

'VULTURES ARE GATHERING'

The Dec. 27 New York Times reported: "Amid rescue efforts, American companies ... appear to be positioning themselves for long-term support of the region--and in the process to snap up some corporate bargains. Chase Manhattan, General Electric, General Motors and J.P. Morgan are all said to be looking at ailing companies in the region."

Many imperialist banks and corporations are waiting for south Korean companies to get even weaker. "'The vultures are gathering,' says Tony Michell, president of Euro-Asian Business Consultancy, 'but the timing is not yet right.' A number of conglomerates and companies have collapsed under huge debt burdens and are appealing to multinationals to commandeer them. 'I have Korean companies lining up outside my door' says an executive at a U.S. investment bank in Seoul." (Wall Street Journal, Dec. 23)

The world's bankers and bosses are desperately trying to stem a crisis that they consistently describe as limited. South Korea is now the focal point of the crisis and the financiers are unable so far to stop it.

After the $10-billion emergency loan was approved, there was a moment of relaxation when both the south Korean stock market and currency prices rose. But the Dec. 27 New York Times warned that "many analysts say that the economic crisis is still in its infancy."

If the crisis is not stopped soon, the bankers may move to consolidate all the south Korean debt and make the government liable for it. But if they do that they will have to reveal what the Times called their "off-balance-sheet financing in South Korea that [is] not completely captured in their public filings. ... 'It would not surprise me at all to find the overall exposure to a catastrophic event in South Korea is greater than the banks have disclosed,' said Dian Glossman of Lehman Brothers, Inc."

The imperialists are hiding the true nature of the crisis. It is clear that so far it is out of control. The system of capitalism and the giant financial monopolies' lust for profit is based on anarchy, with each private grouping of profiteers struggling to squeeze more and more profit out of the workers.

In this crisis they are demanding that the interest payments come first and the workers come last.

This kind of crisis is not limited to south Korea or southeast Asia. Capitalism is a world system. As such, in the long run it cannot be contained to any region.

Workers in the United States should be preparing to wage a campaign of solidarity with south Korean workers--and in the process preparing themselves for their own struggle right here at home.

(Copyright Workers World Service: Permission to reprint granted if source is cited. For more information contact Workers World, 55 W. 17 St., NY, NY 10011; via e-mail: ww@workers.org. For subscription info send message to: info@workers.org. Web: http://workers.org)