Korea Social Sciences Review Vol.2 no.2

Vol. 2(no.2), 2012

Korean Social Sciences Review Contents

Historical Statistics of Korea: A Survey - Kim, Nak Nyeon Labor Flexibilization after the Foreign Exchange Crisis and Changing Corporate Welfare in Korea - Lee, Su Yun and Rho, Yeon Hee A Comparative Social Policy Study on the Structure and Characteristics of the Korean Welfare State: Focusing on the Analysis of Public Social Expenditures - Baek, Seung Ho and Ahn, Sang Hoon Are Korean Welfare Politics Changing?: The Politics of the First and Second Pension Reforms in Korea - Kim, Yeong Soon Measurement of Unemployment and Extended Unemployment Indicators in Korea - Hwang, Soo Kyeong Gyeongbu Expressway: Political Economic Geography of Mobility and Demarcation in Korea - Choi, Byung-Doo Rethinking the North Korean Repatriation Program: The Change from an “Aid Economy” to a “Hostage Economy” - Nam, Keun Woo The U.S. Carter Administration and Korea in the 12/12 Incident: Concession of Moral Diplomacy - Park, Won Gon

The Center for Social Sciences, Seoul National University

Korean Social Sciences Review

Korean Social Sciences Review (KSSR) contains scholarly papers on Korean society from the various disciplines of social sciences, which were originally written in Korean and recently published in academic journals in Korea, and are translated into English specifically for this edition. The basic objective of Korean Social Sciences Review is to provide opportunity for non-Korean speakers to get access to Korean materials on contemporary Korean society written by Korean social scientists. The selection and translation of the papers contained in this edition has been processed by the collaboration between the Center for Social Sciences of Seoul National University and the Center for Korean Studies of UCLA. This publication is funded by the grant from the Korea Foundation.

Editorial Board Oh, Myung Seok (Chief Editor, SNU, Anthropology) Kwak, Keum Joo (SNU, Psychology) Kwon, Hyeong Ki (SNU, Politics) Jung, Hyang Jin (SNU, Anthropology) Lee, Chul hee (SNU, Economics) Kim Hong Jung (SNU, Sociology) Ahn, Sang Hoon (SNU, Social Welfare) Hahn, Kyu Sup(SNU, Mass Communication) Jo, Dong Joon (SNU, Politics) Sohn, Jung Yul (SNU, Geography)

Copyright Š 2012 by The Center for Social Sciences, Seoul National University (SNU) Seoul National University Press E-Journal Edition: October 30, 2012

ISSN 2234-4039

Korean Social Sciences Review Vol. 2, No. 2 | 2012

Contents Historical Statistics of Korea: A Survey Kim, Nak Nyeon

1

Labor Flexibilization after the Foreign Exchange Crisis and Changing Corporate Welfare in Korea Lee, Su Yun and Rho, Yeon Hee

35

A Comparative Social Policy Study on the Structure and Characteristics of the Korean Welfare State: Focusing on the Analysis of Public Social Expenditures Baek, Seung Ho and Ahn, Sang Hoon

63

Are Korean Welfare Politics Changing?: The Politics of the First and Second Pension Reforms in Korea Kim, Yeong Soon

93

Measurement of Unemployment and Extended Unemployment Indicators in Korea Hwang, Soo Kyeong

131

Gyeongbu Expressway: Political Economic Geography of Mobility and Demarcation in Korea Choi, Byung-Doo

181

Rethinking the North Korean Repatriation Program: The Change from an “Aid Economy” to a “Hostage Economy” Nam, Keun Woo

219

The U.S. Carter Administration and Korea in the 12/12 Incident: Concession of Moral Diplomacy Park, Won Gon

253

Korean Social Sciences Review | Vol. 2, No. 2, 2012: 1-34

Historical Statistics of Korea: A Survey*

Kim, Nak Nyeon** Korea was forced to open itself to international trade in 1876 and it was annexed by Japan in 1910. Thirty-five years later, Korea regained independence, but the country was split into two separate regimes North and South Korea. During each of these periods, a different system for gathering statistics was used, which makes it difficult to compile a consistent series of annual figures over those periods. Territorial division creates another obstacle because statistics from the pre-liberation period cover the entire peninsula, but those of the period after are confined to the southern half. Compiling statistics according to international standards began in South Korea during the 1950s and 1960s, although there are differences depending on the area being explored.   Several attempts have been made to compile statistical data from those past periods and link them with current statistics. This article surveys such research, focusing on the population figures, per capita GDP, trade index, and consumer price index. Our purpose is to clarify how these century-long series of statistics were estimated, what new findings were gleaned from the series, and what tasks still remain.

Keywords: Historical Statistics, Long-term Statistics, Population, National Accounts, Trade, Price, Korea.

Translated by Ria Chae from the article published in Review of Economic History 50:171-196, 2011 with permission from the Korean Economic History Society. ** Professor, Department of Economics, Dongguk University. *

1

2 Korean Social Sciences Review | Vol. 2, No. 2, 2012

I. Introduction The purpose of this article is to inform about the present situation in historical statistics of Korea—the extent to which the statistics have been compiled in each field, and to examine what problems remain. “Historical statistics” in this case includes—along with the statistics of the traditional period—the statistics of the Japanese colonial period and of a certain period after liberation. After World War II, most countries started to compile statistics according to a common standard, making it possible to compare data across countries. In South Korea, too, compiling statistics based on the international standard began in the 1950s and 1960s, although there were differences depending on the field. For this reason, it is difficult to link the statistics of the earlier period to current statistics or compare them with the statistics of other countries. Compiling statistics for each period to make long-term consistent series has become an important task.

However, the availability of statistics for each period differs, which leads to differences in the goals pursued and methods of approach. The state of the statistical data for the time in question can be briefly summarized as follows.

First let us examine the statistics of the traditional period. There were no modern statistical surveys at that time, so the available statistics are very limited. True, the household and land statistics, which formed the basis of government collection of taxes, were collected nationwide. However, nonrelatives were often included in household data, making it difficult to assess the overall population. Kŏlsu, the measure for assessing land, was a taxation unit, and its grading differed so much from the original regulations that it is hard to estimate the actual land size. Therefore, the only way to approach the conditions of the time is to rely on microscopic and fragmented data. One example is genealogical records and records left by landowners, merchants, and Confucian academies (journals, harvest records, property division records, etc.). From these materials we can obtain information about prices— such as prices for purchasing or selling commodities, interest rates, and wages; information about size of land and its productivity—such as yield or rent acquired with it; about births and deaths in one family; and other data.

Of course, these types of statistics are fragmentary and cover only certain

Historical Statistics of Korea 3

areas, so there is a limit to their ability to represent developments in the entire country. The task is to make up for this limitation by enlarging the sample size based on the newly found microscopic data.

Second is the the statistics of the colonial period. The first modern statistical surveys began during this period and the number of national surveys (which produced both comprehensive and field-specific statistical books) rapidly increased. One characteristic of these surveys is that Japan extended to its colonies, including Chosen (Chosŏn), the survey standards and methods utilized at home. The Japanese Government-General of Chosen received from local administration offices regular (annual, quarterly, monthly, etc.) reports on current conditions in several spheres, composed according to the “Chosen Government-General Report Forms”; organized the data of the reports; and published several types of statistical books such as the “Statistical Yearbook of the Chosen Government-General” (hereafter, “Yearbook”).

Besides these administrative statistics, the Government-General carried out other kinds of nationwide surveys such as the “National Survey.” Thus, the statistical data of the colonial period is comparatively large but there are certain limits. Firstly, the coverage area was small during the early colonial years until the administrative system for collecting statistics was established.

Dealing with this problem is an important precondition for examining the conditions during the early colonial period. Secondly, the international standards were not used to compile statistical data at that time, so the data must be reorganized.

Next, let us examine the period from the 1940s and until statistics started to meet international standards after Liberation. Publication of statistical data at the end of the colonial period was constrained by the conditions of war. The representative statistical publication “Yearbook,” for example, did not provide the statistical data for 1941 and after, although there were differences depending on the area of statistics. In addition, some of the statistics were classified and some were defined as “other.” After Liberation, previous statistical books stopped publication and new ones to replace them did not start coming out until much later. For example, the “Korea Statistical Yearbook” was first published in 1952, but the amount of statistical data it provided was significantly reduced. Since no comprehensive statistics are available for the interim period, researchers must work with the fragmentary

4 Korean Social Sciences Review | Vol. 2, No. 2, 2012

statistics that remain in each field. Moreover, the compilation procedures at that time did not follow the international standards. Therefore, the main tasks for this period involve collecting and organizing data, and building a long-term series linking these data with the statistics for the previous and subsequent periods.

We refer to these series linking the historical statistics of each period as consistently as possible with the current statistics as “long-term statistics.”

Hereafter, we will examine the current situation in compiling long-term statistics in four selected areas—population, national accounts, trade, and consumer prices. Population and national accounts comprise the basic statistical data for investigating the social structure during a given period as well as making cross-country comparisons. Trade allows us to build the longest series going back to the period of the opening of Korea to the West, whereas consumer prices (specifically, the consumer price index) are chosen because they make possible a comparison of the statistics on nominal values in different periods. These are relatively advanced areas in terms of the compilation of long-term statistics. There are various types of statistics in each area, but in this article, considering the space limitations, we focus on the total population size, GDP per capita, trade index, and consumer price index.

The article has the following structure. In sections II to V, we will briefly examine how the long-term statistics for population, national accounts, trade, and consumer prices were estimated, what tasks remain, and what findings can be gleaned from these long-term statistical series. In the conclusion— section VI—we will discuss the significance of compiling such long-term statistical series.

II. POPULATION The population census (national census) was first conducted in Korea in 1925, and since then has generally been carried out every five years. The exceptions are the population censuses of 1944 and 1949, but from 1955 the census returned to the regular 5-year term. Among the two exceptions, in 1944, the number of surveyed items was smaller than in the previous

Historical Statistics of Korea 5

years; and in 1949, the census only covered the population figures for each gender in every administrative district. The population figures of this period demonstrate great fluctuations because of the return of Korean expatriates from overseas, the rapid increase of refugees from North Korea, and deaths during the Korean War. Scholars face two tasks in this respect: assessing population figures of the period before the beginning of the national census, and providing estimates of population figures for each year during the upheaval period of 1944-1955.

The first task is to address the population figures prior to the national census of 1925. Besides the national census, there are the population statistics of the administrative survey called the “Household Survey,” which began in the early years of the colonial period. However, these figures show a very sharp increase in the population during the early colonial period, and this reflects not the actual conditions but the improvement in accuracy of the household survey as the colonial administration was building the administrative system. That is why several attempts have been made to estimate the population size from 1910-1925 without referring to the household survey. What follows is a brief examination of the results of such research and tasks for the future.

In Table 1, we summarized—along with the population figures of the household survey—the results of the studies that attempt to estimate the population size from 1910-1924, as well as characteristics of these assessments. If the results of the studies are compared based on the population size in 1910, all of them provide a larger figure than the household survey, but the figures vary from 14.77 million to 17.42 million people (an increase of 0.59% to 1.7% in the years 1910-1925), which is a substantial difference.

The first study, in order of publication, is by Ishi (1972). Using the data of the national census, he calculated the progress in survival rate for each (fiveyear) age group after 1925, and made projections on the earlier period based on the assumption that such a trend of increasing survival rate had been taking place before the national census began. Using this method, the scholar calculated the survival rate for each age group prior to 1925 and was therefore able to estimate the population size by age group. On the other hand, Kwon et al. (1975; 1-7, 12, 23) hypothesized that the annual rate of natural increase

6  Korean Social Sciences Review | Vol. 2, No. 2, 2012

Table 1. Results of the Population Assessments for 1910-1924 Population Increase Population Lowest in 1910 rate from estimate limit (Park Yi Taek by age (thousands) 19102008) 1925 (%) group Household Survey

13,130

2.50

Ishi (1972)

15,470

1.39

Kwon et al.

(1975)

17,420

0.59

Suh (1978)

14,770

1.70

Cha Myung Su (2006)

16,270

1.05

Present

Park Yi Taek (2008)

17,000

0.75

Present

Effect of Potential Characteristics Spanish for future of assessment method Influenza development in 1918

Failed Present

Failed

Retroactive projection of survival rate obtained from national census Assumption of population transition after 1900

Failed

Retroactive projection of population increase trend obtained from national census Present Usage of genealogical records Present

Usage of death statistics

(0.2%), calculated based on the household statistics of the ChosĹ?n period, remained the same until 1900, and then the crude birth rate rapidly increased while the crude death rate started to rapidly decrease. As a result, the rate of natural increase was 0.4% in 1910, 0.7% in 1915, 1.2% in 1920, and by 1925 it had risen to 1.87%. However, this research does not provide clear evidence to support the hypotheses that the population transition started from 1900, the rate of natural increase before that was at the level of 0.2%, and the increase was steady until 1925 (Park, Y. 2008: 335-6, 366). Also, since the population size was estimated based on the total population increase rate, it is impossible to obtain population figures for each age group. Suh (1978) calculated the

Historical Statistics of Korea 7

population size by retroactively applying to the earlier period the population increase rate of the period after the beginning of the national survey. The assumption is too simple to consider it a population estimate; nevertheless, it was used as the population statistics in the research by Angus Maddison described later.

Cha, Myung Soo (2006) criticized, as lacking empirical evidence, Ishi’s hypothesis (1972) that the survival rate after 1925 was a long-term trend that had continued from the earlier period. Instead, Cha deduced the survival rate in each age group of the male yangban (aristocrat) population over the age of 20 using genealogical records of four families, which extended to the period before the beginning of the national census. He then compared the survival rates for each age group obtained from the national census and those obtained from the genealogical records for the period after 1925. Based on the relationship between the two sets of survival rates, he was able to correct the bias stemming from the fact that the genealogical records were restricted to the yangban class. He observed a certain pattern in each age group when the survival rate in the national census was on the rise, and applied it to estimate the survival rate that was impossible to obtain from the genealogical records—the survival rate of the population younger than 20 years of age. The genealogical records also omitted information on females, so Cha estimated the survival rate of the female population by projecting the relation between the survival rates of males and females in each age group reflected in the national census, to the survival rate of males of the period before the national census, as calculated with genealogical records.

Park, Yi Taek (2008) estimated the population size using the annual death statistics by age group that were published in the “Yearbook.” For example, the male population N years old at the end of 1924 equaled “male population N+1 years old at the end of 1925 + number of male deaths N years old in 1925.” By retroactively applying this method year by year, the researcher obtained the population figure for 1910. The key to this approach is estimating the number of the deaths not registered in the statistics and the number of immigrants. In his assessment of the population by age group for the period between 1910 and 1924, Park utilized the “Vital Statistics of Chosen,” 1914 population statistics for each age group, and other sources to estimate the number of deaths omitted in records. For the size of the migrant

8 Korean Social Sciences Review | Vol. 2, No. 2, 2012

population, he used the estimates of other scholars.

One point deserving special attention in Park, Y. (2008) is that the population size in 1910 obtained through the method described above and calculated with the unregistered deaths assumed to be zero, becomes the lowest limit for any assessment. That is because the population in 1910 was underestimated by the number of unregistered deaths during the period from 1911 to 1925, so the actual population figure should at least attain this level.

As is indicated in Table 1, the application of this standard demonstrates that not only the household survey, but also the estimates by Ishi (1972) and Suh (1978) do not satisfy the lowest limit. In other words, the results of these studies and the population figure in the household survey are not compatible with the death statistics published in the “Yearbook.” 1 In addition, Park pointed out that the estimates by other scholars did not reflect the increase in the death rate in 1918, when the pandemic of Spanish Influenza reached the Korean Peninsula leaving a high death toll among the local population.

Cha, Myung Soo (2006) satisfied the lowest limit condition. However, the fact that he estimated the population increase rate for the period of 19211925 lower than that for the period of 1916-1920 when the death rate was high due to the Spanish Influenza epidemic is questionable. The problem can 1

On the other hand, regarding the assessment of population by age group, Park, Y. (2008: 365-6) also used death statistics by age to suggest the highest limit for estimating the population increase rate during three periods. According to Park, if the population increase rate in each of the three periods—1911-1915, 1916-1920, and 1921-1925—is shown in a graph, it will display a V shape. The reason for this is the large number of deaths due to the Spanish Influenza epidemic during the period of 1916-1920.

Evaluated against this argument, the population increase rate in 1916-1920 suggested

by Ishi (1972) does not meet the standard. In the case of the research by Kwon, T. et al. (1975), their estimate of the population size in 1910 is high, so it fulfills the lowest limit condition, but the population increase rate in 1911-1915 is calculated lower than that in the other studies. As a result, the increase rate during each period in the study

by Kwon, T. et al. does not take the V shape, but consistently increases; therefore, Park renders the estimates by Kwon et al. for the first half of the 1910s problematic.

Nevertheless, since Kwon, T. et al. (1975) did not suggest the population figures by age group, it is difficult to apply this standard. As for Cha, M. (2006), he performed but did not publish the assessment of population size by age group. Calculations based on his statistics yield the conclusion that his research meets the highest limit condition for the population increase rate in all three periods.

Historical Statistics of Korea 9

be attributed to the very small—compared to the overall population size— sample of genealogical records that he used. However, the problem is likely to be resolved in the future if the genealogical record sample is enlarged.

Moreover, the biggest strength of genealogical records is that despite providing microscopic data restricted to a number of families, the material is based on firsthand observation and can be extended from estimating the population during the early colonial years (1910-1924) to the Chosŏn Dynasty period. Therefore, this research, compared to other studies, has good potential for future development.

The estimates by Cha, M. (2006), with minor revisions,2 were reintroduced in Cha and Kim (2012). Since the Korean population during the colonial period refers to the entire Korean Peninsula but after the liberation is restricted to South Korea, it is necessary to divide the population of the colonial period into that of the northern and southern parts. Kim, N. (2009a), attempted this by first, obtaining the population figures for each province.

For the years of the national census, he calculated the ratio of the province population in that year; for the other years, he obtained the province population ratio from the household survey (“Yearbook”), and then divided the total population from Cha, M. (2006) into the population by province.

The problem was to divide the population of Kyŏnggi-do and Kangwŏn-do (provinces), especially the eight kun (郡, districts; two in Kyŏnggi-do and six in Kangwŏn-do) that are located along the Military Demarcation Line. Kim, N. (2009a), following the approach of Moon, Ho-il (2006), calculated the ratio of ri (里, villages; those crossed by the Military Demarcation Line were calculated as ½) in the eight kun that belong to South Korea, and, based on this ratio, obtained the ratio of the South Korean population in each kun. By applying the ratio to the population of each gun as recorded in the “Yearbook,” 2

The total population size in Cha, M (2006: 521) is the sum of the Korean people and foreigners, and the figure for the period prior to the national census (19101924) directly cites the foreign population figure recorded in the household surveys.

However, the comparison of the household survey with the national census shows that the foreign population figure was also underestimated. Cha and Kim (2012) obtained the ratio of foreign population (i.e., the rate of omission) from the two surveys conducted in 1925, and applied this ratio to the population recorded in the household surveys of the earlier period to revise the number of the foreign population.

10  Korean Social Sciences Review | Vol. 2, No. 2, 2012

Kim was able to estimate the population of the southern part of the peninsula among the populations of KyĹ?nggi-do and KangwĹ?n-do, and to divide the total population figure into the population figures of the northern and southern parts.

The second task is to estimate the population size for each year during the period from 1944-1955. The National Statistical Office started to publish annual population figures in 1960, so there are no official statistics for the previous years. Even if we use the figures of the national censuses conducted in 1944, 1949, and 1955, they will not provide us with information on large annual changes in the population due to population shocks, such as the return of Korean expatriates from overseas and the inflow of refugees from the North after the liberation, as well as a rapid increase in deaths during the Korean War. Angus Maddison (1995; 2003; 2010) offers population figures for each year during this period, but the evidence supporting his research is not clear.3 On the other hand, Kim, N. (2009b: 88-94) estimated the annual population size during this period using the following method. First, he used the estimated for the number of migrants from overseas, deaths due to the Korean War, and refugees from the North as suggested in Kwon, T. (1977: 177, 204). Next, he assessed the distribution of migration flows by year based on the immigration data of the U.S. Army Military Government in Korea (Kim, D. 1999) and other material. Subtracting the overseas migrant population from the figures recorded by the population censuses in 1949 and 1955 and adding the number of the war dead provides the population size without the effect of population shocks. These hypothetical population size changes (during the periods of 1945-1949 and 1949-1955) can be assumed to occur due to the natural population increase. He then obtained the size of yearly natural increase by assuming that the annual rate of natural increase remained constant. He subtracted from that figure the number of international migrants for each year and the number of the dead during the Korean War as calculated above, and then he estimated the population each

3

The population figures for 1946-1948 have been confirmed to match with the estimates of the U.S. Army Military Government in Korea (Bank of Korea 1959: 10), but it is impossible to find the basis for his figures for the other years.

Historical Statistics of Korea 11

year during the period under scrutiny.4 The task for the future is to supplement the assumptions made during these assessments with newly discovered material. If we link the population estimates provided in the studies described above with the data of the National Statistical Office, we can obtain the total population size series for the period of 1910-2010.

III. NATIONAL ACCOUNTS STATISTICS GDP and the respective GDE are the aggregate statistics calculated according to the common international standard of the System of National Accounts (hereafter, SNA; UN 1953; 1968; 1993). In Mizoguchi and Umemura ed. (1988, hereafter “Mizoguchi’s estimates”), the researchers estimated the GDP and GDE for the period of 1911-1938. Their work was part of the “Long-Term Economic Statistics” (LTES) project conducted by the Institute of Economic Research of Hitotsubashi University in Japan. Mizoguchi’s estimates are used as the pre-liberation period series in the cross-country GDP per capita statistics compiled by A. Maddison, whose research we will describe in detail later.

Kim, N. ed. (2006) refined Mizoguchi’s estimates in several respects (Mizoguchi 2006) and provided the national accounts statistics for the period of 1911-1940. The details of the assessment method can be found in the respective part of Kim, N. ed. (2006), so we will limit the discussion here to pointing out several characteristic features of the research. Firstly, the added value for each business sector was obtained by subtracting the intermediate consumption from the output. This method was used in the case of business sectors such as agriculture for which the intermediate consumption data were available. For the business sectors that lack such data, Kim, N. ed. (2006) estimated the added value by multiplying the output by the added value ratio 4

However, if the population estimated using this method is compared to the mid-year population used by the Bank of Korea after 1953 to obtain the indexes per person, one can find that the two sets of figures are very close. This factor was taken into consideration when selecting the mid-year population figures of the Bank of Korea for the period of 1953-1959.

12  Korean Social Sciences Review | Vol. 2, No. 2, 2012

for each business sector code recorded in the input-output tables for 1966.

Scholars supplemented data for the items that were omitted or insufficiently covered in the statistical surveys during the early colonial period and made adjustments for the discontinuities that occurred due to modifications in a survey method (for example, for rice yield in 1936).

In the case of the service industry, due to the scarcity of data, scholars often have to rely on estimations. When examining the wholesale and retail business, Park, Y. (2006), for example, reclassified the statistics for output and trade according to the business sector and estimated the value of the domestic supply (= output value – export value + import value) and distribution value for the wholesale and retail business. To examine prices, he used producer, wholesale, and retail price surveys for each product, and estimated the markup ratio at each distribution phase. By multiplying the distribution value and mark-up ratio, it is possible to obtain the total distribution margin. Then, by deducing from the figure the transport margin, it is possible to calculate the output value of the wholesale and retail business. The wholesale and retail mark-up ratio estimated this way can be used not only in assessing a wholesale and retail output, but also for converting producer prices to consumer prices when assessing expenditure. This approach, in contrast to the method used by Mizoguchi, improves the coherence and reduces any discrepancy between the GDP and its expenditure (GDE).

As for the assessment of expenditure (private consumption, government consumption, investment, etc.), which did not become a subject of surveys conducted during the period in scrutiny, Kim, N. ed. (2006) used the commodity flow method in the estimations. The method involves obtaining the amount (or volume) of domestic supply for each product from the production and trade statistics, and allocating it to the intermediate and final consumption (consumption or investment). Two types of information are required. Firstly, it is necessary to adjust the prices at each phase of distribution, which was achieved by utilizing the mark-up ratio described above. Second is the ratio of allocation of commodities to intermediate goods, consumption, investment, which was calculated when the data of the time was available. When that data was not available, the research cited the allocation ratio from the 1966 input-output tables.

The deflators by industry and type of expenditure were estimated with

Historical Statistics of Korea 13

80

20 15

70

10 60

-5

1911 1913 1915 1917 1919 1921 1923 1925 1927 1929 1931 1933 1935 1937 1939

0

50 1911 1913 1915 1917 1919 1921 1923 1925 1927 1929 1931 1933 1935 1937 1939

5

Taiwan (Mizoguchi) Taiwan 2 (Mizoguchi)

-10 Kim Nak Nyeon ed. (2006) Mizoguchi’s estimates

a. Statistical Discrepancy/GDP (%)

Chosŏn (Joo Ik Jong) Chosŏn (Mizoguchi)

b. Trends in Engel’s Coefficient (%)

Comment: Engel’s coefficient = food expenditure/private consumption expenditure*100 Figure 1. Examination of Mizoguchi’s Estimates

the price for each product (=production value/production volume) and the item’s weight in the total production (or expenditure). For the formula, the research applied the Fisher chain price index methodology. The Fisher chain price index has many strengths compared to the traditional method in which the weight for the base year is fixed during a certain period of time (usually five years). The rate of change obtained with this deflator is not affected by base year shifts. What’s more, it is possible to reflect in a deflator the price information even when the price data do not extend for a long period of time. In the 1993 SNA, the United Nations recommended adopting the chain weighted method, and the Bank of Korea moved to using this method during the recent shift of the base year to 2005.

Let’s briefly compare Mizoguchi’s estimates and the estimates suggested in Kim, N. ed. (2006). Firstly, both scholars provide the assessment of the GDP and corresponding expenditure (GDE), and theoretically, the GDP and GDE should be exactly equal. In reality, however, there is a gap between the two due to a measurement error. This gap is called the “statistical discrepancy.”

Figure 1a demonstrates the scale of the discrepancy against the GDP. We can see that, compared to the statistical discrepancy in Mizoguchi’s estimates, the discrepancy in the statistics suggested by Kim, N. ed. (2006) is significantly

14 Korean Social Sciences Review | Vol. 2, No. 2, 2012

smaller.

Figure 1b points to a problem in Mizoguchi’s estimates of expenditure.

It displays the Engel’s coefficient (=food expenditure/private consumption expenditure) for Chosŏn and Taiwan calculated based on Mizoguchi’s estimates, on the new estimate by Mizoguchi (Mizoguchi ed. 2008) for Taiwan, and on the estimates of private consumption expenditure (Joo, I. 2006) as suggested in Kim, N. ed. (2006). As we can see in the graph, the Engel’s coefficient for Chosŏn calculated based on Mizoguchi’s estimates appears much lower than that for Taiwan, which is difficult to accept since the income per capita in Chosŏn was considerably smaller than in Taiwan.

The fact that despite a trend of increase in income per capita in Chosŏn, the decline in the Engel’s coefficient is modest, is also problematic. The contradiction and problem disappear if we compare the estimate for Chosŏn

by Joo and the new estimate for Taiwan. Finally, in obtaining indicators per capita, Mizoguchi cited the estimate by Ishi (1972), but the latter estimate, as can be seen in its failure to meet the lowest limit condition suggested by Park Yi Taek, underestimates the population size for the period before the beginning of the national census.

Considering the points discussed above, we decided to use the estimates (for the period of 1911-1940) suggested in Kim, N. ed. (2006).5 In order to compile a long-term statistics by linking these estimates with the current series provided by the Bank of Korea for the period after the liberation, it will be necessary to address the three issues described below.

Firstly, in order to link the statistics of the pre-liberation (both parts of Korea) and post-liberation (South Korea) periods in a consistent manner, the series of the pre-liberation period should be divided to cover the two parts of the peninsula separately. Luckily, the production statistics of the period before the liberation provide most data by province. In addition, the results of the research that used these statistics to divide the GDP estimated in Kim, N. ed. (2006) by province (and into the GDP corresponding to the southern and northern parts of the peninsula) have been published (Kim, N. 2008). When 5

Kim, N. ed. (2006) later revised the results to reflect corrections of errors in data input. The newest version of the long-term national accounts statistics can be found in Kim, N. ed. (2012) and Cha and Kim (2012).

Historical Statistics of Korea 15

allocating the GDP calculated by province into the parts corresponding to the north and south, there is a problem with two provinces—Kyŏnggi-do and Kangwŏn-do—which are located on the Military Demarcation Line, but the North-South division ratio calculated in the above-mentioned research can be applied in this case as well. The limitation is that such a division by province (and into the north and south) is possible only for GDP, and cannot be applied to GDE statistics.

Secondly, while the Bank of Korea has been publishing the GDP statistics since 1953, updating the data after each shift of the base year according to the standard of the current series (1993 SNA) has been done only in the series from 1970, while the earlier statistics (1953-1969) follow the 1953 SNA. Accordingly, it is necessary to adjust the old series of the Bank of Korea (1953-1969) so that it matches with the current series. Kim, N. (2009a) provided the adjusted results for the GDP by economic activity and corresponding GDE, as well as for the principal indicators.

The third task is to assess the actual conditions in production during the period of political turbulence when the publication of comprehensive statistics ceased from 1941 to 1952. Due to the shortage of data, it is difficult to estimate the GDP of this period. However, using the fragmentary available material, it is possible to restore a picture of developments in production for some industries. Kim, N. (2009b) attempted to make this kind of assessment for agriculture, forestry, and fishery. Park, K. and Ryu, S. (2010) organized the scattered statistics on the production volume in mining and manufacturing during that period and made estimates of the production index. Following these studies, Kim, N. (2011) suggested a long-term GDP series (prices of 2005) for the period of 1911-2010 (excluding 1944-1945). Moreover, his study presents principal indicators—which include the rate of change and distribution ratio for each item in the GDP and GDE—as a long-term, 19112010 series (with the exclusion of 1941-1952; for the period before the liberation—northern and southern parts, after the liberation—South Korea).

Figure 2 demonstrates the estimates of the GDP per capita from 1911 by Kim, N. (2011) and Maddison (2010). In the case of Maddison’s study, for the period of 1911-1938, he uses Mizoguchi’s estimates, for 1939-1940—he cites Suh (1978), and for the period of 1941-1952, he seems to have made his own assessment yet no clear basis for the assessment is provided. For the periods

16  Korean Social Sciences Review | Vol. 2, No. 2, 2012

50000

1.5

5000

1.0

Kim Nak Nyeon (2011) Maddison (2010) Ratio

0.5 1911 1916 1921 1926 1931 1936 1941 1946 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006

500

Comments: 1) Ratio (scale on the right side) is Maddison/Kim Nak Nyeon. 2) GDP per capita (scale on the left side) unit is the 1990 Geary-Khamis dollar.

Figure 2. Long-term Trends in GDP per Capita (Maddison vs. Kim Nak Nyeon)

of 1953-1969 and after 1970, both scholars rely on the data of the Bank of Korea, and each of the two series is linked and calculated in the 1990 GearyKhamis dollars. To compare the two series, their values for 1970 have been matched, and for Kim, N. (2011), the series were extended with values for the periods before and after 1970 using the rate of change of the GDP per capita suggested in Kim, N. (2011).

In order to discern the discrepancy in GDP per capita between the two series, the figure also provides the ratio between them (scale on the right side). At its maximum (the early 1930s), the gap reaches 28%. The discrepancy in the period after 1953, despite the fact that both scholars used the material of the Bank of Korea for that period, is caused by the difference in the adopted versions of the series. Kim, N. (2011) based his research for the period after 1970 on the recent series (2005 prices), which uses the chain weighted method, and for the period of 1953-1969, he cited the 1975 constant prices series (Bank of Korea 1982; both series are currently available on the homepage of the Bank). In contrast, Maddison combined several versions of constant price series published earlier. The discrepancy between the series of estimates for the period prior to 1953 is also large. It results from a complex

Historical Statistics of Korea 17

set of factors: problems in Mizoguchi’s estimates described earlier, the problem of dividing the GDP of the colonial period into that of the northern and southern parts of the peninsula,6 and the above-mentioned problem of the population figures used by Maddison. At present, Maddison’s research is widely cited around the world, but in our view, it is necessary to revise his estimates and replace them with the estimates suggested in Kim, N. ed. (2012), which provided clear evidence for the assessment.

Let’s look closely at the long-term trend in GDP per capita (left side scale) suggested by Kim, N. (2011), as shown in Figure 2. The trend is marked by a logarithmic scale, so its inclinations stand for the rate of change. We can see that prior to the liberation, the GDP per capita increased annually by 2.3%, whereas during the period of high growth after the liberation, the rate of change accelerated. The peak during the pre-liberation period was in 1941, after which, in 1946, a year after the liberation, the production fell to 43.4% of that level. The subsequent recovery was aborted by the Korean War, and the GDP per capita returned to the pre-liberation level in 1969. Currently (2010), it is 12.9 times higher than at its peak during the pre-liberation period.

There are several reasons for the delayed recovery after the liberation, wherein it is important to note that, prior to the liberation, the GDP figures included the income of the Japanese. Moreover, the population surged after the liberation due to the return of Korean expatriates from abroad, inflow of refugees from North Korea, and the baby boom of the 1950s (Kim, N. 2009b). If we look not at the GDP per capita, but at the total GDP, the point of recovery to the pre-liberation period level will move up by 11 years, to 1958. Therefore, a rapid growth of the population in the 1950s was putting off the recovery of the GDP per capita. This point illustrates what kind of findings can be made using the long-term statistics of the national accounts.

Information about long-term trends in a variety of other areas is provided in Kim, N. ed. (2012).

6

In order to divide Mizoguchi’s estimate for GDP into the GDP of the north and south, Maddison applied the ratio of South Korea in the 1940s to the entire period. However, if we consider that the production ratio of the northern part during the colonial period rapidly increased, especially from the 1930s, applying this method leads to a serious distortion of the actual situation. Regarding this and other problems in Maddison’s statistics see Kim, N. (2009a).

18 Korean Social Sciences Review | Vol. 2, No. 2, 2012

IV. TRADE For trade statistics, since the data are collected through the customs clearance, it is possible to obtain long-term series going back to the time when the Chosŏn Dynasty first opened its ports to trade (1876). However, there is a big deviation with the data during that period. From 1876 and until maritime customs were established in the treaty ports, there was no institution to compile trade statistics. However,we can get a sense of the circumstances of the time through the statistics gathered by Japan regarding its trade with Chosen (“Annual Returns of the Foreign Trade of the Empire of Japan”). After the maritime customs were built, they were operated by China, so the trade statistics for Chosen during this period were provided in an appendix7 of the reports published by the Chinese maritime customs. After the Sino-Japanese War, this publication also ceased, and the trade statistics of Chosen maritime customs for the period can be found only in fragments—for example, in “Opisanie Korei [Description of Korea].” After the annexation (1910), the Japanese Government-General took control over the custom procedures and compiled the trade statistics (“Yearbook of Overseas Trade of Chosen”) relatively systematically. The statistics for trade with Japan from 1942 to 1944, however, remain in a limited form. After the liberation, the Ministry of Commerce and Industry and the Customs Bureau (later renamed the Korea Customs Service) compiled the trade statistics—each according to its own standard—but until the “Statistical Yearbook of Foreign Trade” started to come out, the data was dispersed in a number of documents published by several agencies.

Several attempts have been made to organize the trade statistics of the period after the opening of ports to obtain the trade price index (Kang, D. 1962; Choe, Y. 1972; 1974; Kim, N. 2001), yet none of them have succeeded 7

This document is the “Report on Trade of Korea and Abstract of Statistics” of the Chosŏn maritime customs, which was an appendix of the “Returns of Trade at the Treaty Ports and Trade Reports” published by the Chinese maritime customs (Imperial Maritime Customs). The trade statistics in the report covered the period from 1885 to 1893. The appendix was later published in Korea under the name of “朝鮮海關年報 [Annual Returns of Chosŏn Maritime Customs].”

Historical Statistics of Korea 19

in building an undisrupted index because the scholars have not been able to gather data for certain years. The trade price index of the colonial period was estimated in Mizoguchi and Umemura (1988) and Hori et al.

(2006). Both studies used the data from the “Yearbook of Overseas Trade of Chosen.” The second of the two studies estimates the trade price index for the entire colonial period, and follows the SITC (Standard International Trade Classification) of trade items, which makes a cross-country comparison possible. Park, K. and Kim, N. (2009) discovered and added to the index the trade statistics of the period after the opening of ports and the period immediately after the liberation and then linked it with the current trade statistics (and Comtrade DB of the UN), which started in 1964. The result created long-term trade statistics for the period of 130 years beginning from 1877.

Different periods used different currencies and units of quantity. Moreover the classification method for trade items also varied but researchers adjusted them to achieve consistency. However, the coverage area for the period before the liberation (both parts of Korea) and after the liberation (South Korea) is not the same, which is unavoidable since the trade statistics of the former period cannot be divided into that of the north and south.

Figure 3a illustrates long-term trends in import and export unit value indices and terms of trade based on Park, K. and Kim, N. (2009). The year 1945 is omitted due to the shortage of data. In the pre-liberation period, the index reaches 100 in 1935; in the post-liberation period, it is 100 in 2005. If the export unit value index is divided by the import unit value index, we can obtain the net barter terms of trade, which trends are presented in Figure 3b.

The rupture in the currency of unit price—won in the period of 1946-1954 and dollar in the following period—is marked with the dotted line. The net barter terms of trade rapidly rose after the opening of ports, dropped during WWI, and after that were showing a slight trend toward improvement.

During the post-liberation period, the fluctuations were severe due to oil shocks and other factors; whereas in the recent period, with the decrease in export unit prices for Korea’s main export products—semiconductors and information technology equipment—the terms of trade have been continuously worsening.

On the other hand, the net barter terms of trade show export and

20 Korean Social Sciences Review | Vol. 2, No. 2, 2012

1000

200

160

100

150

120

10

100

80

1

50

40

0.1

0

0

0.01

Export unit value index Import unit value index

a. Export and Import Unit Value Indices

1877 1887 1897 1907 1917 1927 1937 1947 1957 1967 1977 1987 1997 2005

200

1877 1885 1893 1901 1909 1917 1925 1933 1941 1949 1957 1965 1973 1981 1989 1997 2005

250

Net barter terms of trade Income terms of trade

b. Net Barter and Income Terms of Trade

Comments: 1) In pre-liberation index, 1935=100; in post-liberation index, 2005=100.

2) In Figure 3b, the scale for net barter terms of trade is on the left side, the scale for income terms of trade is on the right side.

Data: Park, K. and Kim, N. (2009).

Figure 3. Long-term Trends in Trade Index

import price fluctuations only and do not reflect changes in the volume of commodities. In order to assess the actual profit from trade, one needs to consider the income terms of trade. The latter is calculated by multiplying net barter terms of trade by export volume index. The trends in the income terms of trade are shown in Figure 3b. As can be inferred from the formula, the income terms of trade stand for the quantity of imports that a country can obtain with the total export earnings. For instance, a relative decline in the price of an export product makes the net commodity terms of trade unfavorable, but at the same time has the effect of increasing the export volume. What’s more, if the latter effect is greater than the former, the income terms of trade improve, even if the net barter terms of trade are disadvantageous. From the figure, we can see that the income terms of trade developed in the favorable to Korea direction in most periods, including the time when the net barter terms of trade were disadvantageous (an exception is the wartime of the 1940s).

Historical Statistics of Korea  21

10000 1000 100 Korea World

10

Japan

0.1

1877 1883 1889 1895 1901 1907 1913 1919 1925 1931 1937 1943 1949 1955 1961 1967 1973 1979 1985 1991 1997

1

0.01

Data: Park, K. and Kim, N. (2009); Maddison (1995); Statistics Bureau of Japan (http:// www.stat.go.jp/data/chouki).

Figure 4. Comparison of Export Volume Indices (1935=100, 1970=100).

Figure 4 is limited to exports. It shows long-term trends in the export volume index (=export value/export unit value index) and allows for a comparison with the trends in Japan and the world average. The fast growth trend of Korean exports stands out not only against the world average, but also against Japan. One more noticeable point is that the export-led growth, commonly known as a major characteristic of the period of rapid growth in the 1960s, was also present after Korea’s opening and during the colonial period.

V. CONSUMER PRICES Although some fragmentary information about commodity prices still remains from the traditional period,8 it was not until the colonial period that 8

For example, information on the prices of rice was collected in each region of Korea in the 18th-19th centuries (Jun, S. 1998; Rhee, Y. and Jun, S. 2000; Rhee, Y. and Park, Y. 2001); and, along with prices for some other commodities, was compiled into the

22 Korean Social Sciences Review | Vol. 2, No. 2, 2012

commodity price surveys started to be carried out systematically. The survey institutions included the Japanese Government-General, Bank of Chosen, and the Chamber of Commerce and Industry. They examined prices for major products in large cities once a month (or quarterly) and published yearbooks, monthly reviews, and other related reports. In the beginning, the surveys focused mainly on wholesale prices, but from the 1920’s they also gathered data on retail prices. In the 1930s, a retail price index started to appear in the “Monthly Returns of the Chosen Government-General” and other reports.

However, the prices in this index were not weighted but calculated as simple arithmetic averages, and no information on services, but only on goods, was included, so it is difficult to link it with a modern consumer price index.

After the liberation, the consumer price survey became the responsibility of the Bank of Chosen (later renamed the Bank of Korea), which published the wholesale and retail consumer price indices, but the statistics still had the same problems as the above-mentioned problems of the pre-liberation index. The first full-scale consumer price index that can be linked with the current index was compiled by the Bank of Korea in 1955. However, it covered only the Seoul area. In 1965, the responsibility for consumer price surveys was transferred to the Bureau of Statistics of the Economic Planning Board (later renamed the National Statistical Office). From this time onward, the consumer price index of major cities and combined consumer price index of all major cities have been compiled up to the present. Currently, the webpage of the National Statistical Office provides a long-term, retroacted to 1965, series of the consumer price index by city and of all cities (total); and a detailed series of the index, divided into 12 categories, for the period from 1985.

Therefore, there are two issues to be resolved in order to obtain a longterm series of the consumer price index. 9 The first one is estimating the commodity price statistics (Park, K. and Lee, W. 2001; Park, K. 2004).

The Bank of Korea (2008) provides the producer price index (base year 2005) as a long-term series retroacted until 1910. To achieve this purpose, the researchers of the Bank linked three wholesale price index series (in reference prices of July 1910: 1936; and 1947) compiled by the Bank of Chosen; but the index has the following limitations. Firstly, not only is the number of surveyed items small and restricted to the Seoul area, but the first two indices are calculated using the formula for

9

Historical Statistics of Korea 23

consumer price index of the pre-liberation period. Some of the studies that attempted to fulfill this task are: Mizoguchi (1975), Huh, S. (1981), Joo, I. (2006), Park, K. and Kim, N. (2011). Joo, I. (2006), using the unit price of each item, obtained the deflator for the private consumption expenditure based on the Fisher chain index; whereas all other studies used the data of the prices by city surveys published in the “Yearbook.” Although a unit price can give us information on many items, its weakness is that it cannot sufficiently reflect the actual price paid by a consumer as compared to retail prices surveyed throughout a year. The limitations of the research by Huh, S. (1981) are that the “Annual Average Price Table” published by the city of Keijo (Kyŏngsŏng, as Seoul was called during the colonial period), on which he based the price index for Seoul, is in wholesale prices. Moreover, for the national consumer price index, instead of assigning a weight to each city, the study used a simple average price. In contrast, Park, K. and Kim, N. (2011) added service rates, etc. to the prices by city published in the “Yearbook” and estimated the consumer prices (1907-1939) in eight cities and nationwide, using as weights the composition of private consumption expenditure by item (assessed with the commodity flow method).

The second task is to estimate the consumer price index of the years immediately before and after the liberation. The prices by city surveys of the “Yearbook” stopped in 1939, and from that time the only institution that continued price surveys until the period after the liberation was the Bank of Chosen. However, the coverage of the Bank of Chosen surveys was limited to Seoul, and, until the liberation, it examined only the wholesale prices, whereas the retail prices were added to it after the liberation. Kim, N. and simple (or geometric) average, without considering the weight of each item. Only the wholesale price index compiled by the Bank of Korea from 1955 can be linked to current producer price index. The data for extending the series retroactively are confined to the data yielded by surveys of the Bank of Chosen, but abundant material on wholesale prices during the pre-liberation period is available from other sources, including the surveys of wholesale prices for a much wider range of items, conducted nationwide in major cities by the Japanese Government-General (Finance Bureau) from 1907 to 1941. The task for the future is to retroactively extend the current producer price index to the pre-liberation period, using this abundant data and a more coherent methodology.

24  Korean Social Sciences Review | Vol. 2, No. 2, 2012

1000

50 40

800

30 600

20

400

10

-10

-200

1907 1916 1925 1934 1943 1952 1961 1970 1979 1988 1997 2006

0

a. Total

1907 1912 1917 1922 1927 1932 1937 1942 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007

0

200

-20 -30

b. Rate of change restricted to less than 50%

Data: Park, K. and Kim, N. (2011).

Figure 5. Fluctuation Rate of the Consumer Price Index of Seoul (1907-2009, %)

Park, K. (2007) supplemented these data with the information about service rates and provided an assessment of the consumer price index of Seoul for the period of 1936-1955.

With the results of the above-described estimates it is possible to compile a long-term series of the consumer price index of Seoul based on the following method.10 If we connect (1) estimates in Park, K. and Kim, N. (2011) for the period of 1907-1939; (2) estimates in Kim, N. and Park, K. (2007) for the period of 1939-1955; (3) the series of the Bank of Korea for the period of 1955-1965; and (4) the series from the website of the National Statistical Office for the period of 1965-2009, we can obtain the index extending from 1907 to 2009. In each of the suggested series one year overlaps with another series, so that it is possible to link the entire period using the ratio between the two indices of the overlapping years as a linking coefficient.11 Figure 5 10

The National Statistical Office (2004), in the process of organizing the consumer price index that uses 2000 as the base year, suggested a long-term series of the total index retroacted until 1945. However, the data used and the assessment procedures were questionable. A detailed analysis can be found in Kim, N. (2010: 142).

11 The webpage of the National Statistical Office also provides the index classified in 12 categories (base year 2005) but the latter index only goes back until 1985. In the case

Historical Statistics of Korea  25

demonstrates a century-long annual fluctuation rate of the consumer price index of Seoul obtained in the way described above. In Figure 5a, due to the hyperinflation of the period immediately after the liberation and during the Korean War, the fluctuation rate of the other periods cannot be seen clearly; to discern the trends more easily, in Figure 5b the fluctuation rate is restricted to that of less than 50 percent.

As it appears in Figure 5, the turning points in the long-term consumer price development are the following. The first turning point was the beginning of price control (price freezing on September 18, 1939) during the transition to the wartime economy. After the freeze, the prices appear stable until the liberation because the price index was calculated with controlled prices. However, during this period the amount of issued currency rapidly increased while the production of consumer goods shrank, so the pressure of inflation was high but suppressed by the government, which led to the emergence of a black market. The pressure blew out at once when Korea was liberated; therefore, the starting point of the wartime inflation should be regarded as 1939.

The second turning point is 1958, when prices fell for the first time during the post-liberation period. Immediately after the liberation, the collapse of the economic system and the Korean War triggered intensified inflation, and at the request of the United States, which considered stabilization more important than economic growth, from the late 1950s onward, the Korean government fiercely pushed forward economic stabilization reforms. Owing to this factor, the hyperinflation of the turbulent period started to settle.

The third point is 1982, after which the inflation rate entered the so-called “one-digit stage.� We can say that the high growth, which was accompanied by comparatively high inflation, gave way to stability.

If we calculate the average inflation rate during the four periods of time using the three points described above as boundaries, for the period of 19081939, it will be 4.1%; for the period of 1939-1957, 138.2%; for the period of 1958-1981, 13.7%; and for 1982-2009, 4.4%. Although the figures for the of five of the index categories (prices of food, housing, lighting and heating, clothing, and incidental expenses), it is possible to make a long-term series for the period of 1907-1985 (Park, K. and Kim, N. 2011: 165-7).

26 Korean Social Sciences Review | Vol. 2, No. 2, 2012

first and fourth periods look similar, there is an important difference. As is reflected in Figure 5, during the pre-liberation period, there was a repeating, regular pattern of ups and downs in consumer prices; after the liberation, with the exception of a decline in prices in 1958, inflation—however inconsistent, rapid or slow—became a common condition. During the first period, fluctuations in prices were severe due to the shocks of World War I and the Great Depression, but the inflation of the fourth period was gradual.

Behind this phenomenon is the difference in the currency system. Prior to the liberation, Chosen banknotes were issued on the basis of the Japanese currency reserve, so that the former could be exchanged for Japanese banknotes at a 1:1 rate. Therefore, the government could not regulate the supply of currency at its discretion as was done in the managed currency system after the liberation. As a consequence, business cycles often entailed rises and declines in prices. In comparison, the relatively large issuance of currency during the third period was accompanied by relatively high inflation—along with high growth; and, as it is widely known, constraining the amount of issued currency during the fourth period, led to the stabilization of prices. In addition, during the wartime in the second period, prices were controlled, but the black market emerged also.

The discussion above demonstrates that the history of Korean consumer prices, in general, has gone through four different phases, and by examining it as a whole, we can relativize and grasp each period. Along with changes in the economic system, in each period Korea has experienced a unique situation in the consumer prices; and the long-term statistics can serve as evidence of the effect that the transformation in the system and policies at different periods had on consumer prices. Without a doubt, this century-long consumer price index can also be utilized for converting into current value and comparing the nominal amounts of income and expenditure across the periods.

VI. CONCLUSION The long-term statistics described in this study demonstrate that the transition from the traditional society after Korea opened its ports to trade was swift. We can see that from the colonial period the population and GDP

Historical Statistics of Korea 27

rose simultaneously (see Table 1 and Figure 2), which means that it was a period of modern economic growth. Although it is impossible to examine the trends prior to 1910, it can be inferred that modern economic growth started before the colonization, during the period of the opening. That is because, as mentioned above, the rapid expansion of trade and corresponding relative price changes must have exercised a profound influence on the production of the time and the contact with western systems and modern health technologies was increasing. From this perspective, discovering the micro data of the opening period and bringing light to the actual circumstances of social change during that period constitutes an exciting area of research.12 The long-term statistics in each field discussed above also indicate how great the impact of the system change was after the liberation, and how different the mode of economic growth was before and after the liberation. For example, a comparison between the periods of high growth during the colonial time and after the liberation shows an acceleration of the economic growth rate in the latter period; explaining the reasons for this difference becomes an important task. To do so, it is necessary to expand the perspective to studying not only economic, but also social and institutional factors. This is also a reason why compiling long-term statistics should be extended to the realm of social statistics. There have been attempts to compare the Korean case of high economic growth with other countries’ cases; it is meaningful to make similar attempts to expand the research timeframe.

As we have seen, long-term statistics allow for examining a particular time period amidst the long-term trends as well as comparing it with other periods in order to find out where the differences among them are rooted. This is the first point illustrating the importance of compiling long-term statistics.

The second point is that compiling historical statistics expands the sample period used to support a hypothesis about a given phenomena. Let’s take consumer price trends as an example—although these days prices are relatively stable, soon after the liberation and during the Korean War, Korea experienced hyperinflation, but there was also a time when a drop in prices was a problem. During the period of high growth, there was a time when 12

For example, Cha, M. (2001) considers the starting point of the modern economic growth to be around 1900, and the impulse for it to have come from the outside.

28 Korean Social Sciences Review | Vol. 2, No. 2, 2012

economic growth and inflation occurred side by side, and a time when price controls led to the emergence of a black market. These diverse experiences almost appear as if Korea unintentionally conducted various experiments on phenomena related to consumer prices, and can be used to investigate the effects of system and policy changes on consumer prices.

Thirdly, it is important to note the uniqueness of Korea in historical statistics. The regime changes that Korea experienced several times throughout its modern history are comparable with very few countries around the world. As is widely known, during the traditional period, Korea was forced to adopt an open economic system through an unfair treaty. Then, it had a colonial system (controlled economy during the wartime). After the liberation, due to the division, it experienced both the socialist system (North Korea) and the market economy (South Korea). As was described earlier, these profound transitions brought about discontinuities in the statistical data and make it difficult to compile coherent long-term statistics. The difference between the coverage areas before and after the liberation—a consequence of the division of the country—further aggravates the situation. However, if we look at it from another angle, Korea’s historical experience provides ample material for studying the relationship between the institution (or system) and economic growth (and social changes). Compiling long-term statistics can help bringing light to this relationship.

In conclusion, we would like to emphasize the role that long-term statistics can link economics and economic history. Currently, studies of the traditional period, colonial period, early post-liberation period, and period of high growth are conducted separately—almost without any cross-disciplinary approaches. Economists do not look at the time prior to the beginning of the high growth, whereas the scholars of economic history each examine their own time interval and rarely communicate with those who major in other periods. Along with differences in research interests and methodology, such a division among scholars is probably due to a difficulty in approaching another period, stemming from the data barrier. Long-term statistics not only lowers this barrier but can also expand the space for communication between researchers with different majors. The three points above that stress the significance of long-term statistics can also serve as examples demonstrating this possibility.

Historical Statistics of Korea 29

REFERENCES Books and Articles in Korean and Japanese

Keijo City. 1939. Industry Survey (『産業要覽』).

Keijo Chamber of Commerce and Industry. Various issues. Chosen Economic Journal (『朝鮮經濟雜誌』). . Various issues. Monthly Economic Review (『經濟月報』).

Public Information Agency Bureau of Statistics. 1949. Advance Report on the First General Population Census of the Republic of Korea (『대한민국 제1회 총인구 조사결과속보』).

Ministry of Home Affairs Bureau of Statistics. 1955. Report on the First Simplified General Population Census (『대한민국 제1회 간이총인구조사보고』).

Ministry of Finance Bureau of Customs. Annual Returns of the Foreign Trade of the Empire of Japan (『大日本外國貿易年表』).

Republic of Korea Public Information Agency Bureau of Statistics. Various issues.

Korea Statistical Yearbook (『대한민국통계연감』).

Russian Ministry of Finance. 1984. Choe Seon and Kim Byeong-rin (Transl.)

Academy of Korean Studies Data Research Service (Ed.) Hanguk-ji [Opisanie Korei] (『한국지』).

Ministry of Finance Customs Bureau. Various issues. Statistical Yearbook of Foreign Trade (『무역통계연보』).

Bank of Chosen. Various issues. Bank of Chosen Monthly Statistical Review (『朝鮮 銀行統計月報』).

Government-General of Chosen. Various issues. Chosen Government-General Report Forms (『朝鮮總督府報告例』). . Various issues. Monthly Returns of the Chosen Government-General (『朝 鮮總督府調査月報』). . Various issues. Statistical Yearbook of the Chosen Government-General (『朝鮮總督府統計年報』). . 1925. Results of the Simplified National Census Conducted in the 14th Year of Taisho (『大正十四年 簡易國勢調査結果表』). . 1930. Report on the Chosen National Census Conducted in the 5th Year of Showa (『昭和五年 朝鮮國勢調査報告』). . 1935. Report on the Chosen National Census Conducted in the 10th Year of Showa (『昭和十年 朝鮮國勢調査報告』). . 1940. Summary of the Results of the Chosen National Census Conducted

30 Korean Social Sciences Review | Vol. 2, No. 2, 2012

in the 15th Year of Showa (『朝鮮昭和一五 年國勢調査結果要約』). . 1944. Report on the Population Census Results. 19th Year of Showa (『人口 調査結果報告 昭和一口年』). . Various issues. Vital Statistics of Chosen (『朝鮮人口動態統計』). . Various issues. Yearbook of Overseas Trade of Chosen (『朝鮮貿易年表』).

National Statistical Office. 2004. Consumer Price Index: 1945 – 2003 (CD-ROM) (『소비자물가: 1945-2003』(CD판)).

Bank of Korea. 1968. Compiled Report on the Input-output Tables in 1966 (『산업연 관표 작성보고 1966』). . 2008. Price Statistics Overview (『물가총람』).

Bibliographic Information Center for Korean Studies (Ed.). 1885-1893. Imperial Maritime Customs. Returns of Trade at the Treaty Ports and Trade Reports (Report on Trade of Corea and Abstract of Statistics) (『朝鮮海關年報』).

Naksungdae Institute of Economic Research (http://www.naksung.re.kr).

Ministry of Internal Affairs and Communications of Japan, Statistics Bureau (http://www.stat.go.jp).

National Statistical Office (http://www.kostat.go.kr).

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Kim, Nak Nyeon. 2001. “The Long-Term Trend of the Chosŏn Trade.” Ahn, Byung Jik (Ed.). The History of Economic Growth of Korea. Seoul: Seoul National University Press (“조선무역의 장기동향”. 『한국경제성장사』). . 2008. “Estimating Gross Regional Domestic Product (GRDP) of Korea during the Colonial Period.” Review of Economic History 45: 3-43 (“일제시 기 우리나라 GDP의 도별 분할”. 『경제사학』 45: 3-43). . 2009a. “National Accounts of Korea, 1911-2007: A Long Term Series of Principal Indicators.” Economic Analysis 15(2): 55-95 (“한국의 국민계정, 1911-2007”. 『경제분석』 15(2): 55-95). . 2009b. “Long-term Trends and Cross-country Comparison of GDP of Korea.” Journal of Economic Development 15(2): 79-108 (“한국 GDP의 장기 추이와 국제비교”. 『경제발전연구』 15(2): 79-108). . 2010. “Historical Statistics of Korea: Current Situation and Tasks.” A Study on the Compilation and Use of Historical Statistics of England, United States, Japan and Korea: the Development of Methodology for Enhancing the Quality of Historical Statistics (National Statistical Office Policy Research Service, October 2010) (“한국의 역사통계: 현황과 과제”. 『역사통계 품질제고를 위한 해외 정비사례 연구 및 방법론 개발』).

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Mizoguchi, Toshiyuki. 1975. Economic Growth of Taiwan and Chosen. Tokyo: Iwanami Shoten (『臺灣, 朝鮮の經濟成長』). . 2006. “Book Review: “Economic Growth in Korea 1910-1945”.” Review of Economic History 41: 119-26 (“서평: “한국의 경제성장 1910-1945”.” 『경제사 학』 41: 119-26).

(Ed.). 2008. Long-term Economic Statistics of Asia 1: Taiwan. Tokyo: Toyo Keizai Shinposha (『アジア長期經濟統計 1: 臺灣』).

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. 2010. Historical Statistics of the World Economy: 1-2006 AD (http://www. ggdc.net/maddison).

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Korean Social Sciences Review | Vol. 2, No. 2, 2012: 35-62

Labor Flexibilization after the Foreign Exchange Crisis and Changing Corporate Welfare in Korea* Lee, Su Yun** and Rho, Yeon Hee*** The purpose of this study was to empirically test whether corporate welfare in Korea has grown since the mid 1990’s. The result of this study shows that after the IMF fiscal crisis, the labor flexibilization policies within labor markets initiated flexible forms of employerprovided benefits. These benefits included cafeteria plan or profit-based funds, which ultimately led to a decline of corporate welfare rather than growth. Existing studies do not agree on a trade-off of statutory and voluntary social provisions since the crisis of welfare state.

Existing studies show that some nations experienced a decline of corporate welfare that coincided with a growth of state welfare, while other nations experienced a decline of state welfare coincident with a growth of corporate welfare.

Usng the case of Korea, this study suggests an archetypal development of a welfare system that experienced a decline of corporate welfare alongside a growth of state welfare provisions.

Keywords: Corporate Welfare, Labor Flexibilization, IMF Fiscal Crisis, Korea

I. Introduction Unlike Western countries, Korea has a much more developed corporate welfare system than a state welfare system. The significant difference in the development between state welfare and corporate welfare has been cited as one of the characteristics of Korea’s social welfare (Song, H. 1992; Choi, G. Translated from the article published in Korean Journal of Social Welfare 58(2), 143166, 2006 with permission from Korea Association for Social Welfare Studies. ** Professor, Department of Social Welfare, Sejong University ** Professor, School of Social Welfare, The Catholic University of Korea *

35

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1992a; 1992b; Lee, J. 1999). There is also the possibility that corporate welfare will continue to grow (Choi, G. 1992a; 1992b). Choi, G. (1992a) argues that one of the reasons why corporate welfare has developed more than state welfare is that the state relegated the survival of workers and their families to the responsibility of the market (i.e. corporations).

In order to control the working class as they became post-politicalized and demobilized. He argues that if state welfare is limited in its growth, corporate welfare will continue to expand. In addition, some view it as desirable to establish a Korean social welfare model centering on corporate welfare as the state welfare’s development will be limited (Lee, G. 1986).

Others have argued that corporate welfare in Korea will experience contraction rather than expansion (Song, H. 1992). Song, H. (1992) reasons that in Korea, the state has intervened in economic activity in various forms including wage control and resource allocation. Corporations have benefited greatly from it these interventions, contributing to the expansion of corporate welfare because corporations felt obligated to pay back for these benefits. He argues however that if corporations’ competitiveness falls to a risky level, the national economy falls into a recession, or corporations have little to gain from government-backed economic liberalization, that sense of obligation would shrink dramatically.

Will corporate welfare in Korea continue to grow as it has and serve as one of the most important cornerstones of Korea’s social welfare? Or will it stop growing and take another form in line with changes in the economic system? Indeed in the wake of the 1997 financial crisis, many corporations in Korea have started shifting away from a seniority based wage system to the annual salary system in an attempt to make the labor market more flexible.

As part of this wave, there has been movement towards reducing the nonwage labor cost of the corporate welfare system. Within this system, the amount of the employee welfare fund that is linked to performance has been gradually increasing. In addition, the adoption of cafeteria plans, where the corporation’s performance is linked to its corporate welfare costs to increase flexibility have also risen. This suggests that corporate welfare in Korea is changing from an institution of fixed-cost which is given in exchange for employment to one that is flexible and market-friendly and is greatly dependent on corporate management.

Labor Flexibilization after the Foreign Exchange Crisis 37

This study analyzes how the labor flexibilization strategy in the wake of the foreign exchange crisis has changed corporate welfare in Korea. I use the Esping-Andersen’s argument, which attributes changes in corporate welfare to labor flexibilization, resulting from a production paradigm towards postFordism. Esping-Andersen (1996) argues that a shift to post-Fordism caused stagnant growth in corporate pensions in the 1980s and a decrease in the pension beneficiaries. In short, I analyze the impact of labor flexibilization on corporate welfare in Korea amid a shift towards post Fordism using an Esping-Andersen framework.

One study by Kim, J. (1999) on corporate welfare changes after the foreign exchange crisis is restricted to just 1998; this makes it difficult to gauge changes caused by labor flexibilization over the long term. In contrast, Kim, J., Park, C. and Oh, H. (2004) charted the effects of the crisis from its beginning through 2001. Their study (2004), however, does not systematically observe the changes in terms of labor flexibilization. Our study differs in that I examine the changes wrought by labor flexibilization from the beginning of the foreign exchange crisis to 2003.

Section 2 withwill establish the theoretical background of how labor flexibilization following changes in the production paradigm of post-Fordism changed corporate welfare. Sections 3 and 4 will analyze how corporate welfare changed before and after the foreign exchange crisis in Korea. I will also argue that such changes were caused by the labor flexibilization strategy in the wake of the crisis. Section 5 will present the conclusion. Here I will propose that Korea’s shrinking corporate welfare can be understood as a sign of international convergence. That convergence isevidenced by Scandinavian’s shrinking state welfare, increasing corporate welfare as well as the United States’ expanding state welfare and shrinking corporate welfare systems..

II. THEORETICAL BACKGROUND: LABOR FLEXIBILIZATION STRATEGY AND CHANGES IN CORPORATE WELFARE In this section, I will look into the decrease in corporate welfare as the result of the labor flexibilization strategy. This strategy followed a shift in the

38 Korean Social Sciences Review | Vol. 2, No. 2, 2012

production paradigm and the development of a flexible welfare benefit system which coincided with an expansion of performance,based corporate welfare compensation.

1) The Concept of Flexible Use of Labor Post-Fordism is a new paradigm that helps corporations improve their competitiveness. This is done through a flexible production system, defined as flexible specialization combined with lean production (Park, S. 1994: 275; Cho, M. 1995). The change in the production paradigm resulted from higher flexibility in the production system. These changes were made to cope with microelectronic automation, in which small quantity batch production replaced mass production, as well as the dramatic changes which occurred in demand (Park, S. 1994: 275; Koo, J. 1998: 640).

Post-Fordism is separated into three types of flexibility: flexibility in labor use, flexibility in production technology, and flexibility in industrial organization and capital structure (Park, S. 1994; Cho, M. 1995). Flexibility in labor use forms consists of functional flexibility, numerical flexibility, and financial flexibility (Park, S. 1994: 275). Functional flexibility refers to the placement and functions of labor within the workplace that improve the level of employees’ skillfulness. Numerical flexibility is an adjustment of the amount of employment and working hours. This tactic regulates the demand for labor over a short period of time (Cho, D. 2001). Financial flexibility refers to differentiating worker’s wages depending upon their ability and performance. Wage differentiation is in turn subject to the corporation’s financial capability and the supply and demand in the labor market. In short, labor flexibility is a multidimensional concept involving qualitative and quantitative aspect of human resources combined with wages (Eo, S. 1994).

2) Relationship between Labor Flexibilization Strategy and Corporate Welfare Financial flexibilization as one form of labor flexibilization strategies involves both regulating the absolute level of waves via wage freezing or reduction in the short term along with linking wages to ability or performance,

Labor Flexibilization after the Foreign Exchange Crisis  39

diversifying the wage system and flexibilizing welfare benefits as a long term indirect strategy (Ryu, G. 1998). We will now examine the concepts of reducing welfare costs, expanding variable wages and flexibilizing welfare benefit systems as a means of labor flexibilization.

(1) Reducing Non-Wage Costs (Welfare Benefit Costs) as a Means of Labor Flexibilization Flexibilizing labor through financial flexibilization is achieved through curtailing labor cost increases (Park, D. 2004: 124). Limiting the rise in labor costs can be achieved in two ways: through unit labor cost and non-wage labor cost. There are different strategies for limiting unit labor costs. These include increasing productivity, improving the wage system, and diversifying wage levels. Controlling non-wage labor costs can be achieved primarily by reducing welfare benefit cost. In other words curtailing of non-wage labor costs also reduces welfare costs, which can in turn help change the corporate welfare system.

As referred to above, Korea witnessed a decrease in the growth of corporate welfare costs following the foreign exchange crisis. That crisis resulted from corporations flexibilizing their labor flexibilization. Exactly how that corporate welfare changed and its relationship with labor flexibilization will be discussed in Sections 3 and 4 in greater detail.

(2) Flexibilization of the Welfare Benefit System as a Part of Labor Flexibilization Under the existing welfare benefit system, all employees receive additional welfare benefits per union rules, which raise overall benefit costs. The flexible welfare benefit system allocates a certain amount of welfare for each worker and lets him or her choose (Kim, J. 2004). In this way, workers needs are met while welfare benefit costs can be predicted to a certain degree. The corporation, meanwhile, is able to regulate the level of the total welfare costs as well as labor costs (Argument in Writing 2011: 38). Welfare costs are included in the overall budget, which gives corporations ultimate control.

This means corporations are able to reduce the total welfare benefit budget and instead allocate funds to individuals in order to curtail rising labor costs during recessions. Thus corporations enters adopt and proliferate flexible

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welfare systems as part of a financial flexibility strategy to control total labor costs. Korean corporations’ adoption of the flexible welfare benefit systems can thus be viewed as part of a financial flexibility strategy to be discussed further in Sections 3 and 4.

The various forms of flexible welfare benefits are collectively called the cafeteria welfare system or a selective welfare benefit system. The flexible benefit plan allows individual employees to choose from multiple welfare menus (i.e. medical support, housing subsidies, scholarships for children, self-development, and pension subsidies) within a fixed budget just as one chooses what to eat in a cafeteria (Song, G. and Park, G. 1997). Some corporations offer flat sum selective welfare system, but most provide a flat rate system that takes into account years of service, position and recent performance. Such differences highlight the differences between corporate welfare systems and facilitates competition amongst workers (Cho, G. 2001).

(3) Expansion of Performance-Sharing as a Means of Labor Flexibilization Another financial flexibilization strategy is linking the wage system to corporate performance (Ryu, G. 1998). This particular strategy regulates total labor costs (Park, W. 1998), and is known as a performance sharing system.

Sharing can be in the form of cash or stocks, distributed as either a bonus or in a welfare fund raised for later use (Ryu, G. 1998). Performance sharing to flexibilize labor use can impact the creation and development of the corporate welfare fund system.

In Korea, the employee welfare fund system was also a part of labor flexibilization strategy. I will discuss further how the labor flexibilization strategy affected the expansion of the employee welfare fund system.

While other corporate welfare costs are either quasi-fixed or fixed, depending upon employment rather than unit labor, employee welfare funds are deemed variable costs that depend on the amount of labor put in by the corporation (Shin, B. 2003). In other words, corporate welfare such as housing subsidies and scholarshipa are determined by whether a worker is employed or not whereas employee welfare funds are based on profits. Those depend on the number of hours worked and the intensity of labor input, which is why employee welfare funds are considered a type of compensation for labor (Shin, B. 2003). After the economic crisis, corporations decided to expand employee

Labor Flexibilization after the Foreign Exchange Crisis  41

Three dimensions of labor flexibilization strategies Functional flexibility

Numerical flexibility

Compensational flexibility means Reducing non-wage costs

Expanding of performance sharing

Flexibilizing welfare benefit system Figure 1. The relationship between the labor flexibilization strategy and corporate welfare

welfare funds, which were linked to performance to flexibilize their labor relationship. This was more desirable than simply raising wages or bonuses since that would give them less options in certain situations. Specifically, raising wages or bonuses would limit their options in situations such as paying out severance packages, so instead many corporations opted to reserve part of unexpected revenues in the form of employee welfare benefits instead.

Developed nations such as the U.S. adopted a performance sharing scheme that links productivity to wages in response to the stagnant or decreasing labor productivity that began during the 1980’s (Nam, S. 1993; Lee, S. 1994).

Performance sharing systems smooth out the impact of unstable economic fluctuations because they can be adjusted depending on the size of both planned and achieved performance (Kang, D. 1993: 19). The relationship between labor flexibilization, financial flexibilization, decreasing corporate welfare costs, flexible welfare benefit systems, and performance sharing

42 Korean Social Sciences Review | Vol. 2, No. 2, 2012

employee welfare funds is illustrated below.

III. H OW COPRORATE WELFARE CHANGED AFTER THE FOREIGN EXCHANGE CRISIS In the previous section, I examined reducing corporate welfare costs, the adoption of a flexible corporate welfare system, and the expansion of performance sharing corporate welfare as aspects of a labor flexibilization strategy. In this section I will discuss how corporate welfare costs changed.

Specifically, I explore how a selective welfare benefit system as a type of flexible corporate welfare was adopted, as well as how the employee welfare fund system expanded. I will subsequently argue that all these changes emerged as part of labor flexibilization.

I will use the “Report on Labor Costs of Corporations” to analyze how corporate welfare changed. First, I will explain how the increase in corporate welfare costs while the ratio of corporate welfare to total labor costs began to decrease. Secondly, I will show how that selective welfare system began to be adopted and then expanded after the crisis. Thirdly, I will show that corporate welfare in Korea contains more variable costs (current) nature (performance sharing nature) by demonstrating that proportionally, employee welfare funds began to increase.

1) Slower Corporate Welfare Growth and Decreasing Ratio of Corporate Welfare Proportional to Total Labor Costs Figure 2 shows that corporate welfare in Korea continued to rise until 1992, stabilized between 1993 and 1995, slightly rose from 1995 to 1997 and decreased after 1997 when the foreign crisis erupted.

Table 1 confirms this trend. In the table, the ratio of corporate welfare to the total labor costs increased from 5.8 percent in 1987 through 6.0 percent in 1990, 8.5 percent in 1992 to 9.3 percent in 1993. Then it started to decrease in 1994 until it reached as low as 6.1 percent in 1998. Afterwards, it stabilized until 2001 before it rose to 7 percent in 2002, which was still lower than the 8 percent in the early 1990s (see Figure 3).

Labor Flexibilization after the Foreign Exchange Crisis 43

300 250 200

Statutory welfare cost

150

Cost of corporate welfare expense

100 50 0

1987 1989 1991 1993 1995 1997 1999 2001 2003

Figure 2. Changes in corporate welfare expenditure

Table 1. Ratio total labor costs vs. total cash wages by year Total labor costs Total cash wages 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

468.6 (100) 546.3 (100) 659.7 (100) 816.3 (100) 1,011.5 (100) 1,179.5 (100) 1,336.8 (100) 1,501.9 (100) 1,726.7 (100) 1,870.5 (100) 2,082.1 (100) 2,324.7 (100) 2,370.8 (100) 2,777.3 (100) 2,661.1 (100) 2,827.6 (100) 3,206 (100)

393.2 458.1 554.7 667.3 781.1 891.0 989.3 1,132.3 1294.9 1456.0 1542.9 1409.4 1550.0 1740.7 1840.4 2053.5 2293.3

Unit: KW 1,000 (%)

Legal welfare expense

Corporate welfare expense

10.8 (2.3) 18.8 (3.4) 19.7 (3.0) 24.0 (2.9) 37.9 (3.7) 50.9 (4.3) 61.9 (4.6) 55.1 (3.7) 64.8 (3.7) 81.0 (4.3) 98.1 (4.7) 121.3 (5.2) 163.0 (6.9) 182.2 (6.6) 209.2 (7.9) 220.5 (7.8) 242.8 (7.6)

27.1 (5.8) 26.3 (4.8) 35.7 (5.4) 49.1 (6.0) 75.3 (7.4) 99.7 (8.5) 124.5 (9.3) 126.4 (8.4) 120.8 (7.0) 139.5 (7.5) 154.0 (7.4) 140.8 (6.1) 173.5 (7.3) 168.7 (6.1) 173.7 (6.5) 197.3 (7.0) 227.3 (7.1)

Data: Ministry of Employment and Labor, Survey report on labor cost of enterprise, 19872003.

44  Korean Social Sciences Review | Vol. 2, No. 2, 2012

10 9 8

Ratio of corporate welfare to the total labor cost

7 6

Ration of legal welfare to the total labor cost

5 4 3 2 1 0

1987

1989

1991

1993

1995

1997

1999

2001

2003

Figure 3. Changes in the ratio of corporate welfare to the total labor cost

2) Expansion of the Selective Welfare-Benefit System Another change in corporate welfare in Korea was the adoption of a selective welfare benefit system. The flexible benefit plan flexibilizes non-wage benefits and reportedly was first introduced in Korea by IBM Korea in January 1997, followed by Cheil Jedang in July in the same year. This received significant attention from Korean corporations following the foreign exchange crisis (Wage Study 1997).

A recent survey reveals that 44 out of 424 respondents, or 15 percent, are preparing to adopt a selective welfare benefit system, 86 percent of which will adopt it within three years. This suggests that the adoption of this system will accelerate in years to come (Samsung Life Insurance & Watson Wyatt 2000).

A series of research reports has come out from private and government research institutes which deal with flexible benefit plans (Song, G. 1997; Yu, G. and Cho, G. 1999; Korea Labor Institute 2002). The Wage Study, a publication issued by the Korea Employers Federation, carried a feature article about the selective welfare system, reflecting the increasing interest in the system amongst corporations (Park, W. 2001).

Labor Flexibilization after the Foreign Exchange Crisis  45

Table 2. The proportion of employee welfare fund from 1994 to 2003

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Unit: KW 1,000 (%)

Total corporate welfare costs (A)

Employee welfare fund (B)

Other corporate welfare costs (A-B)

126.4 (100) 120.8 (100) 139.5 (100) 154.0 (100) 140.8 (100) 173.5 (100) 168.7 (100) 173.7 (100) 197.3 (100) 227.3 (100)

13.8 (10.9) 9.8 (8.1) 9.5 (6.8) 10.4 (6.7) 8.7 (6.1) 27.5 (15.8) 28.3 (16.8) 19.7 (11.3) 20.6 (10.4) 34.2 (15.0)

112.6 (89.1) 111.0 (91.9) 130.0 (93.2) 143.6 (93.3) 132.1 (93.7) 146.0 (84.2) 140.4 (83.2) 154.0 (88.7) 176.7 (89.6) 193.1 (85.0)

Data: Ministry of Employment and Labor, Report on Enterprise Labor Cost Survey, 19942003.

3) Increasing Employee- Elfare Fund of Performance Sharing Nature As shown in Table 2, employee welfare funds comprised less than 10 percent of total costs between 1994 and 1998; they then rose sharply, from between 10.4 to 16.8 percent between 1999 and 2003. One of the reasons why employee welfare funds started to increase in comparison to other welfare costs is that other welfare costs are hard to reduce once they increase. On the other hand, employee welfare funds can be readily increased or decreased each year depending on the performance of the corporation. In other words, employee welfare fund are more suited to meeting a corporation’s goal of flexible, elastic labor management.

As shown in Figure 4, corporate welfare costs excluding employee welfare funds remained stable between 1997 and 2000. However, when employee welfare funds are included, they increased abruptly from 1998. This suggests that employee welfare funds are one of the most significant driving forces behind increasing corporate welfare costs. Indeed, as shown in Figure 4, employee welfare funds rose sharply after 1998. Figure 4 also shows that corporate welfare costs rose sharply between 2002 and 2003, during which time employee welfare funds increased accordingly. Based on the evidence

46  Korean Social Sciences Review | Vol. 2, No. 2, 2012

250

200

Corporate welfare costs

150

100

Corporate welfare costs excluding employee welfare fund

50

Employee welfare fund

0

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Figure 4. Changes in employee welfare fund Table 3. The ranks of items comprising corporate welfare costs

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Housing costs

Meal costs

Educational aid costs

Employee welfare fund

Others

2 4 4 4 4 5 5 5 5 6

1 1 1 1 1 1 1 1 1 1

4 2 2 2 3 4 4 3 3 4

3 5 6 5 5 2 2 4 4 3

6 3 3 3 2 3 3 2 2 2

Data(Reconfiguration): Ministry of Employment and Labor, Report on Enterprise Labor Cost Survey, 1994-2003.

shown above, one of the most significant causes of increasing corporate welfare costs after 1997 areis employee welfare funds. This suggests that corporate welfare costs are becoming more and more timely.

Table 3 shows the proportions of items comprising corporate welfare costs. Over the period from 1994 and 1998, employee welfare costs ranked between 3rd to 6th in terms of how much they comprised corporate welfare costs. After 1999, however, it rose to 2nd to 4th after meal costs, and in some

Labor Flexibilization after the Foreign Exchange Crisis  47

years, it even ranked first. The proportionally faster increase of employee welfare funds compared to corporate welfare costs, which are more akin to fixed costs, suggests that the nature of corporate welfare in Korea changed and continues to change.

IV. LABOR FLEXIBILIZATION AND CHANGE IN CORPORATE WELFARE IN KOREA In Section 3, I analyzed how corporate welfare changed in Korea in the wake of the foreign exchange crisis. In this section, I will show that the change in corporate welfare in the wake of the crisis was ignited by labor flexibilization.

1) Adoption and Expansion of Labor Flexibilization in Korea Faced with a rapidly changing market environment and in response to a trend of small quantity batch production, a movement called management rationalization erupted, especially among large corporations beginning in1987. The core of the movement was to set up a new labor management strategy to make the best of human resources within an organization (Park, S. 1994). New HR and labor management systems adopted by major conglomerates from 1987 were different from their predecessors in that they were based on different strategic considerations. In terms of labor force management, the new labor management practices featured: 1) pursuit of more functional flexibility through consolidation and multi-functionalization, 2) improvement of the promotion system and HR management based on a merit system, 3) incentive-based personnel evaluation and emphasis on normative and integrative factors and 4) pursuit of more quantitative flexibility through vertical subcontracting and more use of dispatched workers (Park, S. 1994: 299).

As shown above, employment flexibilization started to be adopted in a piecemeal manner by some private large corporations and public corporations late in the 1980s and on a larger scale by POSCO, Korea Electronics and a few other large corporations. Labor flexibilization started to be adopted widely across the industry in the mid-1990s as one of the core strategies to raise

48  Korean Social Sciences Review | Vol. 2, No. 2, 2012

corporate competitiveness (Park, H. 1997).

2) Changes in Corporate Welfare as a Result of Labor Flexibilization in Korea In this section, I will discuss how corporate welfare changed after the 1990s when labor flexibilization unfolded on a wider scale in Korea.

(1) Welfare Adjustment and Corporate Welfare Shrinkage as a Result of Financial Flexibility Strategy As mentioned in Section 2, financial flexibility strategy involves the curtailed growth of non-wage labor costs, which in turn entails a reduction in welfare benefit costs. In Korea, there was a move to curtail the growth in non-wage labor costs presumably lead to a slower increase in corporate welfare cost and a reduction in the ratio of corporate welfare costs to total labor costs. I will now look at how curtailed growth of labor costs affected the change in corporate welfare in a greater detail.

Table 4 reveals that labor flexibilization from December 1997 to March 1998 occurred at a faster rate than from January to November 1997 as a result of the IMF bailout and the subsequent recession. During the former period, 181 out of 300 corporations, or 60.3 percent, had employment restructuring, 28 percent higher than that during the Jan to Nov 1997 period. As shown in Table 4, the two most widely used methods of labor flexibilization in response to worsening corporate performance is changing the number of employees and wage control.

The percentage of companies which implemented labor flexibilization was less than 20 percent before the IMF crisis, but it jumped to 38.7 percent afterwards. It skyrocketed to as high as 78.9 percent during the period between April to October 1998. To look more in detail into how they implemented wage cuts during the period between Apr to Oct 1998, 61.1 percent of them froze wages, 57.7 percent cut wages including bonuses, and 47.3 percent shrank non-wage labor costs including welfare benefits and training subsidies (See Table 4). In addition, Kim, Y. (1999) finds that from the end of 1997 to November 1998, 8.4 percent of the total corporate respondents used reducing welfare benefits as a key means of controlling

Labor Flexibilization after the Foreign Exchange Crisis 49

Table 4. The change in corporate welfare in the wake of the foreign exchange crisis (Multiple responses) Unit: piece (%) Employment adjustment 1994-96

1997.

1-11.

Employment hours adjustment Reducing overtime hours Reducing regular working hours Increasing holidays Recommending use holidays Temporary closing Temporary leave of absence

244 (40.7) 89 (14.8)

10 (1.7)

60 (20) 18 (6.0) 4 (1.3) 27 (9.0) 41 (13.7) 4 (1.3)

110 (36.7) 199 (56.1) 52 (17.3) 82 (23.1) 13 (4.3) 22 (6.2) 29 (9.7) 58 (16.3) 94 (31.3) 169 (47.6) 8 (2.7) 26 (7.3) 3 (1.0) 16 (4.5)

Changing the number of employees Replacing irregular workers Hiring freeze or cut Conducting early retirement Reducing temporary workers Layoffs

146 (24.3) 69 (11.5) 39 (6.5) 26 (4.3)

59 (19.7) 7 (2.3) 45 (15.0) 17 (5.7) 11 (3.7) 21 (7.0)

131 (43.7) 247 (69.6) 15 (5.0) 56 (15.8) 116 (38.7) 199 (56.1) 24 (8.0) 83 (23.4) 38 (12.7) 62 (17.5) 52 (17.3) 87 (24.5)

Functional adjustment 152 (25.3) Internal & external education/training

Transposition 96 (16) Dispatch

Transferring to affiliates 73 (12.2)

38 (12.7) 5 (1.7) 31 (10.3) 1 (0.3) 7 (2.3)

73 (24.3) 12 (4.0) 60 (20.0) 2 (0.7) 13 (4.3)

106 (29.9) 32 (9.0) 83 (23.4) 11 (3.1) 31 (8.7)

Company reconstructing Expanding subcontracts Closing business or moving overseas M&A Reducing divisions Small business owner system

167 (27.8) 62 (10.3) 26 (4.3)

120 (20.0)

18 (6.0) 6 (2.0) 3 (1.0) 1 (0.3) 9 (3.0) 3 (1.0)

34 (11.3) 9 (3.0) 6 (2.0) 21 (7.0) 4 (1.3)

109 (30.7) 41 (11.5) 32 (9.0) 19 (5.4) 57 (16.1) 23 (6.5)

Wage adjustment Wage freezing Bonus & wage cut Reforming wage system Other wage cut1)

117 (19.5)

32 (10.7) 20 (6.7) 18 (6.0) 1 (0.3)

116 (38.7) 75 (25.0) 86 (28.7) 10 (3.3)

280 (78.9) 217 (61.1) 205 (57.7) 42 (11.8) 168 (47.3)

312 (52)

97 (32.3)

181 (60.3) 168 (47.3)

600

300

Number of companies conducting employment adjustment Total number of companies surveyed

1997. 121998. 3

300

1998.

4-10.

304 (85.6)

Notes: 1) This data was added to the October 1998 survey ( ) Ratio of the total number of companies surveyed Data: Reconstructed from tables of Choi, K. and Lee, G. (1998), Choi, K. (1999).

50 Korean Social Sciences Review | Vol. 2, No. 2, 2012

wages.

What has been found so far can be summarized as follows. First, many corporations implemented employment adjustment using flexibilization in the wake of the foreign exchange crisis. Secondly, wage adjustment was used as a key means of labor flexibilization, which includes cutting welfare benefits.

Third, the majority of respondents used non-wage cost reduction such as cutting welfare benefits to control their wage level. Based on such findings, it can be concluded that changes in the corporate welfare system including the curtailed growth of corporate welfare costs and the decreasing ratio of corporate welfare to the total wage costs resulted from wage control as part of labor flexibilization.

The reason for shrinking corporate welfare—which is a type of wage—is that unions focused more on job stability rather than wage increases. Unions’ top priority was job security and thus had no interest in other working conditions. Consequently, the proportion of negotiations that included unions’ right to participate in changing or revising the wage system was 37.5 percent in 1996, but it went down to 15.6 percent right after the crisis (Moon, M. 2001: 243). Labor disputes were largely attributed to collective bargaining over unions’ participation in management and job security rather than to wage increases (Lee, J. 2001). All these conditions suggest that shrinking corporate welfare took place a lot more readily after the crisis compared to before it.

(2) L ayoffs As A Result Of Quantitative Flexibilization Strategy And Shrinking Corporate Welfare As A Result Of Efforts To Avoid Layoffs As discussed in Section 2, quantitative flexibilization as labor flexibilization involves controlling the amount of employment (number of employees and working time) to regulate demand for labor within a given time period.

Layoffs were also used to regulate labor. Corporations, however, had to use wage control tactics including reducing their corporate welfare before laying off their employees. This certainly led to a reduction in corporate welfare.

From this point on, I will discuss how labor flexibilization after the crisis affected shrinkage in corporate welfare.

The IMF demanded, among other things, that the Korean capital and financial market be fully open and the labor market be more flexible. The

Labor Flexibilization after the Foreign Exchange Crisis 51

Table 5. Efforts to avoid layoff before layoffs were conducted (Multiple responses) Unit: piece (%)

Recruitment control Bonus & wage cut Transposition Recruiting retirees Reducing working hours Reducing temporary workers Dispatch No efforts Others Total

1994-1996

1997. 1-11

1997. 121998. 3

1998. 4-10

12 (61.5) 5 (19.2) 16 (61.5) 9 (34.6) 6 (23.1) 6 (23.1) 10 (38.5) 3 (11.5) 2 (7.7)

17 (81.0) 9 (38.1) 5 (23.8) 4 (19.0) 1 (4.8) 6 (28.6) 2 (9.5) 1 (4.8) -

44 (84.6) 33 (63.5) 19 (36.5) 14 (26.9) 17 (32.7) 19 (36.5) 6 (11.5) 2 (3.8) 1 (1.9)

68 (78.2) 67 (77.0) 33 (37.9) 32 (36.8) 23 (26.4) 22 (25.3) 13 (14.9) -

26

21

52

87

( ) Ratio of the companies that conducted effort to avoid layoffs Data: Choi, K. (1999). Status of corporate employment adjustment in Korea; Focusing on the second half of the 1998 survey.

launch of the Labor, Employer and Government Committee (Jan 15, 1998) and the ‘Social Pact of Feb 2’ paved a way for regulatory framework for making the labor market more flexible to be officially adopted (Lee, J. 2002).

On March 13, 1997, labor laws were revised to make layoffs easier. This provided a legal framework for corporations to adopt flexible work hours, and different working systems including selective ones would make working hours more flexible (Eo, S. 1994). On Feb 22, 1998 the clause stipulating a 2 year grace period for the adoption of layoffs was deleted to make the system immediately take effect. The Labor Standards Act, revised in 1997, however, stipulates that employers should make efforts first to avoid any layoffs (Yang, J. 2003). Consequently, corporations had to make efforts until the last moment before they went for quantitative flexibilization such as layoffs.

As shown in Table 5, one of the most notable changes in avoiding layoffs is that more and more corporations who chose wage cuts that included bonuses increased significantly. The proportion of corporations using wage (including bonus) cuts during the 1994-1996 period was 19.2 percent and 38.1 percent during the Jan to Nov 1997 period, respectively. It jumped to 63.5 percent during the Dec 1997 to Mar 1998 period and 77 percent during the Apr to

52 Korean Social Sciences Review | Vol. 2, No. 2, 2012

Oct 1998 period. Consequently, the proportion of wage cuts reached the same level as suspending new recruitment, one of the most widely used means for corporations to use to avoid layoffs. Though not shown in Table 5 specifically, it can be presumed that a reduction in corporate welfare was included in the ‘wage cut’ item. Yang, J. (2003) and Kim, Y. (1999: 106) find that the most widely used methods to avoid layoffs included curtailing wage increases by reducing bonuses, diversifying the wage system included increasing performance-based pay and reducing non-wage labor costs. Here, reducing non-wage labor costs meant shrinking corporate welfare.

(3) Increased Provision for Employee Welfare Fund as Part of the Financial Flexibilization Strategy In Section 2, I mentioned another method of labor flexibilization, which is changing wage structure towards compensation linked to performance; this can increase the provision for employee welfare funds which are a type of compensation for labor. Korea experienced a shift towards performance compensating wage structures as part of labor flexibilizations, which led to an increase in employee welfare funds. From this point on, I will examine how the performance sharing system, a type of labor flexibilization, affected corporate welfare in terms of enlarged employee funds.

One of the significant changes seen in Korea’s labor market during a recession after 1987 were efforts to raise productivity by improving wage structures (Lee, S. 1994). Awareness of performance sharing proliferated rapidly after the 6.29 Declaration in 1987, and many corporations started considering linking their employees’ wage to performance; many eventually did adopt ttemhis system, contributing considerably to an increase in productivity (Nam, S. 1993; Lee, S. 1994).

The government excluded performance sharing bonuses from total wage calculations. This was meant to encourage corporations to adopt performance sharing schemes in order to curtail the sharp wage increases which erupted after the 6.29 Declaration in 1987 (Nam, S. 1993: Monthly Management World 2000). Behind the government’s drive for a performance sharing system was its intention to stabilize wage increases sweeping through the entire country at that time. Employee welfare funds, another type of performance sharing, were adopted under the government’s drive in 1992.

Labor Flexibilization after the Foreign Exchange Crisis  53

Corporations, however, adopted the performance sharing schemes voluntarily to improve their employees’ productivity by giving work incentives in the run-up to overcoming the crisis (Management World, May).

With the possibility of low growth imminent after the foreign exchange crisis, performance-linked systems emerged as key criteria for HR management, and more and more corporations chose to adopt annual salary systems and performance sharing systems (Kim, J., Park, I., and Gwang, Y. 2001).

In 1996 when the Ministry of Labor first conducted a survey, only 1.6 percent of the respondents had adopted an annual salary system and only 5.7 percent of them had performance-sharing in place. A survey of 5,116 companies with employees of 100 or more conducted in 2000 showed that much greater proportion of the respondents had adopted performance sharing (Wage Study 2000). In 2001, the proportion of those with performance sharing in place was 21.8 percent (Lee, S. 2002). Another study shows that the proportion of corporations with performance sharing in 2005 was 32.1 percent (Kim, D. and Jeong, J. 2005).

According to a survey by the Ministry of Labor, 92.6 percent of corporations with performance sharing responded that they make payments in the form of bonuses, suggesting that most corporations pay cash in distributing their profit. Still, 3.5 percent of the respondents answered that they make provisions for employee welfare funds. Assuming that the proportion of corporations with employee welfare funds, amongst those who had performance sharing up and running between 1996 and 2005 remained the same, the proportion of corporations who adopted performance sharing during the same period increased from 5.7 percent to 32.1 percent. This suggests that the number of corporations who chose employee welfare funds for performance sharing increased significantly.

Assuming that the proportion of corporations with employee welfare funds amongst those who had performance sharing remained the same as 3.5 percent between 1996 and 2005, the proportion of corporations that adopted performance sharing during the same period increased from 5.7 percent to 32.1 percent. This suggests that the number of corporations that instated performance sharing through employee welfare fund increased significantly.

What can be inferred from this finding is that employ welfare funds proliferated as performance sharing became widespread in the wake of

54 Korean Social Sciences Review | Vol. 2, No. 2, 2012

the foreign exchange crisis. As mentioned in Section 4, the driving force behind the sharp increase in the adoption of employee welfare fund is the proliferation of performance sharing as part of a labor flexibilization strategy.

4) Adoption and Proliferation of Selective Welfare Benefit System As mentioned in Section 2, corporations adopt and expand flexible welfare benefit systems that allow easy control of total labor cost and cost effectiveness as part of their labor flexibilization strategy. Korea saw a shift towards flexible benefit plans part of labor flexibilization after the foreign exchange crisis, which in turn led to an increase in the flexible welfare benefit system. From this point on, I will look into why corporations choose to adopt flexible benefit plans and what impact the labor flexibilization movement has had on the adoption of selective welfare benefit systems.

The entry of a low growth regime and the shift towards management emphasis after the foreign exchange crisis made corporations feel the need for an improvement in their welfare benefit systems (Park, W. 2001: 5).

Amid a changing business environment, there were many corporations who considered improving their welfare benefit system to raise their cost effectiveness, and many set their eyes on the flexible benefit plans (Park, W. 2001: 6; Yu, G. and Cho, G. 1999: 2). In addition, there arose a need for cost split linked to performance because welfare benefit costs are deemed a part of total labor costs, and there has been a consensus that those who have performed better deserve greater welfare benefits. Many Korean corporations chose to adopt flexible benefit plan over their existing ones (Kim, H. 2001).

IBM, the first corporation in Korea to adopt a flexible benefit plan in 1999, wanted to meet the diversifying needs of their employees on a limited budget (Ministry of Labor 2002). LG Distribution designed its welfare benefit system modeling upon IBM and Cheiljedang’s and started preparation for fullfledged adoption in September 1998 (Park, W. 2001: 16-17). In compliance with the policy of the LG Group, its parent company, LG Distribution decided to shrink its spending on welfare benefits for their employees, which cause a significant drop in their satisfaction level. Given that, the corporation considered the adoption of a selective welfare system to make spending on welfare benefits predictable while meeting employees’ needs for welfare

Labor Flexibilization after the Foreign Exchange Crisis 55

benefits (Park, W. and Lee, C. 1999). Dongyang Confectioneries adopted the flexible benefit planin 2000. Behind the adoption was the recognition that it is almost impossible to increase welfare benefits for all of its employees equally at the same rate and a need to use limited resources to meet the needs of all the employees (Lee, J. 2011: 97).

As part of this shift, personnel management focusing on seniority and lifelong employment diminished and merit and new, performance-based personnel management was adopted. In addition, the welfare benefit system changed to a selective welfare system, where benefits were differentiated across positions and years of service (Park, W. 2001: 21-22). IBM Korea and Haan Soft run a flat sum system while most of the others run a flat rate system (Written Argument 2001: 35). As shown in the motivation of several corporations to adopt the selective welfare system, the reason why flexible benefit plans proliferated is that they allow for cost control and are cost effective. Consequently, the flexible benefit plans were adopted to flexibilize corporations’ labor use.

V. CONCLUSION In this paper, I argue that labor flexibilization in the wake of foreign exchange crisis has shrunk corporate welfare and increased the proportion of employee welfare funds, which are similar to performance sharing. I also showed that flexible welfare benefit system which allows for easier cost control and higher cost effectiveness as part of labor flexibilization.

I used corporate welfare cost per regular worker, while analysis of the total corporate welfare cost was calculated by multiplying corporate welfare cost per worker with the total number of workers revealing more reduced corporate welfare after the IMF crisis. That is because the proportion of irregular workers excluded from receiving corporate welfare increased significantly. The prediction made in the early- and mid-1990’s that corporate welfare in Korea would continue to rise proved wrong, as was the notion that Korea needed to establish a social welfare model centering on corporate welfare.

It is not plausible that corporate welfare in Korea will continue to rise.

56  Korean Social Sciences Review | Vol. 2, No. 2, 2012

That is because corporations, who could reduce their corporate welfare with the consent of labor unions in the wake of the IMF crisis, know very well that corporate welfare has a nature of fixed cost, which, once adopted, is difficult if not impossible to abandon (Park, H. 2002). In addition, corporations are moving fast to control their total labor costs which include not only cash wages but also corporate welfare costs in an era where cost reduction is the key to improving the competitiveness of both the national economy and their own (Kim, J. et al. 2004: 35). Corporations will try to cut down on corporate welfare which is paid regardless of performance and increase the proportion of wages in an era where performance and evaluation are linked very closely (Cho, G. 2001: Park, W. 2001: 5). There is a movement in government as well, which is set to newly impose tax on some type of corporate welfare such as housing loans or reducing the limit of tax benefits (Kim. J. et al. 2004: 38).

The government, in particular, maintains a negative stance about corporate welfare by curtailing corporate welfare costs and taking them into account for evaluation for state-run or state-participated corporations.

In addition, corporations bearing statutory welfare costs, which are relatively high, make it difficult to develop a corporate welfare system, which is their voluntary employee welfare program. As shown in Table 1, the proportion of statutory welfare costs to the total costs increased from 2.3 percent in 1987, 4.3 percent in 1992, 5.2 percent in 1998 and 7.6 percent in 2003. Rising statutory welfare costs often result in corporations aiming to control total labor costs to reduce corporate welfare, which can be deemed as their pure welfare benefit systems.

Shrinking corporate welfare and rising statutory welfare in Korea where corporate welfare is well developed can be understood within an international context. In the U.S. where corporate welfare is much more advanced, large corporations tend to prefer a national medical insurance system while they are active in dismantling corporate welfare (Esping-Andersen 1996). In contrast, the UK and Scandinavia, where state welfare is well developed, have seen movements to hand over their welfare responsibilities to the market, which in turn gave birth to corporate pension markets (Mares 2003; Pearson and Martin 2005). In other words, states where corporate welfare is developed witness an increase in state welfare while those where state welfare is developed see a growth in corporate welfare. This suggests that an era of

Labor Flexibilization after the Foreign Exchange Crisis 57

international convergence might be under way (Esping-Andersen 1996).

It seems however that corporate welfare in Korea will be reduced to those in other countries where state welfare is developed. This is because, as pointed out in the analysis of corporate welfare in western countries, welfare activity of corporations depends not only on change in state welfare but also on taxation policy or legal frameworks applicable to corporate welfare (Adema and Einerhand 1998; Pearson and Martin 2005). Given that, Korea sees little room for a reduction in corporate welfare because most of the corporate welfare programs in Korea are directed by legal requirements and administrative instructions (Song, J. 1997). Evaluation of labor market flexibility based on non-wage factors in labor costs reveals that Japan is the most flexible with a rate of 18.3 percent followed by the U.S. (27.4), Korea (30.8%) and Germany (44.9) (Park, D. 2004). This suggests that Korea’s degree of flexibility through wage regulations is still low and has its gap with advanced countries’ unfilled.

Korea has used means developmental state means in which the welfare of workers is left to the hands of the market to detach the working class from politics. A shift towards post Fordism and labor market flexibilization now changes the landscape of Korea’s social welfare where corporate welfare plays an important role. This paper tried to reveal the instability of Korea’s social welfare model based on corporate welfare. It also tried to contribute to the development of theories about the developmental path of diverse corporate welfare models after the IMF crisis by looking into Korea’s unique experience in shrinking corporate welfare, which is different from its counterpart in the Western world.

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Lee, Jong Sun. 2001. “ IMF Economic Crisis and the Change of Labor Management Relationship Korea.” Journal of Social Research 4(1): 173-204 (“IMF 경제위 기와 한국의 노사관계 변화”. 『한국사회』 4(1): 173-204). . 2002. “The Neoliberal Economic Restructuring and the Change of Labor Market in South Korea: Paradox of Flexibility.” Korean Journal of Sociology 36(3): 25-47 (“한국의 신자유주의적 구조개혁과 노동시장 변화: 유연화의 패러독 스”. 『한국사회학』 36(3): 25-47).

Lee, Jun Won. 2001. “Flexible benefits of Orion.” KEF Compensation Quarterly Summer (“동양제과의 선택적 복리후생제도”. 『임금연구』 여름호) Lee, Sang Il. 1994. “The Structure of Dual Labor Market and Performance Sharing System.” Journal of Labor Economic 17(2): 215-236 (“이중노동시장 구조와 성과배분제도.” 『노동경제논집』 17(2): 215-236).

Lee, Seng Won. 2002. A Study on Changes of Labor Market Structure after IMF Economic Crisis. Chung-Ang University, Master’s Thesis (『IMF 경제위기 이 후 노동시장구조변화에 관한 연구』. 중앙대학교 석사학위논문).

Ministry of Employment and Labor. “Report on Enterprise Labor Cost Survey” (“기업체노동비용조사보고서”).

Moon, Moo Ki. 2001. “Status of Collective Agreements - Changes in 1997, after the Amendment of Labor Laws.” Korea Labor Institute 10: 215-252 (“단체

60 Korean Social Sciences Review | Vol. 2, No. 2, 2012

협약의 실태- ’97년 노동법 개정 이후의 변화”. 『노동법연구』 10: 215-252).

Nam, Sung Il. 1993. “Problems and Improvements of Profit Sharing Plan.” KEF Autumn (“성과배분제도의 문제점과 개선방안”. 『임금연구』 가을호).

Park, Dong Un. 2004. “A Model on Enhancing Labor Market Flexibility.” The Korean Labor Economic Association 27(2): 117-138 (“노동시장 유연성 제고 모형”. 『노동경제논집』 27(2): 117-138).

Park, Hae Wrong. 2002. “A Study on a Corporate Welfare and its Employee Satisfaction.” Yonsei Social Welfare Review 8: 192-221 (“기업복지 수준과 만 족도에 관한 연구: 공기업의 기업복지프로그램을 중심으로”. 『연세사회복지연구』 8: 192-221).

Park, Ho Hwan. 1997. “The Flexibility of Employment Relations and the Strategies of Trade Union.” Journal of Labor 14: 37-49 (“기업 내 고용관계의 유연화와 노동조합의 대응전략”. 『노동문제논집』 14: 37-49).

Park, Sang Eon. 1994. “The Change of Labor Relations Strategies for the Flexible Labor Process and Internal Labor Market among Large Korean Firms.”

Korea Institute for Industrial Research 4: 273-302 (“유연성확대를 통한 노동력 관리 전략의 변화”. 『산업관계연구』 4: 273-302).

Park, Woo Seong. 1998. The Introduction of Profit Sharing Plan and Iimprovement Strategies. Korea Labor Institute (『성과배분제도의 도입실태와 개선방안』). and Lee, Chun Woo. 1999. A Study on Current Status and Model of Flexibility of Wage System. Ministry of Employment and Labor (『임금체계 유연화의 실태와 모형연구: 사례중심』). . 2001. “Review on Introduction and Tasks of Flexible Benefit.” KEF Compensation Quarterly Summer (“선택적 복리후생제도의 도입과 과제”. 『임 금연구』 여름호).

Samsung Life Insurance and Watson Wyatt. 2000. A Research on Domestic Corporate Welfare and Wage System of 2000 (『2000년 국내기업복지 및 임금 제도 조사보고서』).

Shin, Bum Cheol. 2003. “The Effects of Profit-Sharing Schemes on Productivity through Firm’s Contribution to the Employee Welfare Fund.” Journal of Korea Labor Economic 26(3): 115-147 (“사내근로복지기금제도를 통한 이윤공 유참여의 생산성 효과”. 『노동경제논집』 26(3): 115-147).

Song, Ho Keun. 1992. “Politics of Social Welfare: Theoretical Approach to Korea’s Formal Company Welfarism” Korean Journal of Sociology 26(1): 1083-1113 (“한국의 복지정책 ‘형식적’ 기업복지의 이론적 기반”. 『한국사회학』 26(1): 10831113).

Song, Ke Jeon and Park, Kui Hyun. 1997. “A Study on Introduction of Cafeteria

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Benefit Plans”. LG Economic Institute (『카페테리아식 복지제도의 도입방안에 관한 연구』 LG경제연구원).

The Korea Employers Federation. 1996a. “23% for Companies Labor Cost and Welfare cost; Obstacle to Strengthening the Competitiveness.” KEF Compensation Quarterly (“기업 노동비용, 복지비가 23% 차지: 경쟁력 강화에 최대 걸림돌”. 『임금연구』). . 1996b. “R apid Increasing on Welfare Education Cost.” KEF Compensation Quarterly (“복지 교육비지출 급증 문제”. 『임금연구』). . 2000. “Rapid Increasing of Profit-Sharing System.” Monthly Magazine of the Employers 5 (“성과배분제, 급격한 증가추세 보여”. 『월간 경영계』 5월호). . 1997. “Flexible Benefits: Spreading of Cafeteria Benefit Plans.” KEF Compensation Quarterly Fall (“선택적 복리후생, 카페테리아 제도 확산”. 『임금 연구』 가을). . 2000. “Rapid Introduction of Annual Salary and Profit-Sharing System.”

KEF Compensation Quarterly Spring (“연봉제 성과배분제 도입기업 급증”. 『임 금연구』 봄).

Yang, Jae Jin. 2003. “Labor Market Flexibility and the Korean Welfare State: Coping with the Mismatch between the Labor Market and the Social Welfare System.” Korea Politic Science Review 37(3): 403-428 (“노동시장유 연화와 한국복지국가의 선택: 노동시장과 복지제도의 비정합성 극복을 위하여”. 『한 국정치학회보』 37(3): 403-428). . 1997. “Labor Market Flexibility in Korea.” Journal of Korea Labor Economic 20(2): 365-397 (“노동시장유연화를 위한 정책과제”. 『노동경제논집』 20(2): 365-397).

Yoo, Kyu Chang and Cho, Kyu Seung. 1999. Flexible Benefit Plan. Korea Labor Institute (『선택적 복리후생제도』).

You, Gyu Chang. 1998. “Wage Management during Structural adjustment” KEF 6(3): 130-147 (“구조조정기의 임금관리”. 『임금연구』) 6(3): 130-147).

Books and Articles in English Adema, W. and M. Einerhand. 1998. The Growing Role of Private Social Benefits.

Paris: OECD. Adema, W. 2001. Labor Market and Social Policy-Occasional Papers No. 52: Net Social Expenditure. Paris: OECD. Esping-Andersen, G. 1996. “Occupational Welfare in the Social Policy Nexus.” in The Privatization of Social Policy: Occupational Welfare and the Welfare State in America, Scandinavia and Japan, edited by M. Shalev. Houndmills:

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Macmillan Press.

Mares, I. 2003. The Politics of Social Risk: Business and Welfare State Development.

Cambridge. UK: Cambridge University Press.

Pearson, M. and J. P. Martin. 2005. Should We Extend the Role of Private Social Expenditure? Paris: OECD. Rein M. and E. Wadensjo. 1998. “The Emerging Role of Enterprise in Social Policy.” In Enterprise and the Welfare State, edited by M. Rein, and Wadensjo. Edward Elgar Publishing.

Shalev, M. (ed.). 1996. The Privatization of Social Policy: Occupational Welfare and the Welfare State in America, Scandinavia and Japan. Houndmills: Macmillan Press.

Korean Social Sciences Review | Vol. 2, No. 2, 2012: 63-92

A Comparative Social Policy Study on the Structure and Characteristics of the Korean Welfare State:

Focusing on the Analysis of Public Social Expenditures*

Baek, Seung Ho** and Ahn, Sang Hoon*** The aim of this study is to identify the characteristics of the welfare state in Korea by analyzing the trend of public social expenditure since 1970. To understand and in contrast to previous studies, I examine public social expenditure was divided into cash and social services spending; selective spending; public and private expenditure; and expenditure on those of working age and non-working age. These same criteria were also applied to cluster analysis of 20 OECD countries to identify the characteristics specific to the Korean welfare state.

The following are the findings of this analysis. First, the paradigm of welfare state has not changed since 1970. Second, the Korean welfare state was developed mainly in terms of cash spending; this imbalanced development was expected to grow with the maturation of the national pension system. Third, since the mid 1990’s, the Korean welfare state adopted a selectivist approach based on means-test and it has favored a structural development of selectivism’. Fourth, the welfare state in Korea relied on private finance while private spending was expected to undergo structural development after 2003. Fifth, spending by the Korean welfare state was more focused on those of non-working age than people at working age. Sixth, cluster analysis revealed that Korea still lags in terms of its welfare state and its heavier dependence on private finance.

Keywords: Characteristics of the Korean Welfare State, Cash Benefits, Selectivism, Private Expenditure, Spending on those of Non-Working Age, Comparative Social Policy, Korea

Translated from the article published in Korean Journal of Social Welfare Studies 35, 2007 with permission from the Korea Association for Social Welfare Studies. ** Professor, Department of Social Welfare, The Catholic University of Korea. *** Professor, Department of Social Welfare, Seoul National University. *

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I. Introduction This study aims at identifying the characteristics of the Korean welfare state. I will analyze the structure and trend of the rising public social expenditure in Korea since 1970. Previous studies have relied on total the amount of social expenditure, whether and when social welfare programs were implemented, and the content of social welfare programs to discuss the character of welfare states. Studies based on total public social expenditure in particular have compared public social spending as a percentage of GDP to identify the character of a welfare state. However, it was criticized that the structure and characteristics of a welfare state could not be fully defined by aggregate expenditure as a sole measure (Esping-Andersen 1990: 19). In addition, Esping-Andersen (1990) established welfare regime theory based on his study analyzing the features of particular welfare state programs, after which most of the discussions on the characteristics of welfare states have referred to the welfare regime typology based on analysis of welfare state program .

There would be no dispute that the characteristics of a welfare state are not distorted when the internal features of welfare state programs are analyzed instead of total public social expenditure (Esping-Andersen 1990: 19). However, there is a limit to identifying a welfare state by focusing only on program-specific measures (Castles and Mitchell 1992). In order to understand the characteristics of a welfare state, it is necessary to analyze the implementation and outcome of the state’s social policy apart from the institutional commitment (Choe, H. 2003: 836); a new approach of analysis incorporating both program and expenditure is required.

This study proposes a new analysis that focuses not only on the differences of programs, but also on the achievements of a welfare state. This analysis considers composition as well as changes in what constitutes public social expenditure as well as aggregate spending.1 Such an approach provides the 1

Esping-Andersen (1990: 19-20) presented the analysis of items constituting public social spending as a way to avoid distorting the characteristics of welfare states, noting the limit of data on total public social expenditure. OECD Social Expenditure Database has made it easier to conduct a comparative analysis of public social spending items.

Structure and Characteristics of the Korean Welfare State 65

background to understand the interaction between diverse interests and values as they effect decision-making and implementation (Choe, H. 2003: 836).

Previous studies on the Korean welfare state are largely divided into positive and negative assessments. The features of the welfare state in Korea before the Kim Dae-Jung (Kim Tae-jung) administration were predominantly evaluated negatively (Lee, H. 1992; Choi, G. 1997; Kim and Hong 1999; Hong, K. 1998, 1999; etc.). However, positive evaluations such as the “reinforcement of state welfare” or the “take-off as a welfare state” emerged among studies on changes in the Korean welfare state after the Kim Dae-Jung government (Kim, Y.M. 2002a; Seong 2002; Kim and Seong 2003; Takegawa 2006; etc.).2 The first question revolves around the doubt about whether the positive assessment of the Korean welfare state is valid. Studies of positive evaluation are based on the rise of total public social expenditure and expansion of social welfare programs. The growth of public social expenditure as a percentage of GDP in 1998 is described as the take-off of the welfare state (Takegawa 2006: 136).

As of 2003, Korea’s public social expenditure as a percentage of GDP was 5.66% (SOCX 2007), far lower than that of the more liberal welfare state of the U.S. at 16.2%, and of Sweden at 31.3%. Nevertheless, positive evaluations insist that public social spending in Korea showed an upward tendency once it reached over 5% of GDP from 1998 (Kim, Y.M. 2002b: 355-366). Yet, examining the increase in aggregate spending cannot give a comprehensive picture of changes the Korean welfare state has undegone. To put it another way, it can be disputed whether viewing public social expenditure growth since 1998 reflects changes in the Korean welfare state or is simply a result of a passive response to the financial crisis.

The limitations of focusing on aggregate spending changes from social expenditure data can be overcome by analysing the composition and changes constituting social expenditure. Variance decomposition analysis on social expenditure can add to the analysis in two significant ways uses. First, it 2

Assessment on the character of the Korean welfare state after the Kim Dae-Jung administration has been led by conflicting interpretations on the expansion of welfare policies and increase in total social spending.

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tackles the content validity of the welfare effort in studies that rely on total social expenditure data. Second, this approach does not simplyregard the expansion of the social welfare system as simply a reinforcement of state welfare. In other words, variance decomposition of social spending items provides a more detailed analysis on how institutional features of the Korean welfare state are reflected in policy implementation. As a result, it provides a new evaluation of the Korean welfare state.

This study thereforeinvestigates characteristics that reflect both programs and outcomes using the following four criteria: balance between cash benefits and social services spending; balance between public and private finance, balance between universalist and selectivist spending; and balance between spending on those of working age and non-working age. Using these four criteria, I will review goalthe aforementioned negative assessments on the Korean welfare state. Prior studies have relied on the welfare regime typology of Esping-Andersen (1990) for their negative assessments on the Korean welfare state (Cho, Y. 2002; Son 2005; etc.). Those studies can be categorized as within the limit of institutional determinism on welfare states (Ahn, S. 2007: 136).

Given the close relationship between welfare state, capitalism as well as the shift in the world’s capitalism from Keynesian welfare state to Schumpeterian workfare state (Jessop 1993; 2002), it is necessary to revisit institutional determinism which asserts pre-1980s welfare regime typologies would remain static. This study uses new criteria such as forms of benefit, finance, and benefit eligibility and that takes both programs and outcome into account.

We start by using the features of reclassified social expenditure items as objective criteria. This approach has been tried in one study of welfare states, which divided social welfare programs into cashtransfer and social services proigrams within a broader framework of “livelihood security” (Ahn, S. 2007). The present study reassesses the characteristics of the Korean welfare state by adding three more criteria: balance of social welfare finance, balance between universalism and selectivism, and balance of life cycle risk to the criterion from Ahn, S. (2007).

The research questions of this study are as follows: RQ 1) What features comprise the Korean welfare state spending? Does the increase in spending indicate structural development? RQ 2) How can these features be categorized?

This paper is structured as follows. Section II reviews previous studies on

Structure and Characteristics of the Korean Welfare State 67

the characteristics of the Korean welfare state. Section III explains research data and methodology, followed by results of the analyses in section IV. The last section re-evaluates the character of the Korean welfare state from the perspective of comparative social policy combined with the new analysis.

II. LITERATURE REVIEW As mentioned above, earlier studies on the Korean welfare state are divided into positive assessment and negative assessments.3 The Korean welfare state is viewed positively by studies that value welfare expansion efforts beginning with the Kim Dae-Jung administration. Kim, Y.M. (2002a) argued the state had greater responsibility for welfare and hence universal state welfare was expanded after the financial crisis of the late 1990s. HisHe based this analysis on these factors: a analysisbroader coverage of social insurance including employment insurance, workers’ compensation insurance and the national pension; an integration of the health insurance system; introducing the national basic livelihood security system and better basic livelihood security.

Unlike other studies, Song, B. (2006) reviewed the theoretical framework of capitalist state theory and criticized the idea that welfare policy of the Kim Dae-Jung government was neo-liberal. Taking the approach of Jessop, he examined the unique ways Kim’s administration could expand welfare policy amidst a neo-liberal global economy. He concluded that the welfare policy of the Kim government should not be regarded as neo-liberal. In line with this argument, Takegawa (2006) declared that the changes taking place signaled the beginning of Korea as a welfare state.

Studies that negative evaluate the Korean welfare state conclude that it lags far behind when considering public social expenditure and social welfare priograms. Insufficient industrialization and an authoritarian political system (Lee, H. 1992), the lack of labor politics (Choi, G. 1997), and the welfare 3

Although most of them conclude with mixed — neither positive nor negative — assessments depending on the aspects individual study focuses on, it is regarded possible to roughly divide general ways of defining latest changes of the Korean welfare state.

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function of unofficial community (Kim and Hong 1999) have all been used to explain Korea’s lagging welfare state. Recently, more emphasis was put on the globalization of capital as well as the influence of neo-liberalism (Kim and Lee 1999; Kim and Kim 2006).

Kim and Hong (1999) used various data in their study on the state-marketcommunity model of the social welfare provider to present the Korean welfare state as a “lagging state with a grown market and changed community.” Hong and Song (2003) argued that the increase in social spending as a percentage of GDP in 1998 changed the ‘lagging state and grown market.’ Noting that the change was limited to the development of income security and no significant change was found in social services, they argued that there was no change in the Korean welfare state. Ko, S. (2003: 102) harshaly criticized the expansion of welfare in the late 1990’s; He (2003: 10) pointed out that “Korea is neither a welfare state nor a welfare society.”

Contrary to the approaches mentioned above, recent studies suggest the necessity to consider both welfare policies and labor policies to identify the characteristics of the Korean welfare state (Shin, D. 2003; Yang, J. 2002). They concluded that the Korean welfare state cannot be regarded as improved when taking labor policy into account. Although the welfare policy of the Kim Dae-Jung administration tended to expand state welfare, it was only to help spread neo-liberalism in economic policies, which also means that the Korean welfare state should be seen as neo-liberal (Son, H. 2005: 217).

In addition to studies about characteristics, Choe, H. (2003) applied the measure designed by Castles (2002) to evaluate the Korean welfare regime. Castles (2002) separated social expenditure into household income maintenance, relief and health, and state service to avoid distortiions that arise when total social spending is used to evaluate a welfare state. Choe, H. (2003) conducted a cluster analysis of 28 OECD countries and categorized their welfare regimes into the following five types: conservative, semiconservative, social democratic, semi-liberal, and liberal. It was determined that welfare spending in Korea remained typically liberal (focusing on relief and health) until 1997. Even though the Korean welfare state tended to be conservative in terms of politics, system and culture, the actual spending showed a tendency toward liberalism (Choe, H. 2003: 17). Yet the assessment argued that a conservative welfare model was developed after 1998. With this

Structure and Characteristics of the Korean Welfare State  69

analysis, Choe, H. (2003) refuted opinions of both Nam, C. (2002) and Cho, Y. (2002) which considered the Korean welfare state to be conservative and neoliberal respectively.

This conclusion can be disputed if the increase in social expenditure is explained by the steep rise in pension payments for early retirees is regarded as a shift towards a conservative model. According to Castles (2002), spending grew in 1998 due to unemployment benefit in response to massive unemployment and therefore lump sum payments on retirement should be excluded from the analysis of spending in 1998 for logical consistency. Given this, an evaluation of the Korean welfare state of 1998 will produce a different outcome.

The above discussions on the Korean welfare state, though useful, are limited. Because they rely on the existing welfare regime typology which focuses on income maintenance, they fall easily into a trap of institutional determinism (Ahn, S. 2007: 136). Prior studies are limited by a framework of welfare regime theory and provide assessments that are too broad and abstract which makes it difficult to substantively analyze the characteristics and changes of welfare states. They also fail to reveal specific and diverse areas that require institutional reform, nor do they establish strategies or paradigmatic blueprints for the future welfare states. Finally, these studies do not identify response strategies beyond income maintenance, excluding such areas as responses to new social risks resulting from the change in the socioeconomic structure.

The study of Choe, H. (2003), on the other hand, provides a lot of insight.

As Esping-Andersen (1990: 19) pointed out, analyses based on public social spending can distort the nature of the welfare state. Yet, he continued to say (Esping-Andersen 1990: 19-20) that the problem magnifies when welfare states are assessed by aggregate public social expenditure. An analysis of items constituting the spending and a time-series analysis on the structural change of spending, in addition to an analysis on total public social expenditure can minimize possible errors caused by analyzing aggregate spending only.

Despite these positive aspects, Choe’s study (2003) fails to conduct more detailed analysis on the character of the Korean welfare state. Instead, it remains limited by institutional determinism in which social spending is categorized as conservative, liberal, and social democratic. Because its

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typologies of social welfare spending are too simple, it cannot fully explain the different strategies in welfare states. It also falls short of reflecting later changes since it analyzed data of Korea until 1998.

In order to overcome such shortfalls, this study will use comparative Korean welfare state statistics data from 1970 to 2003 to analyze the upward tendency of the Korean welfare state spending and its characteristicsKorean .

Section III elaborates more on the research data and method.

III. RESEARCH DATA AND RESEARCH METHOD 1. Research Data This study used the Comparative Social Policy Dataset (CSPD) for its analyses. It was collected and compiled from 2005 to 2006 by the Social Policy Research Group of Seoul National University, which was sponsored by the Korea Research Foundation. The macroscopic global dataset was built through collection, compilation and update of quantitative data on the origin, growth and restructuring of the Korean welfare state. This comprises Korean comparative welfare state dataset which was created as part of the Comparative Welfare State Dataset (CWSD) built by Huber et al. (2004).

Korean social expenditure data linked with the OECD Social Expenditure Database (SOCX) was the primary variable used in CSPD data. Previous studies using aggregate social spending have relied on SOCX. Yet, there is a limit in analyzing the characteristics and changes of the Korean welfare using SOCX because its data on Korea is available only from 1990. On the contrary, CSPD data on the social spending of Korea dates back to 1960. As the data before 1970 is incomplete in specific areas of the expenditure, it is hard to completelyfully categorize the spending based on the data though they could still be useful for an analysis on aggregate expenditure. Given these facts, this study used data from 1970 for its analysis.

The Korean public social expenditure data is designed to have the same structure with SOCX to enable international comparisons. SOCX has a total of nine areas which include old-age, survivors, incapacity-related benefits, health, family, active labor market programs, housing and other social policy

Structure and Characteristics of the Korean Welfare State  71

areas. Each of the nine areas are divided into cash benefits and benefits in kind and present specific programs for each country.

2. Analysis Method: Variance Decomposition and Cluster Analysis The present study reviewed the Korean welfare state from various perspectives by conducting variance decomposition of social welfare spending items.

Variance decomposition was adopted to investigate the first research question of this study which was to figure out if a rise in social spending beginning in 1970 could be considered a structural development.

Cluster analysis was deployed to answer the second research question to explore how each country is linked. Because this study divideocial welfare expenditure into four types, hierarchical cluster analysis was used.4 Squared Euclidean Distance was adopted to measure distance between each country and Average Linkage Method was used for clustering. For each analysis criteria, average value of data from 1999 to 2003 was used.

A total of 20 following OECD countries were included in cluster analysis: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Italy, Japan, Luxembourg, the Netherlands, Norway, Sweden, Switzerland, the U.K., the U.S., Portugal, and Korea.

3. Analysis Criteria: Establishment and Measurement 1) Establishment This study divided social expenditure based on the following four criteria: form of benefit (cash and social services), finance (public social expenditure and private social expenditure), benefit eligibility (universalism and selectivism), and life cycle risk (spending on those of working age and nonworking age).

Those four criteria were derived from the following definition of welfare state. The present study adopted the following definition by Briggs (1961)5: 4

Software used for the analysis is Stata 8.0/SE. While SPSS provides rescaled distance 0-25, Stata presents actual distance. Therefore, countries were clustered based on 2550% of actual distance.

5 Briggs (1961) is considered to have defined welfare state in the most comprehensive

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A welfare state is a state which guarantees individuals and families a minimum income, provides protection against certain social contingencies, and offers all citizens social services of the best standards available (as cited in Flora and Heidenheimer 1981: 29).

According to Briggs (1961), a welfare state is where a state (finance) provides all citizens (benefit eligibility) with both cash and service (form of benefit) against social contingencies (life cycle risk). This framework of analysis is useful in identifying the characteristics of welfare states in general. Marshall (1963) also emphasized the importance of taking these factors into account to achieve social right.

In addition to defining the welfare states, these criteria have also been used to evaluate the structural reform ofin welfare states. Pierson (1996: 157) considered the extent of expansion of means-test (benefit eligibility), the level of increase in accountability of the private sector (finance), and the degree of changes in generosity of cash benefits (form of benefit) as the criteria to assess structural reform of welfare states. More lately, Ahn (2007) suggested it would be useful to have an analysis with distinction between cash transfer programs and social services programs as criteria for new typology strategy.

2) Measurement This study divided social welfare expenditure into cash and social services spending; expenditure based on selectivism; public and private expenditure; and spending on those of working age and non-working age. Each of the items was measured in the following manner.

First, cash spending is spending for income replacement which serves as an exclusive source of income for recipients, wherein pensions account for the largest part of it (Castles 2002). Cash expenditure was measured by adding all the cash spending of nine areas in SOCX. Second, social-services spending is in response to new social risks that have emerged in the post-industrial society (Castles 2002). That includes spending on family services as well as social protection for the elderly and disabled. It was calculated by adding spending the ALMP to the total benefit manner (Kim and Seong 2000).

Structure and Characteristics of the Korean Welfare State  73

in kind onto the nine areas of SOCX, excluding healthcare spending.

Although ALMP spending is not included in the SOCX benefit in kind, this study incorporated it into social service expenditures because it is related to changes in the employment structure; what’s more, it is spending to improve employment. On the other hand, healthcare spending is better explained as expenditure on medical security, which is a response to traditional social risks (Castles 2002) and thus this study excluded it from social spending.

Third, expenditure based on selectivism is defined as means-tested spending with the objective of poverty reduction. While selectivist expenditure in Korea was measured by counting other social policy areas of SOCX, other OECD countries included in cluster analysis calculated it by adding expenditure on means-tested programs beginning in 2003. In addition to items under other social policy areas of SOCX,6 means-tested spending on unemployment (e.g. Germany), means-tested benefit for the elderly and disabled (e.g. Belgium and the U.K.), and other family cash benefit programs with means-test were included in selectivist spending. Housing assistance benefit, ALMP spending, and means-tested medical benefit were excluded (SOCX 2007a: 21-22).

Fourth, public and private expenditure were divided depending on who controlled the relevant financial flows (SOCX 2007a: 8). For public spending, the financial flow is controlled by the government while spending not provided by the government is considered private (SOCX 2007a: 9). Private spending is further divided into mandatory private social expenditure and voluntary private social expenditure (SOCX 2007a: 9).

Fifth, spending on those of working age was measured by adding cash and social services spending, which included family, unemployment and ALMP of SOCX. Although family expenditure encompasses spending on children, it was counted as expenditure on those of working age since female employment could be promoted with spending on children. Spending on old6

In case of Korea, other social policy areas include benefits with no means-test such as benefit for protection of North Korean defectors. Yet, as the amount is not large enough to change the percentage of GDP used for analysis, they have no impact on the result of the study. Therefore, it is considered acceptable to use other social policy areas data for the analysis.

74  Korean Social Sciences Review | Vol. 2, No. 2, 2012

age pension was used to measure expenditure on those of non-working age.

IV. ANALYSIS RESULT In this section, we see that variance decomposition analysis on increased spending by the Korean welfare state presents no structural development. As to the comparative cluster analysis among OECD countries, results reveal that the Korean welfare state lags behind in all areas of analysis.

1. Charactertistics of the Korean Welfare State and its Structural Development This section uses variance decomposition of aggregate social spending and variance decomposition of social spending items to identify the nature of the Korean welfare state and its structural development.

1) U pward Tendency of Total Public Social Expenditure and Variance Decomposition The upward tendency of total public social expenditure and variance decomposition of specific spending items will reveal whether the social spending shows structural development.

Figure 1 below exhibits the trend of public social spending since 1970.

Korea recorded a steady growth of public social expenditure as a percentage of GDP from 0.83% in 1970 to 5.66% in 2003. Public social spending in 1998 showed a remarkable increase.

Takegawa (2006: 136) described it as take-off of the welfare state in Korea, while Kim, Y.M. (2002b: 355-366) used it as grounds to argue that the state welfare in Korea was improved. However, spending growth at the time was a temporary phenomenon resulting from rising unemployment during the financial crisis of the late 1990s. Thus, it would be a mistake of generalizing a statistical illusion to regard the increase as take-off as a welfare state or improvement of state welfare.7 The upward trend line of public social 7

Esping-Andersen (1990: 19-20) warned about distorted interpretation of welfare

Structure and Characteristics of the Korean Welfare State  75

Percentage of GDP(%)

7 6 5 4 3 2 1 0 year

Figure 1. Trend of public social expenditure in Korea since 1970

expenditure since 1970 in Figure 1 shows no particular shift in the trend of public social spending changes after 1998.

Figure 2 illustrates the variance decomposition of items that contributed to increased public social expenditure at that time. In 1998, the total spending growth reached KRW 7, 158 billion, of which old-age pension, ALMP and unemployment benefit accounted for 48.3%, 23% and 10.1% respectively. It turned out that lump sum payments by the government employee retirement pension and lump sum refunds by the national pension increased by about KRW 2.1 trillion and KRW 1 trillion respectively compared to 1997. They were temporary severance payments caused by growing unemployment and they could not be considered extensions of the state role for insuring its people against social risks (Esping-Andersen 1990: 19). Even Kim, Y.M. (2002b), who argued for improving state welfare, defined the period as a time when a neo-liberal approach emerged (Kim, Y.M. 2002b: 353-354).

Table 1 shows an average annual growth rate of public social expenditure in each area, which presents an average rise in the 1970s. This is explained by the impact of mature institutions adopted in the 1960s and new institutions introduced in the 1970s. Specifically, social spending rose due to the government employee pension (1960), the military pension (1963), the states, which could occur when aggregate spending data is used.

76 Korean Social Sciences Review | Vol. 2, No. 2, 2012

Health, 16.9

Others, 1.7 Old-age, 48.3

Unemployment, 10.1

ALMP, 23.0

Figure 2. Share of items contributed to the increase in public social expenditure in 1998

workers’ compensation insurance (1963), the livelihood protection system (1961), the medical aid (1970), the health insurance system (1977), and the Social Welfare Services Act (1970). Survivors’ benefits increased significantly because health insurance-based funeral payments grew dramatically from 1978 and 1979. The dramatic increase in incapacity-related benefits coincided with a steep rise in workers’ compensation insurance payments and incapacity benefits by the government employee pension and the military pension. Although family-related benefits grew considerably, its share in the total sum was small. Spending on other policy areas rose due to educational assistance began in 1979.

With such a start, by the 1980’s, public social expenditure in Korea slowed. While it grew temporarily in the 1990s, mainly in the areas of oldage pension, family, ALMP, unemployment and public assistance, it again slowed down at the beginning of the 2000s. Spending growth in the 90s’ was temporary, which, as explained above, resulted from the financial crisis.

As most of the positive evaluations in the discussions on the Korean welfare state are focused on Kim Dae-Jung’s administration, it is necessary to examine average annual growth rate of public social expenditure of each government to evaluate those positive assessments. Table 2 presents average annual growth rate of public social expenditure by government.

As the table shows, average public social expenditure during the Kim DaeJung administration fell in both aggregate spending and spending by area. It is notable that spending on other policy areas grew at higher rate despite the downward tendency of overall spending increase. Other policy areas refer to means-tested public assistance, whose higher spending growth results from

Structure and Characteristics of the Korean Welfare State  77

Table 1. Average annual growth rate of public social expenditure by area (%) Area

Total

1970s

1980s

1990s

2000-2003

Old-age Survivors Incapacity-related benefits Health Family ALMP Unemployment Housing Other social policy areas

24.6 31.0 34.2 28.3 38.3 39.4 233.9 49.1

26.3 65.3 69.2 43.8 73.4 28.8 132.9

27.7 21.7 24.1 29.6 27.6 31.1 14.2

32.3 16.2 19.4 18.2 30.1 80.1 528.4 18.7

-6.3 14.1 17.7 15.7 24.6 -23.1 13.0 23.8

Total

26.3

39.5

25.3

23.8

5.7

Table 2. Average annual growth rate of public social expenditure by government (%) Area Old-age Survivors Incapacity-related benefits Health Family ALMP Unemployment Housing Other social policy areas Total

Park, Chun, DooRoh, TaeKim, Kim, DaeChung-Hee Hwan Woo Young-Sam Jung nd 2 term (Aug. 80 (88-Oct. 92) (93-Feb. 98) (Feb. 98-02) (73-Oct. 79) –Nov. 87) 27.2 77.1 71.0

29.1 17.8 21.6

29.4 34.4 37.0

22.1 12.3 16.9

12.9 8.3 9.7

49.8 73.4 28.8 162.7

28.1 34.8 32.3 16.4

27.8 31.5 37.5 4.6

17.5 31.3 34.2 652.8 17.8

16.1 10.3 85.2 192.3 34.8

43.7

24.4

27.4

18.6

15.4

implementing the national basic livelihood security system. Expenditure on the livelihood care amounted to around KRW 1.1 trillion in 2000, which was more than double the amount of 1998.

These results show that it is not valid to identify the characteristics of the welfare state during Kim Dae-Jung administration as an improvement of state welfare (Kim, Y.M. 2002). In particular, selectivist expenditure on public

78  Korean Social Sciences Review | Vol. 2, No. 2, 2012

assistance grew more while increase in spending on other areas slowed. That means it is necessary to review the idea that the Kim Dae-Jung government pursued a universalist welfare state. This agrees with the study that found that the Korean welfare state before 1997 had a liberal spending structure focused on public assistance (Choe, H. 2003). Although Choe, H. (2003: 851852) argued that the public social expenditure structure became conservative in 1998, the result of this study refutes that conclusion. As Table 2 shows, public social spending on areas like old-age, survivors, incapacity-related benefits, which Choe, H. (2003) classified as conservative expenditure, grew less beginning in 1998 under the Kim Dae-Jung administration. On the contrary, spending on public assistance and other policy areas, namely liberal expenditure, increased.

The iresults suggest that there has been no structural development to the Korean welfare state expenditure since 1970.

2) Variance Decomposition of Social Spending Items Next, we will explore the composition of social spending in the Korean welfare state by dividing items constituting social expenditure using four criteria.

FFirst is selectivist spending, which is related to benefit eligibility. Figure 3 illustrates the upward tendency of selectivist benefits as a percentage of GDP since 1970. Selectivist benefit expenditure was measured with meanstested benefits and Figure 3 shows its rapid growth since 1996. Based on the spending trend, there was no particular pattern in selectivist spending of Korea until the mid-1990s but structural development began from the late 1990s. Development of the national basic livelihood security system per se has often led to a positive evaluation. Yet public assistance functions as a primary safety not not as last resort safety net, which means its development is only temporary, given the lack of a general welfare state safety net and thus the development does not prove that the Korean welfare state is advancing apace.

The second is cash benefits and social services spending, a criterion in relation to the form of benefit.

Social benefits are largely divided into cash benefits and social services

Structure and Characteristics of the Korean Welfare State  79

year Figure 3. Trend of selectivist expenditure growth (% of GDP)

7 6

Share of GDP(%)

5

Total Public Social Expenditure Health Cash Benefit Social Services

4 3 2 1 0

year

Figure 4. Trend of expenditure on each form of social welfare benefit

(Gilbert and Terrell 2005; Ahn, S. 2007) and Figure 4 exhibits public social spending of each form as a percentage of GDP. It shows a widening gap between shares of social services and cash benefits, which is expected to grow even more once the national pension system enters the maturation phase after 2008 (see Table 3).

Table 3 presents spending on cash transfer as a percentage of GDP, which uses the financial estimates of the national pension with the replacement rate lowered to 40% in the long term and with the estimation of minimized cash transfer expenditure of other systems (KIPF et al. 2007: 223). It shows sums

80  Korean Social Sciences Review | Vol. 2, No. 2, 2012

Table 3. Share of cash transfer and social services based on estimates of the national pension expenditure Year 2007 2010 2015 2020 2025 2030 2040 2050

As a percentage of GDP Estimates of the national pension Social welfare expenditure (KRW million) Health Cash transfer service 6,000,000 10,000,000 17,000,000 31,000,000 56,000,000 90,000,000 207,000,000 381,000,000

3.06 3.45 3.96 4.90 5.97 7.15 9.70 11.82

0.34 0.57 0.63 0.71 0.90 1.21 2.14 3.25

2.66 2.76 3.03 3.15 3.22 3.29 3.41 3.52

* Data: Data from the KIPF et al. (2007) recalculated by the author.

of social services spending and expenditure on health as a share of GDP, based on the assumption that most systems related to social services would be extended to a greater degreeafter 2007.

Changes in the shares of expenditure on cash transfer and social services are found in Table 3. For cash transfer spending, its share increases to 7.15% in 2030 due to maturation of the national pension system and to 11.82% in 2050. By contrast, the share of social services is expected to reach 1.21% in 2030 and 3.25% in 2050.

Such a result shows that the Korean welfare state has a lopsided expenditure structure in favor of cash transfers and this bias would worsen without extending social services policies.

The third criterion revolves around finance: public and private spending.

The constituents of public finance in the Korean welfare state is illustrated in Figure 5. The share of contribution to public finance was measured by measuring contributions of the state, employees and employers to social insurance revenue. The figure exhibits a steady increase in the contribution by employees, with a downward tendency in the share of employers. It is worth noting that the share of state contribution remains very low, which means the state plays only a tiny role even in public financing.

Building on these features of the composition of public financing, Figure 6 shows the growth rate of public and private expenditure. The growth rate

Structure and Characteristics of the Korean Welfare State  81

70

Employees Employers State

60 50 40 30 20 10

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

0

Figure 5. Trend of each contributor’s share in social insurance revenue 150.0

Public Private

100.0

50.0

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

0.0

-50.0

Figure 6. Growth rate of public and private expenditure

of public spending hovered around 20% until 1998 when it started to slide.

On the contrary, increase in private spending recorded steep rise in 1998 and kept fluctuating until 2003 when it reached over 20%.

As a percentage of GDP, private spending fell behind public spending by 2% point during the 1990s, but the upward tendency suggests private expenditure would assum a greater role after 2003. In addition, it needs to be considered that data collected on private spending reflects no private transfer expenditure. Taking into account the role played by welfare function of community (Kim and Hong 1999), it could be said that private spending is underestimated in Figure 6. Nevertheless, the growth rate of public expenditure fell while that of private spending rose after 1998, which

82  Korean Social Sciences Review | Vol. 2, No. 2, 2012

Working age Non-Working age

Figure 7. Trend of expenditure on those of working and non-working age

confirms that arguments for structural development of the Korean welfare state and improvement of state welfare are not valid.

The last chart is spending on those of working age and non-working age.

Figure 7 presents the trend of expenditure on people at working and nonworking age. It shows that the spending structure is focused on those of nonworking age (the elderly). Also, a considerable increase in expenditure on both working and non-working age was recorded in 1998 temporarily due to the financial crisis in the late 90s. The change in trend in 2003 suggests that spending on the elderly rose more sharply, which is due to growing pension payments. The amount of pension payment for the elderly rose from KRW 5.7 trillion in 2002 to KRW 7 trillion in 2003. On the other hand, expenditure on those of working age recorded only a slight increase from KRW 2.9 trillion in 2002 to KRW 3 trillion in 2003. Without other changes, the spending structure of the Korean welfare state is expected to have a structural development of expenditure on those of non-working age.

2. New Typology: Analyzing Type of Spending Structure of the Korean Welfare State In the previous section, the characteristics of the Korean welfare state was explored using four criteria applied to spending items and aggregate social spending data. This section adopts the same criteria to see how different Korea is from other OECD countries in terms of the type of welfare state

Structure and Characteristics of the Korean Welfare State  83

expenditure Table 4 presents the result of cluster analysis with each of the four criteria applied, classifying the 20 OECD countries included into four types.

Type 4 was composed of countries with the highest average value in social services spending, public expenditure and non-working age spending, most of which were Northern European countries. In other words, those were social democratic countries according to the welfare regime typology of Esping-Andersen (1990). Type 3 mainly consisted of countries classified as conservative regime.

By contrast, Type 2 was comprised of countries with the highest average value in private expenditure and selectivist spending, which were categorized as liberal regimes such as the U.S. and Australia. On the other hand, Type 1, Korea, recorded the lowest average value in all criteria. It means that the Korean welfare state lags significantly and fails to reach the standard of Western welfare states in all four criteria.

Table 5 shows the outcome of cluster analysis with all the criteria, clustering the countries into five types.

Type 1 included only Korea with the lowest spending in most criteria.

Interestingly, Korea recorded the highest level of private spending compared to the other four types, while its expenditure as a percentage of GDP was low in all the other criteria. It accords with the research of Kim and Hong (1999), which reviewed data until the mid-90s’and described the Korean welfare state as lagging state, grown market, and changed community. To put it another way, no change is found in the spending structure of the Korean welfare state.

Type 2 showed the highest average of selectivist spending and consisted of countries like Australia, the U.S. and Japan. It means that Japan should be classified as a welfare state with a liberal spending structure (Esping-Andersen 1990) rather than one with semi-conservative structure (Choe, H. 2003). It also suggests Korea and Japan should not be regarded as belonging to one model, such as an East Asian welfare model. In terms of private spending, in particular, Japan showed the lowest level compared to other types while Korea had the highest private expenditure.

Countries with spending structures similar to that of Type 4 rather than Type 2 constituted Type 3. Interestingly, Finland classifies as a social democratic regime according to the typology of Esping-Andersen (1990) yet

84  Korean Social Sciences Review | Vol. 2, No. 2, 2012

Table 4. Result of cluster analysis 1 Criteria 1 Average

Type 1

Type 2

Type 3

Type 4

Cash spending

2.3

10.0

15.6

14.1

Service spending

0.6

3.1

2.3

8.1

Korea

Norway, Finland, Netherlands, U.K., Switzerland, Australia, Japan, Canada, U.S.

France, Belgium, Germany, Austria, Greece, Luxembourg, Portugal, Italy

Sweden, Denmark

Countries

Criteria 2 Average

Public financing

5.6

17.9

22.2

27.2

Private financing

2.4

6.6

2.4

2.6

Korea

U.S., Switzerland, U.K., Netherlands, Japan, Canada, Australia

Norway, Italy, Portugal, Luxembourg, Greece, Finland

Sweden, France, Germany, Denmark, Belgium, Austria

Countries

Criteria 3 Average

Public social expenditure

5.6

17.5

19.4

26.1

Selectivist expenditure

0.4

7.3

1.5

1.05

Countries

Korea

Australia

Canada, Japan, U.S., Austria, Belgium, Finland, Greece, Denmark, Luxembourg, Germany, France, Portugal, Italy, Norway, Netherlands, Sweden Switzerland, U.K.

Criteria 4

Average

Workingage

0.09

2.6

4.4

7.4

Nonworking age

1.4

7.3

11.6

13.1

Korea

U.S., Switzerland, U.K., Netherlands, Japan, Canada, Australia

Portugal, Luxembourg, Italy, Greece, Norway, Finland, Germany, France, Belgium, Austria

Sweden, Denmark

Countries

Structure and Characteristics of the Korean Welfare State  85

Table 5. Result of cluster analysis 2: Input of all variables

Cluster average

Type 1

Type 2

Type 3

Type 4

Type 5

Cash

2.3

8.3

12

16.3

13.5

Service spending

0.6

2.2

2.8

2.6

7.5

Public expenditure

5.6

16.7

20.5

25.2

26.9

Private expenditure

2.4

0.6

2.3

0.7

0.7

Selectivism

0.4

3.1

1.5

1.1

0.9

Working age

0.09

1.3

2.2

2.1

3.7

Non-working age

1.4

5.1

6.1

10.7

7.9

Countries

Australia, Korea Canada, Japan, U.S.

Finland, Netherlands, U.K., Luxembourg, Portugal, Switserland

Austria, France, Sweden, Germany, Denmark, Belgium, Norway Greece, Italy

the U.K. and Switzerland were categorized as liberal despite having the same characteristics as Finland. In contrast, the present study tried to establish a typology by focusing on spending structure with regard to actual policy implementation, while the welfare regime typology of Esping-Andersen (1990) was based on institutional data and emphasized cultural and political aspects. In other words, Finland is social democratic in terms of institution and culture, but it is more conservative when it comes to actual financial spending structure.

Type 4 exhibited the highest average in cash and non-working age spending and included mainly conservative countries like Germany based on the welfare regime typology. Finally, Type 5 recorded higher services spending, public expenditure, and working age spending than other types and consisted of countries with social democratic regimes such as Sweden.

The result of cluster analyses suggests that Korea is isolated as a lagging

86  Korean Social Sciences Review | Vol. 2, No. 2, 2012

welfare state, falling far behind any other OECD countries. Moreover, the private sector plays the greatest role in the expenditure of the Korean welfare state.

V. CONCLUSION This study has evaluated the characteristics and structure of the Korean welfare state by applying the criteria of cash/social services spending, selectivist expenditure, public/private spending and expenditure on those of working/non-working age. The result could be summarized as follows.

The analysis on the features of spending structure based on these four criteria produced the following outcome. With regard to the form of benefit, the Korean welfare state had an expenditure structure focused on cash transfer and showed a low level of development on social services spending, with no trend of structural development found. As for finance, the welfare state in Korea relied on private finance, and the structural development of private spending was expected to begin after 2003. In terms of eligibility for benefit, the Korean welfare state was selectivist based on means-test and showed trend of structural development toward a selectivist welfare state from the mid-90s. As to expenditure according to generation, the welfare state of Korea spent far more on those of non-working age than people of working age. With maturation of the national pension, a structural development is expected for expenditure on those of non-working age.

Second, cluster analysis was conducted on 20 OECD countries to identify the relative position of the Korean welfare state. The result showed that Korea was categorized as significantly lagging and was particularly dependent on the private sector compared to other types.

The findings of this study have several implications.

First, the present study has theoretical significance regarding debates over the characteristics of the Korean welfare state.

The study also improves analytical result by using time series data on the Korean welfare state expenditure. Further, it evaluates the character and development of the Korean welfare state with subdivided social spending data. Regarding the characteristics of the Korean welfare state, the result of

Structure and Characteristics of the Korean Welfare State  87

variance decomposition of total public social expenditure and social spending items suggest that there has been no structural development of the Korean welfare state since 1970. It means improvement of state welfare or take-off as a welfare state, which studies of positive evaluation like that of Kim, Y.M. (2002a) or Takegawa (2006) suggested, was not found between 1970 and 2003. The expenditure increase in 1998 was not a structural development but a temporary phenomenon responding to the financial crisis. Typology based on new criteria showed that the Korean welfare state still fell far behind and the private sector has led the development more than in any other countries.

Second, this study provides more specific implication with respect to the strategy to organize systems for a paradigm shift of the Korean welfare state.

The present study does not aim to show that the Korean welfare state is not mature enough to discuss its characteristics (Kim, Y.B. 2002: 331), and thus efforts are still required to improve state welfare. It’s purpose is to propose a strategy for a future paradigm shift based on a detailed evaluation of the Korean welfare state current status. This is because an abstract is of little help in establishing specific policy directions. Although the analysis indicates that the Korean welfare state has yet to mature, considering the path dependency of the system, it seems highly likely that one of the two spending structures will be used as the welfare spending structure of Korea: either liberal spending structure of underdeveloped welfare state or conservative spending structure that is less economy-friendly and cannot respond to new risks properly. On the premise that a historic turning point of path dependency is possible, it seems that the analysis showing the Korean welfare state is lagging behind could serve as a ground for reform to establish a new welfare state strategy. In other words, a plan for a system reform of the Korean welfare state could be formulated based on the criteria applied to the analyses of the study in following ways.

Firstly, the strategy of the Korean welfare state needs to be adjusted considerably towards expanding social services expenditure. This is different from insisting on maintaining or reducing cash benefits. As the abgove analysis showed, the Korean welfare state is still lagging. It is therefore necessary to establishe a system that tries expand social services which serve as functional equivalent to cash benefits while guaranteeing appropriate cash benefits. This idea is in line with research that suggested the political

88  Korean Social Sciences Review | Vol. 2, No. 2, 2012

and economic sustainability of a welfare state can be achieved whilewhile balancing cash benefits and social services spending (Ahn, S. 2007).

Secondly, it is necessary to expand the universalist system led by the public sector.8 The findings of this study indicate that the state’s role in developing the Korean welfare state was concentrated on means-tested selectivist spending. Compared to Western welfare states, the state’s contribution to social insurance and universalist spending was far less in Korea. The Western welfare states show that high social-services spending is compatible with cash benefits for income maintenance over 10% of GDP. As of 2003, cash benefits in Korea recorded a meager 2.3% of GDP. Therefore, Korea needs a strategy of welfare state that pursues expansion of universalist social services spending with income maintenance programs reformed to an appropriate extent.

Finally, a strategy for increasing social expenditure on those of working age is required. Korea has shown a considerably imbalanced development of spending on those of non-working age between 1999 and 2003, which is recorded at 1.4% of GDP on average, while; expenditure on people of working age was 0.09%. This is an extremely imbalanced structure even in comparison to countries with the greatest gap between the two, such as Austria, Germany and France, where spending on those of working and non-working age was recorded at 2.1% and 10.7% respectively. Such an imbalance, it is thought, will worsen when the timing of the national pension system maturation is considered. On the premise that a welfare state cannot be developed when considered separately from productivity, the lopsided spending structure is a critical issue that threatens the sustainability of the welfare state.

In conclusion, the findings of this study could serve as a compass in drawing a blueprint for new sustainable Korean welfare state beyond the limit 8

The direction of the reform strategy proposed in the present study is different from the pursuit of social investment strategy which emerges in current discussions on the reform of the Korean welfare state. As previously proposed social investment strategies lack specific budget estimates regarding the amount of total aggregate social spending, which makes them difficult to assess. Yet, the idea of adding social investment policies without reforming the income maintenance system is highly likely to result in quasi-selectivistic social investment state which focuses on those of low income entrenched in social services system development unless considerable aggregate social expenditure is guaranteed (cf. Kim, Y. 2007; Yang, J. 2007 etc.)

Structure and Characteristics of the Korean Welfare State 89

of institutional determinism. Although the Korean welfare state has taken the wrong path towards development, that does not preclude changes in the institutional path is impossible. It is even more hopeful that the Korean welfare state has greater possibility for more thorough reform than other developed countries as it is still in the initial stage of development.

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Cho, Young Hoon. 2002. “Characteristics of the Welfare Policy of the Incumbent Government: Is It Beyond Neoliberalism?” in Kim, Yeon Myung (Eds.).

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Choi, Gyun. 1997. “Underdevelopment of the Social Welfare in Korea and Challenges for the Future Development.” in Institute of Social Welfare of Hallym University, Comparative Social Welfare 3 (“한국 사회복지의 저발달과 향후 발전과제”. 『비교사회복지』 3).

Hong, Kyung Zoon. 1998. “A Comparative Study of the Welfare State Formation in Korea and Western European Nations.” Korean Journal of Social Welfare 35: 427-451 (“한국과 서구의 국가복지 발전에 대한 비교사적 검토”. 『한국사회복 지학』 35: 427-451). . 1999. “A qualitative Comparative Analysis of Welfare Regimes.” Korean Journal of Social Welfare 38: 309-335 (“복지국가의 유형에 관한 질적 비교분 석-개입주의, 자유주의, 그리고 유교주의 복지국가”. 『한국사회복지학』 38: 309-

90 Korean Social Sciences Review | Vol. 2, No. 2, 2012

335).

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Korean Journal of Social Welfare Studies 13: 29-59 (“한국사회복지의 현실: 낙 후된 국가, 성장한 시장 그리고 변형된 공동체”. 『사회보장연구』 13: 29-59) Kim, Tae Sung and Seong, Kyoung Ryung. 2000. A Study on the Welfare State.

Korea: Nanam (『복지국가론』).

Kim, Yeon Myung (ed.). 2002. Debates on the Korean Welfare State Regime I. Human & Welfare Books (『한국복지국가 성격논쟁 I 』). . 2002a. “Social Welfare Policy of the Kim Dae-Jung administration: Beyond Neoliberalism.” in Kim, Yeon Myung (Eds.), Debates on the Korean Welfare State Regime I (pp. 109-141). Seoul: Human & Welfare Books (“김 대중 정부의 사회복지정책: 신자유주의를 넘어서”. 『한국 복지국가 성격논쟁 I』). . 2002b. “Some Comments on the Critiques of the Reinforcement of State Welfare in Korea.” In Kim, Yeon Myung (Eds.), Debates on the Korean Welfare State Regime I (pp. 351-384). Seoul: Human & Welfare Books (“‘국 가복지강화론’ 비판에 대한 재비판과 쟁점”. 『한국 복지국가 성격논쟁 I』). . 2007. “The Future of Social Investment Policy and the Korean Social Policy.” 2007 Conference of the Korean Academy of Social Welfare: pp. 111139 (“사회투자정책과 한국 사회정책의 미래”. 『2007한국사회복지학회학술대회자 료집』 pp. 111-139).

Kim, Young Bum. 2002. “Critical Analysis on the Studies on Classification of Korean Welfare State: Focusing on the immaturity of Korean Welfare State.” Journal of Critical Social Policy 11: 329-350 (“한국복지국가의 유형화 에 대한 비판적 검토: 제도의 미성숙과 그에 따른 한계를 중심으로”. 『상황과 복지』 11: 329-350).

Kim, Young Hwa and Kim, Ji Sook. 2006. “State’s Crisis-Strategies in Changing of Korean Social Welfare Policy.” Social Welfare Policy 26: 149-175 (“한국사회 복지정책의 주요 변화를 통해 본 한국의 국가 위기전략”. 『사회복지정책』 26: 149175).

Kim, Yung Whoa and Lee, Ogg Hee. 1999. “Globalization and Critical Review for the Korean Welfare State.” Korean Journal of Social Welfare 39 (“세계화와 한 국 사회복지의 비판적 검토”. 『한국사회복지학』 39).

Ko, Se Hoon. 2003. State and welfare: A Search for a Korean Welfare Regime in an

Structure and Characteristics of the Korean Welfare State 91

Age of Globalization. Seoul: Asiatic Research Books (『국가와 복지: 세계화 시 대 복지한국의 모색』).

Korea Institute of Public Finance and Korean Association for Social Welfare Studies and Korea Institute for Health and Social Affairs. 2006. A Study on the Development of the Korean Model of Welfare Finance, Ministry of Strategy and Finance (『한국형 복지재정 모델 개발연구』).

Lee, Hye Kyung. 1992. “Development of Social Welfare in an Authoritarian Capitalist Society: The Korean Experience.” Korean Academy of Social Welfare International Conference (“권위주의적 자본주의 사회에서의 사회복지 의 발달: 한국의 경험”. 『한국사회복지학회 국제학술대회자료집』).

Nam, Chan Seob. 2002. “The Nature of the Korean Welfare System-Searching for Some Empirical Bases.” In Kim, Yeon Myung (Eds.). Debates on the Korean Welfare State Regime I (pp. 557-592), Seoul: Human & Welfare Books (“한 국 복지체제의 성격에 대한 경험적 연구” 『한국 복지국가 성격논쟁 I』).

Seong, Kyoung Ryung. 1991. “Changes of Political Regime and Social Policy in Korea: A Political-Sociological Analysis.” Korean Journal of Social Welfare Studies 3: 109-146 (“한국의 정치체제변동과 사회정책의 변화: 정치사회학적 분 석”. 『사회복지연구』 3: 109-146). . 2002. “Democratic Condolidation and Welfare State Development: A Comparison of the Kim Young Sam Government and the Kim Dae Jung Government.” In Kim, Yeon Myung (Eds.), Debates on the Korean Welfare State Regime I (pp. 487-523), Seoul: Human & Welfare Books (“민주주의의 공고화와 복지국가의 발전: 문민정부와 국민의 정부 비교.” 『한국 복지국가 성격논 쟁 I』).

Shin, Dong Myeon. 2006. “The Elective Affinities of production Regime and Welfare Regime in Korea.” The Korean Political Science Association Journal 41(1): 115-138 (“한국의 생산체제와 복지체제의 선택적 친화성”. 『한국정치학회 보』 41(1): 115-138).

Son, Ho Chul. 2005. “Characteristics of Kim Dae Jung Government’s Welfare Reform.” The Korean Political Science Association Journal 39(1): 213-398 (“김대중 정부의 복지개혁의 성격: 신자유주의로의 전진?” 『한국정치학회보』 39(1): 213-398).

Song, Baek Seok. 2006. “Critical Analysis on the Evaluation of the Kim Dae Jung Government’s Policy Nature.” Economy and Society 71: 126-153 (“김대중 정 부의 정책성격분석 비판”. 『경제와 사회』 71: 126-153).

Takegawa, S. 2006. “The Korean Welfare State in Comparison to Welfare Regimes in Japan and Europe.” In Ahn, Sang Hoon et al. Issues and Challenges of the

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Korean Economic and Social Policy in the Future. Korean Labor Institute (“일본·유럽과의 비교시점에서 본 한국 복지국가”. 『미래한국의 경제사회정책의 쟁점과 과제』).

Yang, Jae Jin. 2002. “Labor Market Flexibility and the Korean Welfare State: Coping with the Mismatch between the Labor Market and the Social Welfare System.” The Korean Political Science Association Journal 37(3): 403-468 (“노동시장유연화와 한국복지국가의 선택”. 『한국정치학회보』 37(3): 403-468). . 2007. “The Social Investment State is the Welfare State Model for Korea A Reply to Critics of the Social Investment State.” 2007 Korean Academy of Social Welfare Conference: 319-355 (“사회투자국가가 우리의 대안이다”. 『한국 사회복지학회 2007년도 학술대회 자료집』: 319-335).

Books and Articles in English

Briggs, A. 1961. “The Welfare State in Historical Perspective.” Eroupean Journal of Sociology (2): 221-258.

Castles, F. G. 2002. “Developing New Measures of Welfare State Change and Reform.” European Journal of Political Research 41: 613-641.

Castles and Francis G. and Mitchell and Deborah. 1992. “Identifying Welfare State Regimes: The Links Between Politics, Instruments and Outcomes.”

Governance, An International Journal of Policy and Administration 5(1): 1-26.

Esping-Andersen, G. (ed.) 1990. The Three Worlds of Welfare Capitalism.

Cambridge: Polity Press.

Flora, P. and Heidenheimer, A. 1981. Development of Welfare State in Europe and America. Brunswick: NJL Transaction Books.

Huber, E., C. Ragin, J. D. Stephens, D. Brady, and J. Beckfield. 2004. Comparative Welfare States Data Set. Northwestern University, University of North Carolina, Duke University and Indiana University.

Jessop, B. 1993. “Towards a Schumpeterian Workfare State? Preliminary Remarks on Post-Fordist Political Economy.” Studies I Political Economy 40: 7-39. . 2002. The Future of the Capitalist State. England: Blackwell Publishing Ltd. Marshall, T. H. 1963. Sociology at The Crossroads, and Other Essays. London: Heinemann.

Pierson, P. 1996. “The New Politics of the Wefare States.” World Politics 48: 143-179.

SOCX. 2007. OECD Social Expenditure Database. OECD. . 2007a. OECD Social Expenditure Database: An Interpretative Guide SOCX 1980-2003. OECD.

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Are Korean Welfare Politics Changing?: The Politics of the First and Second Pension Reforms in Korea* Kim, Yeong Soon** This article examines what factor was most significant in determining the pension reforms in Korea. This will be achieved by analyzing the two pension reforms undertaken during the Kim Dae-jung government (the first pension reform) and Roh Moo-hyun government (the second pension reform). The research demonstrates that in both cases the results were decided by the power relations formed through a process of strategic actions and interactions among major actors. This implies that actors rather than institutions, and dynamic power relations rather than the power resources of actors, are crucial in changing welfare policies.

In addition, the comparison of the two pension reforms shows that the interactions among the actors became more active, and the role of the political parties became more important during the decade separating the two reforms. The pattern of forming coalitions and cooperating among the actors also changed during the period in scrutiny from being tacit and loose to open and active.

Keywords: Welfare Politics, Pension Reform, Kim Dae-jung Government, Roh Moohyun Government, Actors, Power Relations, Korea

I. Introduction All welfare policies and the related decision-making processes are fundamentally political. However, in Korea, even after democratization, Translated by Ria Chae from the article published in Korean Political Science Review 45(1): 141-163 with permission from the Korean Political Science Association. ** Professor, School of Liberal Arts, Seoul National University of Science and Technology *

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welfare issues had not been politicized for an unusually long period. Only recently have we started to observe some overt indicators of the activation of welfare politics. These include the hot debates over free school lunches during the 2010 local elections and the subsequent vigorous discussions among influential politicians about their vision for the welfare state. The phenomenon is likely to become more pronounced during the campaign period ahead of the 2012 presidential election. The situation might make one assume that Korean welfare politics are finally experiencing some significant changes. Are Korean politics of welfare indeed slowly changing from the bottom? And what does this transformation mean for the future of the Korean welfare state?

To answer these questions, this paper compares the national pension scheme (NPS) reforms in 1998 during the Kim Dae-jung government (hereafter, “the first pension reform”) and those in 2007 during the Roh Moohyun government (hereafter, “the second pension reform”). It looks for the critical factors that determined the results of the two reforms and analyzes how and why these factors differed in order to assess the changing trends in the politics of welfare.

Why choose the pension scheme? In general, a national pension system is a core program of a welfare state, which requires larger expenditures than any other program. Also, as the central part of the “politically constructed property rights” (Schwartz 2001) within a welfare state, a pension system incorporates the logic of redistribution and social solidarity and represents political compromise among social forces. These characteristics make pension politics the best site to observe welfare politics in a country. Although the public pension system in Korea has not reached a mature stage yet, in terms of importance it already shares the common characteristics mentioned above.

To perform a comparative analysis of the first and second pension reforms, this study adopts the perspective of the power-centered action theory of Ana Rico. This perspective, compared to other existing approaches, is more advantageous for examining the socio-economic base of the welfare politics, the power resources of the main actors, and the dynamic interactions among the actors. The focus of the comparison will be on the strategic interactions and consequent power relations among the actors. It is this factor that determined the difference between the two pension reforms. And I will argue

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that the changes in the strategic actions and the interactions of the actors, which formed the eventual power relations in the two pension reforms, represent an important transformation in Korean welfare politics.

II. THEORETICAL DISCUSSION: EXISTING STUDIES AND ALTERNATIVE ANALYTICAL FRAMEWORK The research on the pension reforms since the start of the Kim Dae-jung government can be divided into studies focusing on the structure and context, and those works emphasizing the interactions between the main actors. Of the first type, several works that have adopted a new institutionalist perspective (Kim and Kim 2005; Kim, Y. 2005; Hyun, O. 2008; Park, K. et al.

2008) stand out in particular. They confirm that the main propositions of the new institutionalism, represented by path dependency and veto point (Bonoli and Shinkawa 2005: 20), also apply to Korea. That the social solidarity attribute of the pension was preserved during the first reform because of the existing pension system design (Kim and Kim 2005; Kim, Y. 2005), and that the range of the second reform was not large (Park, K. et al. 2008: 111) both support the path dependency thesis. The veto point thesis is supported by the fact that during the first reform the original bill passed without major revisions in the power structure of the majority government in a highly centralized presidential system, and during the second reform the final bill was significantly modified in the decentralized power structure of a the divided government (Kim, Y. 2005).

However, such new institutionalist explanations, as convincing as their simplicity and clarity are, also contain limitations. Since they focus on institutions, the more dynamic variables are unintentionally underestimated.

As will be examined in the main part of this article, the institution is a necessary condition rather than a sufficient condition for a particular policy change. Even when there is no significant veto point in the power structure, most governments tend towards compromise during pension reforms to avoid blame. Therefore, rather than checking whether a compromise and modifications are present or absent, it is important to explain why particular compromises and modifications become possible.

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Another noteworthy study focusing on the structure and context of the pension reform is Choi, Y. (2008). This study deals with the influence of the industrial structure and businesses. Based on a comparative analysis of Korea and Taiwan, he argues that pension reforms brought about divergent results caused by differences in industrial structures and subsequent differences in employers’ interests rather than institutional variables. This research is exceptional because it draws attention to employers, an easily overlooked but important factor in the politics of welfare. Nevertheless, because the political actions of employers in welfare politics are not highly visible in Korea, there is a tendency to infer the business interests from the characteristics of the industrial structure and substitute the analysis of businesses’ actions with the inference.

In contrast to arguments emphasizing structure and context, there is a series of studies focusing on the dynamic interactions among main actors.

The most representative among these is research utilizing the theory of policy network (Yang, J. 2001; Cho, G. et al. 2009). These studies, Cho, G. et al. (2009) in particular, investigate how the interactions among the involved actors have influenced pension reforms and demonstrate that in Korea too, the politics of welfare and welfare policies are becoming closely related to each other. However, these studies generally adopt a pluralistic perspective that considers all those involved in the policy process as “individuals and groups of individuals with various motives, goals, and interests.”1 Such studies are not concerned with the socio-economic roots of the actors’ interests, the asymmetry of their economic and power resources, and the properties of the ideology of the political parties that represent them. This perspective obscures the connotation of class politics in pension reform.

This paper modifies the theoretical traditions defined by Ana Rico (2004) as “power-centered action theories” in order to analyze the political process of the first and second pension reforms. Rico’s power-centered action theories possess the following characteristics. Firstly, the strategic actions and interactions of the main actors are considered the most important factor of the policy changes. This allows us to break away from the excessive emphasis 1

The only exception is Yang, J. (2001), which examines the policy network of the first pension in connection with the dominant political coalition.

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Figure 1. Analytical framework of the politics of welfare surrounding the pension reform

on structure and context and grasp the importance of the dynamics in of welfare politics. Secondly, while the focus is on the actors, their actions are grounded in a socio-economic context, i.e. the capitalist economy and class interests. This argument constitutes the fundamental difference between Rico and the policy network approach, which treats political actors as individuals and which separates them from their broader connections with society (Rico and Costa 2004: 16). Thirdly, as a framework for analyzing strategic interactions between actors and their power relations, Rico emphasizes strategic alliances connected to a broad range of social subgroups who provide competing policy alternatives. For example, solidaristic coalitions

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composed of various actors—such as a pro-welfare coalition and an antiwelfare coalition (Hicks and Misra 1993), or a stakeholder coalition and a stake challenger coalition (Peterson 1993)—may form around a welfare reform. And policy changes depend on the aggregated, relative power resources of these competing alliances. Unlike the classical power resource theory, this approach lets us assess the influence of various actors involved in the policy transformation process, in addition to the influence of labor and employers.

This paper uses Rico’s perspective with two modifications. Firstly, I believe that policymaking is influenced more by power “relations” of actors than by the amount of their power “resources.” Power resources, as an asset providing a source of power includes collective action resources, formal institutional power resources, financial resources, and knowledge-based power resources (Rico 2004: 16-20). Generally the power resources of an actor are fairly stable and therefore somewhat static within a given period.

On the other hand, a power “relation” develops through complex interactions under specific conditions and is thus changeable depending on mobilization of public support and on coalitions and alliances. In other words, the power resources of each actor are structuralized in a relatively stable form in a given period, whereas power relations are “shaped” in the “process” of interactions amongst the actors. Power relations are much more dynamic than power resources. In this study, within a dynamic situation of policy-making, power resources are considered a factor constraining and shaping the actors’ actions.

The strategies and interactions between the actors as well as the resultant power “relations” and balance of power are considered the critical factors determining the results of a policy-making. Power resources are an important variable affecting power relations among the actors, but power relations cannot be reduced to power resources.

Secondly, the main actors in this article are categorized as social actors and political actors. A social actor is a group that has direct vested interests in a specific issue in civil society, while political actors are those who aggregate and articulate social actors’ interests in the formal, institutionalized political arena. Such a categorization helps explain the differences between the roles of an interested party and a political representative, as well as the differences in their political influence that stem from the fact that their actions take

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place in different spaces. The main social actors examined in this article are the employers association and the two largest labor unions, civic groups, and interest groups. Among the political actors are several political parties, the presidential office as an institution, and each administrative department.

Figure 1 demonstrates the analytical framework for understanding the pension politics in Korea, based on the discussion above. Using this framework, I will compare how the pension politics differed between the two governments— the Kim Dae-jung and Roh Moo-hyun governments—and what kind of effect each had on the results of the pension reforms.

This paper adopts the method of cross-time comparison. The focus areis the strategic actions and interactions between the main actors over pension reform in each government. The process and results of the two pension reforms were fairly different, and we hypothesize that the cause was the difference in the strategic interactions and consequent power relations among the main actors. This study mainly uses the literature review method. I will work with the official and unofficial government documents, pension-related revision bills and enactment proposals, records of the National Assembly, materials of public hearings and discussions, statements and press releases of interest groups and civic groups. In addition, I use a database of the interview material on the related actors, built by the “Research Team for the Collection of Qualitative Basic Data Related to the Birth, Growth, and Reorganization of the Korean Welfare State” (hereafter, “Basic Data Collection Team”).2

III. PENSION POLITICS OF THE FIRST PENSION REFORM 1. Process and Results of the Pension Reform The Kim Dae-jung government, which took office during the 1997 financial crisis, faced three tasks in regard to the NPS. The first problem was the 2

This research team, composed of Yang Jae-Jin, Kim Yeong-Soon, and eleven other researchers, and supported by the Korea Research Foundation (presently the National Research Foundation of Korea) collected, from 2005 to 2007, the primary written data and testimonies of major actors concerned with the core social security system. The results were digitalized and built into the database.

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existence of the self-employed urban population who were not covered by the program, and the people who were formally included in the system but in reality remained outside of it—mainly non-regular workers in small businesses. Secondly, the system was not financially sustainable in the long term because of the unrealistic low contribution-high benefit structure and the aging population. Thirdly, the government had to solve the potential reduction of returns in the national pension fund caused by a lack of transparency and the undemocratic operation of the fund.

In fact, the preceding Kim Young-sam government recognized these problems and prepared a revision bill to tackle them. At that time, the Office of the Chief Social Welfare Secretary in the President’s Office (Blue House), upon a request by the president, drew up a plan for long term development of the public pension system. The essence of the plan was to urgently carry out a structural reform to financially stabilize the NPS and then expand the scheme to include the self-employed (reform first, expansion second). The Ministry of Health and Welfare (MOHW) raised objections and suggested including the self-employed first and then implementing reform, which would not damage the frame of the existing pension structure (expansion first, reform second).

However, the ministry’s proposal was rejected. In the end, the Task Force for Improving the National Pension System was established under the guidance of the Blue House Chief Social Welfare Secretary’s Office in June 1997, and the Task Force presented three different alternatives. The first one focused on maintaining and improving the existing system through a parametric reform that would decrease the benefit level and increase the premium.

The second plan was developed based on the reform plan for a multi-pillar pension system recommended by the World Bank. This alternative involved a structural reform in which the national pension would be divided into basic and earnings-related parts, and the two parts combined would make up an income replacement rate of 40 percent. The third alternative suggested introducing personal pension plan, i.e. a complete privatization of the pension system in the Chilean style. The second among the three proposals was finally adopted in December 1997 (Yang, S. 1998; Yang, J. 2008).

However, the reform plan of the Kim Young-sam government was abolished with the advents of the Kim Dae-jung government in February 1998. The new government carried forward an effort, led by the MOHW, to

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extend the pension scheme to the urban self-employed, while preparing a new pension reform proposal based on the parametric reform plan mentioned above. The main contents of the new proposal were as follows. First, reduce the income-replacement level of the national pension from 70 percent to 55 percent. Second, gradually adjust the legal retirement age from 60 to 65 years (by 2033). Third, reduce the income redistribution function by revising the pension to earnings-related pension ratio in the national pension benefit formula from 1:0.75 to 1:1. Fourth, make estimates for future financing and readjustments of the national pension system every five years. Fifth, increase the number of representatives of the insurants in the National Pension Fund Operation Board, change the head of the Board from the Minister of Finance to the Minister of Health and Welfare, and provide the Board with the actual decision-making authority by transforming it from a consultative to decisionmaking body. This reform bill was taken to the vote of the National Assembly in December 1998. With the exception of the decision made in the process of National Assembly review to modify the post-reform income-replacement level from 55 percent to 60 percent, the bill passed in its original form. It was enforced beginning in January 1999. The expansion of the scheme to include the urban self-employed began in April 1999.

The process of the first pension reform formally ended here. In reality, however, a kind of “third round of the battle,” aborted later, was on the way. In March 1998, the World Bank provided Korea with a 2 billion dollar structural adjustment loan, attaching to it, among other conditions, the requirement to reform the public pension to a multi-pillar system and revise the public fund management law. To fulfill this promise, the Kim Dae-jung government set up the Action Committee for Public and Private Pension Systems, which proposed several reform plans. Nevertheless, no reforms followed during the administration as the MOHW opposed the multi-pillar system and adopted a lukewarm attitude toward any future discussion. The opposition party did not take any special motion on the issue, either (Yang, J. 2008: 147).

As seen from the discussion above, the most important aspect of the pension reform of 1997-99 was that it preserved the basic frame of social solidarity in the national pension—the principle of solidarity between classes, groups, and generations (Kim, Y. 2002: 41). The reform ceased at parametrical changes, and the urban unemployed were newly included in

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the system. In addition, it can be argued that the first pension reform had several other effects. Firstly, the insurants’ representation in National Pension Fund Operation Board was strengthened. Secondly, the reform did not offer a solution to the problem of old-age protection for the group of low-income non-participants in the NPS. Thirdly, the income redistribution function of the NPS was slightly weakened.

2. Politics of the Pension Reform What kind of welfare politics caused the results of the first pension reform?

Let us first examine the socio-economic interests surrounding the pension reform and then investigate how the interactions and power relations among the actors affected policy-making.

We can largely divide the socio-economic interests surrounding the first pension reform, which was started by the Kim Young-sam government, into two positions. The first aimed at making the pension scheme universal by expanding the existing national pension of social solidarity to the selfemployed with a simultaneous parametric reform to achieve financial sustainability. This position corresponded with the interests of the urban selfemployed who remained outside of the system, the low-income insurants who would benefit from the redistribution element of the national pension, and the existing insurants who would enjoy the advantages of high returns through the pension scheme. The wage earners had conflicting interests.

Minor parametrical changes were more favorable than a radical structural reform. But expanding the NPS with its strong income-redistribution element to include the self-employed who tend to underreport their profits, could hurt wage-earners. The office of the Chief Social Welfare Secretary in the Blue House under the Kim Dae-jung government, the MOHW, the ruling party — National Congress for New Politics (hitherto, political actors); the Korean Confederation of Trade Unions (KCTU, Minju Nochong), progressive civic groups, social welfare scholars (hitherto, social actors) were the main actors representing the first position.

The second position supported the structural reform plan (abovementioned reform plan 2), which was intended to strengthen the responsibility of the individual and the logic of the market. This position

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argued for weakening the inter-generational as well as the inter-class redistribution aspect of the existing pension scheme by reducing the income replacement level and expanding the earnings-related part of the pension.

In the civil society, this position conformed to the interests of insurance companies, businesses, and the higher-income class. Insurance companies would benefit from the expansion of the private pension market; businesses would be able to reduce the contribution payments for their employees to the public pension program; and the higher-income class would not need to accept a relative disadvantage due to the redistribution element. The Office of the Chief Social Welfare Secretary in the Blue House during the Kim Youngsam government, the Ministry of Finance, the New Korea Party (hitherto, political actors), the Korea Employers Federation, and neoliberal economists (hitherto, social actors) were the main actors representing this position.

How did the strategic interactions of these actors unfold? The test of the actors’ strength over the first reform proceeded in two rounds. The first one took place between the office of the Chief Social Welfare Secretary in the Blue House and the MOHW during the Kim Young-sam government. The MOHW proposed an “expansion first, reform second” approach (parametrical reform) but the Office of the Chief Social Welfare Secretary in the Blue House pushed forward its “reform first, expansion second” position (structural reform). The result was the victory of the Office of the Chief Social Welfare Secretary, which was backed by the president. The Task Force for Improving the National Pension System, under the influence of the Chief Social Welfare Secretary’s Office, appointed advocates of neoliberalism as the committee members and they eventually adopted the structural reform plan as the majority proposal (Yang, J. 2008: 138-9). A popular civic group, People’s Solidarity for Participatory Democracy (PSPD) issued critical statements against the proposal, although it did not have any effect.

However, the change of government in 1998 offered an opportunity for a second contest over the pension reform, which completely reversed the direction of the initial reform. When Kim Dae-jung won the presidential election, the MOHW filed a report to the government transition committee in which it negatively evaluated the adopted reform bill. It argued that the existing pension structure was good for securing the support of broad masses of the population and for facilitating social solidarity among different income

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Figure 2. Composition of Politics of Welfare in the First Reform

brackets and occupations. The ministry, therefore, claimed that the structural reform was the issue to be considered after the scheme was extended to the urban self-employed. In the end, the transition committee accepted the recommendations of the MOHW and repealed the pension reform plan of the Kim Young-sam government. And it was decided not to proceed with the structural reform while expanding the scheme in the urban areas in 1998 (Yang, S. 1998).

Several social actors voiced their protests during the subsequent process of devising a new pension reform bill based on the MOHW’s proposal. First, the Federation of Korean Industries and the Korea Employers Federation protested against the extension to the urban self-employed on the grounds that it would increase the burden on businesses. The Federation of Korean Trade Unions (FKTU) argued that to prevent disadvantages to wage workers

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because the urban self-employed tend to underreport their earnings, it would be necessary to separate the pension funds for the paid workers from those for the self-employed. In contrast, the Korean Confederation of Trade Unions suggested maintaining the existing unitary structure with its strong character of social solidarity but reinforcing the assessment of the earnings of the selfemployed. The most active among the social actors, PSPD enthusiastically supported expansion of the NPS to achieve universal coverage (Kim, Y. 2002: 46).

Secondly, in regard to operating the pension fund, the PSPD, Korean Confederation of Trade Unions, Federation of Korean Trade Unions, and even the Korea Employers Federation criticized the system of compulsory deposits of the pension fund in the public sector and demanded democratizing operations of the pension fund. The opinions converged and the efforts joined for the common goal of defending the pension fund against insolvency. This was a demand they had voiced since the National Pension Reform Board was established in 1997 (People’s Solidarity for the Participatory Democracy 1997).

Thirdly, regarding the income replacement rate, the PSPD, Korean Confederation of Trade Unions, and Federation of Korean Trade Unions were all strongly against the sharp reduction from 70 percent to 55 percent.

They firmly requested lessening the drop of the income replacement rate (Federation of Korean Trade Unions, Korean Confederation of Trade Unions, People’s Solidarity for the Participatory Democracy 1998). Among the social actors, the voice of the PSPD was the most prominent. Consistently arguing that they stood for social solidarity and represented the interests of the socio-economic minority, the civic group made their own policy proposal and exercised pressure on the political actors so that the latter would accept the proposal. At that time, when no progressive party existed, the PSPD performed those functions in terms of interest representation and policymaking.

On the other hand, the political actors were not very active. The role of the parties was particularly weak. Neither the ruling nor opposition parties either performed the function of formulating policies by planning the policies and setting the agenda, or the function of interest representation by actively aggregating and articulating the interests of social actors. Instead,

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they passively adopted the policy proposal prepared by an administrative department and selectively accommodated preferences of social actors according to the party’s political position. The Millenium Democratic Party accepted the proposals of the MOHW, PSPD, and Korean Confederation of Trade Unions, whereas the stance of the Grand National Party mainly reflected the position of business community and Federation of Korean Trade Unions (Kim, Y. 2002: 50-51).

It can be said that two loose alliance entities thus formed between the social and political actors around the first pension reform. That is, the first round was a scene of confrontation between the group composed of the Office of the Chief Social Welfare Secretary in the Blue House, Finance Ministry, businesses, and scholars with neo-liberal views on the one hand, and the group of MOHW, PSPD, two labor unions and social welfare scholars on the other. With the change in government, it was transformed into the group of the Grand National Party, businesses, Federation of Korean Labor Unions and neo-liberal economists contra-positioned against the Office of the Chief Social Welfare Secretary in the Blue House, MOHW, National Congress for New Politics, (United Liberal Democrats), PSPD, Korean Confederation of Trade Unions, and social welfare scholars. The bonds between actors inside each camp were informal and loose rather than formal and intimate, and no close negotiations or compromises were made to achieve the solidarity.

The struggle between the two camps ended with voting at the National Assembly but this final stage went rather “quietly.” The ruling party, National Congress for New Politics had obtained a majority in the assembly through the coalition with the United Liberal Democrats, so the circumstances were favorable for easy passage of the bill prepared by the government. The United Liberal Democrats also supported the government’s bill because Welfare Minister Kim Mo-im was a member of the party. In addition, the political parties did not play the leading role in pension politics, and therefore in the process of review at the National Assembly they did not make any important modifications to the national pension reform bill submitted by the MOHW. The only significant revision was changing the income replacement rate from 55 percent to 60 percent. The Federation of Korean Trade Unions vigorously demanded this change, the Grand National Party argued for it at the National Assembly, and the Korean Confederation of Trade Unions and the ruling

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party shared the same position.3 The outcome from the first reform’s pension politics shows that the most important variable that determined the reform’s results was the strategic interactions of actors and the power relations that developed through this process. As pointed out by existing studies (Kim and Kim 2005: 223-224; Kim, Y. 2005), one might say that the Korean political institution—presidential system and single term presidency—provided the important conditions for the failure of a structural reform in addition to finishing the reform with parametrical changes. Although this explanation highlights the power of the institution, it does not prove that the institution is the critical factor affecting the results. The decisive opportunity for the MOHW to have its position accommodated in the first reform was not the institutional conditions but rather a major change in power resources due to the government transition. Had the Grand National Party seized power again, the wait-and-see tactics of the MOHW most likely would have become meaningless. The change of administration to the Kim Dae-jung government altered the composition of the two camps pitted against each other over the pension reform (changing the president’s and Blue House Chief Social Welfare Secretary Office’s characters), and under a strong presidential system this transformation brought a critical change to the power resources of the two coalitions. Moreover, the transformation eventually changed the power relations between the coalitions formed around pension reform.

Although the “creation” of the majority government through the DJP alliance (alliance of Kim Dae-jung’s National Congress for New Politics and Kim Jong-pil’s United Liberal Democrats) did, in fact, put the government’s bill in an advantageous position, it was not the critical factor determining the pension reform results either. Not only did the Grand National Party lose power and enter the pension politics with diminished power resources, it also could not mobilize support or form a policy coalition. It can be concluded that the power relation factors were more important for the results of the first 3

Interview with Kim, Yeon-Myung (representative from civic groups to the Task Force for Improving the National Pension System; interview conducted by Yang, Jae-Jin on 23 March 2000); interview with Lee, Hye-Kyung (representative from academia to the Task Force for Improving the National Pension System; interview conducted by Yang, Jae-Jin on 9 August 2007); Database of the Basic Data Collection Team, 2008.

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reform than the systemic factors. The Grand National Party not only lacked a solid platform as a political party when it lost the majority, but it was also unable to abort the government’s reform by mobilizing its supporters in civil society or forming alliances with other forces. Meanwhile, the forces that allied with the Grand National Party during the second reform had been covert supporters of the ruling government party during the first reform.

The institution, therefore, was just a necessary condition whereas changes in power resources and resultant power relations were the most important factor in the first reform.

IV. POLITICS OF THE SECOND PENSION REFORM 1. Process and Results of the Second Pension Reform The financial reassessment of the national pension fund in 2003 demonstrated that, despite the first reform, the fund would be exhausted by 2040. In the face of rising concerns about the low birth rate and aging population, the MOHW again prepared a pension reform proposal that focused on financial stabilization and improving the management and supervision of the pension fund. After the 2002 presidential election and the launching of the Roh Moo-hyun government, the MOHW submitted to the National Assembly a pension reform bill (31 October 2003, Table 1). But the proposed bill received criticism from the labor and civic groups for excessive retrenchment and damaging the democratic operation of the fund. Moreover, the Grand National Party, conscious of public sentiment and preparing for the April 2004 general elections, refused to deliberate on the bill. Ultimately the reform plan was automatically abandoned when the 16th National Assembly term ended.

In the post-impeachment storm, the 17th General Election finished with a victory for the ruling party. Although the Roh Moo-hyun government was able to move from a divided to a majority government, the composition of parliamentary seats was still too unstable to push ahead with pension reform.

The ruling party obtained just two seats more than was required to achieve the majority, and in the Health and Welfare Committee and Legislation

Are Korean Welfare Politics Changing? 109

and Judiciary Committee the number of seats occupied by the ruling and opposition parties was equal.4 In addition, in May, the so-called “Eight Secrets about the National Pension Scheme” spread on the Internet sparking off an anti-national pension movement.5 The uproar revealed the distrust of the people in the national pension scheme and the government who was planning another retrenchment after the 1998 reform. The MOHW struggled to calm down the unprecedented situation with a public hearing to make known the true facts about the NPS. After the uproar subsided, in October 2004 the MOHW submitted to the National Assembly the same proposal for reforming the national pension as the one they had submitted in 2003. The core of the government’s bill was to gradually raise the contribution rate from the present 9 percent to 15.9 percent by 2030, and to reduce the income replacement rate from the present 60 percent to 55 percent (2007) and then to 50 percent (2008).

The labor and civic groups, Grand National Party, and Democratic Labor Party pointed to the problems in the government’s financial reassessment of the pension fund, the unfairness of raising the premium, and the population that was excluded from the NPS. Moreover, they all strongly opposed the bill.

The Grand National Party did not limit its opposition to criticism but set up a taskforce team and, through a public hearing, proposed its own basic pension bill (Yun, K. 2004). The bill included separating the NPS into basic and earnings-related parts, setting the income replacement level for each at 20 percent. It also suggested measures to resolve the problems of the excluded population as well as financial instability. The basic pension targeted “all” elderly of the age of 65 and above, and the earnings-related pension was designed to be fully funded with a contribution rate of 7 percent. The proposal of the Grand National Party offered a fresh solution to the issue of 4

The distribution of 299 seats of the National Assembly was as follows: Yeollin Uri Party – 152, Grand National Party – 121, Democratic Labor Party – 10, Democratic Party – 9, United Liberal Democrats – 4, National Alliance Twenty-One – 1, and independents – 2. In the Health and Welfare Committee, the composition was: Yeollin Uri Party – 9, Grand National Party – 9, Democratic Party – 1, Democratic Labor Party – 1.

5 Regarding the validity and errors in the logic of the anti-national pension movement and “Eight Secrets about the National Pension Scheme,” see Oh, K. (2006: 158-168).

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the excluded people, which was overlooked in the ruling party’s bill. Yet it was difficult to find the enormous financial resources it required (Table 1).

In the beginning, the Grand National Party suggested increasing the value added tax. Soon, however, faced with the criticism that the measure would negatively affect the national economy, it adopted an ambiguous position regarding the problem of financing.

Having lost the initiative to the Grand National Party, the ruling Yeollin Uri Party also prepared a reform bill that significantly revised the government’s plan (Rhyu, S. et al. 2004). The income replacement rate remained the same with that suggested by the government, but the premium was readjusted upwards to reflect the results of the financial assessment in 2008. In addition, the bill accommodated many long-standing demands of academia and civil society, such as a stipulation by law of the nation’s guarantee to pay a national pension, an introduction of a child care credit, and a revision of the conditions for receiving multiple benefits. The review of reform bills by the Health and Welfare Committee of the National Assembly started in November 2004. However, both the Yeollin Uri Party and Grand National Party insisted on their own party’s plan and did not compromise.

The stalemate continued until 2005.

A turnaround in the deadlock came when Rhyu Si-min was appointed Minister of Health and Welfare and submitted a new reform bill, which was a revision of the bill by the Yeollin Uri Party. The new plan rectified coverage for the originally excluded people, which was the main point of criticism of the existing proposal by the ruling party. The income replacement rate was set at 50 percent; the contribution rate, at 12.9 percent. The basic pension was to be paid in the amount of 80,000 won to the elderly in the lower income bracket, which constituted 45 percent of the population age 65 and above (Table 1).

Through negotiations, the Yeollin Uri Party and the MOHW were able to finalize the reform proposal and put it forth in September as the “National Pension Reform Bill” (Kang, G. 2006a) and “Basic Old Age Pension Bill” (Kang, G. 2006b), thus opening a new stage in the negotiations over pension reform.

In addition, the Democratic Labor Party proposed both the “National Pension Reform Bill” (Hyun, A. 2006a) and the “Basic Old Age Pension Reform Bill” (Hyun, A. 2006b), which combined the suggestions of labor and civic groups. The proposal of the Democratic Labor Party involved a

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two-tiered structure and on the surface looked similar to that proposed by the Grand National Party. However, the Grand National Party’s bill limited the government’s responsibility in old age protection to guaranteeing the minimum basic protection and left the rest to the private sector. This was premised on the idea that the role of the NPS could be reduced or transferred to the private sector in the future. In contrast, the Democratic Labor Party bill assumed that the NPS was the foundation of the old age protection system and the basic pension should be introduced to complement the existing protection system (Kim, S. 2008: 164). For this reason, the basic pension bill of the Democratic Labor Party had a tighter structure (small target population and low payments) than the bill suggested by the Grand National Party, and the contribution rate to the NPS was also set somewhat higher. On the other hand, the suggested income replacement rate of the NPS was two times higher than in the Grand National Party’s bill and the partial reserve system was to be retained (Table 1).

Table 1. Comparison of 2007 Pension Reform Bills (In 2008 constant prices) Grand Original Government- Grand Democratic National Partygovern- Yeollin Uri National Labor Party Democratic Labor Party bill Party bill ment bill Party bill consensus bill (2006) (2004) (2006) (2003) (2007) Income re- 50% National placement rate Pension Scheme 15.9% Premium Payment rate Target Basic Pension

Costs in the first year Financial resources required (% of GDP, 2030)

Adopted bill (Yeollin Uri Party-Grand National Party consensus bill) (2007)

40%

20%

40%

40%

40% (2028)

13% (2030)

7% (2006)

Maintain current 9%

Maintain current 9%

Maintain current 9%

70-100 thou- 9%(2006) 5%(2008) sand won 20%(2028) 15%(2028)

5%(2008) 10%(2018)

5%(2008) 10%(2028)

60% of elderly

80% of elderly, 60% of elderly 80% of 100% of (2008); disabled 3rd elderly, dis- elderly, abled 3rd disabled 3rd degree and 70% of elderly (2009) above degree and degree and above above

2.4 trillion 9.5 trillion 4.3 trillion 4.4 trillion won (2008) won won won (2008) (2008) (2006) 3.3 trillion won (2009) 6 trillion won 91 trillion (0.3%) won (5.5%)

50 trillion won (2.9%)

38 trillion won (2.0%)

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Overall, by November 2006, the ruling and opposition parties proposed a dozen enactments and reform bills. Among these, the revised version of the national pension reform bill passed the Health and Welfare Committee through the cooperation between the Yeollin Uri Party and Democratic Party on November 30; the basic old age pension bill passed on December 7. However, the bills’ review by the Legislature and Judiciary Committee coincided with a conflict between the ruling and opposition parties over the issue of private school law, and, as a result, stayed in the committee for a long time.

At the beginning of the following year, the Grand National Party and Democratic Labor Party started to seek an alliance. This led to an unprecedented situation in which the most conservative and the most progressive parties cooperating over similar policies. After passing the review of the Legislature and Judiciary Committee, the bills were referred to the plenary session of the National Assembly on 30 March 2007. The Grand National Party and Democratic Labor Party reached a compromise and, on 2 April 2007, referred to revised versions of the alternative national pension and the basic old age pension acts. But the voting brought results beyond anyone’s expectations. The revised national pension bill proposed by the government party was rejected. Both the alternative national pension and basic old age pension proposals by the opposition were rejected, too. Only the revised version of the basic old age pension bill submitted by the government party passed.6 The key to this situation was in the hands of the Grand National Party. They voted in favor of the basic old age pension bill of the government party rather than their own basic pension reform bill.

This meant that only the basic pension was introduced to solve the problem of the NPS’ excluded population without reducing the cost of the existing national pension, and the situation developed in direct opposition to the original goal of achieving financial stabilization. Under a storm of public 6

The number of registered members of the National Assembly at that time was 296: Grand National Party – 127, Yeollin Uri Party – 108, United New Democratic Party – 23, Democratic Party – 11, Democratic Labor Party – 9, People First Party – 5, and independents – 13. The basic old age pension bill was approved with 254 votes in favor and 9 against with 2 abstentions. The national pension partial reform bill was rejected with 123 votes in favor, 124 against with 23 abstentions.

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criticism for these results, the ruling and opposition parties again prepared several national pension reform bills (Lee, J. 2007; Kim, H. 2007; Chung, H. 2007) and entered a new round of negotiations. The Grand National Party, which had thus far had cooperated with the Democratic Labor Party, now sought a coalition with the ruling party. Surrounded by criticism that the two parties traded adopting the national pension bill for revising the private school law, the consensus bill of the Yeollin Uri Party and Grand National Party was finally formulated in April, and passed the National Assembly in July in cooperation between the Yeollin Uri Party, Grand National Party, and Democratic Party.

The main contents of the final bill included: in regard to the national pension, reduction of the payment rate from 60 percent to 40 percent (gradually by 2028), retention of the premium rate at the present level of 9 percent; and in regard to the basic pension, payment of the amount equal to 5 percent (10 percent in 2028) of the average wage for workers to 60 percent (70 percent by 2028) of the elderly age 65 and above.7 The meaning of this pension reform can be summarized as follows. Firstly, the goal of financial stabilization was attained slightly below the government’s original goal (postponing the exhaustion of the fund to 2070). By reducing the income replacement rate, the projected time of financial depletion was extended from 2047 (in case of maintaining the existing system) to 2060. Secondly, the old age protection of the insurants was weakened. The problem concerned insurants who would not be able to receive a full pension because of a short period of contribution to the scheme.8 For example, the pension paid to a couple both of whom work and make average earnings but contribute to the scheme for less than 20 years would not reach the level of the minimum cost of living (Kim, S. 2008: 161). Thirdly, the introduction of the basic pension -allowed for-resolving the problem of the excluded population. In particular, the decision to make base the basic pension on an income pe replacement rate rather than a fixed amount as argued for by the Grand 7

Other important amendments included: introduction of the childcare credit and military service credit, division of pension in case of re-marriage (which was not allowed before), and easing restrictions on receiving multiple pensions as a survivor.

8 In 2007 the average period of contribution to the national pension was 21.7 years.

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National Party and Democratic Labor Party, meant that the basic pension resembled a public pension rather than public assistance (Oh, K. 2007: 197). Considering institutional path dependence, this point can be seen as the biggest achievement of the pension reform for those forces aimed at building a universal welfare state. Nevertheless, it was pointed out that the bill did not clarify whether the basic pension would still target 70 percent of the population after 2010, and thus left room for reducing the number of recipients of the basic pension in case the number of pensioners in the national pension scheme increased.

2. Politics of the Pension Reform Let’s examine the socio-economic interests and interactions among actors involved in the second pension reform. In terms of the interests involved, there were two major controversial issues in the second pension reform: financial stabilization measures and an introduction of the basic pension.

Firstly, to make the national pension financially sustainable, it was necessary to either raise the premium or reduce the income replacement rate or both.

The measures would lessen the burden on future generations, but they undermined the interests of the current insurants. Another retrenchment in the income replacement rate following the one in 1999 would significantly weaken their old age security. For this reason, the two labor unions, the Korea Women’s Association United, the PSPD, and other organizations representing the interests of the insurants opposed the “pay more get less” pension reform plan of the government party. They strove to minimize the reduction in payments and increase in premium (PSPD et al. 2006). Meanwhile, the business community objected to raising the contribution rate. The Korea Employers Federation argued that companies are already responsible for half of the workers’ national pension premium payments and for the severance pay, so another premium increase would detrimentally effect the competitiveness of Korean businesses. Instead of raising the contribution rate, they suggested introducing a diversion of severance pay so that a certain proportion of the severance pay would be deducted from the national pension premium. If that was too onerous, they proposed an alternative of reducing the income replacement rate to 40 percent (Korea Employers Federation

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2004). In addition, they argued that it would be necessary to tighten the relationship between contribution and benefits by separating the basic and earnings-related parts of the pension since the burden on companies’ employees increases caused by understating profits by the self-employed coupled with an inadequate system for assessing their income (Yonhap News, 19 November 2006).

Regarding this issue, in the first bill (2003), the government party proposed decreasing the income replacement rate to 50 percent and increasing the contribution rate to 15.9 percent. In contrast, the Grand National Party suggested that the basic pension be introduced and setting the income replacement rate at 20 percent (40 percent together with the basic pension), with the contribution rate at 7 percent. The Democratic Labor Party argued that even if the basic pension was introduced, the income replacement rate should be 40 percent (60 percent together with the basic pension) and the contribution rate must be kept at the present 9 percent (Table 1).

Secondly, introducing the basic pension was a structural reform aimed at guaranteeing income for that generation of the elderly who were not able to join the national pension scheme since it was nonexistent, and for the younger population who would be unable to participate in the scheme in the present and thus would be ineligible for pension in the future. Naturally, the biggest beneficiaries of the new basic pension system would be the present and future aged people in the lower income bracket. For those with a higher income, they would be ineligible for receiving the basic pension. Given that the basic pension was financed with general taxes, even if those with a higher income did receive a basic pension, it was likely that the burden on them would be greater than their gains. As might be expected, the elderly groups actively supported the basic pension plan. The Korean Senior Citizens Association, using a high voting rate of the elderly as a lever, exercised pressure on political parties and sat in the voting sessions concerning the basic old age pension bill at the National Assembly. The PSPD, Korean Confederation of Trade Unions, Federation of Korean Trade Unions, Korea Women’s Association United and other civic groups took a stance in support of the cause for the common good of “alleviating poverty among aged people with a low income” and strongly demanded the introduction of a generous basic old age pension system (National Pension Insurant Groups Association

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2007). In contrast, the five major business community groups insisted that the excluded population’s problem should be solved through the national basic livelihood security system and related residual pension of public assistance, not by the basic pension system funded with general taxes (Yonhap News, 19 November 2006).

As to the basic pension system, the Grand National Party suggested an income replacement rate of 20 percent paid to 100 percent of the elderly.

The Democratic Labor Party submitted a bill targeting 80 percent of the population age 65 and above with the payment rate of 15 percent (starting from 5 percent). The government party at first opposed the introduction of a basic pension system but, faced with an offensive from the Grand National Party and Democratic Labor Party, later prepared a plan that covered 60 percent of the elderly with the income replacement rate of 5 percent (Table 1).

What kind of interactions took place among the actors, based on these interests? The political process of the second pension reform can also be divided into two rounds: October 2004 – June 2005, and June 2005 – July 2007. In the first round, the MOHW submitted the “pay more get less” pension reform bill and received severe criticism from the labor and civic groups among social actors, and the Grand National Party and Democratic Labor Party among political actors. Unlike during the first reform, this time the Federation of Korean Trade Unions sided with the Korean Confederation of Trade Unions and civic groups against the government bill. While opposing an increase in premium, the Korea Employers Federation did not make any active moves.

Considering the actors in this round, the Grand National Party, which proposed the introduction of the basic pension, conspicuously stands out. In the beginning of the discussion, the Democratic Labor Party and civic groups prepared their own proposals for a two-tiered basic pension plus national pension system, but rather than promoting their bills, they put most of their efforts into criticizing the government plan, so their proposals did not receive much publicity. In contrast, the Grand National Party set up a taskforce team, held a public hearing and took other steps to actively present their policy, and eventually succeeded in gaining political benefit for the basic pension bill. In other words, they prepared the ground for claiming the credit. In the context of the government and the ruling party, which posed as more progressive,

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not suggesting any measures to deal with the problem of the excluded poor elderly from the NPS, the proposal of the Grand National Party looked particularly novel. Some critics said that the proposal amounted to no more than a political offensive because the Grand National Party’s position on the problem of financing was ambiguous, and that the party’s intention was to privatize the earnings-related part of the national pension (in the future).

Nevertheless, that did not become an issue. Instead, the bill received the ardent support of the elderly groups.

Interactions among actors at this period were not active. The labor, civic groups, and Democratic Labor Party shared their positions but did not closely cooperate with each other; instead, each of them concentrated on criticizing each other. The ruling party was relatively cooperative with the government, but kept a passive attitude toward the politically unpopular government plan and then reluctantly submitted a revised bill that simply delayed the increase in the contribution rate (Rhyu, S. 2004). The government (MOHW) could not gain support from any of the social forces and became isolated. If we summarize the positions regarding the issues in this period, the composition was a “government party desiring a parametric reform” versus “all other political and social actors,” but neither a policy coalition nor a united front were built.

The second round of the reform, which proceeded from June 2005 to July 2007, was an active period for welfare politics, during which all the actors formed and reformed policy coalitions. In particular, the role of political parties was significantly expanded. The event that initiated this change was the MOHW attitude under newly appointed Minister Rhyu Si-min.

The MOHW prepared a new reform plan that added the elements of the basic pension. It proposed further cuts of the earnings-related part of the national pension to 40 percent, and introduced the Basic Old Age Pension in the amount of 70,000-100,000 won to 60 percent of the elderly (Table 1).

Although this bill looked similar to the proposal of the Grand National Party, in reality it contained a profound difference. The Basic Old Age Pension was not based on the concept of an income replacement rate but was to be paid in fixed amounts. This meant that the Basic Old Age Pension resembled public assistance rather than the first tier in a two-tiered pension scheme. The target of 60 percent of the elderly population was also far from constituting a

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pension system with universal coverage.

In any case, when the new government proposal came out, the ruling party, in contrast to its previous behavior, started debates and negotiations with the MOHW. After adopting a modified government plan as a new pension policy, the party proposed several amendments to the national pension act and the basic old age pension bill. The Democratic Labor Party also put forth a national pension reform bill and basic pension bill that better defined its previous proposal (Table 1). During the heated debates, the parties released several dozen national pension reform bills ahead of the legislative review period (November) of the regular session of the National Assembly, which opened in September 2006. The plenary sessions of the National Assembly and the Health and Welfare Committee became the site of a fierce battle.

Active participation of political parties in pension politics signified a phenomenal change in welfare politics. The initiative of the Grand National Party should be regarded as the momentum that started this transformation.

After the presidential election, Park Se-Il, Yun Kun-Young, Lee Hye-Hoon and other pension experts joined the Grand National Party, and the party was able to develop a solid position on pension reform unlike in the previous period. And by communicating with civil society at public hearings and other venues, it reaffirmed its policy line. Clearly, the party had already shown itself a skillful player in the first round. Its unexpected proposal for a basic pension earned the support of the elderly and lower income class; the suggestion to reduce the contribution rate was popular among those who distrusted the NPS and those who could not afford to pay pension premiums because of financial hardship. The problem of financing was the Achilles’ heel of the Grand National Party proposal but none of the social or political actors succeeded in making it an issue. On the contrary, the basic pension bill of the Democratic Labor Party, with its decreased generosity in consideration for the basic pension’s relations with the NPS, was overshadowed by Grand National Party’s proposal.

The proactive approach of the Grand National Party placed a great deal of pressure on the Yeollin Uri Party. In addition to widespread distrust and discontent of the citizens with the national pension scheme, resistance from civic groups and labor, as well as criticism of the Democratic Labor Party, the

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Yoellin Uri Party now faced the challenge of the more conservative Grand National Party proposing a more progressive reform proposal. In response to this challenge, during the second round the Yeollin Uri Party attempted to seize the initiative through close negotiations between the party and the government. In turn, this made the Democratic Labor Party, which had previously concentrated all its focus on criticism, prepare its own reform bill and get more deeply involved in the pension politics inside the Assembly. The initiative of the Grand National Party initiated a chain effect that activated the party roles synergistically.

The parties’s roles were not confined to aggregating interest of civil society and proposing policies. To carry through their proposals, the parties built strategic coalitions with other political parties. Under the circumstances, this had a very important impact because neither the ruling, nor the opposition party had the majority. The strategic coalition built by the Yeollin Uri Party with the Democratic Party ahead of the voting played a decisive role in the government party’s bill passing through the Health and Welfare Committee (in November and December 2006). Because of policy similarities, the Grand National Party and Democratic Party cooperated in spite of their heterogeneous ideologies and constituencies. The two parties prepared a joint bill (the Grand National Party – Democratic Labor Party consensus bill in Table 1) and submitted it as a revised bill during a regular session of the National Assembly in April 2007.

Meanwhile, social actors developed temporary alliances according to their positions, forming links with political actors. A temporary policy coalition for pension reform included the Korean Confederation of Trade Unions, Federation of Korean Trade Unions, Korean Peasants League, PSPD, and the Korea Women’s Association United. They took the same position as the Democratic Labor Party and, through close interactions, achieved a considerable level of unity over policy. The Korean Senior Citizens Association, representing the interests of senior groups, supported the bill of the Grand National Party. Later, when the Grand National Party and Democratic Labor Party joined their efforts, these social actors developed a loose alliance pivoting on areas of agreement between the two parties. In contrast, the Korea Employers Federation took a neutral stance and criticized all bills of political parties as populist. In reality, there was no political

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Figure 3. Composition of Welfare Politics in the Second Reform

party that represented the association’s suggestion to cut down the income replacement rate to 40 percent without introducing the basic pension.

In this way, we can define two policy coalitions that formed over the pension reform before the April 2007 voting in the National Assembly. These were: the Grand National Party – Democratic Labor Party – progressive civic groups – labor – senior groups – progressive social welfare scholars coalition on the one hand; and the Blue House – government – Yeollin Uri Party – Democratic Party on the other (Figure 3). As neither side was able to achieve dominance, the balance of power between the two coalitions was tight. However, the result of the struggle was unexpected: as outlined above, at a regular session in April, the National Assembly passed only the Basic Old Age Pension Act of the government party. As mentioned earlier, the Grand National Party changed its position and agreed to the basic old age pension

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system as suggested by the ruling party. The members of the United New Democratic Party, who seceded from the Yeollin Uri Party, also supported the proposal and the Basic Old Age Pension Act was adopted by an overwhelming majority. In contrast, the national pension scheme reform bill was rejected not only by the Grand National Party and Democratic Labor Party, but the members of the United New Democratic Party also casted blank ballots. The United New Democratic Party members wanted to join in credit claiming (the basic old age pension bill) but avoid criticism (for national pension scheme reform), and the ruling party failed to attract them to their side (See Footnote 7).

During this process, speculations arose that the ruling party, in order to have the national pension bill pass the Assembly, arranged passage of the private school reform act. Public criticism was rampant about the abnormal situation and sudden metamorphosis of the Grand National Party. But the Grand National Party, which had so far allied with the Democratic Labor Party, this time decided to negotiate with the ruling party. And in July the consensus bill of the two parties allowed completion of the second pension reform. The tight power relationship between the two coalitions broke down the moment the Grand National Party chose to compromise with the ruling party, and the pension reform finished with the consensus bill of the Grand National Party and ruling party. Although the Democratic Labor Party and insurant groups formed the “solidarity convention for normalization of the pension system� and denounced the actions of the government party and Grand National Party, they were unable to change the adopted bill.

The resolution of the second reform lets us see the unique, comic, and kaleidoscopic side of Korean politics that can annihilate a long-term process of coalition-building at a stroke. Nevertheless, if we look carefully into the results of the pension reform, we will realize that the power relations that had formed through coalitions were not completely destroyed in the end. The proposal put forth by the Grand National Party during negotiations with the ruling party was closer to the plan devised in consensus with the Democratic Labor Party, rather than to the original bill of the Grand National Party. The bill of the government party was also considerably modified to accommodate criticisms by the insurant groups and opposition parties. In other words, the final result of the pension reform clearly reflected the power relations that

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formed around the reform.

The politics of the second reform can be interpreted from a similar perspective to that of the first reform. The power structure of the divided government made it impossible for the government and ruling party to unilaterally push ahead with the reform, and the bill adopted in the end was considerably different from the initial proposal of the government (Kim, Y. 2005; Park, K. 2008). This fact demonstrates the limits imposed by the institution on the actors (from the position of the government and the ruling party) and the opportunities it offers (from the position of the forces that were against the government-led reform). Nevertheless, the explanatory power of the institutionalist approach for the second reform also ends here.

The results of the second reform, as in the first one, were ultimately determined by power relations. During the second reform, the government and ruling party had more power resources. Even though the conservative Grand National Party had large power resources in several fields, the government party not only gained control of the government in the presidential system, but at least for a short time, had a majority in the National Assembly. Nevertheless, despite a disadvantage in power resources, the Grand National Party was able to turn the odds in its favor through a skillful play in building power relations. First, it isolated the government party by cooperating with the Democratic Labor Party and then aligning with some of the powerful social actors linked to the latter. Then it built the power relations that gave it a political stake in the pension reform, along with a stake in the private school reform bill by reversing its alliance with the Democratic Labor Party overnight to one with a common competitor, the ruling government party. Of course, an overnight shift in a policy-based alliance with impunity was possible only in the realities of the Korean politics, but the Grand National Party utilized these realities to its full advantage.

To sum up, the key variable of institutional power resources—whether the party is in power or not—did not change significantly from the first to the second reform. However the ability of the Grand National Party to develop power relations to its advantage by mobilizing support and forming alliances demonstrated a profound change. The party was able to overcome its weaker power resources to a large extent.

In contrast, despite superior resources, the ruling government party

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was not able to build power relations to its advantage and became isolated.

The problem of pension reform had already been politicized during the presidential election and the anti-national pension movement, but the MOHW remained indifferent to preparing favorable political conditions to promote reform. Also, despite the necessity of resolving the problem of the excluded population which was emerging as an important social issue, the Ministry did not pay attention to these circumstances and put up a proposal focusing only on financial stabilization. The Yeollin Uri Party dragged behind the Grand National Party and other oppositional forces all throughout the pension reform process and failed to attract even opposition parties with a similar position. Eventually, the ruling government party had to take on the entire blame for the problems related to pension reform and ended up with a reform greatly different from what it had in mind.

The Democratic Labor Party did not do better in terms of political ability.

It made a bill proposal and made it available to public opinion too late so the credit for introducing the basic pension went to the Grand National Party.

Moreover, despite the fact that the adopted bill was closest to the Democratic Labor Party’s proposal, they experienced a negative assessment—the “(only) opposing force”—rather than that of the “alternative (suggesting) force.”

That is because instead of focusing its criticism on the regression of the basic pension from the party’s original bill, the Democratic Labor party denounced the revision of the national pension law to which it agreed with the Grand National Party as diminishing the new pension to “pocket money.” True, for a minor party that had entered the National Assembly for the first time, there existed fundamental limits to its power resources. Yet the Democratic Labor Party did not demonstrate a mature image as a strategic actor in pension politics. Since the final bill differed greatly from the Grand National Party’s initial proposal, its gains were more a political victory than practically beneficial. To a significant extent, it was a victory achieved as a result of the incompetency of other political actors.

V. CONCLUSION: IMPLICATIONS AND PROSPECTS Let us now summarize the implications of the two pension reforms in Korea.

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The most significant implication is that actors are more important in welfare politics than an institution, and that the power relations developing through interactions among actors play a more important role than the actors’ power resources. Power relations are not static but dynamic. Even if an actor is in unfavorable institutional conditions and lacks power resources, it can build power relations to its advantage through strong leadership, appropriate framing of issues, and mobilization of public opinion, as well as effective coalitions. And when this power surpasses that of the stakeholders in the existing system, it can bring about change and open new paths.

Next, the results of the second pension reform demonstrate that Korean welfare politics experienced a profound transformation over the past ten years. Firstly, compared to the first reform, the number of actors increased and interactions among them became more engaged in the second reform.

Enthusiastic activities of many groups—several civic groups (in the end, their number reached 16) aggregated under the umbrella of National Pension Insurant Groups Association, interest groups such as senior groups who wanted to raise their voices in welfare politics, and an “anti-national pension” movement on the internet—indicate that Korea, too, is entering the period of full-fledged welfare politics.

Secondly, the role of political parties became more important. The major actors in the first reform were the president’s office and government departments. The political decisions of top leaders in the government mattered most, the details of the reforms were determined through the policy-making process in the bureaucracy, and the civic groups performed a role similar to a progressive political party representing the interests of the socio-economic minorities. As for the political parties, they selectively adopted the policy proposals prepared by the government and preferences articulated by the social actors (based on their political position). Towards the second reform, however, political parties became very important actors and consequently the legislature acquired a more prominent role. Political parties took the lead in devising policies and forming public opinion; they aggregated and represented the interests of their supporters. And it was the vibrant strategic interactions among the parties that decided the concrete contents of laws.

Thirdly, the mode of strategic actions and interactions between major

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actors during the two periods also changed. During the first reform and until the first round of the second reform, social and political actors shared positions but did not build coalitions openly, limiting their cooperation to “tacit policy alliances” (Kim, Y. 2002: 52). Interactions between the two competing camps were insignificant as well. The second reform, however, was characterized by public proclamations of support, active negotiating and compromising, and explicit policy coalitions. Within a coalition entity, cooperative interactions became closer and it was possible to achieve considerable unity of policy contents among insurant associations and political parties; confrontation between the two coalition entities became fierce, developing into a dynamic process of conflict and compromise. All these processes were reflected in the legislative proposal.

What does this change mean for the future of the Korean welfare state? The shift that occurred from the first to the second pension reform demonstrated that the role of welfare politics in determining welfare policies is becoming more pronounced in Korea. And we can also see that welfare has become an increasingly important issue in party politics and election campaigns. The controversy over free school lunches and the victory of the Democratic Party in the 2010 local elections, along with the subsequent outpouring of welfare discourses, should be considered relevant points in the long-term trend of welfare issues becoming politicized. The trend is likely to accelerate until the next National Assembly and the presidential election in 2012. And there is a great possibility that a much more systematic debate on the welfare state—including on the problems of financing and taxes, on labor market policies and the growth engine—will take place in this process.

The fundamental reason for the transformations in welfare politics is that the level of social risks has increased since the 1997 financial crisis and is now reaching a critical point in Korean society. The deepening social crisis is well represented in the trends of low fertility, poverty-caused family disorganization, and old age suicide due to living hardships. A more immediate cause is the self-awareness of the political and social actors, i.e. the realization that the crises of livelihood in Korean society are difficult to solve with the market alternatives, and that welfare is a system of redistribution decided through politics. The lesson of the politics of two pension reforms for the political forces who will vie with each other over “what welfare state we

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shall pursue” are as valid as ever: power resources are more important than institutions, and power relations are more important than power resources.

Quoting Rico (2004) once again, a soccer team with superior players, the best financial resources, and strong supporters does not always win.

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Chung, Hong Won. 2008. “Pension Reform and Social Dialogue in Korea.”

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Federation of Korean Trade Unions, Korean Confederation of Trade Unions, and People’s Solidarity for the Participatory Democracy. 1998. “Federation of Korean Trade Unions’, Korean Confederation of Trade Unions’, and People’s Solidarity for the Participatory Democracy’s Opinion on the National Assembly’s Review of the ‘National Pension Law Revision Bill’.” (“‘국민연금법 개정법률(안)’국회심의에 대한 한국노총 민주노총 참여연대의 의 견”.) www.peoplepower21.org (Accessed 5 November 2010).

Goh, Hyeong Gyu. 2006. “Five Economic Organizations, ‘Decrease the National Pension Income Replacement Rate to 40 Percent’.” Yonhap News (19 November 2006) (“경제5단체 ‘국민연금 소득대체율 40%로 인하’”. 『연합뉴스』).

Hyun, Ae Ja. 2006a. National Pension Reform Bill. National Assembly (『국민연금법 개정안』). . 2006b. Basic Pension Bill. National Assembly (『기초연금법 개정안』).

Hyun, Oye Sung. 2008. “A Study on the Policy Process and Welfare Politics of National Pension Reform in Korea.” Journal of Welfare for the Aged 41: 353-384 (“국민연금개혁의 복지정치분석.” 『노인복지연구』 41: 353-384).

Kang, Gi Jung. 2006a. National Pension Law Revision Bill. National Assembly (『국

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민연금법개정안』).

. 2006b. Basic Old Age Pension Bill. National Assembly (『기초노령연금법 제 정안』).

Kim, Hyo Seuk. 2007. National Pension Law Revision Bill. National Assembly (『국 민연금법 개정안』).

Kim, Soo Wan. 2008. “Korean Pension Reform in Perspective of Women’s Social Rights.” Journal of Korean Women’s Studies 24(3): 147-176 (“여성사회권 관 점에 의한 한국 연금개혁의 재구성”. 『한국여성학』 24(3): 147-176).

Kim, Yeon Myung. 2002. “Social Welfare Reforms of the Kim Dae-jung Government and Uncertain Future.” Economy and Society 55: 35-91 (“김대 중정부의 사회복지 개혁과 불확실한 미래”. 『경제와 사회』 55: 35-91). . 2005. “Politics of the National Pension Reform under the ‘Divided Government’: Korea’s Experience.” Paper prepared for a Conference of the Institute of Social Science, University of Tokyo, Japan (19-20 March 2005) (“‘분점정부’하의 연금개혁의 정치: 한국의 경험”).

Korea Employers Federation. 2004. “Our Position on Improvement of Pension System.” (20 July 2004) (“연금제도 개선에 대한 입장”).

Korea Employers Federation. Social Policy Team. 2007. “National Pension Reform in Dilemma (Issue Report).” (“딜레마에 빠진 국민연금개혁” 이슈보고 서).

Lee, Jong Kul. 2007. National Pension Law Revision Bill. National Assembly (『국민 연금법 개정안』).

National Assembly Records System. http://likms.assembly.go.kr/record.

National Pension Insurant Groups Association. 2007. “National Pension, How to Reform It.” Sourcebook of the Urgent Discussion Meeting Organized by the National Pension Insurant Groups Association (13 April 2007). National Assembly Members’ Office (“국민연금 개혁, 어떻게 할 것인가”. 『국민연금 가입 자단체 주최 긴급토론회 자료집』).

Oh, Keon Ho. 2006. National Pension, Public Enemy or Social Solidarity Wage?

Seoul: Chaeksesang (『국민연금, 공공의 적인가, 사회연대 임금인가』). . 2007. “A Review on the National Pension Law Revision Bill and Pension Politics in Korea.” Journal of Korean Social Trend and Perspective 71: 190204 (“국민연금법 개정안 평가 및 연금정치.” 『동향과전망』 71: 190-204).

Park, Kwang Duck, Dong Hyun Lee, and Yu Na Do. 2008. “A Comparative Study of Public Pension Reforms in Korea and Japan: From the Perspective of New Institutionalism.” Social Science Review 39(1): 77-116 (“한국과 일본의 국민연금개혁 비교연구: 신제도주의적 관점에서.” 『사회과학논집』 39(1): 77-116).

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Park, Su-Jin and Noh Gyeong Mok. 2007. “National Assembly Rejected National Pension Law Revision Bill… Mounting Public Criticism: ‘It Will Only Increase Financial Burden’.” Korea Economic Daily (3 April 2007) (“연금법 개정안 국회 부결‥. ‘재정부담만 가중’ 비난여론 고조.” 『한국경제』).

People’s Solidarity for the Participatory Democracy et al. 2006. “Problems in the National Pension Reform Bill of the Ministry of Health and Welfare.”

Reference material for the Joint Press Conference of Labor and Civic Groups Demanding Fundamental Reforms of National Pension Based on Social Consensus (19 June 2006) (“보건복지부 국민연금 개혁안의 문제점” <사회적 합의에 기반한 근본적 연금개혁을 촉구하는 노동시민사회단체 공동기 자회견> 첨부 참고자료). www.peoplepower21.org (Accessed 5 November

2010).

People’s Solidarity for the Participatory Democracy. 1997. “Reform of the National Pension Scheme Should Be Based on National Consensus.” (“국 민연금의 제도개혁은 국민적 합의에 기초해야 한다.”) www.peoplepower21.org (Accessed 5 November 2010).

Research Team for the Collection of Qualitative Basic Data Related to the Birth, Growth, and Reorganization of the Korean Welfare State. 2008 (“Basic Data Collection Team”). Database of Qualitative Basic Data Related to the Birth, Growth, and Reorganization of the Korean Welfare State—Section on Pension (『한국복지국가의 태동, 성장, 재편에 관한 질적 기초자료 DB - 연금 편』).

Rhyu, Si Min. 2004. National Pension Law Revision Bill. National Assembly (『국민 연금법 개정안』).

Yang, Jae Jin. 2001. “Economic Crisis, Policy Network, and Pension Reform Paradigms: A Comparative Study of Pension Reforms in Mexico and Korea.” Korean Public Administration Review 35(2): 63-79 (“경제위기, 정책 망 그리고 연금개혁패러다임: 멕시코와 한국의 연금개혁 비교연구”. 『한국행정학 보』, 35(2): 63-79). . 2008. “Chapter 3: National Pension Scheme.” Policymaking Process of the Korean Welfare Policy: History and Qualitative Data. pp. 103-160. Seoul: Nanam (“제3장 국민연금제도”. 『한국의 복지정책 결정과정: 역사와 자료』. pp.

103-160).

Yang, Seong Il. 1998. A Case Study on the Policy-making Process in Korea: The Reform Process of the Korea National Pension Scheme. Master’s Thesis.

Seoul National University Graduate School of Public Administration (『국 민연금제도개선의 정책결정과정에 관한 연구: Allison 모형을 중심으로』).

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Yun, Kun Young. 2004. National Pension Law Revision Bill. National Assembly (『국 민연금법 개정안』).

Books and Articles in English

Bonoli, Giuliano and Toshimitsu Shinkawa. 2005. Aging and Pension Reform around the World. Cheltenham UK: Edward Elgar.

Choi, Young Jun. 2008. “Pension Policy and Politics in East Asia.” Policy and Politics 36(1): 127-44.

Hicks and Misra. 1993. “Political Resources and the Growth of Welfare in Affluent Capitalist Democracies 1960-1982.” American Journal of Sociology 99: 688-710.

Kim, Yeon Myung and Kim, Kyo Seong. 2005. “Pension Reform in Korea.”

Giuliano Bonoli and Toshimitsu Shinkawa, Aging and Pension Reform around the World. Cheltenham UK: Edward Elgar.

Peterson. M. 1993. “Political Influence in the 1990s: From Iron Triangles to Policy Networks.” Journal of Health Politics, Policy and Law 18: 2.

Rico, Ana. 2004. “Health and Welfare in the 20th Century. The Politics of State Expansion in Europe and North-America.” Paper prepared for the 2004 Conference of the EU Concerted Action COSTA15 “Reforming Welfare States in Europe.” Nantes, 22-3 May. Schwartz, Herman. 2001. “Round up the Usual Suspects! Globalization, Domestic Politics, and Welfare State Change.” Paul Pierson (ed.). The New Politics of Welfare State. Oxford: Oxford University Press.

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Measurement of Unemployment and Extended Unemployment Indicators in Korea* Hwang, Soo Kyeong** This paper explores the causes and solutions of the problem that the official unemployment rate does not adequately represent the reality of employment situation in Korea. First, compared to ILOâ&#x20AC;&#x2122;s international standards, there are several differences in the measurement of unemployment in Korea, for example, the treatment of unpaid family workers working less than 18 hours per week, the classification of persons who are waiting for a new job or temporarily laid-off, and the criteria of job search activities. The questionnaire structure of the Labor Force Survey in Korea also misleads the judgment of economic activity state. Comparing the responses of the basic survey to those of the supplementing survey, approximately 90% of the responses show discrepancies and this indicates the possibility of misclassification. Next, this paper suggests the extended unemployment indicators as alternative, based on the current survey. The extended unemployment indicators support the presence of significant amounts of hidden unemployment and underemployment. And, it is found that the analyses using those indicators are very useful for the investigation of many aspects of employment dynamics.

Keywords: Unemployment, Underutilization of Labor Force, ILOâ&#x20AC;&#x2122;s International Standards of Unemployment Indicators, Extended Unemployment Indicators, Korea

*

**

Translated from the article published in the Labor Economic Journal 33(3), 2010 with permission from the Korean Labor Economic Association.

This paper was initially intended for publication in the Journal of Korean Official Statistics of the Statistical Research Institute 15(1) (submitted on 30/11/2009 and confirmed publication on 4/2/2010) but publication was delayed. Later, it received a reply from the SRI that it could not be published because it had a different opinion from the official viewpoint. Thus the paper was revised and resubmitted to the Labor Economic Journal.

Researcher at the Korea Development Institute.

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I. Introduction The unemployment rate is the most important indicator of the deterioration of the economy as well as the employment situation. It is imperative that policymakers are sensitive to the current state or fluctuations of the unemployment rate. However, many people raise questions as to whether the unemployment rate in Korea functions well in assessing the labor market situation or accurately identifies policy standards on employment.

There is also increasing attention to the gap between the officially reported unemployment rate and the reality.

Criticisms raised regarding the unemployment rate can be summarized into two parts. First is the low calculation of the unemployment level, that is, the number of people without a job. For instance, when the Korean economy plummeted due to the 2009 global financial crisis, the official employment rate did not deviate from 3 percent. In fact, Koreaâ&#x20AC;&#x2122;s level of unemployment is the lowest among OECD member states. However, Koreaâ&#x20AC;&#x2122;s employment rate (= proportion of the population employed) remains so low only because of the high proportion of the population economically inactive. This implies the possibility of a large presence of hidden employment excluded from the official unemployment rate.

Second is a criticism related to dynamics, which claims that the unemployment rate cannot accurately reflect the volatility of the labor market. During the period between January and May 2009, the number of individuals employed decreased by 169,000, whereas the number of individuals unemployed increased only by 131,000. The discrepancy is explained by the fact that many people who lose their jobs do not remain as part of the unemployed group but instead transfer to the economically inactive population. Kim, D. (2000) and Lee, B. and Jung, J. (2005) have shown that there is a high rate of direct movement between the employed and the economically inactive population in the Korean labor market without undergoing the unemployment stage.

This gap between reality and the unemployment rate has already been discussed not only by the media but also in the academia. Most researches have the perspective that there is a large population with a low degree of

Measurement of Unemployment and Extended Unemployment Indicators in Korea 133

settlement in the labor market and that they act as a buffer against economic shock, which leads to low unemployment rates and low levels of fluctuation.

An example of the systematic analysis on the number and dynamics of hidden unemployment—i.e. what is elided from the unemployment rate—is Kim, D. (2002). He points out that the low economic activity of Korean laborers constitute a significant characteristic of labor supply; additionally, he argues that the number of ‘marginal participants’ who hover between economic activity and economic inactivity add up to 14% of the productive population and a quarter of the entire economically active population. Meanwhile, Kang, S. et al. (1999), Kim, Y. (2005), Hwang, S. (2009) and several others emphasize the need for a supplementary unemployment indicator to capture the hidden unemployment unrepresented by the official unemployment rate.

Furthermore, Kim, K. and Jang, D. (2005) point out that the unemployment rates are limited in understanding the situation of the labor market due to the fluctuating number of its participants. Instead, they emphasize the utility of the employment rate (=employment-population ratio) instead of the unemployment rate for economic analysis.

However, it remains difficult to find previous studies that have made unemployment statistics itself the subject of analysis. Earlier studies mainly focused on the uniqueness of the Korean labor market, under the assumption that the unemployment rate was accurately measured. However, if there is a problem in the measurement of the unemployment rate and if a considerable portion of unemployment is statistically omitted, that directly affects the unemployment rate and its fluctuation. In this case, a large number of marginal participants would change the underestimated measurement of unemployment, and this would result in movements between actual employment and unemployment being seen as movements between an employed and an economically inactive state. As a result, the economic activity of Korean workers is assessed as excessively low due to an error in measuring the statistical data of unemployment.

This research focuses on the underestimation of the unemployment rate in Korea by dealing with the gap between the official unemployment rate and reality. It will systematically discuss the validity and problems of Korea’s definition of the unemployed and its method of measuring the unemployment rate by conducting a comparative analysis with international standards

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of measurement. With the foundations of this analysis, the limitations of our statistical data regarding unemployment rates can be clarified, and an alternative solution can be devised in order to procure a more accurate unemployment rate for labor market diagnosis and policy-making.

The structure of this paper is as follows: the second part of this research introduces ILO debates related to unemployment and underutilization of the workforce in regards to the international standard of unemployment.

The third section compares Korea’s method of measuring unemployment with the international standard as well as that of the United States and Japan, analyzing their differences and problems. The fourth section contains an extended unemployment indicator that can supplement the shortcomings of the current unemployment rate, and inspects its possible utility. The last section provides a summary of the discussions raised and proposes directions for future research.

II. INTERNATIONAL STANDARDS FOR MEASURING THE UNEMPLOYMENT RATE 1. ILO Definition of Unemployment Including South Korea, most countries base their official unemployment rate on the labor force approach. In other words, through a sample survey, the individual’s labor status is divided into three categories: the employed, the unemployed, and the economically inactive population. The first two groups constitute the size of the labor force (= the economically active population).

Here, the unemployment rate is defined as the proportion of individuals without a job, out of the whole economically active population. Here, the most problematic part is the standard used to categorize the employed, the unemployed, and the economically inactive population. In reality, there are individuals situated in between employment and unemployment, and in between unemployment and the economically inactive state. Thus, the size of the labor force as well as the measurement of the unemployment rate can vary according to which standard is used for categorization.

The ILO provides international standards and guidelines of measurement

Measurement of Unemployment and Extended Unemployment Indicators in Korea 135

that were established through long and comprehensive debates. At the 13th ILO International Conference of Labor Statisticians (ICLS) 1982, the basic principles for determining the economically active state and terms of the employed, the unemployed and the economically inactive population as well as their definitions were adopted. At the 16 th ICLS in 1998, the standard for distinguishing those in the boundary lines of employment and unemployment was further refined.

According to the standards, the basic principles used to distinguish an individual’s labor status is that first, the individual in the age capable of economic activity must be exclusively classified so that he or she belongs to one out of the three categories of the state of economic activity (priority rule). In addition, the categorization standard should be based on the actual activities that the individual carried out (activity principle), and also, it should be conducted at a time when the level of fluctuations due to weather or labor movement is low (snapshot scope). Here, it is important that the economic activity encompasses all market and non-market activities when they are within the System of National Account (SNA).

Since definitions of the employed, the unemployed, and the economically inactive population are mutually related, we will look at the standard used to categorize the economic activity state by focusing on the term of the unemployed. First, the following three conditions need to be satisfied to be categorized as the unemployed.

First, “without work,” i.e. were not in paid employment or selfemployment; Second, “currently available for work,” i.e. were available for paid employment or self-employment during the reference period; and Third, “seeking work,” i.e. had taken specific steps in a specified recent period to seek paid employment or self-employment.

The first element is to distinguish the employed from the unemployed, but if an individual has worked for wages or conducted economic activities for his or her private business for at least an hour, that person is considered to have a job, and not unemployed. This 1-hour standard used to determine employment has been subject to many criticisms and debate; claims are that it is excessively loose but it was adopted because it is important to include as much economic activity as possible, to construct statistical data of which the total labor input and total production accord with each other (14 th

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ICLS). However at the same time, there was emphasis on the need to provide another criterion of ‘underemployment’ within the category of employment, and the standard to determine this was proposed at the 16th ICLS in 1998.

On the other hand, unpaid family workers were regarded unemployed if they work one third of the hours of full time workers, an exception to the 1-hour rule (8th ICLS, 1954). However this exception was judged to go against the general principles of categorizing the state of economic activity and thus eliminated at the 16th ICLS in 1998. Accordingly, the current ILO standard categorizes unpaid family workers as employed, regardless of the number of hours they work.

The second and third conditions are standards used to differentiate the unemployed and the economically inactive population amongst those without work. This means that the standard of determination used should not be subjective; moreover, examples should not be of those who “want a job” but more objective measures such as “seeking work activities” or “availability for work” (activity principle). This means that although an individual wishes to become employed, if that person has not been seeking work in the labor market, or is actually unable to be employed, that person should be excluded from the category of the available labor force.

In fact, the standard for determining job-seeking activity has become the center of discussion. Job-seeking activities include not only signing up for public and private employment agencies, but also using unofficial routes such as seeking assistance from friends or relatives. The 13th ICLS outlined specific examples of job-seeking activities: making registration at a public or private employment exchange; sending applications to employers; checking at worksites, farms, factory gates, market or other assembly places; placing or answering newspaper advertisements; seeking assistance of friends or relatives; looking for land, building, machinery or equipment to establish own enterprise; arranging for financial resources; and applying for permits and licenses. Passive activities such as merely looking at job advertisements are not considered to be job-seeking activities.

However, those who are currently unemployed but are expected to become employed within the reference period or are preparing to launch a private business are categorized as unemployed regardless of their jobseeking activities (13th ICLS, R.10(4)). Also, those who are temporarily laid off

Measurement of Unemployment and Extended Unemployment Indicators in Koreaâ&#x20AC;&#x192; 137

are also allowed a mitigation of the requirements for certain activities being accepted as job-seeking activity (13th ICLS, R.10(5)). Although not directly dealt with in the international standard, this easing of necessary conditions for activities to be accepted as job-seeking activities is acceptable for seasonal jobs; although they do not engage in job-seeking during the off-season, they are in fact treated the same as the temporarily laid-off (Hussmanns 2007).

Also, when a substantial part of the labor market is not institutionalized, the informal sector or the private sector composes a large part of the economic environment, and when the circumstances are such that general job-seeking activities have limited meaning, the ILO judges that the proposed standard for determining the jobless is excessively strict and thus cannot accurately reflect the reality of the labor market. In this case, the ILO allows relaxation of the criteria used to determine job-seeking activities (13th ICLS, R.10(2)). Also, in determining the availability of an individual to be employed, the ILO advises that an appropriate method be devised based on the individualâ&#x20AC;&#x2122;s current wish to work as well as their past working experiences (13th ICLS, R.10(3)).

Meanwhile the ILO does not specify standards regarding the reference period in determining job-seeking activities, and left it open for individual countries to decide on different bases, such as 1-week, 4-week and so on.

Most OECD countries use the 4-week standard whereas Japan uses the 1-week standard.1

2. Ilo Discussions on Labor Force Underutilization The ILO, in addition to presenting its official unemployment measurement standard under the assumption of full unemployment rate, has also made continuous efforts providing a standard to devise supplementary indicators showing the state of the labor forceâ&#x20AC;&#x2122;s underutilization. The 13th ICLS in 1982 completed the international standard for the full unemployment rate, and the 14th and 16th ICLS in 1987 and 1998 made intense attempts to refine the standard for determining the boundary between employment 1

The official unemployment rate in Japan employs the 1-week standard, but investigations on job-seeking activities in 1-month periods are additionally conducted.

138 Korean Social Sciences Review | Vol. 2, No. 2, 2012

and unemployment—to measure underemployment. Meanwhile, although a specific standard for determining latent unemployment (between the categories of the employed and the economically inactive population) is not provided, it was decided that the standard definition of unemployment determined by the ILO was not sufficient in showing the circumstances of employment according to the different labor markets of each state. They pointed out that in this case, in addition to the official unemployment rate, which is referred to the full employment unemployment rate, a variety of supplementary indicators that can show labor force underutilization should be utilized.2 First, the ILO standard of underemployment must be examined. In countries where social insurances are underdeveloped (developing countries), the individual must become employed in whatever shape possible in order to survive. In this case, there is a high probability that the individual is in an insufficient or improper employment situation, but the official employment rate has difficulty in expressing such circumstances. Underemployment is also rising in developed countries, which entails increasing flexibility in the labor market as well as temporary employment. Due to such circumstances, the ILO advises that states not only determine the full unemployment rates but also underemployment indices.3 The 16th ICLS in 1998 provided a standard for determining underemployment using the number of working hours. According to the 16 th ICLS, underemployment is determined first by, the willingness to work more than the current working hours; second, the availability of an individual to work additional hours; and third, having worked less hours than a certain threshold 2

ILO maintains that when the international standard of unemployment has only limited meaning, the definition of unemployment should not be altered, but additional supplementary indicators using mitigated standards suitable to each nation’s circumstances should be used, while maintaining their official employment and unemployment rates and definitions according to international standards (Hussmanns, 2007).

3 The determination of underemployment is a necessary part of the current international structure of employment statistics based on the “1 hour standard.” It calls attention to inadequate employment situations, and proposes the need to capture the improper use of the labor force in terms of vocational abilities, danger of job-loss according to economic crisis, industrial safety and health and so on.

Measurement of Unemployment and Extended Unemployment Indicators in Korea 139

of working hours (16th ICLS, R.8(1)). In determining this, the definition must include not only paid employment, but also the self-employed, the temporarily unemployed, comprising the entire number of the employed (Hussmanns, 2007).

The first condition of a “desire for additional employment” was proposed (16th ICLS, 1998) to replace having worked less than the general working hours due to an involuntary reason is a criterion that was previously used to capture the state of underemployment (13th ICLS, 1982).4 Here, this “desire” must encompass various situations including a desire for additional work, to extend working hours, and to find extra work, for example.

Meanwhile, in the standard for underemployment—in contrast to the unemployed—there is no assumption that the individual must make an overt effort in seeking additional work. However, it requires that he or she be available for additional work within the period that parallels that of the unemployed. Regarding the reference period to determine the possibility of additional employment, it is generally acknowledged that it must be longer than determining the possibility of an unemployed individual’s finding a job, since the time consumed for changing jobs takes relatively longer.

As to the third condition of the time threshold, many standards such as distinguishing full and part time, legal working hours and the like can be used. However degrees of employment is not limited simply to part time labor, but instead should include all those employed who are seeking additional employment regardless of their working hours (16th ICLS, R.8(2)).

The underemployment indicator can be calculated using the head-count measure or the time measure. The former can be constituted by determining the proportion of the underemployed from the total number of employed (= underemployment rate), or the proportion of the underemployed from of the total number of the economically active population (16 th ICLS, R.11). Meanwhile, the latter is a measure that determines the unrealized underemployed hours, the standard being the number of hours that an individual actually wants to work. However this time-based measure has limitations in data collection and in reality cannot be used by many countries.

4

However many EU countries still places involuntary short-term workers under the category of underemployment.

140 Korean Social Sciences Review | Vol. 2, No. 2, 2012

III. K OREA’S UNEMPLOYMENT CALCULATION METHOD AND ITS PROBLEMS 1. Statistical Definition of Unemployment and Comparison With the International Standards Like that suggested by ILO, the unemployment rate presented by the Korean National Statistics Office is also based on the labor force approach, using a monthly sample survey. The official sample survey used to measure unemployment is the Economically Active Population Survey, which distinguishes the individual’s condition of economic activity using a sample survey of 33,000 households5 that represent the nation. The investigation is conducted on the members of these households over the age of 15, every month, on the week that has the 15th day of the month. Household members subject to investigation and are soldiers in active service, public service workers, part of full time reserve forces, combat police (including conscripted policemen), prisoners with confirmed sentences, prisoners in youth detention centers or institutes of forensic psychiatry, or those in security reserve military training units are excluded.6 The “employed” according to the Economically Active Population Survey includes persons who, during the week of investigation, worked more than 1 hour for the purpose of income, helped a business or farm owned by another member of their household for more than 18 hours a week to increase some sort of profit although they may not earn direct profits (unpaid family 5

While selecting the households subject to investigation, in order to alleviate their burden of responding, to prevent the aging of the sample survey and the possibility of a disjunction of the old and new samples due to entire restructuring, approximately 900 households (1/36 of the sample) are replaced each month—an interlocking sample replacement method.

6 Although Korea’s unemployment statistics only includes civilians, excluding soldiers, the ILO standard includes them in the paid-worker group according to their international standard classification of occupation (13th ICLS, R.9(9)). Whereas Japan, Taiwan and most European countries include professional soldiers living in a private house in their labor force statistics, USA, Canada and Australia do not.

Measurement of Unemployment and Extended Unemployment Indicators in Korea 141

worker), and those who do have a job or own a business but have been temporarily sick, unsettled due to weather, on a vacation, or on a strike, and thus temporarily on a break.

Meanwhile, the “unemployed” is defined as individuals who, during the week of investigation, do not have a job with an income, have actively searched for a job during the last 4 weeks, and are available to take on a job immediately if offered. Specifically, during the week of investigation the individual must not be employed, must have tried to get a job during the last 4 weeks, and was available to work if given a job. Before June 1999, job-seeking activities within the last 1 week was investigated but after June, activities within the last 4 weeks were additionally taken into account and since July 2005, the construction standard for the official unemployment rate was expanded to 4 weeks from a prior standard of 1 week.

Individuals over the age of 15, who are neither employed nor unemployed during the week of investigation, are classified as the economically inactive population. Housewives who primarily stay home taking care of the household and raising children, students going to school, the elderly and the mentally or physically challenged who cannot work, and those who voluntarily participate in charities or religious groups are included in this group.

The standard currently used in Korea to construct unemployment statistics data seem to be following the international standard established by the ILO on the surface. However, when thoroughly inspected there are several dissimilarities.

First, according to ILO standards, unpaid family workers who have worked more than 1 hour should be categorized as employed (13th ICLS, R.9(5)) but in Korea, unpaid family workers are categorized as employed only if they work for more than 18 hours which mirrors ILO’s previous resolution (8th ICLS, 1954). Individuals are regarded as unemployed if they work for less than 18 hours. Thus, according to current ILO standards, unpaid family workers who work for less than 18 hours are employed, but according to Korean standards they are classified as either unemployed or not in the labor force depending on his or her job-seeking activities. In 2008, the number of unpaid family workers who worked less than 18 hours was 143,000, and while 3,000 of them were unemployed, 140,000 were categorized as part of

142 Korean Social Sciences Review | Vol. 2, No. 2, 2012

the economically inactive population. The U.S. uses a similar standard of 15 hours, and Japan uses the same standard set by the ILO, which is 1 hour.

When unpaid family workers who work less than 18 hours are included in the employed category, the unemployment rate decreases by 0.1%p and the employment rate increases by 0.4%p.

Second, the ILO standard regards individuals expecting to begin work or start a business within a certain period as unemployed regardless of their job-seeking activities. Also, those who are temporarily jobless including the seasonal discouraged workers are categorized employed or unemployed according to whether they officially belong to a specific company. Here, it is important that their job-seeking activities are not considered. Those temporarily laid-off in the U.S., and those who are scheduled to start a job in Japan are regarded as unemployed in their respective countries regardless of their job-seeking activities (Table 1). However, Korea does not make any exceptions to the need to conduct job-seeking activities. For instance, sometimes a person waiting for assignment is identified as being part of the economically inactive population (4,000 in 2008). However according to ILO standards, they should be categorized as the employed or unemployed depending on their employment relationships.

Table 1. ILO standard and standard of identification for economic activity state in the US, Japan, and Korea ILO standard Survey Population

no specific age (soldiers included)

US 16+ (excluding soldiers)

Japan 15+ (including soldiers)

Korea 15+ (excluding soldiers)

Unpaid family Employed if Employed if works Employed if more employed if workers works more than more than 15 than 1 hour works more than 1 hour hours a week 18 hours a week Reference no specific stanPeriod of job- dard seeking activity Job-seeking activity requirement

4 weeks

specific action active job-seeking for employment activity* and/or starting a business*

1 week

4 weeks, 1 week

job-seeking active job-seekactivities and pre- ing* paring to launch business*

Specific job• registered to of- • made applica• registered to seeking activificial or private tions or conduct- public employties (examples) employment ed interviews ment stabiliza-

(no examples)**

Measurement of Unemployment and Extended Unemployment Indicators in Korea 143

Table 1. (continued) ILO standard

US

Japan

Korea

agencies • sent job applications • checked out workplaces • asked friends and/or family for recommendations • searched for building or facilities, equipment and funding for business • application for authorization or qualification needed for employment

• registered to official or private employment agencies • asked friends and/or family for recommendations • checked out workplaces • visited college employment centers • sent applications and resumes • published advertisements or responded to them • checked associations and institutes • other active jobseeking activities

t ion office or private employment agencies • signed up for businesses that dispatch workers • utilized job ads • asked friends and/or family for recommendations • made direct applications to places of business • sought financial and equipment procurement • waiting for result of previous job-seeking activities

Scheduled for starting a job

unemployed

jobless (jobseeking activity requirement)

unemployed

jobless (jobseeking activity requirement)

Temporary layoff

employed if he or she has official affiliation, if not, unemployed

if he or she will return to work in 6 months or has a specific date of return, that person is unemployed

jobless (job-seeking activity requirement)

jobless (job-seeking activity requirement)

Availability criterion

required, but no he or she was able currently able to be employed specific standard to become employed previous week (temporarily occurring situation, exception for persons scheduled to work)

was able to be employed during previous week (does not ask reason for inability to become employed)

* Does not include passive job-seeking activities such as merely looking at job advertisements ** There are no examples for job-seeking activities but there is a question that asks regarding their means of job-seeking activities, to those who are immediately able to start working if given work.

144 Korean Social Sciences Review | Vol. 2, No. 2, 2012

Third, although not explicitly dealt with, the standard of identifying jobseeking activities can be problematic. According to ILO standards, “specific steps taken for employment or starting a business” (active job-seeking activity) are regarded as job-seeking activities, whereas merely looking at newspaper job advertisements (passive job-seeking activity) are not. Here, the “specific steps” or “active steps” refer to activities that elicit a response from a potential employer (14th ICLS, R.11), and it does not refer to any intensity spectrum although the term “active” does contain such nuances. Looking at the list of examples for job-seeking activities in the U.S. and Japan, we see that they have set standards in parallel with the objectives of ILO standards.

Japan includes situations in which an individual is waiting for results from his or her previous job-seeking activities. As this is also based on a request for jobs to employers, it was judged that the activity is an extension of the initial job-seeking activity. However, Korea’s job-seeking activity determination criteria cannot be seen as fully reflecting the objectives of ILO standards. For example, although the best course for youth employment is the government civil service examination or employment exams, most of those preparing for employment who responded that they attended academies or institutions for employment or were preparing for employment were not identified as unemployed but economically inactive population, with their number amounting 600,000. This number is similar to the official unemployment rate (Table 2). If ILO standards are to be met, it is more reasonable that the content of preparation for employment be more specified. If an individual takes employment exams or if he or she is waiting for the results during the reference period, that person should be regarded as having practiced jobseeking activities.

By recalculating the unemployment rate using available data that aligns with ILO standards as much as possible, we will find disparities. Based on the previous discussion, three conditions were considered. First, unpaid family workers who work less than 18 hours are regarded employed according to ILO standards. Second, those who are expected and scheduled to work are regarded as unemployed regardless of their job-seeking activities. Third, taking government civil service examinations or other employment exams and preparations for starting a business are regarded as specific actions for employment and must be determined as unemployment. But unfortunately,

Measurement of Unemployment and Extended Unemployment Indicators in Koreaâ&#x20AC;&#x192; 145

Table 2. Main activities during the past week (2004, 2008)

(unit: 1000)

2003~2004

1. worked

2005~

2004

2008

Employed Unemployed Not active

Employed Unemployed Not active

21,649

0

20

1. worked

22,415

0

11

2. temporary break

289

0

0

2. temporary break

344

0

0

3. job-seeking activities

5

756

8

3. job-seeking activities

2

653

1

4. infant care

52

4

1,510

4. waiting to be assigned

0

4

4

5. housework

275

32

5,212

5. infant care

68

5

1,559

6. attend formal educational institution

164

19

3,548

6. housework

331

29

5,454

7. attend preparatory school

1

0

82

7. attend formal educational institution

203

16

3,946

8. attend academy or institute for employment

4

4

200

8. attend preparatory school

2

0

81

9. preparation for employment

5

12

183

9. attend academy or institute for employment

8

4

234

10. preparation to go on to school

4

1

112

10. preparation for employment

16

18

364

11. old age

18

0

1,544

11. preparation to go on to school

9

0

125

12. mental and/or physical disorder

4

0

466

12. old age

26

1

1,518

13. scheduled for military service

2

0

63

13. mental and/or physical disorder

2

0

437

146â&#x20AC;&#x192; Korean Social Sciences Review | Vol. 2, No. 2, 2012

Table 2. (continued) 2003~2004

2005~

2004

2008

Employed Unemployed Not active

Employed Unemployed Not active

14. preparation for marriage

0

0

9

14. scheduled for military service

2

1

43

15. rest

69

27

1,033

15. preparation for marriage

0

0

12

16. etcetera

17

4

309

16. rest

132

37

1,352

17. etcetera

17

2

158

Total * persons preparing for employment

22,557

860

14,300

23,577

769

15,251

10

16

383

24

22

598

Source: Statistical Office, Economically Active Population Survey (2004, 2008) source data.

such related direct information cannot be obtained for this investigation.

Instead, an individual was determined as unemployed when their main activities were preparation for employment, had wished to become employed, and were in a situation that they could work immediately if given a job during the previous week.

Table 3 compares the important employment indicators, one based on the official unemployment rate and the other based on regulated unemployment rate by the means outlined above. The unemployment rate after regulation rose 0.1%p and similar changes were seen across gender. Participation rates and employment rates show more differences, each increasing by 0.5%p and 0.4%p. However according to the above regulation, aside from recognizing unpaid family workers who work less than 18 hours as employed (+143 thousand persons), the standard for job-seeking activities remains strict.

Thus, the problem of arriving at a low calculated number of unemployment remains unsolved. It must be noted that although the unpaid family workers who work less than 18 hours have an unofficial employment status and are not considerable in number, disregarding them may distort the women and

Measurement of Unemployment and Extended Unemployment Indicators in Koreaâ&#x20AC;&#x192; 147

Table 3. Comparison of the employment indicators after adjustment (2008) (unit: 1000, %) Before Population (15 years old and over) Economically active - Employed - Unemployed Economically inactive Participation rate Unemployment rate Employment ratio

After

Both

Men

Women

Both

Men

Women

39,597

19,324

20,273

39,597

19,324

20,273

24,347 23,577

14,208 13,703

10,139 9,874

769

505

265

15,251 61.5 3.2 59.5

5,116 73.5 3.6 70.9

10,134 50.0 2.6 48.7

24,534 23,720 (143) 814 (45) 15,063 62.0 3.3 59.9

14,268 13,735 (32) 532 (27) 5,056 73.8 3.7 71.1

10,266 9,984 (110) 282 (17) 10,007 50.6 2.7 49.2

Note: The numbers in parentheses indicate the difference between the two amounts of before and after adjustment. Adjustment includes: i) unpaid family workers who work less than 18 hours are regarded employed, ii) those who are expected and scheduled to work are regarded as unemployed, iii) an individual was determined as unemployed when their main activities were preparation for employment, had wished to become employed, and were in a situation that they could work immediately.

Source: Statistical Office, Economically Active Population Survey (2008) source data.

youth work force statistics in particular.

Although the statistical definitions of employment are partly regulated, contrary to expectation, this does not result in a significant difference. The main reason is that the majority of individuals preparing for employment not only did not engage in job-seeking activities, but were also identified as not wanting a job (people who do not wish to be employed are not asked whether they are available for employment), preventing regulation efforts from having any impact. However, if a considerable number of individuals who replied that they mainly prepared to get a job did not want a job, this would logically be inconsistent. In order to analyze the problem in detail, the next section examines the specific structures of the surveys.

148 Korean Social Sciences Review | Vol. 2, No. 2, 2012

2. Statistical Structure of the Economically Active Population Survey and the Possibilities of Error In Categorization Figure 1 shows a survey structure of the Economically Active Population Survey that distinguishes the status of individuals in the labor force. This survey starts from questions such as “what were the main activities you have conducted during the past week,” then on to questions such as “have you been seeking for a job previous week (or during the last 4 weeks),” which determines whether job-seeking activities were conducted, and “if you had a job previous week would you have been able to work,” which checks whether the person is available for employment. There are 6 parts to the process of the survey that determines an individual’s labor status.

Main activity during the previous week Worked

Other

Have you worked at least a little?

Yes

No

Temporary break Yes No

Employed Yes No

No Worked less than 36 hours Yes

No

Job-seeking activities previous week

Job-seeking activities during last 4 weeks

Unpaid family workers

No

working less than 18 hours

Wish for additional work

Availability for work

Not in labour force

No

Yes

Yes

Availability for additional work

Unemployed

No

Wish for work Yes

Job-seeking activities for additional work

Method of job-seeking

Availability for work

Form of work (industry, occupation, etc)

Period of job-seeking

Reason for not job-seeking

Wanted form of employment

Job-seeking experience during the past year

Month and year when started work Whether work is of limited period

Work experience

Figure 1. Flow chart of the Economically Active Population Survey

Measurement of Unemployment and Extended Unemployment Indicators in Koreaâ&#x20AC;&#x192; 149

Notes: E =Employed; U = Unemployed; N = Not in labor force; Q10. Any work for pay, profit or family gain during reference period?

Q11. Engaged in any economic activity on the following list during reference period? (activity list) Q12. Had a job or enterprise from which temporarily absent during reference period?

Q30. Wanted work during reference period?

Q31. Method of job-seeking (list) (=> Act: Active job search) Q32. Reasons for not seeking work (list) (=> FS: Future start, AR: Accepted reason for not having sought work) Q33. Current availability for work; Q34. Test of availability for work; Source: Hussmanns et al. (1990: 117-118).

Figure 2. Flow chart of ILO Questionnaire to classify into labor force categories

Individuals who worked mainly during the previous week, those who worked at least minimally to earn an income, and those who did not work but did have a job are determined in each stage and categorized as the employed.

Those who are not within this category are asked further questions whether they have been seeking for a job in the previous week or in the previous 4 weeks, whether they would have been able to work if they were given a job

150 Korean Social Sciences Review | Vol. 2, No. 2, 2012

the previous week, and then are categorized as unemployed. Others are categorized as the economically inactive population. Meanwhile, unpaid family workers who work less than 18 hours are first categorized as employed, and then by asking questions on the number of hours they worked they are re-categorized.

When this survey structure is compared with the standard survey structure of ILO (Figure 2), the differences and problems can be identified more clearly.

When ILO is using a standard definition regarding unemployment (Figure 2A) the questions are limited to 7, whereas when the standards used to determine job-seeking activities are intended to be relaxed (Figure 2B) they are limited to 8.

In the process of determining the employed, people are initially questioned as to whether they have worked for an income (including family income) (Q10). Those who responded “no” are additionally asked whether they have conducted activities that can be regarded as economic activities (Q11). This way, the subjectivity of the respondents’ answers about ‘work’ can be revised into an objective standard. The way of determining temporary leaves (Q12) is similar to Korea’s method.

Meanwhile, in classifying the unemployed and the economically inactive population, the first question is whether an individual wanted work (Q30).

Next, for those who wanted work, job-seeking activities are determined using the given examples (Q31). With individuals who have participated in jobseeking activities, the next step distinguishes the unemployed by checking whether they are in a situation in which they can work (Q33). Also, even if they have not conducted job-seeking activities if they provide adequate reasons (Q32) that satisfy recognized standards for unemployment (scheduled for employment), they are classified as the unemployed or the economically inactive depending on whether they are in a possible situation to work (Q33).

Meanwhile, the standard for job-seeking activities can be partly relaxed in domestic situations (example of B). In this case, while acknowledging a wider range of reasons for not looking for a job, an additional test (Q34) must be conducted to reconfirm a desire for a job.

Like this, ILO’s standard survey is constructed so that it determines the employed, the unemployed, and the economically inactive step by step, expanding into and confirming each situation within the boundary with as

Measurement of Unemployment and Extended Unemployment Indicators in Korea 151

much objectivity as possible.

Compared to this method, the survey structure of the Economically Active Population Survey is one in which the first question (main activities conducted the previous week) is used to roughly determine the individual’s economically active state, then additional questions are used to rearrange that state. The first question regarding the main activities conducted during the previous week is not a necessary question to determine the individual’s status in the labor force, nor is it a question that carries an assessment function,7 but the answer choices provided are in parallel with the meanings of each labor force status, resulting in a close correlation. Conceptually, the employed are those who have worked or are in a state of temporary leave, the unemployed are those engaged in job-seeking activities or waiting to be assigned, and the economically inactive population includes those who are conducting non economical actions such as infant care, housework, studying and so on.

According to responses to a survey, 97% of the actual employed have mainly worked or were in a state of temporary leave during the previous week, 86% of the unemployed were engaged mainly in job-seeking activities or waiting to be assigned, and 99.9% of the economically inactive population were engaged in activities such as infant care, housework, school and the like (see Table 2 on previous page). Determining the status of the labor force can be done if the following questions are carefully planned. In fact, the first question could precede all other standards and work as a constraining factor to determine the status of the labor force.

In our case, the questions that determine employment are the second and third questions, which define whether an individual has worked for an income and check the status of temporary leave. However, there is a possibility for the respondent to answer with an arbitrary judgment because there is no explicit definition as to what is ‘work,’ nor is there any process for 7

The single question after this question that asks, “Have you worked at least an hour for the purpose of earning an income during the previous week?” can include respondents who have worked during the previous week. Also, in that a proportion of those who have worked during the previous week are categorized as economically inactive, and of those who have answered to have conducted job-seeking activities, there are some who are not unemployed, so there is lack of assessment function regarding the labor force state.

152 Korean Social Sciences Review | Vol. 2, No. 2, 2012

confirming objectivity like that of ILO’s standard survey. ILO has pointed out that if judgment of ‘work’ is left to the arbitrary judgment of individuals, there is a danger that much of the non-market economic activity will be omitted.

The more problematic is the process of determining unemployment.

Our process of unemployment determination is one that has mechanically adopted the ILO standards. Among the persons without work, individuals who satisfy the conditions of job-seeking activities and the availability for work once employed are regarded unemployed, whereas those who do not are categorized as the economically inactive population. Here, there are no specific criteria for determination or examples regarding job-seeking activities and reasons for not seeking a job, nor any mechanism for guaranteeing objectivity.8 In addition, because the ILO standard survey determines the unemployed and those not in the labor force by checking step by step the wish to be employed, reasons for not job-seeking, whether to be available for work and the like, the grey area between unemployment and economically inactive (ex. Discouraged workers) is considered when the demarcation line between the two is defined. However, the Korean method does not consider this grey area. Rather, unemployment is determined first. Then, questions regarding the wish to be employed, reasons for not job-seeking, whether employment is possible, and etc. in the current circumstances are asked only to those who are part of the economically inactive population. Such binary survey structure leaves room for conceptual discordance regarding ‘the wish for work’ between the unemployed and the economically inactive population.

To check this we used additional survey data of May 2009 of the youth (15-29 years of age) and senior (55-79 years of age) age groups to compare the differences in the responses between the main and supplementary investigations. First, in the additional survey on youth, of 539,000 individuals who responded that they engaged in job-seeking activities those who responded with a desire for work only amounted to 52,000, while 482,000, or 90% responded that they did not (Table 4). Claiming that they do not wish to be employed while preparing for employment exams is contradictory. Here 8

The term “job-seeking activity” is defined separately in the surveyor’s manual but there are no specific examples or criteria. Also, the National Statistical Office does not reveal this manual in order to avoid dispute.

Measurement of Unemployment and Extended Unemployment Indicators in Korea 153

Table 4. Response discordance in the Supplementary Survey for the Young Population, May 2009 Preparation for employment exam previous Q. Did you want a job previous week? week Yes No n/a* Total 1. Broadcast, newspaper, and other media

3

7

0

10

2. Public firms, industrial complex, and other public firms

1

26

0

10

3. LE, SME, and other firms

20

82

0

102

4. Teaching, teacher certification examination (including private school teachers)

1

50

0

51

5. Civil service examinations including diplomacy, law, administration, etc.

2

20

0

22

6. General public officers (incl. police, firefighting, military)

16

157

0

174

7. Patent lawyer, CPA, etc. other professional certification

3

48

2

53

8. Beautician, chef, and other technical certification

4

67

1

72

9. Other

2

26

0

28

10. None

60

4,802

5

4,868

Total

112

5,284

10

5,407

Those preparing for employment

52 (9.6)

482 (89.5)

5 (0.9)

539 (100.0)

* This refers to those who have engaged in job-seeking activity but were not able to be employed immediately and thus categorized as economically inactive.

Source: National Statistical Office, 2009. 5 Economically Active Population Survey, Supplementary Survey for the Young [경제활동인구조사 청년층 부가조사] raw data.

we can presume that respondents were confusing whether they wanted work with whether they were actually available for work.

Likewise, regarding the question of those who “wish to be employed” in the additional survey for the elderly, the number of jobless people who wanted to be employed was 1,248,000. However in the main survey only 112,000 people, which amounts to 9%, responded that they desired

154 Korean Social Sciences Review | Vol. 2, No. 2, 2012

Table 5. Response discordance in the Supplementary Survey for the Older Population, May 2009 Whether the individual wants a paying job and its reasons

Q. Did you want a job the previous week?

Yes

No

n/a*

Total

1. Wants to work as long as the individual is physically capable / because working brings satisfaction

22

352

1

376

2. To make a living / the individual is in need of money

81

589

2

672

3. The society is in need of my capabilities (skills and techniques)

0

16

0

16

4. To maintain health

3

56

0

59

5. Staying home is tedious / to pass time

6

116

0

121

6. Etcetera

0

4

0

4

7. Does not want a job

10

3,279

2

3,291

Total

122

4,411

6

4,539

* Those preparing for employment (1-6)

112 (9.0)

1,132 4 1,248 (90.7) (0.3) (100.0)

* This refers to those who have engaged in job-seeking activity but were not able to be employed immediately and were thus categorized as economically inactive.

Source: National Statistical Office, 2009. 5 Economically Active Population Survey, Supplementary Survey for the Old Population raw data.

employment; 1,132,000 people, or 91%, responded that they did not desire employment (Table 5). We can infer from this situation that the desire for work was conflated with their availability for work.

In other words, when an individual is initially asked whether he or she has conducted job-seeking activities, and then when those who responded ‘no’ are asked again if they wish to be employed, they are essentially being asked the same question twice. In this case, the individual’s desire for work will be determined with a much stricter standard than in other cases. This could result in a possible error, categorizing many non-job seekers as individuals not wanting a job.9 9

This incompatibility can be explained as a behavior pattern according to the ‘anchoring

Measurement of Unemployment and Extended Unemployment Indicators in Korea 155

For those mistakenly categorized as individuals who do not wish to be employed, the survey is structured in such a way that the reasons for not seeking for a job or the availability for work cannot be identified; this makes it impossible to adjust the unemployment rate in accord with ILO standards.

Thus, even if it is expanded into a discouraged workers category that assumes a desire for work, there are additional problems. If the gap between the responses regarding the desire for employment is over 90%, the possibility of a categorization error in conducting the survey must be carefully considered.

IV. KOREA’S QUASI-ENEMPLOYMENT AND EXTENDED UNEMPLOYMENT INDICATOR 1. The Need for a Supplementary Unemployment Indicator The previous section examined the various problems in measuring the unemployment rate in Korea. Of particular interest was the fact that the current unemployment rate does not accurately reflect the employment situation in the youth and senior age groups. Ultimately, we must conduct a careful examination in order to restructure the measurement standard and method of investigation. But a more urgent matter is to utilize additional unemployment indicators to show employment situations that cannot be shown by the official unemployment rate. This supplementary indicator is necessary for revising and correcting the problems and limitations in calculating the official unemployment rate.

According to ILO, the official unemployment rate should be constructed in parallel with the international standard on measuring (full) unemployment.

However, instead of completely relying on the official unemployment rate, there is a need to examine the employment situation from a threedimensional perspective, using diverse supplementary unemployment effect’ proposed by Tversky and Kahneman. In other words, when an individual is judging a specific issue he or she sets a reference point and confirms judgment by adjusting this point; but by becoming entangled in the reference point first set in the adjustment stage, subsequent adjustments cannot be made. As a consequence, a bias can result (Tomono 2008: 81-82).

156â&#x20AC;&#x192; Korean Social Sciences Review | Vol. 2, No. 2, 2012

indicators that reflect the domestic situation of a country. Based on this viewpoint, the current international debate regarding employment indicators are moving from the official unemployment rate towards developing various indicators that reflect the underutilization of the labor force. This is because although the official unemployment rate is said to be most accurate, this data alone only captures full unemployment and recognizes unemployment only when active job-seeking activities are accompanied with joblessness; this approach cannot accurately reflect the state of a nationâ&#x20AC;&#x2122;s employment, which makes taking appropriate responses difficult. Given this common understanding, many countries are constructing and using diverse supplementary indicators in addition to the official unemployment rate to correspond to their national situations. These indicators include underemployment, discouraged workers, and hidden unemployment. Among the OECD countries, there are 27 countries that determine underemployment (involuntary part-time workers), and up to 18 countries regularly determine the number of discouraged workers. Whatâ&#x20AC;&#x2122;s more, BLS is designing and proposing additional alternative unemployment indicators, U1~U6.

Figure 3 shows the concepts and necessities for supplementary indicators.

Measuring the unemployment rate begins with defining the boundaries between employment and unemployment, and between unemployment and the economically inactive population. However, in reality this division is less clear. Individuals in the grey area between employment and unemployment (A: underemployment) and the grey area between unemployment and the economically inactive population (B: hidden unemployment) are not officially regarded as the unemployed but in a state of semi-unemployment.

Determining their number and seeking an appropriate countermeasure for them becomes a significant task in labor market policy. The cause for this gap between reality and the official unemployment rate in Korea is the lack of representation for the youth, women, and older population. For example, women are not fully integrated in the labor market and their rate of movement between employment and the economically inactive state is reported as high. However, it is highly probable that this represents movement between the underemployment and hidden unemployment. Similar problems arise in terms of the youth and elderly population; if being in a state of unemployment, in other words if conducting active job-seeking activities

Measurement of Unemployment and Extended Unemployment Indicators in Korea 157

Employed

(23,577)

(A)

(769)

Population economically inactive (15,251)

Hidden unemployed (B)

Underemployed Unemployed

Economically active population (24,347)

Noninstitutional population (39,597)

Figure 3. Labor force state of non-institutional population

are not advantageous (persons preparing for government or LE employment examinations) or if there are no separate incentives such as unemployment allowances, these people might consider remaining economically inactive or partially-employed while looking for a good job more advantageous.

Given this, there is a basic limitation for the official unemployment rate to accurately reflect the Korean labor market, especially the employment situation of the more vulnerable population. There is a high probability that quasi-unemployment exists, and using diverse supplementary indicators to discern their movements would provide a useful tool for meaningful policymaking.

However Korea has been passive in constructing supplementary unemployment indicators because this may cause confusion. The National Statistical Office however does provide some supplementary indicators for individuals desiring additional work currently working less than 18 hours/36 hours, individuals who gave up job-seeking, job preparers, and those who are taking a hiatus.

“Persons who want additional work,” a substitute indicator for underemployment, are defined as those who worked less than 36 hours because of an economic reason (job unavailable, business slump, and ceased operations), thus want additional employment. Table 6 examines the desire for additional work for each group of people according to the hours they worked during the previous week. Excluding individuals who responded that they “wish to remain working the same hours,” the rest are categorized as part-time workers seeking additional work, and those people who could

158 Korean Social Sciences Review | Vol. 2, No. 2, 2012

Table 6. Desire for additional employment according to each group sorted by the number of working hours (2008) (Unit: 1000) Desire for additional employment

hours worked the previous week

1. I wish to increase the number of hours I work

0

1-17

18-35

total

2. I want to work additionally to what I do now

33 (21)

150 (100)

320 (230)

504 (351)

3. I want a different job where I can work more hours

7 (3)

44 (20)

97 (64)

148 (65)

4. I am satisfied with the current hours

304 (34)

628 (116)

2,125 (329)

3,057 (479)

Total

349 (60)

850 (249)

2,597 (621)

3,796 (930)

* Involuntary part-time workers

44 (26)

222 (133)

472 (293)

739 (451)

Note: 1) Question regarding desire for additional employment was not asked to persons working more than 36 hours.

2) When the number of hours worked is 0, this is regarded as a state of leave of absence 3) The number in ( ) indicates the frequency of working short term due to economic reasons (such as job unavailability, business slump, ceased operations and the like) Source: National Statistical Office, 2008 Economically Active Population Survey, raw data.

work only these specific hours due to lack of work, business slump, ceased operations or other economic reason are categorized as “persons who want additional work” in parallel with the definition set by the National Statistical Office.

When compared with the ILO definition of underemployment, the difference here is that outside of the conditions of the possibility of employment, there is an additional condition that must account for short work hours of work for economic reasons. This is based on the ILO’s previous debate in 1998, which resembles measuring the involuntary part-time workers like many OECD countries including the U.S. (ILO KLIM 6th). However the problem is that whereas the Statistical Office includes individuals working less than 18 hours a day who desire additional employment (133,000 people)

Measurement of Unemployment and Extended Unemployment Indicators in Korea 159

and those working less than 36 hours a day (133,000 + 293,000 people), they exclude those who have not been able to work even one hour or are temporarily on leave due to lack of job availability (26,000 people). This not only conflicts with the ILO definition of underemployment, but also renders the concept and meaning of “persons who want additional work” significantly vague. To avoid inaccuracy and confusion, it would be best to use the term ‘involuntary part-time workers’ or “the underemployed,” which is more conceptual and objective, rather than terms such as “persons who want additional work” which involves the subjective intention of involuntary parttime.

“Despaired jobseekers” is a substitute indicator for discouraged workers.

The National Statistical Office defines “despaired jobseekers” as people within the economically inactive population who intend to become employed and have the capability to do so, but have not conducted job-seeking activities during the last 4 weeks because of labor market conditions. 10 These people have experienced such activities during the last year. In general, “discouraged workers” is a term which relaxes the standard of job-seeking activity for the officially unemployed. The term refers to persons who have not conducted job-seeking activities because they believe there is a low possibility of finding a job in the current labor market; therefore, these people are not defined as unemployed. However in the case of Korea, “despaired jobseekers” refers to a confined group of people who, among discouraged workers, have conducted job-seeking activities during the past year.11 Including the condition of jobseeking activities within the past year has resulted in many discouraged workers being excluded from the despaired jobseeker statistics. Non-job seekers or discouraged workers (because of the labor market) are 286,000 in number but the despaired jobseekers according to definition of the National Statistical Office is only 118,000 (Table 7).

10

Labor market causes include 1) likeliness that there would be no appropriate job (major/specialty, experience, wage level, working conditions, and environment), 2) have tried job-seeking before but couldn’t find a job, 3) insufficient qualification (education, techniques, lack of experience, age discordance).

11 The U.S. has similar job-seeking experience limitations when determining discouraged workers, and European countries do not attach such specific limited condition related to past experiences of job-seeking.

160 Korean Social Sciences Review | Vol. 2, No. 2, 2012

The definition of despaired jobseekers used by the National Statistical Office today is one that was adopted from the standard for determining discouraged workers and was revised in the U.S. in 1994. Prior to this, the condition of “job-seeking activities during the past year” was not included, but it was a change made reflecting criticisms that the discouraged workers indicator only reflects subjective factors such as the “desire for work” and “judgment regarding the circumstances of the labor market.” The new designation was more a objective, indicator reflecting the individual’s actual settlement in the labor market (Yamagami 2002).

Table 7. Reasons for not job-seeking among those who wish to be employed (2004, 2008) 2000-2004

2005~

2004

2008

1. There doesn’t seem to be an appropriate job regarding profession (major) or experience

32

1. There doesn’t seem to be an appropriate job regarding profession (major) or experience

33

2. There doesn’t seem to be a job with a satisfying salary level or working conditions 3. There seems to be no work nearby 4. Lack of education or technical experience 5. The employer may think that the individual is too old or too young 6. The individual has attempted jobseeking before but there was no work available

78

2. There doesn’t seem to be a job with a satisfying salary level or working conditions 3. There seems to be no work nearby 4. Lack of education or technical experience 5. The employer may think that the individual is too old or too young 6. The individual has attempted jobseeking before but there was no work available

68

7. Infant care, housework 8. School 9. Etcetera

14 5 17

7. Infant care 8. Housework 9. School 10. Physically or mentally challenged 11. Etcetera

5 10 4 3 14

Total

336 Total

322

* Discouraged workers (1-6)

300 * Discouraged workers (1-6)

286

71 10 35 74

47 8 43 88

* Despaired jobseekers (National 100 * Despaired jobseekers (National 118 Statistical Office) Statistical Office)

Measurement of Unemployment and Extended Unemployment Indicators in Korea 161

Table 8. Discouraged workers including experiences of participating in economic activities during the past year (Unit: 1000) 2004

2005

2006

2007

2008

Discouraged workers

300

328

290

270

286

(100.0)

+ Experience of job-seeking activities in the past year → despaired jobseekers (National Statistical Office)

100

125

121

108

118

(41.3)

+ Experience of employment in the past year

181

193

155

149

160

(55.9)

+ Experience of employment or job-seeking activities in the past year

218

237

211

199

213

(74.5)

Source: National Statistical Office, Economically Active Population Survey [경제활동인구조 사], data from each year.

However the flaw in Korea’s designation of job-seeking experience is not merely that the yardstick for determining job-seeking activities is strict, but also in that it is not an indicator that accurately reflects the Korean labor market. When considering the large number of movements from employment straight into the economically inactive population, it is more useful to include employment experience rather than experiences of job-seeking activities during the past year to determine the extent of settlement in the labor market.

Table 8 shows that in Korea’s reality there are more discouraged workers with work experience than those with job-seeking activities. When the former is included, the number of despaired jobseekers increases to 213,000, including 74.5% of the discouraged workers.

The most problematic of all supplementary indicators utilized by the government are those regarding ‘persons preparing for employment’12 and ‘persons on a break.’ This merely reflects their main activities during the last week, and thus by definition cannot be distinguished from other economic activity indicators. For instance, those who have replied that they have been 12

This refers to those within the group of economically inactive persons who have replied that their main activity during the previous week had been “attending institutions or academies preparing for employment,” or “preparing for employment.”

162 Korean Social Sciences Review | Vol. 2, No. 2, 2012

preparing for employment or have been taking a break, includes everyone: those who are employed, unemployed and those who are economically inactive. Moreover, although it may be limited to the economically inactive population, this concept overlaps with despaired jobseekers. The use of such a non-conceptual indicator provides an excuse for the media and others to produce inaccurate statistical information. Specifically, the number of people who conform to the groups of despaired jobseekers, ‘persons preparing for employment,’ and who have been “taking a break” can be easily included in those who are “the actually unemployed,” “employment difficulty,” or “de facto unemployed.”13 Especially given labor market conditions, those “taking a break” cannot be viewed as sharing enough commonalities to allow the prediction of constant and uniform behavior. Although one may be “out of a job,” this itself cannot be referred to as “hidden unemployment” or “the group with employment difficulties.” Because using a non-conceptual indicator blurs the problem blurrier and amplifies statistical distrust rather than improving an understanding of the labor market, it is necessary to construct a more meaningful and objective employment indicator regarding the behavior of the labor market.

2. Quasi-Unemployment Measurement Using the Supplementary Indicator of the U.S. Bureau of Labor Statistics Among complementary indicators, the most frequently cited among is the U.S. BLS supplementary unemployment rate system of U1~U6. With the official unemployment rate U3 as a standard, U1 and U2 determine the ratio of the unemployed in specific conditions; U4 and U5 are indicators that include the discouraged workers and marginally attached workers among the economically inactive population; and U6 is a supplementary indicator of the most broad meaning by encompassing underemployment (table 9).14 These indicators demonstrate specific types of unemployed and jobless; they 13

If “individuals preparing for employment,” or individuals who are “taking a break” are simply summed up, an overlap occurs.

14 BLS has been proposing complementary unemployment indicators U1-U7 since 1976; its form changed into a U1-U6 system when the labor force research investigation was redesigned.

Measurement of Unemployment and Extended Unemployment Indicators in Koreaâ&#x20AC;&#x192; 163

Table 9. Supplementary unemployment rate of BLS Definition

(Unit: %) 2008. 8 2009. 8

U-1 (long term un- The proportion of the unemployed who among employment) the economically active population are in a state of long-term unemployment of more than 15 weeks

2.1

4.9

U-2 (involuntary un- Among the economically active population, the employment) proportion of job losers or persons whose temporary work is finished

3.0

6.0

U-3 (full unemploy- Among the economically active population, the ment) proportion of all unemployed

6.1

9.6

U-4 (Unemployment Among the economically active population and 6.3 including discour- discouraged workers, the proportion of the un- (1.03) aged workers) employed and discouraged workers

10.0 (1.04)

U-5 (Unemployment Among the economically active population and 7.1 including marginally marginally attached workers (= discouraged (1.16) attached workers) workers+ other marginally attached workers), the proportion of the unemployed and marginally attached workers

10.9 (1.14)

Among the economically active population and 10.7 marginally attached workers, the proportion of (1.75) unemployed, marginally attached workers, and short term workers with economic reasons

16.5 (1.72)

U-6 (Unemployment including marginally attached workers and the underemployed)

Note: Marginally attached workers are persons who, among the economically inactive population, wish employment, can work right away, and have sought jobs during the past year. Discouraged workers are those who, among the marginally attached workers, did not carry out job-seeking activities due to labor market related reasons.

The underemployed are part-time workers with reasons related to the economy. ( ) refers to its ratio to the official unemployment rate.

Source: Bregger and Haugen (1995); BLS, Economic News Release on Employment Situation, 2009. 9. 4.

supplement the official unemployment rate to determine the specificities of the underutilized labor force.

However the BLS indicator cannot be used for cross-national investigations because it uses a different standard from that in Europe. It includes past job-

164â&#x20AC;&#x192; Korean Social Sciences Review | Vol. 2, No. 2, 2012

Table 10. Quasi-unemployment rate of the U.S. and Japan, U3~U6 (1994-2000 average) (Unit: %) United States U3 U4 U5 U6 U4/U3 U5/U3 U6/U3

Japan

Total

Men

Women

Total

Men

Women

5.0 5.2 6.0 8.8 1.05 1.20 1.78

4.9 5.2 5.8 8.4 1.06 1.18 1.71

5.0 5.2 6.2 9.3 1.04 1.23 1.86

3.5 (3.8) 4.7 4.9 8.0 1.36 1.41 2.31

3.1 (3.8) 4.2 4.3 6.2 1.35 1.39 1.98

3.9 (3.7) 5.4 5.7 10.7 1.38 1.45 2.72

Note: Japan regards the prospectively employed (persons waiting for the results of their application for employment) as the unemployed; this categorization is made according to standards used by the U.S. ( ) is the official unemployment rate of Japan.

Source: U.S.: Current Population Survey; Japan: Special Survey of the Labor Force Survey.

Recited from Yamagami (2002).

seeking activities in defining discouraged workers (Haugen 2009). Only limited cross-national comparative studies have been conducted, such as one conducted by Yamagami (2002) (Table 10).

Table 11 represents an examination of Koreaâ&#x20AC;&#x2122;s quasi-unemployment using the U3~U6 of the BLS supplementary unemployment indicators. U1 and U2 were excluded because they are indicators showing the long-term and involuntarily unemployed among the full unemployed persons. The following statistical definitions were used to construct U3~U6. Discouraged workers are those among the economically inactive population who desire work, are available for work but did not engage in job-seeking activities due to reasons related to the labor market (see footnote 10), and those who have worked during the past year. Marginally attached workers are those whose reasons for not job-seeking include personal situations such as infant care and housework. The underemployed are defined as individuals who work short hours (less than 36 hours a week) for economic reasons (no job available or slump in business, cessation of operations, etc.) and who want additional work.

Meanwhile, the BLS definition of discouraged workers and marginally

Measurement of Unemployment and Extended Unemployment Indicators in Korea 165

attached worker is limited to circumstances where the individual has jobseeking experience within the past year. When the fact that Korea’s jobseeking activity conditions being relatively strict is considered, including employment experiences as an indicator that reflects the extent of the labor market settlement would be more corresponding to the original objectives.

The three last rows of Table 11 are the results of reconstituting the index by including individuals who have employment experience with the discouraged workers and marginally attached workers.

U4, calculated by adding discouraged workers to the officially unemployed is 3.63%, U5 which includes discouraged workers and other marginally attached workers is 3.68%, and U6 which includes the underemployed is 5.52—they appear to be 1.15, 1.16, 1.75 times larger than the official unemployment rate of 3.16% respectively. When calculation was made by adding the number of those who had work experience during the past year to the discouraged and marginally attached workers, U4 was recorded 4.00%, U5 4.10%, and U6 5.93%, each 1.27, 1.30, and 1.88 times larger than the official unemployment rate respectively. In the case of extending the unemployment index to U4~U6, the range of captured state of semi-unemployment becomes wider in the case of women compared to men. This reflects the fact that the degree of women’s labor market settlement is relatively low.

One feature identified by the above results is that Korea’s U4~U6 structure shows a more similar appearance to that of the U.S. than that of Japan. A significant gap still remains between Korea and Japan, even when adjustment is made by including work experience. This is an unexpected result, especially when we consider the relative similarity between their labor markets, culture, and society.

The core cause is related to how individuals preparing for employment are dealt with. Japan identifies individuals waiting for their results of employment applications without conducting further job-seeking activities as the officially unemployed, but Yamagami (2002) reclassified them into discouraged workers in order to match it with U.S. standards. However in the case of Korea, if these persons waiting employment application results have not carried out additional job-seeking activities, they are categorized as part of the economically inactive population and are made to respond to additional questions regarding their wish for a job. However as examined before (refer

166 Korean Social Sciences Review | Vol. 2, No. 2, 2012

Table 11. Korea’s state of quasi-unemployment examined by U3-U6 BLS standard (Officially) Unemployed Unemployed + Discouraged workers Unemployed + Marginally attached workers Unemployed + Marginally attached workers + Underemployed U3 (= official unemployment rate) U4 U5 U6 U4/U3 U4/U3 U6/U3

BLS adjusted

Total

Men Women Total

Men Women

769 888 900

505 576 582

265 312 318

982 1,007

628 639

354 368

1,351

874

477

1,458

931

527

3.16 3.63 3.68 5.52 1.15 1.16 1.75

3.55 4.03 4.07 6.12 1.14 1.15 1.72

2.61 3.06 3.12 4.68 1.17 1.19 1.79

4.00 4.10 5.93 1.27 1.30 1.88

4.38 4.46 6.49 1.23 1.25 1.83

3.46 3.59 5.15 1.33 1.38 1.97

Note: 1) Marginally attached workers are persons who, among the economically inactive population, wish employment, can work right away, and have experience of job seeking during the past year. Discouraged workers are those who, among the marginally attached workers, did not carry out job-seeking activities due to labor market related reasons. The underemployed are part-time workers with reasons related to the economy.

2) Includes individuals who wish employment, can start to work immediately, and have employment experience in the past year, within the marginally attached workers and discouraged workers.

Source: National Statistical Office, Economically Active Population Survey [경제활동인구조 사], 2008.

to Table 4), a large number of individuals preparing for employment were excluded because only a few responded that they wish to get a job, not satisfying the conditions for discouraged or marginally attached workers.

Only 8.5% of the individuals preparing for employment in an economically inactive state in 2008 responded that they want work.

The second feature is that compared to the U.S. or Japan, Korea shows nearly no difference between U4 and U5. The results are substantially the same even when the conditions for job-seeking experience are alleviated.

This means that there is hardly any distinction between the discouraged

Measurement of Unemployment and Extended Unemployment Indicators in Korea 167

workers and the marginally attached workers; wish for a job and experiences of employment or job-seeking activities worked out to be a stronger control factor than the reasons for not looking for a job.

Based on the above analysis, the supplementary unemployment indicators of BLS are understood to be insufficient in its utility as a supplementary index to determine the fluctuations and urgency of Korea’s employment situation.

3. Composition of Extended Unemployment Indicators15 Based on the above analysis the core elements that must be considered for a supplementary indicator that suits Korea’s circumstances can be summarized as the following: First, in order to capture the potential unemployment we must be able to distinguish individuals who, although they want work, cannot be identified as the unemployed due to their inability to satisfy the requirements of jobseeking activities or availability for diverse reasons. Also it should be able to supplement the problems of individuals being omitted from the group of discouraged workers in the course of individuals who mainly conducted activities of employment preparation being identified as not wanting work in their responses to questions, a result due to a deficiency in the investigation method.

Next, the group of the underemployed whose workforce is underutilized must be identified among the employed. While doing so, going beyond the generally mentioned ‘involuntary part-time workers,’ it should be able to distinguish those underemployed who sought employment for survival but are in fact semi-employed due to the lack of available work.

The following distinguishing standards can be used to identify the potentially unemployed and the underemployed in the current data available from the Economically Active Population Survey.16 15

It is noted that this section is part of Hwang, Soo Kyeong’s debate (2009) partially edited and expanded.

16 A diverse range of standards has been proposed in previous studies to calculate hidden unemployment. Kim, D. (2000) has connected data on economic activity to a panel and defined individuals who participated in economic activities for only a few months out of a year as “marginal participants.” While these “marginal participants”

168 Korean Social Sciences Review | Vol. 2, No. 2, 2012

First, the non-job-seekers with a labor market related reason can be identified as discouraged workers by partially easing the standard used to determine job-seeking activities. This is in accordance with the discouraged worker definition of OECD. Second, individuals who wish for work and have recent experience of economic activity (job-seeking or employment) can be categorized as marginally attached workers, because these people can enter the labor market at any time. In relation to this, there is a need to make a judgment about individuals who conducted job-seeking activities but were still categorized as the economically inactive population. Individuals should be counted as having had the intention of employment if they were job-seeking, but the current investigation structure does not ask this intention at all if individuals do not satisfy the condition of ‘having been available for work during the previous week,’ discluding them from all categorizing standards distinguished from intentions of employment. Accordingly, it is most reasonable to categorize job-seekers who recently conducted economic activities (employment or job-seeking) as marginally attached workers, although they may not meet the condition of availability.

Third, job preparing individuals excluded from the discouraged worker and marginally attached worker groups also need to be identified as a separate category. This is to remedy the problem of omitting individuals who have prepared for a job during the previous week but responded that they do not want a job, from the category of discouraged or marginally attached workers. Despite their responses, job-preparing activities indicate intent for employment. Individuals preparing to get a job can be used to show the characteristics of the youth age group’s patterns for entering the labor market.

This group of individuals does not yet have past experiences of economic activity.

Fourth, the underemployed are individuals who desire additional work but only work short hours due to economic reasons. Put differently, these may agree with the intent of research, it is not useful in determining trends in the labor market for each month. Meanwhile, Kang, S. et al. (1999) and Hwang, S. (2009) propose diverse supplementary indexes that have applied the BLS indicators, but the grounds for each indicator have not yet been fully dealt with.

Measurement of Unemployment and Extended Unemployment Indicators in Koreaâ&#x20AC;&#x192; 169

Table 12. Typology and concepts of extended unemployment Type

Statistical definition

Unemployed (Fully) unemployed

Conducted job-seeking activities with wish for employment, can become employed immediately, but were unable to find a job (=the officially unemployed)

Economically inactive population Discouraged workers Has the intention to work and can start working immediately, but were unable to become employed due to labor market reasons (easing of job-seeking activity standard requirements Marginally attached Has the intention to work, has experience of economic activiworkers ties (employment or job-seeking), and not a discouraged worker (easing of standard for the possibility to work immediately) Potentially jobless (hidden unemployment)

Discouraged workers + marginally attached workers + employment preparing individuals

Employed Underemployed

Short-hour workers due to economic reasons (no job available or business slump) but wishing for additional work

Partially unemployed Underemployed individuals who work less than 18 hours Extended unemployed and unemployment rate Extended unemployed * Extended unemployment rate

Unemployed + the potentially jobless (among economically inactive population) + partially unemployed (among the employed) (Unemployed + potentially jobless + partially unemployed)/(economically active population + potentially jobless) x 100

individuals can be defined as involuntary part-time workers. This definition is in accordance with the definition of underemployment used by the OECD. Individuals who have worked less than 18 hours among the underemployed have been subject to significant underutilization; they are defined as the partially unemployed and can be included in the extended concept of unemployment.

Based on this typology, the extended concept of employment identifies hidden and partial unemployment as part of official unemployment, defining

170 Korean Social Sciences Review | Vol. 2, No. 2, 2012

Table 13. Scale of each extended unemployment type 2003 2004 2005

(Unit: 1000, %) 2006 2007 2008 2009.1-8

818 252 59 318 629 344 120 1,566 3.6 6.6 (1.86)

860 300 70 355 725 470 177 1,761 3.7 7.3 (1.99)

887 827 783 328 290 270 70 81 71 426 488 502 825 859 843 515 469 454 185 173 155 1,897 1,859 1,781 3.2 3.5 3.7 7.1 7.5 7.7 (2.07) (2.17) (2.20)

769 286 64 547 898 451 159 1,826 3.2 7.2 (2.29)

923 393 89 537 1019 596 211 2,153 3.8 8.5 (2.24)

<Men> 508 (Fully) Unemployed 123 Discouraged workers 23 Marginally attached workers Employment preparing individuals 176 322 Potentially unemployed 191 Underemployed 59 Partially employed 889 *Extended employed 3.8 *Official unemployment rate 6.4 Extended unemployment rate (1.71) (multiples ratio)

534 143 28 195 367 270 94 995 3.9 7.1 (1.81)

552 533 517 167 161 154 31 38 34 232 274 287 434 473 473 317 295 297 88 95 108 1,095 1,102 1,078 3.7 3.8 4.0 7.4 7.6 7.6 (1.92) (2.00) (2.02)

505 161 29 308 498 292 94 1,097 3.6 7.5 (2.10)

610 229 40 288 557 386 133 1,299 4.3 8.7 (2.05)

310 129 36 142 307 153 61 677 3.3 7.0 (2.12)

326 157 42 159 358 200 83 766 3.4 7.6 (2.27)

334 294 266 161 129 116 38 43 37 194 215 215 391 386 370 198 174 156 67 78 77 802 758 703 2.6 2.9 3.4 6.7 7.3 7.8 (2.31) (2.48) (2.55)

265 125 35 239 400 159 65 729 2.6 6.9 (2.65)

314 164 49 249 462 210 78 854 3.1 8.1 (2.60)

<Total> (Fully) Unemployed Discouraged workers Marginally attached workers Employment-preparing individuals Potentially unemployed Underemployed Partially employed Extended employed *Official unemployment rate *Extended unemployment rate (multiples ratio)

<Women> (Fully) Unemployed Discouraged workers Marginally attached workers Employment-preparing individuals Potentially unemployed Underemployed Partially employed Extended employed *Official unemployment rate *Extended unemployment rate (multiples ratio)

Note: ( ) is the ratio to official unemployment rate Source: National Statistical Office, Economically Active Population Survey.

Measurement of Unemployment and Extended Unemployment Indicators in Korea 171

this as ‘extended unemployment.’ Table 12 shows each of the types and statistical definitions of the extended unemployment. The scale of each extended unemployment category from 2003, the earliest data available, to the most current year is recorded in Table 13.

The number of the potentially unemployed masked in the economically inactive population increased from 629,000 in 2003 to 898,000 in 2008. The ratio of this number to the number of the officially unemployed increased from 0.77 to 1.17. The scale of the potentially unemployed shows a sudden surge to 1,019,000 in 2009 (January-August in average) when the economic crisis became prevalent. Such a rapid rise of hidden unemployment was caused by the surging number of individuals preparing for employment.

During 2003-2008, their numbers increased by 230,000, while the number of discouraged and marginally attached workers remained stable until the 2009 financial crisis when they suddenly soared. This data shows that many joblosers during financial crisis were in a hidden unemployment state rather than the official unemployment state.

Meanwhile, the underemployed increased overall during the same period and showed a marked increase in 2009. Part-time workers who worked less than 18 hours (the partially unemployed) among the underemployed are also identified to have increased significantly. The proportion of the partially unemployed among the underemployed remained stable at 35%.

The extended unemployment rate that encompasses hidden unemployment and partial unemployment was 8.5% during January-August 2009, 2.24 times higher than the official unemployment rate of 3.8%. The multiples ratio of the extended unemployment rate rose from 1.86 in 2003 to 2.29 in 2008 and it shows that the official unemployment rate’s representativeness is becoming increasingly weak. Meanwhile this multiples ratio still remains higher among women than men, showing that the official unemployment rate has even more limitations in reflecting the employment crisis for women.

4. Utility of Extended Unemployment Indicators For an extended unemployment indicator to be useful for policy-making, it must be accurately capture the fluctuations of the labor market affected by market situations. Figure 4 shows increasing market fluctuations as

172â&#x20AC;&#x192; Korean Social Sciences Review | Vol. 2, No. 2, 2012

(Unit: 1000)

increase of the employed

increase of the unemployed

increase of the extended unemployed

Coincident Composite Index, cycle variation value

economic cycle

Note: The business cycle reference until April 2005 is the official reference date reported by the National Statistical Committee and the data after that is the assumption of the researcher.

Source: National Statistical Office, Economically Active Population Survey, dataset from each year.

Figure 4. Business and employment fluctuations using extended unemployment indicator

fluctuations for the employed, officially unemployed, and the extended unemployed. Figure 5 shows the fluctuating trend according to each type of the extended unemployed.17 First, the range of fluctuation of the unemployed following economic fluctuations are noticeably low compared to the fluctuation range of the employed, but when it is identified by the fluctuations of the extended unemployed, the difference markedly decreases. This is because when the 17

In order to thoroughly analyze the economic fluctuations, the Beveridge-Nelson decomposition, Hodrick-Prescott filter, Baxter-King filter and other methods must utilize only the cycle variation value without the secular trend variation value.

However the extended unemployment data can only be constructed from the year 2003, and thus a time series for filtering is insufficient. Here, only a rough economic fluctuation is identified using year to year variation analyses, which accounts on for seasonal change.

Measurement of Unemployment and Extended Unemployment Indicators in Koreaâ&#x20AC;&#x192; 173

(Unit: 1000)

the officially unemployed

the potentially unemployed (excluding employment preparing individuals)

employment preparing individuals

the partially unemployed

Source: National Statistical Office, Economically Active Population Survey, dataset from each year Figure 5. Increasing trend for extended unemployment by type

number of jobs decreases with the deteriorating economy, only a portion of the unemployed is identified as the officially unemployed and the rest lie dormant in the labor market in the form of hidden or partial unemployment.

When the extended unemployment is examined by type, fluctuations of the officially unemployed, the potentially unemployed (excluding individuals preparing for employment), and the partially unemployment move in reverse directions from the economy. However, the fact that individuals preparing for employment are showing economic cyclicality is a distinguishing factor.

This can be explained intuitively. When the economy is in good shape the individual expects increased employment opportunities in the future, resulting in an increase in the number of people joining to prepare for better employment. On the other hand when the economy is deteriorating the individual is in concern of the decreased opportunities for employment. So, the individual may give up preparation for getting a job. After giving up, whether they would show tendency to first settle with whatever they can get

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Table 14. Relationship between economic growth rate and the unemployment rate fluctuations (2003.1/4~2009.3/4) Growth rate → Unemployment rate

Unemployment rate → Growth rate

official unemployment rate

extended unemployment rate

official unemployment rate

extended unemployment rate

growth rate

-0.071 (0.015)*

-0.165 (0.032)*

-

-

unemployment rate

-

-

-6.915 (1.577)*

-3.417 (0.670)*

-0.032 (0.028)

-0.153 (0.056)*

-0.715 (0.237)*

-0.942 (0.212)*

0.472

0.522

0.614

0.671

trend

R

2

Note: Unemployment rate fluctuations are comparisons with previous year; ( ) is standard error. N=23. * is 1% significance level Source: National Statistical Office, KOSIS National Statistics Portal; Economically Active Population Survey [경제활동인구조사], dataset from each year.

their hands on, or would remain in an economically inactive state can be determined only with additional research, such as dynamic analysis.18 Table 14 shows the relationship between fluctuations of the economy and the unemployment rate according to Okun’s Law, using a simple regression analysis. When the official unemployment rate is used, it is analyzed that for every 1% of GDP increase the unemployment rate decreases by 0.071~ 0.145%p, but when the extended unemployment rate is used, it decreases 18

Two hypotheses are possible. The first is that if the employment-preparing individuals are a group with a relatively low degree of labor market settlement compared to the unemployed (i.e. a person currently engaging in job-seeking activities), fluctuations of the employment preparing individual would be closely related with the fluctuations of the economically inactive population that encompasses the discouraged workers. That is, a large proportion of decreased employment individuals preparing for employment will be transferred to the economically inactive population. However if the employment preparing individuals that will be future job-seekers show no difference in their willingness compared to current job-seekers, there is a high probability that the decreased number of employment preparing individuals will appear coincident with an increase in the underemployed or the employed. This is because they will take the job that is available to them for now, if there is not much possibility that they will get a good job in the future.

Measurement of Unemployment and Extended Unemployment Indicators in Koreaâ&#x20AC;&#x192; 175

Table 15. Fluctuations in the state of the labor force, according to previous status of work of the extended unemployed type Fully employed Underemployed cur_Underemployment* rent _Partial unemployjob ment Subtotal Officially unemployed Hidden unemployed _Discouraged workers previ- _Marginally attached ous worker job _Job preparers Purely economically inactive Subtotal

unpaid temdaily em- self emregular family total porary worker ployer ployed worker worker worker 356 11 6 4

-2 27 19 7

-182 27 20 7

-20 6 3 3

-280 35 20 15

-58 4 4 0

-186 109 72 37

367

25

-155

-14

-245

-54

-77

52 15 12 6

13 32 15 8

45 35 26 13

-1 1 0 1

0 5 6 -1

1 -1 2 0

109 86 61 26

-3 28 95

9 34 78

-5 -24 56

0 3 3

0 4 9

-3 38 38

-1 84 279

Note: This is an average of January-November of each year.

Source: National Statistical Office, Economically Active Population Survey.

by 0.165~0.293%. The latter shows doubled sensitivity to the economic fluctuations.

Also, the extended unemployment indicators are useful in identifying the dynamics of the labor market by each category: gender, age, status of workers and so on. Table 15 shows the fluctuations in the state of the labor force according to the status of the extended unemployed. During the year 2009, employment plummeted, especially for the self-employed and day laborers, and simultaneously the underemployed increased significantly. Meanwhile, individuals who were regular workers in their previous jobs are transferred to the officially unemployed when they lose their jobs, but temporary or day workers tend to transfer to the potentially unemployed group instead.

Temporary and day workers are the first target of employment adjustment, but their numbers are difficult to represent in unemployment indicators.

This is also the reason why an approximate 3% unemployment rate could

176 Korean Social Sciences Review | Vol. 2, No. 2, 2012

be maintained despite the actual deterioration of the recent employment situation.

As broadly examined above, the size of the potentially employed and partially unemployed that are not captured as the unemployed is large, exceeding twice the official unemployment rate. Also, it can be seen that it responds dynamically to economic fluctuations. In addition, each indicator provides a useful analysis framework for understanding the different labor market behaviors according to the types of workers. This is why we must examine their size and characteristics, as well as the progress of fluctuations.

V. CONCLUSION Korea shows a stable unemployment rate of approximately 3%. Ironically, this results in a side effect of amplifying distrust in statistics. There is a wide gap between the official unemployment rate and the perceived unemployment rate. This research paper intends to solve this mistrust and seeks to find room in calculating the unemployment rate, systematically inspecting it in comparison with international standards.

When compared with ILO standards in measuring the unemployment rate, Korea’s unemployment rate seems to comply generally with international standards but when analyzed in detail, differences can be identified. This disparity is seen especially in dealing with nonpaid family workers who work less than 18 hours, judgments of the prospectively employed or individuals waiting to be assigned, and requirements for job-seeking activities.

However not all countries determine their unemployment rates in exact accord with ILO standards, and countries are given discretion in interpreting parts of it so it complies with the specific domestic situations. This is why the ILO does not designate even minor detailed standards. What is most important is whether national standards parallel ILO standards in a given domestic situation by reflecting ILO principles and guidelines.

In light of this, determining Korea’s unemployment rate is weakest in its lack of an objective standard that determines an individual’s desire for work and how to determine whether an individual has conducted job-seeking activities. If the response is divorced from reality by 90%, checking errors

Measurement of Unemployment and Extended Unemployment Indicators in Korea 177

in categorization caused by faulty methodology must be foremost. It is also necessary to reconstruct the investigation to avoid omitting actual jobseekers or errors in categorization caused by job-seeking activity requirements; that entails providing uniform and objective concepts of ‘work’ and ‘employment’ and investigating the individual’s desire for employment, whether they have conducted specific job-seeking activities, specific reasons for not jobseeking step by step. Considering time series stability of the statistics, the discrepancies caused by different investigation methods also should be carefully investigated and analyzed. I leave the specific investigation structure construction to future research.

There is also a need for a three-dimensional approach to domestic unemployment using supplementary indicators that are specific to Korea.

This paper proposed using extended unemployment indicators based on current investigations to identify and measure hidden employment and underemployment. There are limitations in quantifying exact numbers with current investigative methods, but this study was able to identify different aspects of the labor market’s dynamics. This demonstrates the potential for the extended unemployment indicator as a useful tool for analyzing the fluctuations in the labor market.

REFERENCES Books and Articles in Korean

Hwang, Soo Kyeong. 2009. “Structure and Scale of Hidden Unemployment” Monthly Labor Review 4. Korea Labor Institute (“잠재실업의 구조와 규모”. 『월 간 노동리뷰』 4월호. 한국노동연구원).

Kang, Soon Hee, Jae Sik Jeon, and Kay O Lee. 1990. Study on Improvements for Unemployment Statistics. Korea Labor Institute (『실업통계의 개선방안』).

Kim, Dae Il. 2000. “Marginal Participation and Unemployment.” Korean Economy Analysis 6(1). Korea Institute of Finance (“한계적 경제활동참가자와 실업” 『한 국경제의 분석』 6권 1호, 한국금융연구원).

Kim, Ki Ho and Dong Gu Chang. 2005. “Significance of the Employment Rate and its Utility Analysis.” Economic Analysis 11(2). Financial Economy Institute, Bank of Korea (“고용률의 의의와 유용성 분석”. 『경제분석』 11권 2호.

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한국은행 금융경제연구소).

Kim, Yong Hyun. 2005. “Unemployment level assessment by progress of quasiunemployment.” Monthly Labor Review. Korea Labor Institute (“유사실업률 추이를 통한 실업률 수준 평가”. 『월간 노동리뷰』 창간호. 한국노동연구원).

Lee, Byung Hee and Jae Ho Chung. 2005. Labor Mobility and Manpower Development. Korea Labor Institute (『노동이동과 인력개발 연구』).

Moon, Kwoun Soon. 2002. “Story of Economic Life: Understanding Labor Statistics.” Economic Education 11(1). Korean Development Institute (“생 활경제이야기: 고용통계의 이해”. 『경제교육』 11권 1호(통권 제19·20호 합본). 한 국개발연구원).

National Statistical Office. Various Issues. Economically Active Population Survey (『경제활동인구조사』).

Tomono, Norono. 2008. Behavioral Economics. Jihyung Publishers (『행동경제학』 지형출판사).

Books and Articles in English

BLS. 2008. “The Unemployment Rate and Beyond: Alternative Measures of Labor Underutilization.” Issues in Labor Statistics Summary 08-06. U.S. Department of Labor & U.S. Bureau of Labor Statistics.

Bregger, J.E. and S.E. Haugen. 1995. “BLS Introduces New Range of Alternative Unemployment Measures.” Monthly Labor Review Oct: 19-26.

Haugen, S.E. 2009. Measures of Labor Underutilization from the Current Population Survey. BLS Working Papers.

Hussmanns, R. 2007. “Measurement of Employment, Unemployment and Underemployment: Current International Standards and Issues in their Application.” Bulletin of Labour Statistics. ILO. Hussmanns, R., F. Mehran, and V. Verma. 1990. Surveys of Economically Active Population, Employment, Unemployment and Underemployment: An ILO Manual on Concepts and Methods. ILO. ILO 13th ICLS. 1982. Resolution Concerning Statistics of the Economically Active Population, Employment, Unemployment and Underemployment.

ILO 14th ICLS. 1987. Guidelines on the Implications of Employment Promotion Schemes on the Measurement of Employment and Inemployment.

ILO 16th ICLS. 1998. Resolution Concerning the Measurement of Underemployment and Inadequate Employment Situations. . 1998. Guidelines Concerning Treatment in Employment and Unemployment Statistics of Persons on Extended Absences from Work.

Measurement of Unemployment and Extended Unemployment Indicators in Korea 179

Sorrentino, C. 2000. “International unemployment rates: how comparable are they?” Monthly Labor Review June. BLS. Yamagami, T. 2002. “Utilization of Labor Resources in Japan and the United States.” Monthly Labor Review April. BLS.

Korean Social Sciences Review | Vol. 2, No. 2, 2012: 181-218

Gyeongbu Expressway:

Political Economic Geography of Mobility and Demarcation* Choi, Byung-Doo** This paper examines the Gyeongbu (Kyŏngbu) Expressway construction from the standpoint of the political economy pursued by President Park Chung-Hee (Pak Chŏng-hŭi) in the 1960s. Specifically, I examine the politics of mobility and demarcation. I will argue that Gyeongbu Expressway was a powerful symbol to promote the socio-spatial integration of the population which enforced the authoritative political power of the Park regime through the creation of mobility. Moreover, it has had a strong impact on changing the physical landscape of national space and the spatio-temporal rhythm of everyday life by extending the ‘machine space’ as a non-place. Finally, it has provided a physical infrastructure through which the capital’’s circulation could be reduced. But Gyeongbu Expressway has also led to serious problems such as uneven regional development, the expansion of non-place or alienated place, ecological destruction and pollution. In conclusion, a sustainable politics is suggested to overcome this kind of “tragedy of highway” to develop a highway as an integration and balance of politics and space.

Keywords: Gyeongbu Highway, Geo-strategy of transport, Automobility, Non-place, Machine space, Uneven Regional Development, Korea

I. Introduction The construction of Gyeongbu (Kyŏngbu) Expressway by President Park Chung-Hee (Pak Chŏng-hŭi) during a period of rapid economic growth in the1960s, was an important event. It justified authoritative political power Translated from the article published in Journal of the Economic Geographical Society of Korea Vol.13, No.3, 2010 with permission from The Economic Geographical Society of Korea. ** Professor, Department of Geography Education, Daegu University.

*

181

182 Korean Social Sciences Review | Vol. 2, No. 2, 2012

while simultaneously rewriting the history of Korean national land. Indeed, politics as an exercise of power is always deployed spatially, on it, through it and under spatial conditions. As Foucault says, “A whole history remains to be written of spaces — which would at the same time be the history of powers” (Foucault 1980: 149; original emphases). Viewed within a context of a politics of space or a political geography (or Foucauldian geo-politics, if you like), a new construction or expansion of transport, especially a new expressway which differs significantly from existing traditional roads can be seen two ways. Practically, it can be seen as a result of historical efforts to accelerate the mobility of people and things, while symbolically, it justified political power.

In ancient Greece and Rome, it was necessary for central political powers to construct and maintain roads to peripheral regions to keep and extend their influence. In general, new routes and modes of transportation reduce the negative effects of distance while they increase spatial mobility. By increasing spatial accessibility as well as the circulation of people, materials, and information between nodes and networks, roads promote ‘connection effects’ for social and political integration. In short, roads extend the influence of central power to peripheral regions, creating centripetal force towards the center of power. New transport facilities allow not just access to new resources while increasing the transport speed of commodities, they also strengthen military mobility, capability, and enhance their territorial control.

Construction of new transport networks can therefore be seen as a part of territorial strategy or geo-strategy of political power.

In modern history when nation-states settled down their territorial borders, construction and the extension of transport still played an important role, or at least a much more important than before, for capitalist economic growth and to promote centralized political power. Both the internal enforcement of centralized political power and the enhancement of social and spatial integration along with either external territorial expansion or the colonial exploration of modern states need to be supported by transport systems. The development and use of new transport systems generated a decisive moment that shows the symbolic dominance of a modern technological civilization. Moreover, it changes everyday life with new spatial landscapes and temporal rhythms. Construction of new transport networks such as expressways and the invention of new transport means (that is,

Gyeongbu Expressway 183

transport technology and machines) to use them have expanded machine space, and led to new modes of daily life which are dependent on them.

Even though increasing socio-spatial mobility and accessibility through both construction and the expansion of transport is a long-range task, the processes of creating mobility and the demarcation effect caused by them are ultimately very symbolic for developing a capitalist economy. In particular, the rapid development of transport and communication technology in contemporary society has accompanied the development of automobile industry, as well as the growth of construction (and real estate) capital to extend transport infrastructures. The development of transport has promoted the circulation of goods and capital over time and space and reduced the period of return on invested capital, hence contributing to an increased profit rate for capital.

But development of transport has tended to bring about an effect of spatial demarcation that has deepened disparity between regions included in and excluded from constructed transport systems. Cities connected by transport networks enjoy a reduction of time-distance, while those excluded from transport networks bear a relatively more distant timedistance. Moreover, even within cities included in a transport system, uneven geographical development between a central city and peripheral ones can intensify since capital, power, and information are concentrated in the central city. This is because the central city functions as the hub that controls the transport system and social and spatial interactions, which is, the so-called “straw effect.” In this situation, transport can bring about not only a sociospatial “integration effect” between regions but also a separate effect which demarcates the national land space which gives rise to political conflicts between them.

I examine the construction and management process of Gyeongbu Expressway, especially focusing on the effects brought about by this new mode and route of transport. I first look at recent research trends on the construction of expressways and their political and economic geographical effects in Korea. I then analyze the political and military characteristics of the geo-strategy that president Park Chung-Hee pursued in constructing the Gyeongbu Expressway. I point out that the construction of the Gyeongbu Expressway in the name of “modernization of the fatherland” and of “speed

184 Korean Social Sciences Review | Vol. 2, No. 2, 2012

war” has extended a modern ‘machine space’ generating “non-place,” and led to a time-space compression to promote economic growth and the accumulation of capital. But it has also generated a decisive moment that frames the uneven regional development between the included and excluded regions, and even within the included regions. It exemplifies non-sustainable development, environmental destruction and highlights the increase in traffic accidents. As a final remark, this paper will briefly outline alternative politics for sustainable transport construction.

II. RECENT RESEARCH TRENDS ON EXPRESSWAYS IN KOREA Research on expressways includes examining its effects, but this is conducted from the perspective of transport geography, analyzing route and usage. This information is derived from an economic geography that examines changes in land-use, industrial location, and the post-construction regional economy.

Research that uses political geography focuses on the political process of decision making for huge public projects, their political symbolism, the political effects of social and spatial integration, and conflicts between regions. The environmental geography approach deals with ecological and environmental impacts, while social and cultural geography study psychological and behavioral changes in the consciousness and lifestyle of users.

This work will analyze Gyeongbu Expressway from a political and economic geographical perspective. I will focus on the expressway’s effect on mobility and demarcation, though I will also include those aspects of its geography as mentioned above. A review on existing research on expressways which examine the political aims and characters of the decision makers. In addition, conflicts between regional interests, political and administrative mobilization of technical workers and public finance, and political and psychological effects of its construction will be examined.

Ryoo’s research on existing expressway constructions (Ryoo 1991) seems most interesting and useful. This work interprets 88 Olympic Expressway as a political symbol mobilized by the new military regime of the President

Gyeongbu Expressway 185

Chun Doo Hwan (Chŏn Tu-hwan). According to Ryoo, even though public policy is often seen as a rational process using scientific analysis, many cases have been decided through non-analytical and non-rational processes. This is driven by the desire to use such projects to garner political power. That is, public policies that include expressway construction can function as political symbols that address the dissatisfaction and discontent of people while simultaneously promoting socio-spatial integration. For example, the 88 Olympics Expressway connects Daegu and Kwangju, two central cities of from regions that harbor mutual conflicts. Because the new military regime could not establish legitimacy, it used the Expressway construction as a scapegoat for its own political problems: first, the regime emphasized the necessity of construction of the Expressway by pointing out the physical and geographical disconnection rather than politics as the primary reason for their regional conflict. In doing so, the regime used a geo-strategy to weaken or dilute critiques against their own lack of legitimacy as well as the undemocratic nature of the new military regime. This in turn mobilized political discourses for national reconciliation (Ryoo 1991: 237).

That a dominant political power uses political symbols for its legitimation and national integration is well matched with the concept of iconography.

This concept refers to a symbolic system such as national flags, heroes, statues, and other symbols and beliefs which represent the nation. These symbols and promote a sense of a common destination and shared sentiments amongst the general populace (Im 1997: 13, 49).

The 88 Olympic Expressway can thus be seen through the lens of political symbols or iconography. The Jeon regime tried to gain national support by emphasizing the Expressway’’s role reducing regional conflicts, creating a myth of national harmony about it despite the fact its construction was rushed, it had only two lanes, and its economic effect was minimal (Ryoo 1991: 238). These geo-political manipulations were used not only during the authoritative regimes of president Park and Jeon, but also in the recent democratic governments. For example, during a policy forum on the construction of the East-West Expressway connecting Pohang and Saemangum, discussants talked about “reconciliation and development between regions through expressway,” using the phrase tongdo ikchin (通道益 親) which means “to connect roads is to increase friendships” (Rhu 2009).

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These studies that argue expressways were constructed function as political symbols or iconography directly influence those that explore the politics of those who decided to construct these expressways. For instance, Kwak’s study characterizes the political leadership of president Park ChungHee as consequential paternalism. For example, President Park’s leadership pursued the construction of Gyeongbu Expressway as a symbolic project of the idea of ‘‘modernization of fatherland’’, presupposing a speed war and anti-communism within the project. During President Park Chung-Hee’s leadership, the decision-making process in the construction of Gyeongbu Expressway seems to be justifiable with its results, yet it does not necessarily exemplify a democratic and constitutive leadership. This research is useful in that it enables us to see how the decision-makers’ characters are reflected in large public policies. like the Gyeongbu Expressway with its impact on national land space. This research can also be seen as illustrating how the Gyeongbu Expressway construction exemplifies particular ruler’s political leadership rather than the social and spatial characteristics of the Express itself.

The second type of research deals with political issues surrounding the construction of expressways. That includes local movements against expressway construction, regional conflicts about route location, political mobilization of public finances and land expropriation. For example, local movements opposing expressway construction have been continuously active since the late 1960’s with the Gyeongbu Express to that of Western Expressway of the capital region (Suwon-Kwangmyeong) in 2008 and the Third Gyeongin (Kyŏngin) Expressway in 2010. There are several studies on local and national scale conflicts surrounding the route sites as well as political efforts to resolve them. For example, Kim, C. (2003) examines conflicts and resolutions by focusing on the reappraisal case of the Cheongseong (Ch’ŏngsŏng) and Keumjeong (Kŭmjŏng) Mountain Track of Gyeongbu Train Express; Park, H. (2009) analyzes conflicting and cooperating factors between government and NGOs using the case of the Chuncheon (Ch’unch’ŏn)-Yangyang Express Way Route Section.

Yet research on movements against expressway construction has little import when examining the construction process of Gyeongbu Expressway, because there were some oppositions to, and conflicts around it, but these

Gyeongbu Expressway 187

could not appear obvious under an already authoritative regime of President Park. There was only one exceptional study, of Park, H. (1969), who analyzed the background of the construction of Gyeongbu Expressway in terms of how the role of leader reflected on the construction plan, the pros and cons of the Expressway, the resolution of conflicts, and the economic and social effects expected with its construction. This important research provides a variety of real data that vividly depicts the political circumstances of that time, as it was conducted and published just before the completion and opening of the expressway, despite the inherent difficulty of researching such issues objectively.

The third type of research is concerned with economic, political, social, and psychological effects that have resulted from the construction of expressways. There are many studies on the economic effects of expressway construction. Most of the research on this issue has tended to expect expressway construction to produce positive effects on the regions around expressway routes. For example, according to Yang’s research (2005), it was estimated that the Seohaean (Sŏhaean, western coast) Expressway would satisfy the increased demand for transportation in the capital region, promote development of major regions along the western coast, and improve national logistics and tourism. The positive effects of the Seohaean Expressway on the development of regional economies have been confirmed by Jeon and Kang (2007), especially in terms of changes in population and employment. But the construction of new modes and/or routes of transport, such as new (car or rail) expressways also seems to have negative effects. Kim, Y. (2009) has demonstrated such negative effects in regions that are connected with larger cities through expressways or express railways. The so-called straw effect describes how consumers of the former regions travel to the latter regions to purchase commodities that cannot be bought in their own regions.

This kind of negative straw argument implies uneven regional development between cities even within the boundary of new expressway construction. In fact, uneven regional development between the capital and other regions in Korea has become one of the most serious social and political issues in recent years. This issue is the result of the concentration of all kinds of transport and communication systems, including Gyeongbu Expressway, around Seoul. As we shall discuss later, the controversy on this issue can be

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traced back to the time of the construction of Gyeongbu Expressway (Han 2009), There seems to be no question that the Expressway is a major axis of this uneven regional development, though it is difficult to find studies that have explored how and to what extent the expressway has impacted it.

Another area of research on expressways suggests that the transnational extension of expressways would bring about greater political and economic exchange of people and goods. In this sense, Lee and Lee (2006) discuss a necessity and background of the plan to link the Korean Peninsula, China, Japan, and Russia with one network of expressways, and suggest implementing stages of the plan. Kim and Park (2006) tries to estimate the national and regional effects when a Korea-China-Japan network of highways is realized. The extension of expressway across national borders would predictably bring about greater economic cooperation and development of regions and/or countries through increased connectivity and accessibility.

Yet this would also cause economic and political unevenness among them, Seen from a geopolitical point of view this can be used as means by which the political influence of a stronger country could spread toward its neighboring weaker countries. It is preciesly this point of view that was implied in President Park ChungHeeâ&#x20AC;&#x2122;s assessment of the unification of the Korean Peninsula when he tried to construct Gyeongbu Expressway.

Finally, there is research that seems to be relevant here for this work, especially in terms of the social and psychological effects of expressway construction. The construction of Source: Kim and Jeong (2008). expressways has the effect of reducing Figure 1. A cognitive map of effect of reducing time-distance through construc- the time-distance between regions in and around the expressway, while tion of expressway network.

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increasing the speed of movement or accessibility. Kim and Jeong (2009) estimates that a direct connection via an expressway reduces the timedistance, in comparison between before and after construction, by 60%.

But the psychological effect of reducing time-distance is about 16%, which is much less than the real reduction of time-distance. In particular, the psychological effect of reducing distance by the construction of expressways with an east-west axis is relatively less than that with the north-south axis, as shown in Figure 1. This research identifies the effects of rapid urban development, or time-space compression, resulting from the construction of new routes of transport. This research suggests the importance of an expressway network along the east-west axis, because the effect of reducing the psychological sense of isolation and hence removing the sense of economic, social and cultural heterogeneity, would be higher with an eastwest expressway than a north-south one. This kind of research seems to lead us to see how to improve the sense of integration through the construction of expressways, but research on the social and psychological effects needs to include other important issues such as the sense of instability and non-place as well as its political effects.

III. THE CONSTRUCTION OF GYEONGBU EXPRESSWAY AS A LEADERâ&#x20AC;&#x2122;S GEO-POLITICAL STRATEGY In geo-politics, transport is implicated in the exercise of political influence, the domination of territory, and as a form of regional development for the exchange of people and goods. Through increased mobility of labor power, raw materials, products, capital, technology and information, and hence enhancing the efficiency of location, transport has the economic effect of promoting the economic power of states. It also has a geo-political effect by enforcing the social and spatial integration of states, by enabling dominant political groups to conduct their geo-political strategies and tactics, and hence to extend their political influence (Im 1997; Wolfe 1963). Because it requires the investment of large financial sources and vast man power the construction of transport that requires large civil engineering works is regarded as a national project, Transport constructed as a national project

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is itself a very useful social infrastructure, and can be seen as a strategy of territorial domination, a geo-strategy though which a political leader expects to have several effects, as mentioned above.

The integration and domination effect of transport construction can be identified empirically throughout history. For example, the ancient Roman empire’’s military engineers constructed about 50 thousand of stone-paved roads covering the whole territory and they still can be used today (Jeong, J. 2007: 68). The Roman roads were built to promote the mobility of Roman armies, and hence made a great contribution to economic and political prosperity, as it is often said that ‘all roads lead to Rome.’ The effective control and efficient circulation of people and goods to distant peripheral regions become more important after the formation of modern states. Transport construction has played a decisive role for extension of imperial powers as well as for expansion of capitalist markets throughout the world.

Some economic and political effects of transport that have been often suggested from the view of political geography can be summarized as follows (Im 1997). First, development of transport has the economic effect to promote the growth of regional and national economies. It does this by increasing the mobility of people, goods, capital and information which foster production components at the proper time and place. Secondly, by enhancing interchange and communication through which the power of a political leader or group can be exercised, the extension of transport strengthens social and spatial integration, Thirdly, the construction of transport has a military aspect which allows for heightens strategic performance by increasing the mobility of troops and military equipment.

President Park Chung-Hee’s plan to construct the Gyeongbu Expressway can be seen as a major aspects of his geo-strategy. After he seized political power through a military coup d’etat, he strongly adhered to policies of rapid economic growth and national integration. Hence, in 1962, Park’s government implemented the first Economic Development Plan, which strongly emphasized regional development, including the construction of Ulsan industrial complex to foster import substitution industries such as the production of refined oil and fertilizers. In 1967, as one of his campaign promises for national land development, President Park put forth the second Economic Development Plan, which included the construction of four major

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expressways (Gyeongbu, Yeongdong, Honam, and Namhae Expressway). In December 1967, after being elected president, Park Chung-Hee organized the Presidential Committee on National Expressways and installed a team for National Expressway Planning and Investigation within it. This team oversaw the groundbreaking of the first section of the construction of Gyeongbu Expressway.

Even though, from the infrastructural point of view, it might be viewed as required for the development of a capitalist economy the construction of Gyeongbu Expressway can also be seen as a part of President Park’s broader geo-strategy as the leader of a military regime,. The effects of the Gyeongbu Expressway construction which were expected at that time included the expansion of social infrastructure, and secondly, the realization of a political leader’s idea. ‘The implementation of a political leader’ was, as is well known, the modernization of the fatherland for the purpose of making a “rich country and strong military” (富國强兵: puguk kangbyŏng). This means the development of the national economy with increased regional productivity fostered through a rapid circulation of production factors and products. It also encompasses the consolidation of political power, including military superiority to North Korea achieved by enhancing territorial integration.

Economic growth and anti-communism were two major national policies under President Park. Gyeongbu Expressway was expected to provide him with an extension of a material basis for economic growth, a real and symbolic assurance of political legitimation, and the construction of strategic infrastructure for military superiority.

The phrase “rich country and strong military” referred to economic growth and military superiority over a hostile country, North Korea, which was stressed by President Park during the construction process of Gyeongbu Expressway. For example, in a groundbreaking ceremony for the construction of the Expressway between Seoul and Suwon in February 1968, he announced, “There is an individual who might feel strongly threatened by our country’s rapid growth of industry and by the rapid construction of infrastructure. That person is Kim Il Sung in North Korea and his puppet regime” (Park 1969: 69). What is more, he mentioned; When it can be regarded as a part of an aorta of our country which will

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penetrate from the south to the north, Gyeongbu Expressway will be a symbolic aorta and a great national project for South-North Unification as well. When the construction of Gyeongbu Express [between Seoul and Busan] is completed, the government intends to extend it to Panmunjom (Park, H. 1969: 261).

President Park Chung Hee’s thinking tells the fact that the expressway is a decisive means and symbol of extending political power.1 In this sense, he regarded the construction of Gyeongbu Expressway as ‘a ceremonial project of anti-communism’.

This kind of geo-strategy, to comprehensively realize a political leader’s idea, was pursued though a personal mode of governing, that is, through arbitrary decision-making and one-sided arguments by President Park. In a certain sense, it might appear difficult that Gyeongbu Expressway, given its scale and character at that time, could be planned and implemented by a government department since it required coordination and cooperation among ministries. For this reason, President Park seized administrative power and brought it under his leadership. The Presidential Committee on National Expressways and the team for National Expressway Planning and Investigation were titular organizations without any power. The president’’s decision-making power was absolute, even down to siting the concrete routes of the Expressway (Park, Chung-Hee 1969). In comparison with other expressways, Gyeongbu Expressway was much more significant in relation to the construction plans of Ulsan industrial complex, Pohang Iron and Steel, and other large industrial complexes along the Southeast coastal region for development of Nakdong (Naktong) River economic region. But “what seems unusual was that President Park decided directly and arbitrarily the route and construction process of Gyeongbu Expressway” (Son, J. 2003: 111).

Of course, some people, especially among intellectuals, might opposes this type of decision making process. As Son, J. (2003: 109) describes, “most of the intellectuals...were opposed, and there was even opposition among 1

Indeed, airstrips and heliport for takeoff and landing of military aircrafts at emergency situations were constructed at several points on Gyeongbu Expressway. Those in Singal (450,000m 2), Seongwhan (420,000m2), Gumi (235,000m 2), and Eonyang (40,000m2) were decommissioned from facilities for military operations in 2005.

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government officials and members of the ruling party.” It seems certain that there was considerable opposition against the construction of Gyeongbu Expressway. Major reasons included that the maintenance of poor national and local roads should take precedence over the construction of Gyeongbu Expressway, and the view that because Korea was not very economically developed and therefore did not need an expressway. In fact, the GNP per capita of Korea at the end of 1967 was less than 150 US dollars, moreover, just after its opening, only about 9000 vehicles per day used the Gyeongbu Expressway. Thus, “there seems no doubt that it would be too early to construct such a large-scale expressway in a country which had barely US $142 for per capita GNP ... But all opposition, including that it was premature to construct such an expressway, the argument for maintaining existing roads, and so on, were discussed only in private places or seminars, and could neither be reported in the mass media, nor published in academic journals. It was an era when nobody could dared to oppose the public policy of President Park Chung-Hee” (Son, J. 2003: 109).

Seen from a geo-strategic point of view of a political leader, internal limitations, including a shortage of financial resources and technical workers, was more serious than external opposition to constructing Gyeongbu Expressway. The total amount needed to construct the Expressway was estimated at about 30 billion won, and about 10 billion won was added in the construction process so that Geyeongbu Expressway cost a total of 43 billion won.2 Assigning a formal plan to finance its construction, the government funded it by transferring transport-related taxes to a transport construction budget through legislative amendments on pertaining to an oil tax and on road improvement, issuing road bonds, transfers from general accounting, and toll revenues (see Table 1).

However, other important informal measures of financial funding for the construction were considered besides the above-mentioned formal financial 2

The construction plan of Gyeongbu Expressway spurred a dramatic shift in the government’’s budgetary allocation policy by increasing the budget for road construction beginning in 1968, the first year of construction for Gyeongbu Expressway. The original budget for transport in the Second Economic Development was 30.2 billion won, but it increased to 90 billion won including 33 billion won for the construction of Gyeongbu Expressway.

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Table 1. Financial plan for the construction of Gyeongbu Expressway

(Unit: billion won)

Total

1968

1969

1970

1971

Total

33.0

7.6

13.8

11.6

(△4.7)

Oil tax Passage tax Toll revenue The fund of the claim to Japan Grain loans Road bond The established budget Sub-total Transfer from other accountings (Lack of fund)

11.2 3.7 0.7 2.6 4.9 4.9 0.6 28.7 4.3

3.2 0.8 3.0 7.6 -

3.6 1.7 0.2 1.9 2.5 1.4 11.3 2.5

4.4 2.0 0.5 △0.1 2.4 0.5 9.8 1.8

(△0.1) (△0.2) (△4.4) 0.6 (△4.7) -

Source: Ministry of Construction; cited in Park, C. (1969).

plan. For example, in order to reduce cost of land purchase for constructing the expressway, there was a measure to compel forfeiture by landowners.

In the process of a land redajustment project in the Yongdong zone, a measure of voluntary oblation of land for the Expressway was sought out, as “magistrates of county (gun, kun) and chiefs of myeon (myŏn) and eup (ŭp) asked landowners to dedicate or to vend, if not they did not want to dedicate, their land, for national development” (Son, J. 2003: 111). Another option was to use the funds from the claim against Japan and that which was gained from the Vietnam War. As shown in Table 1, it can be seen that part of the fund from Japan was used for the construction of Gyeongbu Expressway, but it is very difficult to determine how and what amount the fund gained from the engagement in the Vietnam War was transferred to the construction of Gyeongbu Expressway. But from the circumstances at that time we can surmise what one study describes as follows: The biggest source whichthat allowed us to proceed with such a great project [that is, the construction of Gyeongbu Express] was in fact due to the Vietnam War. Most of the construction cost was appropriated from the so-called special boom from the Vietnam War to fund the construction cost ... The economic profit that Korea gained from the boom of the Vietnam War was

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estimated at more than US dollar 5 billion in total (the exchange rate was 290 won per US $1 at that time). The amount was really very large in comparison with US $0.3 billion of free aid in the fund of the claims against Japan, which was the result of 14 years of negotiations. The amount of money that had been [formally] invested for the construction of Gyeongbu Express was trivial, when it compared with this amount of US $5 billion (Sim, S. 2002).

As can be seen in this quotation, some of the funds gained from the Vietnam War negotiation were invested in the construction of Gyeongbu Expressway.

The construction of Gyeongbu Expressway was in a way paid for through the pain of all people during the period of Japanese colonization and to the sacrifice of young people who fought during the Vietnam War. Another limitation to the construction of Gyeongbu Expressway was the lack of technical experts. Even though some labor supervisors were employed in different areas, officers from the engineer corps were mobilized to compensate for a lack of technical experts on road construction. “According to Kim, Jeong-Ryeom [the Presidential Chief of Staff at that time], President Park made a tour of construction fields and commanded working progress as if there were battle fields. “President Park,” Kim continued, “declared a war, set up strategies, and commanded directly the combat soldiers.” In concrete terms, Kim recalled, “Hhe set up a combat dispatch within the Blue House, and made three military engineering officers and one technical officer taken from the ministry of construction reside there to analyze and monitor the construction plan,” (Son, J. 2003: 112). But some technical experts who participated in the construction fields expressed that “there was a rumor that working at the construction fields of the Expressway was as hard as working at the Aogi coal mine, and indeed, in their memory, the work environment for the construction was not so good,” (Park, K. 2000).

In the construction process of Gyeongbu Expressway, 77 people died and many others suffered injury. Moreover, as traffic increased after the opening of Gyeongbu Expressway, serious problems were exposed such as damage to the road surface, the necessity for additional pavement, and defects in bridge connections, and hence significant additional funds were necessary to repair the Expressway.

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Source: â&#x201C;&#x2019; Korea Highway Corporation; http://news.khan.co.kr/section/khan_art_view.ht ml?mode=view&artid=201003260931122&code=900306.

Figure 2. The military army and equipments in a ceremony of groundbreaking for the construction of Gyeongbu Expressway.

IV. POLITICS OF AUTO-MOBILITY AND IDEOLOGY OF MACHINE SPACE Historically, one of major factors for military success or failure is mobility.

According to famed urban planner and architect Paul Virilio, militarypolitical regimes from the ancient Greek polis, through the development of commercial cities in Feudal Europe, to the formation of modern nationstates, all have been preoccupied with how to enhance mobility to ensure their success. In particular, the transition in the latter part of the 19th century from an infantry-centered to the logistics-centered army organization, that is, the transition of war strategy to machine-centered modernization, became a central paradigm for spatial reconfiguration on the national and global scale.

Both are strategies of territorial integration, within a nation-state as well as

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outside it in the race for colonization around the globe. National and global space has been reorganized in terms of offensive and defensive strategies and it is mobility that connects them. Thus national and global geo-politics or geo-strategies for spatial reconfiguration can be seen as the results of war.

The increasing machine-based mobility to overcome distance and the increased speed of warfare based on heightened mobility provide a basic framework for reorganizing modern space and time as well as developing modern states as war machines. The paradigm of creating mobility in modern space has been realized through a revolution of speed and of acceleration by mobile machinery, which is what Virilio calls the “dromocratic revolution.”

For this kind of mobility revolution, space becomes the essential medium for politics. But for Virilio, the final destination of mobility politics or revolution is not geo-politics but ‘chrono-politics’. That is, “politics is less in physical space than in the time systems administered by various technologies, from telecommunications to airplanes, passing by the TGV, etc…[T]he distribution of territory becomes the distribution of time,” (Virilio 1986: 115; cited in Luke and Ó Tuathail 2000: 369). From this point of view, chrono-politics (or politics of time or speed) becomes more important, as urban space in recent years has become increasingly deterritorialized. Of course, it can be agreed that what becomes significant strategically is closely related to speed with non-place, an unfixed place without time. “The strategic value of nonplaceness of speed (that is, the situation free from place through speed) has decisively substituted that of place,” (Virilio 1986). In this way, “speed become power itself,” while “stop is regarded as death.”

We can extend part of Virilio’s paradigm for spatial mobility might as it is reflected in a leader’s politics in general, and that of space or geo-strategy in particular for reconfiguring national land in Korea which has undergone colonization and to that of the Korean war, even though Virilio’s arguments have been criticized for overemphasizing the influence of war on modern society. Especially regarding President Park’s experience in the military, Virilio’’s stance might be relevant. The geo-strategy of a military and political leader is an important moment wherein the sense of speed implied in the mobility of an expressway is generalized into everyday life and the culture of “faster faster” or of a speed war. This was all introduced into the Korean society. And this kind of speed culture, or the so-called “faster faster” culture,

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which has neither philosophy nor spirit (Ham 2010), became the ideological foundation on which political power tried to gain legitimation. This is expressed on the back of the monument proclaiming the completion of Gyeongbu Expressway which was erected at its middle point, Chupungryeong (Ch’up’ungnyŏng). It states: This expressway is our glorious proud step forward towards the goal of modernizing the fatherland, which has been constructed under the historical decision making and direct command of President Park Chung-Hee, with our own finance, our technology, and our power, in the shortest period in the world history of expressway construction.3

Even without emphasizing the explicit influence of modern war or its implicit ideology or metaphor, mobility can be seen as a central theme of a new paradigm in both social sciences and applied ones, as Urry (2007) has suggested. Mobility refers to an autonomy of geographical movement which can be activated by overcoming spatial constraints. Mobility has been enhanced continuously with the development of transport and communication technology and means throughout history, but the hyperspatial mobility accelerated after the latter part of 20 century becomes a core factor for the globalization of a capitalist economy. These factors all generate a nomadic everyday life. Spatial mobility includes the mobility of the human body, that of materials (e.g. car and other types of vehicles, that of symbols (TV, Internet, telephone, etc). and cyber-space, all of which become ideological means to promote a national identity and territorial integration.

The extension of transport and increasing mobility of human bodies and other materials are especially related to the production and diffusion of automobiles and spatial reconfigurations for them. From the beginning of the 20th century, automobiles became a central element for the social and spatial 3

According to Kim, W. (1970), “in an international comparison of construction costs of expressways, 100 millions won was input per 1 km of Gyeongbu Expressway, while the cost in the U.S.A. amounted to 2.8~9.2 times more, in Italy to 3.1~4.0 times more, in France up to 5.6 times more, and in Japan to 4.5~7.8 times more. As to the time required for construction, Tomei Expressway in Japan took 10 years to complete the construction of 346.6 km.”

Gyeongbu Expresswayâ&#x20AC;&#x192; 199

(A)

(B)

(C) Source: National Statistical Office, 1998, Major Statistics of Korean Economy.

Figure 3. Change in indicators on transport: (A) Production and registration of automobile; (B) Passenger and flight on road; (C) Extension of pavement and expressway

organization of capitalism. As such, they were and are rooted in peopleâ&#x20AC;&#x2122;s daily life and identity. Cars have provided people with a new source for transforming their lives and formulating a new identity. For the 20th century, more than 1billion automobiles have been produced, and since the mid-2000s, there are 700 million vehicles are actually being driven. In Korea, the period of rapidly increasing production and diffusion of automobiles differs from that of the construction of Gyeongbu Expressway. The capacity of automobile production of Korea was negligible, and the number of vehicle registrations

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was only 59,000 in 1967, 79,000 in 1968, and 106,000 in 1969, which shows a relatively high increase rate, but in absolute terms remained low until the middle of the 1970s (Figure 3). Given that there was no significant change in passenger and freight automobiles compared with the period prior to the construction of Gyeongbu Expressway. The extension of pavement showed a high rate of increase by 1969, while that of expressway still remained at a low level. Thus it seems more important to first examine the political effect of how Gyeongbu Expressway changed the physical landscape and built environment, and hence how it contributed to strengthening political power rather than analyze its economic effect on the production and diffusion of the automobile.

Space in contemporary society is dominated by the automobile culture and as such consists of the flow and trajectory of automobiles. As a typical example, Gyeongbu Expressway exemplifies the speed and landscape of ‘automobility’ as well as the disappearance of a sense of place, or a creation of ‘non-place’ (Featherstone 2004; Lee, H. 2009). Auto-mobility within a city is a fundamental feature in everyday life, wherein the speed in urban areas is highly restricted, and the speed of automobiles is often slow because of road congestion. Yet the speed of automobile on expressway like Gyeongbu is increasing rapidly and in fact, in some countries, there is no speed limit.

Driving at a high speed on an expressway becomes a metaphor for people experiencing a sense of escape from the effect of distance. Thus people experience a sense of spatial freedom as well as liberation from social oppression. One of fictions that the politics of mobility promotes is this sense of social liberation which can be obtained from high speed mobility.

But instability rises in proportion to rising auto-mobility, while the sense of place and its relationship to the surrounding landscape is weakened because auto-mobility generates a specific landscape of the expressway.

Specifically, the expressway is wide—usually with more than 4 traffic lanes—and requires an open sightline to allow automobiles proceed at a high speed. When one drives on an expressway, the landscape in one’s sight is monotonous as one can see only signs that show names of cities or regions, or indicate directions and distances between them. In fact, the majority of recent expressway development tends to consist of tunnels and bridges, and otherwise it is surrounded by incised slopes and soundproofing barriers,

Gyeongbu Expressway 201

so that drivers and passengers can see little outside of the car. Even where there are no artificial landscapes, its difficult for drivers and passengers to see natural elements because they are traveling at high speeds. This kind of estrangement from surrounding landscapes due to high-speed travel heightens passengers’ anxiety and risk, though one might expect it to offer a sense of liberation.

Urban spaces and landscapes are thus rendered as abstract, nongeographical or non-place because of accelerated mobility typical in contemporary (urban) societies. In a normative sense, place is defined as local, face-to-face, familiar, intimate, organic, and meaningful. Place is also a space where relationships between peoples and things can be made in everyday life, which generates self-identity. But when a gap opens between an individual and the space where he or she moves, place is no longer a place, but what Marc Augé’s conceptualizes as ‘non-place’. Non-place is “a space where there remains a bleakness without producing social solidarity or social emotions, though it is a space of circulation, communication, and consumption,” (Augé 1996: 178; cited in Merriman 2004: 148). According to Augé who described expressways in France as typical non-place, expressway passengers recognize cities and rural settlements only by signs and as fleeting images. Drivers and passengers have no communication with people who live in cities or regions through which their cars pass, and even with people in other cars on the expressway. Everyone travels at a high speed and as such, they rely on signage, direction signs, electronic information screens, guide maps or electronic navigation systems in their cars: they have no connection with what is passing outside of their car windows except in unique situations.

The creation of non-place by auto-mobility has both a practical and metaphorical relationship with the concept of “machine space,” a term coined

by Horvath (1974). For him, machine space means a territorial space that is allocated especially for machines rather than prioritizing that space for use by people. The territory or space allocated automobiles can be seen as machine space, and represents the dominant position of the automobile in contemporary culture: Automobile territory includes any area that is devoted to the movement, storage, or servicing of automobiles. The criterion used to classify individual

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Source: ⓒ The Kyeonghyang Shinmun; Korea Highway Corporation. http://news.khan.co.kr/section/khan_art_view.html?mode=view&artid=20100326093112 2&code=900306 Figure 4. Confusion between machine space and people space at the early stage of Gyeongbu Exressway.

parcels into ‘machine space’ (--- automobile territory) rather than ‘people space’ is: Who or what is given priority of use in the event of a conflict?

Areas of conflicting use are classified as machine space when the machine is normally given the right-of-way (Horvath 1974: 169).

Horvath distinguished machine space from “people space” in which people have priority access, and argued that machine space required for mobility, especially the territory of automobiles has expanded rapidly, as transporting passengers and flights have also increased.

The rapid expansion of machine space as automobile space has some important features, and these can be applied to Gyeongbu Expressway. First of all, machine space expands at the expense of “people space” (cf. Lee 2009).

People space in which people have priority access has been encroached upon by the expansion of machine space, as urban space has been reconfigured for

Gyeongbu Expressway 203

the diffusion and use of the automobile. The rise of the automobile requires more and more construction of machine space such as roads and parking space which may further reduce people space, with the resultant shifting of residential space as well as reduction of natural space including farmland and forest.

Secondly, machine space is an alienated space in that the machine takes priority over people and human life is separated from their experience (Horvath 1974: 179). The alienation is similar to the experience of people in non-place spaces. Users of space in non-place cannot recognize their own presence in such places because they cannot communicate with others or landscapes.

Thirdly, the use of machine space is a dangerous space if it is not properly planned and controlled. Specifically, problems arising from construction and use of transport, that is, deaths by traffic accidents, intensifying air pollution, and environmental degradation by road construction, convert machine space like automobile territory to spaces of biological or ecological “death” (Horvath 1974: 181).

Seen from these points of view, the automobile culture which dominates contemporary societies is a machine culture, and the territory of automobiles is a machine space which has been allocated to service automobiles. This space has symbolized a cultural territory in developed countries. But it is the culture and territory of automobiles, created for people’s convenience, that has encroached on human culture and reduced people’s space. This problem can be found during the construction and use of Gyeongbu Expressway symbolizing the “modernization of the fatherland.”

V. TIME-SPACE COMPRESSION AND POLITICAL ECONOMIC GEOGRAPHY OF DEMARCATION The construction and extension of transport has an important effect on the political economics of spatial reconfiguration; it also reveals the geo-strategies of a political leader, as well as the cultural and political influences on its users. The impact of new transport construction on spatial relations between cities is often through the concept of “urban implosion” (Kim, I. 1986: 232-

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233). Urban implosion is space reconfigured in terms of time-distance, while accessibility among major cities are reduced due to an innovation of transportation. Innovation accompanying new construction or extension of transport results in reducing time-distance and enhancing accessibility between major cities, which creates a hierarchy of relational locations and promotes inter-dependency and cooperation for the economic growth of cities. But small and medium size cities excluded from the transport route become more isolated and alienated as they are outside of transportation network. Hence, they cannot benefit from time-distance reduction and increasing accessibility and interdependency. This concept of urban implosion can be applied to explain the differential effect of spatial demarcation that can be generated by a construction of new transport.

Before the construction of Gyeongbu Expressway, cars could travel between 60-70 km/h on most of national roads given their physical condition, though there was no official legal speed limit. Yet when Gyeongbu Expressway opened, travel of up to 100 km/h was possible. Cities along the Gyeongbu Expressway have experienced at least a 30% reduction of timedistance though the physical distance was not changed (Figure 5). 4 Cities between Seoul and Busan, the origin and the terminus, underwent a rapid rise in the interchange of people and goods, as both time-distance and the cost of transport between them were reduced. The national land space from the 1970s developed rapidly around the capital region and southeast coastal region. But cities excluded from the accessibility of Gyeongbu Express become more distant in their time-distance, and hence became economically depressed regions with relative reductions of interchange between cities and/ or regions.

In recent years, as discussions on the social and spatial impact of developing transport and communication technology have been on the rise, the concept of urban implosion has been substituted with more 4

The average bus speed at that time was 40 km per an hour, that of a car was 60 km, that of the railroad (Jaeeonho, ChaegĹ?nho) was 80km, and cars on expressways was 120 km (Chosun Ilbo, 1967. 11. 30; cited in Kim, G. 2010). If we accept that the actual speed limit on the expressway was 100 km, this figure constitutes a 70% reduction of the diagonal distance of Seoul-Busan, while the diagonal distance of Sokcho-Mokpo remained unchanged.

Gyeongbu Expressway 205

Note: The size of cities is that of population in 1970, and some cities are not expressed.

Figure 5. Urban implosion of national land space due to the construction of Gyeongbu Expressway: (A) Physical distance (before the construction); (B) Time-distance (after the construction).

sophisticated and complicated terms such as “time-space compression,” “time-space distancing.” The term, “time-space compression” was suggested by a famous geographer, Harvey (1982; 1989) to explain that development of capitalism has promoted that of transport. According to him, transport is the physical basis for the accumulation of capital, and in particular is regarded as a representative element of fixed capital (or the built environment) into which surplus capital drawn from production can be put. The infrastructure of transport and communication, which has rapidly increased under modernization, is a typical part of built environment or the physical basis for economic growth (or accumulation of capital) through the rapid transportation of people and goods. In particular, developing transport enables capitalists to gain surplus profits through time-space compression, which reduces transport costs, enhances price competition of products, and shortens the turnover time of capital invested.

When Gyeongbu Expressway was constructed, the physical foundation for Korea’s capital accumulation was very weak. It is therefore possible that surplus capital generated from the sphere of production was not switched to

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(B)

(A)

(C) Note: There is no record before 1966 and in 1971~1973.

Source: National Statistical Office, 1998, Major Statistics of Korean Economy.

Figure 6. Changes in indicators related to expressway construction: (A) Construction work; (B) Import of crude oil; (C) traffic accidents.

the sphere of the built environment. This can be identified in the shortage of financial funds and technical workers for the construction of Gyeongbu Expressway, as mentioned before. Rather the construction of Gyeongbu Expressway was a moment of growth in construction capital. Even though the construction industry at the time was quite vulnerable. The number of construction companies was increasing during the construction of Gyeongbu Expressway. And after four years of shrinking between 19701975, it again began growing after 1975 (Figure 6(A)). In particular, the number of heavy construction firms at the end of 1967 when construction

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Table 2. Estimated effects of the construction of Gyeongbu Expressway Monetary effects (billion won per year)

Reduction of driving distance Reduction of (1,000 km per Reduction Time traffic Total of transport year) savings accidents cost Amounts 287.4

118.6

111.2

57.6

1,299

Reduction of driving time (Hours per year) 18,640

Source: Choi, T. (2000: 14).

of Gyeongbu Expressway began was about 3,602 in total (1,086 possessed by the government, 2,516 by private companies), and most were quite old (Park, J. 1969). But during the co Gyeongbu Expressway construction, the Korean government encouraged private construction companies to actively buy heavy construction equipment, providing preferential benefits including exemption of import duty.

The construction of Gyeongbu Expressway promoted the accumulation of capital in general as well as a rapid growth of private construction firms in Korea. After the opening of Gyeongbu Expressway in 1972, freight cars quickly outnumbered passenger cars, which means that one of the Expressway’s main functions was as an industrial road. It also brought about many important results such as reducing transport costs, expanding means of transport, shortening circulation routes and times, and decreasing damage rates to goods. The Expressway’s impact on reducing costs can be calculated as 287.4 billion won, including 118.6 billion won in reduced transport costs, 111.2 billion won in time saved, and 57.6 billion won in accident reduction (Table 2). In addition, the Expressway has been evaluated as a major means of price stability by mitigating the difference of price of commodities between regions. Moreover, it has been suggested that Gyeongbu Expressway has promoted the location development of, and connectivity between, large national industrial complexes, which were suggested in The First National Comprehensive Development Plan.

But according to Harvey (1982), the time-space compression for accumulating capital often makes competition more fierce among capital to get surplus profits, while simultaneously fomenting uneven regional

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development. When capital can no longer garner such profits, it tries to make a “spatial fix” to move its investment to other regions, but the built environment of the existing transport infrastructure is so fixed that it limits new spatial fixes, highlighting the contradiction between mobility and fixity. Harvey’s explanation gives us significant insight into why transport is amongst the first construction projects during industrialization, and how it is eventually confronted with problems or contradictions. But this explanation seems to be confined to the economic aspect, and gives little explanation of political issues.

The concept of “time-space compression” in relation to developing transport and communication technology corresponds to the concept of time-space distancing which is a temporal and spatial extension or stretching of economic and political influence. This concept has been suggested by Giddens (1981) to explain how the interactions between persons who do not share the same time or space have been expanded by the development of transport and communication technology. In pre-industrial societies, interactions in everyday life were primarily face-to-face encounters within relatively narrow communities, but in modern industrialized societies, the scope of interactions has been extended almost infinitely. And hence the social integration within face-to-face relations has been separated functionally in a relationship of mutual absence. The time-space distancing has increased with the development of transport and communication technology. And yet these have also made important contributions to developing capitalist societies based on integration. Gradually, however, this social integration and communal identity has collapsed. This concept of time-space distancing can be applied to the economic, political and social effects of extending means of transport, including Gyeongbu Expressway. The Expressway has made a great contribution to both the circulation of capital and political power, enhancing regional connectivity, it has done so at the expense of social integration and communal identity.

Another important argument on the effects of Gyeongbu Expressway is by Castells (1996) who has suggested a transition from the concept of space of places to a space of flows based on the development of transport and communication technology. In pre-industrial society where transport and communication technology was not developed, space was discrete

Gyeongbu Expresswayâ&#x20AC;&#x192; 209

(A)

(B) Source: National Statistical Office (e-narajipyo), http://www.index.go.kr/egams/stts/jsp/ potal/stts/PO_STTS_IdxMain.jsp?idx_cd=1007 Figure 7. A comparison of changes in population of included and excluded regions: (A) populations of included regions; (B) populations of excluded regions.

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and designated individual places or regions, and hence each place had inherent geographical characteristics. But space in recent years exists no longer in individual, separate places, but in networks of transportation, communication, and flows. Places have not been disappeared, but they have become nodes in networks, organized and hierarchicized based on their relative importance. The informational society, or what Castells calls “network society,” developed around this kind of space of flows, which separates regions or countries included in the network from those excluded from it, in which the informational, economic, and socio-cultural disparity between them deepens. The social groups or regions included in networks can enjoy rapidly increasing interaction and improve their qualities of life, with new constructions and extension of transport and communication networks, while those excluded from the networks are deprived of both opportunities to use transport and communication infrastructures, and of accessing new information or knowledge, and hence become more marginalized groups or regions.

Seen from Castells’ view, the construction of Gyeongbu Expressway has demarcated national land space into inclusion and exclusion along the Seoul-Busan axis. It also marks an important moment that has generated and deepened the disparity between those cities within its influence and those cities and rural areas outside its influence, thereby promoting uneven regional development. As shown in Figure 6, all of the cities and regions which have been included in the influence of Gyeongbu Expressway—Seoul, Gyeonggi-do (Kyŏnggi-do), Chungcheongnam-do (Ch’ungch’ŏngnam-do), Gyeongsangbuk-do (Kyŏngsangnam-do), Gyeongsannam-do, and Busan (Pusan)—have experienced increased population, while those regions excluded from its influence experienced decreased population. It seems clear that Gyeongbu’s construction has provided transport infrastructure and hence enhanced mutual accessibility necessary for a rapid development of urban agglomerations along the Gyeongbu axis connecting Seoul, Daejeon (Taejŏn), Daegu (Taegu), and Busan. Yet it has also led to a deepening disparity between the regional developments of Yeongnam (Yŏngma) and Honam, and brought about serious political conflicts between them as a result.

While promoting uneven regional development and conflicting

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regionalism might be not the intent of a political leader or his regime, these two interrelated problems have remained continuously and produced a political burden for subsequent regimes to resolve. In fact, these problems were already hot-button issues among politicians and officials at that time.

In fact, “it has been argued loudly by senior officials of the government and other policy makers at that time that, if the Expressway was constructed, the concentration of population and industries to large cities would be prevented, but it would promote a balanced development of national land, between local small and medium-size cities, and between agriculture and manufacturing” (Son, J. 2003: 116). But Kim Dae-jung (Kim Tae-jung), a member of the National Assembly at that time, and who later became the president of Korea, pointed out that a serious uneven regional development would be brought about because of the construction of Gyeongbu Expressway. That is: Amidst the polemicists stressing uneven regional development due to the construction of Gyeongbu Expressway, Kim Dae-Jung, a member of the National Assembly belonging to construction committee at that time, was most vocal. He recognized that the construction of the Expressway would be a great work that could foster pride and dignity because it would expand the social infrastructure. But in the 62th Construction Committee of the National Assembly in 1967 he defined the construction of Gyeongbu Expressway as ‘a work like an oaf with its legs larger than its head, and with both arms and the right leg being thin’. This undoubtedly referred to the concentration of the transport network in the Yeongnam region would heighten the imbalance between the Gangwon (Kangwŏn) and the Honam regions (Han 2009).

In the end, the debate around the balanced/imbalanced development with the construction of Gyeongbu Expressway has fallen towards the latter. That is, “after the opening of Gyeongbu Expressway revealed a rapid concentration of population and industries in the capital and Busan regions, with a subsequent decrease in population and relative and/or absolute decline of industries in the rest of the national land space, including small and medium cities and rural areas,” (Son, J. 2003: 116). This burdened the Park regime, which was based on a political terrain of “the ruling party in rural areas and the opposition party in the urban ones,” (that is, 與村野都 yeochon yado, yŏch’ŏn yado), and triggered regional identity-based competitiveness between the

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Honam and Youngnam regions which continues even today.

Gyeongbu Expressway has played a decisive role in reconcentrating political power as well as economic wealth in Seoul and the capital region, and in recent years this trend has been further strengthened by the construction of Gyeongbu Express Rail. As a result, even the Yeongnam region seems unable to escape from the trend of the ongoing economic recession. In fact, the centralization and concentration of economic wealth and political power in the capital region are not simply caused by Gyeongbu Expressway, but also by the industrial restructuring process around high-tech industries and production services, as well as the tradition of centralizing power in the political structure. But the concentration of growth engine industries and traditional political power itself presupposes the construction of a centralized transport system and political, economic, and socio-cultural mechanism operating in such a system.

Apart from the uneven regional development and concentration of economic and political power, the construction of Gyeongbu Expressway was an important moment for people not only in the regions it crossed but also for Korean society ,which began to experience increasing traffic accidents, massive consumption of resources (especially oil), destruction of nature, and rapid degradation of environment (see Figure 3). For example, the increasedf import of crude oil, despite the oil shocks in the 1970s, was stimulated not only by the process of industrialization, but also by the increase of automobiles on paved roads and the newly constructed expressway. The number of traffic accidents also increased significantly from the middle of the 1970s. The construction of Gyeongbu Expressway was the first massive civil work that was conducted without any consideration to its impact on nature. In particular, the Expressway itself has resulted in separating not only people’s communal life, but animals’ ecological system, because of its route. In addition, increasing automobiles in the Expressway have seriously impacted the environment such as air pollution, noise and vibration. Seen from these social and environmental stances, Gyeongbu Expressway can be seen as a critical moment for Korean society entering into what Ulrich Beck has called the modern ‘risk society’.

Gyeongbu Expressway 213

VI. CONCLUSION The construction of transport reflects not only the economic development of the time but also the political regime pursing it (Hudson 1981). Gyeongbu Expressway symbolizes the method of preparing, implementing, and evaluating grand national agendas on industrialization, modernization, and unification (Jeon, C. 2010). That is, Korean society since the 1960s has accelerated the process of modernization, or of capitalization, and made the construction of transport networks the physical basis for this process. In particular, the construction of Gyeongbu Expressway reflects the geo-strategy of the military regime which exercised a hard dictatorship for development with its aim of ‘rich country and strong military’. Its construction was conducted under President Park’s military organization of management and with an actual mobilization of the army and its equipment, as if conducting a war.

Even without military experiences or the metaphors of war, the construction and use of new transport like Gyeongbu Expressway has legitimized the development of a dictatorship for modernizing the “fatherland.” It has been constructed on the basis of an economic logic based on extending the physical basis for capital accumulation. The construction of Gyeongbu Expressway has made a great contribution to the growth of construction capital, enhancement of productivity, and strengthening of competitiveness through a reduction of cost and time of transport with time-space compression. But Gyeongbu Expressway has brought about several negative effects, including a “faster-faster” culture in general, as well as the risks associated with the development of a fast-paced infrastructural development originating from military culture. This has generated a sense of placelessness or extended industrialized space that encroaches on the traditional senses of places inhabited by people. Moreover, the construction of Gyeongbu Expressway has drawn a demarcation line dividing the included regions and the excluded ones along the Gyeongbu axis, and hence increased the disparity between them. It also has also led to an increase in traffic accidents, greater consumption of oil, the destruction of nature, and the degradation of environment.

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In spite of the political, economic, social, and ecological effects brought on by constructing the Gyeongbu Expressway, there remain strong political, economic and technological impetuses to pursue such projects (Featherstone 2004). Hence Paterson (2007) argues that there exists a political power which has made automobiles highly dominant nowadays, a result of the interconnection of capitalist political economy with the cultural politics of space. The extension and use of transport in the capitalist system keeps the accumulation of capital. On the one hand, it promotes the production of mobility machines, as well as generally promotes economic activity through the circulation of goods and services. On the other hand, it also maintains and strengthens political power with the politics of inclusion/exclusion through the construction of material identity on the basis of mobility This kind of negative effect would be termed the “tragedy of the expressway” (Baeten 2000). In order to resolve this problem and make expressways real channels of communication, it can be argued, “a politics of sustainability” is required. The politics of sustainability should abaondon policies that emphasize military mobility, produce non-places, or that stimulate uneven regional development. Policies that have developed on the basis of slow but scrupulous planning, that try to promote space necessary for human life, and that orientate a real inclusion and integration for balanced regional development of the national land should be promoted.

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Korean Social Sciences Review | Vol. 2, No. 2, 2012: 219-251

Rethinking the North Korean Repatriation Program:

The Change from an “Aid Economy” to a “Hostage Economy”* Nam, Keun Woo** This article examines the North Korean repatriation project of the period of December 1959 through 1984. The purpose of this study is to identify economic intentions of North Korea relating to the repatriation project and its impact on the North Korean economy.

Though there have been many studies on the North Korean project, they mainly dealt with the processes of homecoming or superficial aspects of its political and financial intentions.

There are a few cases focusing on the repatriation itself. Most studies have been conducted in Japan rather than Korea. Therefore, it is not so easy to find research on this subject in the fields of domestic and international politics. This study searches for the missing parts of the repatriation project through interviews and documents from Japan and North Korea to understand the economic intentions of North Korea. The results show that one of the main goals of North Korea in the repatriation project was to overcome its economic crisis at the time the project was planned.

Keywords: Homecoming Project, Repatriation Campaign, North Korean Economy, Aid Economy, Hostage Economy, Korean Diaspora in Japan, Korea

*

**

Translated from the article published in Korean Political Science Review 44(4): 137159, 2010 with permission from The Korean Political Science Association.

Research Fellow, Department of Political Science and Diplomacy, Hanyang University.

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I. Introduction Half a century has passed since the North Korean repatriation or homecoming project began. Koreans in Japan who moved to North Korea between December 1959 and 1984 number 93,340, including about 6,730 who had Japanese nationality. Many Koreans in Japan who chose North Korea as their fatherland believed in Kim Il Sung’s (Kim Il-sŏng’s) promises to ensure a good living, education, and vocation upon their return. The propaganda of Choch’ongnyŏn (General Association of Korean Residents in Japan; proNorth Korean group) touted North Korea as the “earthly paradise,” and reports by Japanese mass media showed vast improvements in North Korea’s economy and livelihood. The return to North Korea by Koreans in Japan was an unprecedented mass move from a capitalist country to a socialist one.

What is the purpose of reviewing the “Return to the Fatherland Campaign” thirty years after it ended? By investigating the project, we can gain a new understanding about the formative period of North Korea’s economic system.

There have been numerous studies on the formation of the North Korean system and on the economic development process. But most of them were done in relation to the USSR, China, and the socialist countries of Eastern Europe. Not many researchers paid attention to the influence of the economic resources of Koreans in Japan. The project was a realistic economic solution for North Korea to fill the economic gap caused by a significant decrease in the financial aid of socialist nations during the late 1950s. By acquiring advanced technology, capital, manufacturing machinery, and labor force by repatriating about 100,000 Japanese Koreans, the repatriation program aimed at developing and maintaining the North Korean economy.

The project transformed the North Korean economy from an “aid economy” to a “hostage economy.”1 It also made the North Korean economy more closed, which eventually rendered it unable to exercise competitive power to deal with changes in the international economic environment. The North Korean economy faced severe limits from the embargo of the ship 1

Refer to Section IV for reasons and features why that I call the return project a “hostage economy.”

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Man’gyŏngbong by Japan in 2006. Thus while the intentions of individual Koreans returning from Japan are important, the economic goals and results of North Korea’s repatriation program are even more important.

This study investigates the repatriation program to illustrate the North Korean economic intent and analyze its impact on the North Korean economic system. There have been many studies done in relation to the project, but they focus at a superficial level on the repatriation and North Korean political economic intentions. Worse, there have been few studies done on the project itself and are especially difficult to find in South Korean political science scholarship. Rather, Japan has more active researchers in the area. It is not only because these Koreans in Japan moved from Japan to North Korea, but also because they, their wives, and offspring are anticipated to return to Japan if the North Korean regime breaks down or its political system changes. It is thought that the relationship between North Korea and Japan acted as a third factor, and has been aggravated by such matters as the nuclear issue, missiles, and kidnappings.

We can classify the studies on the project in the following manner.

First are studies that justify the project’s purpose and superiority. 2 This was most evident at the beginning of the project. The studies also focused on the economic rehabilitation and improved life of returnees in order to eagerly promote optimistic viewpoints and propaganda on the repatriation to North Korea. Thus, this academic research is largely based on records of trips to North Korea, films, and memoranda that implicitly advocate repatriation. Second are studies that deal critically with the project.3 They 2

In particular, Telao (1959), reporters who visited North Korea (1960), and Taihei Shuppansha (1972) introduced audiences to the rapid industrialization and improvement of living standards of post-war North Korea and greatly influenced Koreans in Japan in their determination to return to their mother country in the early stage of the repatriation program. Additionally, the Asahi Shimbun (1959/12/25) carried an article, “Strongly Advancing Horses-Skillfully Working People,” on the rapid restoration after the war and amelioration of North Korean residents’ lives.

Aside from this, director Mochizuki (1960) and director Urayama (1962) had a profound effect on Koreans in Japan and their return, with a film that showed the fervent atmosphere at the moment of their return.

3 The following texts constitute some representative studies. Min, G. (1962); Kim, Y. (1999; 2000); Jang, M. (2003); The Institute for Northeastern Asia Studies (2004);

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center on the reasons why Korean in Japan returned to North Korea, the returning process, and the veiled political and economic intentions of North Korea, Choch’ongnyŏn, and Japan. Most of the studies on the project fall in this category. Third, there are some studies that focus on the lives of the returnees.4 These experiential studies show and analyze the experiences of the people re-naturalized as Japanese citizens after escaping North Korea. Fourth are studies that do not deal with the repatriated Koreans directly, but survey the formation, conflicts, and the development of the unification movement of Zainichi (Korean residents in Japan) organizations and deal with the returnee problem.5 Hence many studies on the project have generally focused on these four issues but few have closely analyzed the project in the economic context of North Korea or its impact on North Korea’s economy. I will show North Korea’s involvement in the project and from that, demonstrate North Korea’s economic goals. It will become clear that it is necessary to examine the project in the context of North Korea’s economic goals in that the project was a practical solution to overcome North Korea’s economic crisis. Through this examination, we will discover various shortcomings in North Korea’s economic system. This study utilizes North Korean and Japanese authorities’ official records, writings and letters of the repatriated, the experiences of the people involved in the project, interviews with the Koreans in Japan who have Suzuki (2005; 2007); Yoshiaki (2008; 2009); Hidenori et al. (2009); Kim, G. (2010).

In particular, the research of Jang, M. (2003), Yoshiaki (2009), and Suzuki (2007) reveal how the Japanese government and neighboring countries were involved in the repatriation project by utilizing data of the International Red Cross Committee and the Japanese Red Cross.

4 Exemplary studies include those of Lee, J. (1999), Kang, I. (2006), Han, S. (2007), and Jung, E. (2009). Lee, Ju Cheol’s study on the system adaptability of Koreans from Japan is important as an early study on the life of repatriated North Koreans but is limited in that it lacks Japanese data and interview data. Jung, Eun Lee’s study not only supplements the research of Lee, Ju Cheol by using interviews with North Korean defectors in Japan, but also analyzes the influence on the formation and development of the North Korean system. Han, Suk Kyu describes how the returned Koreans in Japan lived. Using letters written between 1960 and 1988, Kang, Il Mae shows indirectly how the author’s elder brother, who was repatriated, lived in North Korea.

5 Chin, H. (1995); Nam, K. (2010) etc.

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family members in North Korea, and with Mindan (Federation of Korean Residents in Japan; pro-South Korean group) and Choch’ongnyŏn.

II. KOREANS IN JAPAN AND THE “RETURN TO THE FATHERLAND” CAMPAIGN 1. The First Campaign (1946-1950): Period of Small-Scale Voluntary Returns Because the Soviet army was occupying North Korea, the return of Koreans in Japan to North Korea was not implemented right after the 1945 Liberation.6 The returns were made possible when the American-Soviet agreement on the Soviet withdrawal was signed on December 19, 1946. According to the agreement, they decided that the return to North Korea should include those 10,000 people who had resided above the 38th parallel of the Korean peninsula. And it was scheduled to be implemented between March 9 and March 15, 1947. The figure includes 9,701 who applied to return when the Japanese government surveyed the 647,006 Koreans in Japan in March 1946.7 But when reexamined in late January 1947, just 14.5 percent (1,413) of those who volunteered to return still wanted to return. Those who actually returned to North Korea amounted to just 351, including 233 by the Sasebo (Japan)Hŭngnam (North Korea) route on March 15, 1947 and 118 more on June 26 of the same year (Kikuchi 2009: 20-21). This is just 3.6 percent of those 6

Unlike the return to North Korea, the return to South Korea was executed right after Japan was defeated. About 1,340,000 among the 2 million Koreans in Japan returned to South Korea from August 1945 to March 1946. 940,000 Japanese-Koreans were among these returned according to the planned repatriation and the remaining 400,000 people went back for of their own accord (Japanese Red Cross Society 1956: 2).

From then on, about 100,000 Korean Japanese returned before the Korean War, so the Koreans in Japan who returned to South Korea number 1,400,000 altogether.

7 In March 1946, the Japanese government established and promulgated the “edict to register those who were Korean, Chinese, or Hondo people (Japanese residents in Hokkaido, Honshu, Kyushu, Shikoku) and those who were domiciled in Kagoshima prefecture and Okinawa prefecture located below 30° north latitude” and examined the potential returning people on this basis (Japanese Red Cross Society 1956: 2-3).

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who had originally applied to return. After this, the project was officially halted when Japan stopped the repatriation project as soon as the General Headquarters of the Allied Powers (GHQ) sent the message that “from now those non-Japanese who voluntarily return are on their own” to the Japanese government with the outbreak of the Korean War (Japanese Red Cross Society 1956: 5).8 There are many reasons why the number decreased from 9,701 to 351.

First, those who volunteered to return changed their minds after hearing of the political confusion on the Korean peninsula, as well as the unemployment problem and poor living conditions in South Korea. Second, after the 1945 Liberation GHQ restricted the amount of money that could be carried into North Korea to 1,000 yen per person.9 Most of the researchers attributed the reasons for delay to the above factors.10 But there are also other reasons.

Third, they felt that the returning process seemed apprehensive.11 Fourth, Koreans in Japan had little or no memory of life in their hometowns, for they had lived so long in Japan. They were thus apprehensive of planning lives in North Korea.12 Fifth, family members became sick or they postponed their moving for other personal reasons. Meanwhile, the Korean War broke out in 8

The return to North Korea ended officially, but according to the testimony of Shin Chang-seok (from Tokyo, born 1930), many people smuggled to North Korea by boat during the Korean War, though there are no accurate statistics (Korea Institute of National Unification 2006a: 90).

9 The maximum amount of money that a returnee could take was 1,000 yen per person at first, then relaxed to 20,000 yen and raised again to 45,000 with the sixth provision of the return agreement concluded between the North Korean Red Cross and the Japanese Red Cross in 1958.

10 According to surveys done by G-2 of GHQ Staff section and Japanese-Korean‘ youth committees, reasons why returnees were reluctant were political uncertainty on the Korean peninsula, unemployment and general difficulty of living in North Korea, and the restrictions on taking money to North Korea (Kikuchi 2009: 22-23).

11 Some Japanese-Koreans sent a part of their property before their return. But when money sent to their hometowns went missing and rumors spread, some delayed their repatriation (interviewed by Lee, Young Soo).

12 Park, Myoung Soo (from Kaech’ŏn, P’yŏngnam, born 1926) is said to have given up on repatriation, for he was not sure how he would survive in North Korea because he did not know the situation in his hometown (Oguma and Kang, S. 2008: 372).

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1950, and so they could not go into North Korea (interviewed by Han, Wook Soo).13 Sixth, the Federation of Korean Residents in Japan (hereafter referred to as the KF), established in October 1945, was not linked closely with North Korea.14 North Korea carried out democratic reform through the North Korean Provisional People’s Committee during the repatriation movement. North Korea’s most urgent task was to set up the foundation of a new country by accomplishing a democratic revolution against imperialism and feudalism.

So they could not afford to prepare themselves to promote repatriation and welcome the returnees; all they did was show interest and amity toward Koreans in Japan.15 But North Korea arranged for a makeshift repatriation reception center and provisions for the temporary accommodation of 10,000 returnees in Hamhŭng, Hamgyŏng province before taking them to their final destinations, adopting the 13th determination of the North Korean Provisional People’s Committee, the “Issue on the Chosŏn People’s Homecoming from Japan” on December 26, 1946 right after the conclusion of the American-Soviet agreement.

The first campaign occurred voluntarily among the Koreans in Japan after liberation. And most of the returnees had hometowns below the 38th Parallel.

So the majority of them moved to South Korea. In those days, Koreans in Japan preferred to return to their fatherland rather than settle down in Japan. Therefore, the return right after the Liberation was determined not by political inclination but by their desire to return home.

13

According to the data from Japanese Red Cross (1956: 4-5), there had been 1,413 Japanese-Koreans who had hoped to repatriate to North Korea when authorities reexamined the potential for return in January 1947. There were 627 Japanese Koreans who could not return to North Korea because of illness or other personal reasons.

14 According to Lee, Yong Soo, who was a branch manager of Choch’ongnyŏn and had studied at the political academy under the KF, the KF reflected the mass education and return movement and its close relationship with the Japanese Communist Party, supporting neither South Korea nor North Korea.

15 Through a “Letter Sent to Korean residents in Japan on December 13, 1946,” North Korea announced that it would welcome Japanese Koreans when a unified government was established, though it was not yet prepared to accept Japanese Koreans at that time, for the unified government had not been established. It also sent the message to strengthen their fight until then (Kim, I. 1979: 575-577).

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2. The Second Campaign (1953-1955): Restricted Campaign by The Democratic Front For Reunificaiton In Japan (DFRJ) Unlike the first campaign, the second campaign was directed by the proNorth Korean Democratic Front for the Reunification in Japan (hereafter referred to as the DFRJ)16 as ordered by the Japanese Communist Party (JCP).

The DFRJ was established in January 1951 after Choch’ongnyŏn was forcibly dismissed by the Japanese government. And around the time of the armistice agreement, it again pushed ahead with the campaign that had been suspended after the start of the Korean War.17 The DFRJ’s movement was inaugurated to repatriate about 1,000 Koreans in Japan who had been imprisoned in several camps, including the Omura camp. The DFRJ specifically requested the Japanese-Korean prisoners’ embarkation on a ship intended for the mutual repatriation of the Chinese in Japan and the Japanese in China according to the Peking Agreement between China and Japan (Kikuchi 2009: 42). But the campaign which exploited the repatriation of the Chinese in Japan was shifted for two reasons.

First, it was reproached by the JCP and the JCP ordered the DFRJ to fight for free visits between North Korea and Japan, for Koreans in Japan to gain rights, and for the nullification of the South Korea-Japan Talks together with the repatriation campaign instead of just promoting the movement utilizing the return of the Chinese in Japan (Kikuchi 2009: 45). Second, after the motto “preferred development of heavy industries and simultaneous development of light industries and agriculture” had been adopted as the fundamental line 16

It said, “We will gather together all the patriotism of all the Koreans in Japan, be closely united under the Democratic People’s Republic of Korea (DPRK), sweep the American and English imperialists who invaded into our fatherland with the military forces and puppet Syngman Rhee [Yi Sŭngman] regime, achieve the complete unity of territory and national unification and fight for the security and the prosperity of the mother land.” in the first provision of the doctrine draft adopted at the Third DFRJ Conference held on December 18, 1952 (compiled by Park, K. 1983: 300).

17 According to the “The Recent State of Our Diplomacy” published in June 1960 by the Japanese Department of Overseas Trade, some Koreans started to prepare for their return to North Korea after the armistice agreement was signed. Through this, we can see that the post-war return campaign was led by the DFRJ.

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of the post-war rehabilitation and reconstruction at a plenary meeting of the Central Committee of the North Korean Communist Party on August 5, 1953, the need to support this came to be realized. The DFRJ accepted criticism of the JCP and did not adhere to the previous campaign of the 11th Central Committee held on August 25, 1953. Instead, the Central Committee decided to collect 100 million yen over three months from September 9 to December 8 as a recovery fund for the mother country and send a fatherland-visitation delegation composed of 60 or so members to support the rehabilitation and reconstruction of the nation’s economy as well as a group of engineers to North Korea (Liberation Newspaper, September 1, 1953). At the 11th Central Committee meeting, the order for the repatriation movement converted from the return of Japanese Korean prisoners to the aid rehabilitation and reconstruction of the nation’s economy and fight for free visits to North Korea.

But the fundraising campaign for the motherland recovery was not successful, with the result at 10 % of the target figure.18 The fatherland-visit delegation and engineer-dispatch movement were also unsuccessful. The DFRJ established a “home-visiting delegation of Korean residents in Japan to congratulate victory in the fatherland liberation war,” composed of 60 members on September 11, 1953 (Liberation Newspaper, September 17, 1953) and actively developed a passport acquisition campaign that commenced in 18

The deadline to finish the fund-raising on December 8 was postponed to the end of January 1954 at the fourth plenary conference on November 13, 1953 (Liberation Newspaper, November 10, 1953). It was extended to February15 and then extended again to the end of March by the determination of the meeting of the 14th Central Committee on December 20, 1954. The fundraising movement for fatherland recovery was stopped tentatively after that. The reason for prolonging the fundraising movement was that just 10% of target goal was achieved at the time of the fourteenth Central Committee meeting (Liberation Newspaper, February 5, 1954). A reason for the failure of the movement, according to an editorial in the Liberation Newspaper, was not because Koreans in Japanese were poor, but because activists could not organize the movement systematically. According to the testimony of Park, Jin-san and Shin, Chang-seok, who were activists of the DFRJ, some of the executives of the DFRJ appropriated the collected money, through which we can guess that the fundraising movement was not so systematic (Korea Institute of National Unification 2006a: 9092).

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July 1953. However the North Korea visit failed, for the Japanese government would not issue the exit visas to North Korea (Liberation Newspaper, May 20, 1954).

The second campaign had several unique characteristics. First, the direction of the repatriation movement changed from one focused on prisoners’ repatriation to an extension of the political struggle. Second, it did not proliferate into a massive homecoming movement. Third, the campaign was the first repatriation movement actually promoted by the pro-North Korea DFRJ. Fourth, there were limits: the DFRJ was under orders from the JCP, so North Korea could not forcibly interrupt a movement that was advocated by the DFRJ.

3. The Third Campaign (1955-1958): Realizing the First Return Led by Choch’ongnyŏn The homecoming movement that the DFRJ unfolded had been directed by the JCP since August 1953 and faced a shift again with the advent of 1995. Just after the DFRJ was dismissed in May 1955, and Choch’ongnyŏn was formed at the direct command of the Korean Workers Party (KWP), the campaign was developed under the guidance of North Korea on a full scale. The reason why the DFRJ was disbanded was that it was limited in carrying out the campaign. It is no wonder that North Korea encountered limits in developing the repatriation and unification movement through the DFRJ, because the DFRJ was the group whose purpose was to bring about a revolution in Japan under the direct command and guidance of the JCP. The DFRJ was dismissed by the sixth plenary session of the DFRJ held on May 24 and Choch’ongnyŏn was formed under direct orders of the KWP. From then on, the repatriation movement was virtually under the leadership of Choch’ongnyŏn, under the command of North Korea.

The homecoming movement led by Choch’ongnyŏn greatly differed from that of the DFJR. The DFRJ’s campaign was developed within the boundary of a Japanese revolution, while the movement of Choch’ongnyŏn unfolded toward that of repatriating Koreans in Japan. The Japanese Koreans’ voluntary returnees’ meeting took place in Tokyo on July 15, 1955, just after the foundation of Choch’ongnyŏn (Kang, C. 2002: 338). North Korea also took

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measures to assure the education and scholarships to cover school supplies, footwear, and life-preparation funds of 20,000 won per capita, with the seventh cabinet’s ruling on January 16, 1956 according to the repatriation order on Koreans in Japan (Academy of Social Science 1981: 456). North Korea’s homecoming movement was developed into a direct action around 1956. Forty-eight Koreans in Japan protested in front of the headquarters of the Japanese Red Cross, asking for repatriation and were allowed to do so in July by the Japanese government. This was the first demonstration of Koreans in Japan demanding to return to North Korea. North Korea established measures for stable living and security adopting the 53rd cabinet command on June 30 in preparation for the return of Japanese Koreans. Meanwhile, the return was blocked by opposition of the South Korean government. But twenty-three people, including twenty protestors and three students who hoped to study in North Korea, all departed from Moji seaport and arrived at Pyongyang (Academy of Social Science 1981: 460). The remaining twentyeight returned to North Korea with the official permission of the Japanese government in March 1957 (Suzuki 2007: 174).

The return in 1956 was significant in terms of the first realization of the return through Choch’ongnyŏn as directly ordered by North Korea. North Korea also thought highly of the movement as “the first victory accomplished in the struggle of opening the return path to the fatherland” (Academy of Social Science 1981: 460). But North Korea did not mean to execute a mass repatriation. There were no preparations for a large-scale return since North Korea was in a period of recovery and reconstruction after the Korean War. Furthermore, the ardor for a massive return was not existent, as North Korea had not yet propagated the idea of North Korea as an “earthly paradise” to the Koreans in Japan.

4. The Fourth Campaign (1958-1984): Mass Repatriation Movement Led

by Choch’ongnyŏn The campaign converted into a massive one around 1958 after it was changed into a practical campaign with the formation of Choch’ongnyŏn.

The watershed moment of the massive campaign was the “remembrance assembly of August 15” held at Nakadome, Kawasaki in Kanagawa prefecture.

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The attendees decided to send a letter to Kim Il Sung, saying “We hope to participate in the construction of the motherland after repatriation.”19 The central conference to commemorate Liberation was held on August 12 after the Nakadome resolution adopted a resolution to require the Japanese government to guarantee repatriation to North Korea and ask Kim Il Sung to welcome the Koreans in Japan to North Korea. The chairperson, Han Duksoo, insisted on the superiority of the North Korean socialist system and officially called it the “earthly paradise” (Jang, M. 2003: 55-57). The campaign developed in a totally different way around August 1958 after the Nakadome resolution to the extent of holding 19,400 large- and small-scale assemblies all around Japan for the realization of repatriation (Kikuchi 2009: 169).

Responding to the request, Kim, I. (1981a: 504) issued a welcome to the Koreans in Japan, proclaiming their right as citizens to return to their fatherland and live a happy life. At the “Congratulatory Conference for the Tenth Anniversary of the Inauguration of the Republic” on September 8, 1958, he promised to guarantee the returnees’ life in North Korea. Foreign Minister Nam Il and the First Vice-premier Kim Il respectively repeated assurances of returnees’ life and education in speeches on September 16 and October16 of the same year (Rodong Sinmun, September 17, 1958; October 17, 1958). Also, Kim, I. (1981b: 83-84) even said to the chief director of Choch’ongnyŏn upon his arrival in North Korea that Kim were prepared to accommodate even hundreds and thousands of Koreans in Japan, for all their needs, including housing, workplace, and education. The evaluation of Kim Il Sung was generally positive among Koreans in Japan because North Korea had sponsored an education fund and scholarships to Choch’ongnyŏn since 1957.20 So the welcoming remarks and guarantees by Kim Il Sung and 19

But it seems that the Nakadome determination was not decided at the branch level but by the order of Choch’ongnyŏn. According to Jang, Myoung Soo, who was the executive of Choch’ongnyŏn, the key figure in the repatriation plans at the time was the one who was appointed by Choch’ongnyŏn’s leadership and the written oath was also prepared before by the leaders of Choch’ongnyŏn.

20 It seems that the trust in Kim Il Sung and North Korea was great to Koreans in Japanese of pro- Choch’ongnyŏn at that time. According to testimony by Yeo, Il Hwa, who was a teacher at a Korean school (from Osaka, born in 1930), as an education aid fund and scholarships were delivered from North Korea in 1957, and the assembly

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dignitaries heated up the repatriation zeal among the Koreans in Japan.21 The Japanese government gave what amounted to formal recognition repatriation to North Korea with Foreign Minister Fujiyama Aiichiro’s January 29, 1959 affirmation of the right of Japanese Koreans to choose their residence and by a cabinet meeting resolution of February 13, 1959 officially sanctioning the return (Kikuchi 2009: 102). North Korea also adopted the 16th cabinet determination about the reception of Korean citizen coming back from Japan and established a reception committee, making Kim Il the first vice-premier chairperson on February 16 (Jang, M. 2003: 41). At the first visit, 975 people returned from Niigata port to Ch’ŏngjin on December 14, 1959 according to an agreement between North Korean and Japanese Red Cross organizations on June 10, 1959 regarding repatriation to North Korea. The number of Koreans in Japan who returned to North Korea was 2,942 in 1959, and 49,036 in 1960, but decreased from late 1961 to 1984 and terminated with a total of 93,340 returnees (Kim, Y. and Takayanagi 1995: 341).

welcomed those in the society of Koreans in Japanese (Oguma and Kang, S. 2008: 630). Additionally, according to testimony by Park, Yong Cheol (from Nonsan, Ch’ungnam province, born 1929) who was an activist in Choch’ongnyŏn, a movement promoting the reading of memoirs by the participants in anti-Japan military struggles became nationwide, led by Choch’ongnyŏn, from November 1958. And the memoirs were popular enough to be a bestseller book among Koreans in Japan (Oguma and Kang, S. 2008: 512).

21 The propaganda of North Korea, Choch’ongnyŏn, and the Japanese media had an important role in the repatriation fever of those days, but the economic and psychological factors of Koreans in Japan greatly influenced the phenomenon so this propaganda could permeate quickly into the Japanese Korean society. The most important reason why the Koreans in Japan were determined to repatriate was economic, for they wanted to escape from other difficulties. Other psychological reasons included wanting to return to their homeland, preparation for unification led

by North Korea, reunion with family members, avoiding compulsory repatriation to South Korea, and the need of Choch’ongnyŏn executives to prove their patriotism. For further detailed content on the determination of Koreans in Japan, refer to Kikuchi (2009, 150-162).

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III. N orth Korea’s economic intent on the drive for the massive return movement Here, we have to think about the reason why the repatriation campaign became massive in 1958. The massive homecoming movement was not merely raised by Japanese Korean community, led by Choch’ongnyŏn. North Korea’s intention had a great influence on the massive campaign.22 North Korea has yet to publish data on the return project, so it is not easy for us to find out its purpose. Therefore, we have to analyze the political and economic conditions in those days from the viewpoint of the domestic and international situation in order to understand North Korea’s purpose. The political reasons why North Korea led the massive repatriation campaign are as follows. First, domestically, the year was when the first party representatives’ meeting was held to conclude the incident that had occurred at the plenary session in August 1956 and when Kim Il Sung’s mono-system was being established.

So having people return from capitalist Japan to socialist North Korea was a good chance to fortify the internal political standing of Kim Il Sung and his aides.23 Second, internationally, it was also a suitable opportunity to propagate the superiority of the North Korea system, for the massive return marked the movement of people from a capitalist area to a socialist one. It seems that they had the intent of promoting the superiority of North Korea’s system among Koreans in Japan to return just as the preliminary negotiations for the third North Korea-Japan talks showed some progress in December 1957. Third, 22

The changes of position and policies of Japanese government, the Japanese Red Cross, and the International Red Cross committee had a significant effect on the massive change. But the analysis goes beyond the scope of this writing, so I’ll delete it. For further detailed analysis refer to Jang, M. (2003), Suzuki (2007), Yoshiaki (2009).

23 Oh, Ki Hwan (exiled to South Korea in 1963) who was the first deputy vice-prime minister and a member of the welcoming committee said that the committee members gave addresses every day in the political propaganda conference insisting on that they should welcome the Koreans in Japanese, for they wished to return to their motherland due to living difficulties in Japan in an interview with the Japanese Monthly Asahi in August 1991. These political propagandas are said to have had a big influence domestically (Jang, M. 2003: 42-43).

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North Korea seems to have had the intention of exploiting the repatriation campaign for Japanese domestic politics. North Korea had the purpose of rallying the Japan-Korea Association, the socialist party, and the communist party for the pro-North Korea movement in the process of directing the return campaign (Takasaki and Park, J. 2005: 30). Fourth, North Korea had the purport of using it for South Korean strategy. According to Kikuchi (2009: 136-139), North Korea had the intention of increasing pro-North Korean support by promoting a positive image of North Korea to the unemployed and needy by means of the homecoming movement. He also insisted that North Korea had the intention of utilizing the returnees as activists and guiding members in South Korea after the reunification of Korea, as a great majority of them had come from the south.

But North Korea’s intent is not a sufficient answer as to why this happened specifically in 1958. Instead, an economic purpose, rather than a political one, had a larger influence on the massive homecoming campaign. North Korea accepted the preferred development of heavy industries and simultaneous development of light industries and agriculture as the fundamental line on the postwar rehabilitation and reconstruction at the sixth plenary session of North Korea’s Central Party Committee on August 5, 1953 and commenced the rehabilitation and reconstruction of the nation’s economy for three years from 1954. North Korea lacked the workforce, capital, technology, material, and overall preparation of society to drive the massive campaign, for it had suffered tremendous damage during the Korean War. Also, there had been no strong economic incentive to promote the return of Koreans in Japan in the immediate post-war period, for the Chinese People’s Liberation Army greatly helped North Korea with postwar rehabilitation and reconstruction while it was stationed there, and North Korea received large-scale economic aid from socialist countries in Eastern Europe. North Korea had rather just wanted a small-scale return of proficient technicians and an economy recovery fund. In this context, we can understand why the DFRJ converted the homecoming movement from repatriation of prisoners to a recovery fund and call for technicians.

But foreign aid decreased dramatically around the late 1950s. According to Japanese Foreign Ministry data (Ministry of Foreign Affairs of Japan January 16, 1960: 44), the ratio of foreign aid in the national budget of North Korea

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reached a peak in 1954 at 29.3% and dropped to 21.7% in 1955, then to 16.2% in 1956 and 14.4% in 1957, with a further plunge to 4.2% in 1958, 4.9% in 1959, and to a mere 2% in 1960.24 Foreign aid decreased more rapidly in the 1960s, when credit assistance and grant-type aid and loans from the Soviet Union, China and socialist countries dropped by 80% from $1,653,360,000 in the 1950s to $336,680,000 (Yang, M. 2004: 305). When foreign aid decreased, North Korea tried to rehabilitate on its own by singling out domestic preparation and appealing to socialist countries for continued aid.25 Kim Il Sung visited the Soviet Union and Eastern European socialist countries and asked for economic aid to accomplish its five-year plan (195760). But when he could not get aid, he had to promote the five-year plan under the motto of self-reliance. In 1958, as agricultural cooperation and the nationalization of commerce and industry were completed, the material foundation for the socialist industrialization was prepared, too. But North Korea was deficient in its workforce, capital, and technology needed to advance rapid industrialization for material basis. The workforce shortage was especially at a terrible stage, which Kim, I. (1983: 342) had predicted an improvement by 1974. Worse, however, was that the deficiency in labor force was aggravated when the Chinese People’s Liberation Army wholly withdrew in 1958. Thus, although North Korea had established the material basis for industrialization, it came to face a situation of having to prepare its labor force and resources on its own due to the decrease of foreign aid and the withdrawal of the Chinese People’s Liberation Army.

Therefore, it seems reasonable to conclude that North Korea moved forward with the massive homecoming campaign around 1958 to supplement its labor force and receive capital and skills from the Koreans in Japan. We can understand why Kim Il Sung had stated to the chief director of JapanChosŏn Association on January 10, 1959 that he could accommodate even hundreds and thousands of Japanese Koreans who repatriate. In actuality, 51,978 Japanese Koreans from December 14, 1959 when the first repatriation 24

Refer to Lee, Y. (2000: 137) for the data after 1958.

The Internal preparation in North Korea means the effort, the equipment, and materials which are not used in production or not utilized effectively (Kim, I. 1994: 250). They began to emphasize the internal preparation from the period of people’s economic recovery construction (1954-56).

25

Rethinking the North Korean Repatriation Program 235

began, to December 18, which accounted for 55.6% of the total number of 93,340 of returnees through 1984. And the number of returnees through 1967 when the first seven-year plan was finished and the “return agreement” 26 expired, was 88,611, which accounted for 94.9% of the whole returnee total (Kim, Y. and Takayanagi 1995: 341). Of course, it is true that we can cast a question on the economic purpose of supplementing the labor force when we investigate the returnees by age group. According to a study (Takasaki and Park, J. 2005: 30-31) that raised the question, 62% of those who returned in the tenth group, in March 1960, were between the ages of 18 and 55. Also, 83% of the 11,022 who returned in the eleventh group, in March 1960, were illicit and reportedly 2,400 of them received medical treatment. They insist that North Korea did not promote the massive homecoming campaign to add to the labor force, for much of the returnee labor was unavailable. Actually it is somewhat controversial as to why North Korea turned its economic focus to the massive homecoming campaign.27 But there is one fact not to be overlooked. It is not convincing to only select available laborers as they returned in the early stage of the repatriation program when North Korea coined a motto of humanitarian enterprise, propagating itself as the “Earthly Paradise.” Rather, it was more effective to accept all the applicants regardless of age, gender, nationality, occupation, health in the early period of the program.28 But labor discipline was loose, 26

Refer to Kim, Y. (1999, 2000) as to return agreement.

Min, G. (1962: 36-37) who took part in the return movement as a Choch’ongnyŏn executive, considers the security of the labor force to be the most important reason for the shift to a massive homecoming program. On the contrary Oh, Gi Hwan once said that massive return might have been a little help to guarantee the labor force, but the security of the labor force was not the main purpose (Jang, M. 2003: 43-44). Koh, Y. (1992: 279), a North Korean diplomat, said that the repatriation program was a project to show the superiority of the socialist system. Han, Duck Soo, the president of Choch’ongnyŏn, also mentioned that one of the significances of the homecoming project was to show the world the superiority of the socialist structure.

28 Exceptionally in some cases, return applications were not accepted, for if all of the applicants were approved of, there would be no one to work in Choch’ongnyŏn.

Actually Lee Yong-soo, who worked as a branch chief of Choch’ongnyŏn, was rejected eleven times, for Choch’ongnyŏn wanted him to manage the organization in Japan (Lee, Yong Soo interview). Lee, Dahl Wan, who worked as the branch committee chief 27

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for many returnees in the early stages asked to live in P’yŏngyang and to have their assigned workplaces changed.29 So Choch’ongnyŏn, as guided by North Korea, decided to accept the unemployed, the poor, and students who wanted further education, so the Central Committee let persons with technical skills return first on November 26, 1960. Furthermore, the Central Committee was determined to suppress the return of Japanese wives whose mindsets were hard to change (Korean Institute for Politics and Economy 1974: 255-257).

According to data analysis of the occupations of 21,773 men among the total 88,611 returnees through 1967 when the repatriation campaign ended, the jobless numbered 8,640 (39.7%), which is a high number relative to 4,528 (20.8%) who were farmers, construction laborers, and day workers, with another 2,014 (9.2%) who were factory workers (Cabinet Intelligence and Investigation Office 1968: 69). North Korea once again decided in July 1961 to promote the repatriation of mechanics and entrepreneurs along with Japan-DPRK trade (Kikuchi 2009: 118). North Korea’s economic intention lay behind this decision to selectively welcome workers who could help their economic development. We can also see North Korea’s economic intent in the belongings that the returnees took with them. Items like trucks, machinery, and machine tools, increased after 1964. The per capita luggage allowance increased from twelve items in 1964 to sixteen in 1965 (Kikuchi 2009: 195).30 We can guess through this series of measures that they meant to include a labor force with the skills and technology necessary to fulfill the first sevenyear-plan. Accordingly, it is logical to see that North Korea’s economic purpose was an important factor in promoting the massive homecoming.

of Choch’ongnyŏn in Tokyo, also couldn’t return to North Korea though the whole family applied, with the order that he and his elder brother should pay attention to organization activities (Lee, Dahl Wan interview).

29 Refer to Nam, K. (2010: 166-169) for more discussion on labor disciplines.

30 It seems that the amount of material goods increased, for the returned who had repatriated in advance sent the letters to their family members, relatives, friends still in Japan, in which the list of the necessary items were written. And the materials were passed through the homecoming ship. The returned sent many letters which contained the message of sending daily commodities and various materials. Refer to Min, G. (1962: 191-219); Kang, I. (2006) for the content of the original letters.

Rethinking the North Korean Repatriation Program 237

IV. The Transfer from the ‘Aid Economy’ to ‘Hostage Economy’ The role of aid was crucial in the early period of the campaign, as North Korea was able to establish a basic economic framework with the economic assistance of socialist countries. In particular, the recovery and reconstruction of the public economy was completed quickly with the help of socialist countries. Japanese Foreign Ministry (Ministry of Foreign Affairs of Japan, January 16, 1960: 43) analyzed two reasons why socialist nations supported North Korea. First, the USSR and Eastern European socialist countries had money in reserve to aid North Korea, for they had entered a period of economic construction at that time. Second, the USSR needed to stabilize North Korea’s status domestically and internationally by rehabilitating North Korea’s economy. North Korea was able to get grant-type-aid amounting to 2.5 billion rubles ($625,000,000) from these nations from 1953 to 1957 thanks to the economic development of Eastern European socialist states and USSR’s assessment of the situation. 77.2% of the aid was concentrated in the 1954-1955 period. The importance of the support will be more evident if we compare the scale of the aid from socialist nations with the national budget invested in the recovery and reconstruction of the public economy of the time. According to Japanese foreign ministry data (Ministry of Foreign Affairs of Japan, January 16, 1960: 44), North Korea expended 97.3 billion yen for three years’ recovery and construction of the public economy. Meantime, foreign aid income was 66,573 million yen, which amounted to almost 70% of the budget spent for economic development during the same period. It is not far-fetched to say that the early achievement of recovery and construction of the public economy was the result of aid from USSR and Eastern European states.

But the decrease in foreign aid acted as a tremendous hindrance to achieving the five-year-plan successfully and executing the subsequent first seven-year-plan. The massive homecoming campaign was a practical economic prescription for compensating the decrease in aid. The returning Koreans from Japan supplied North Korea with a labor force and also brought various goods with them. Additionally, remaining family members and relatives in Japan sent them daily necessities and/or a lot of money.

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Affluent Koreans in Japan who dealt in commerce and industry donated a large amount of money to North Korea whenever they met repatriated family members in order that they might have secure livelihoods. Aside from this, Koreans in Japan directly helped North Korea’s economy by founding factories there or through promoting Japan-DPRK joint businesses.

North Korea supplemented its labor force with about 100,000 repatriated Japanese Koreans, and extracted significant economic assets from the Korean community in Japan by keeping them as hostages. North Korea’s economic system was transformed from an aid economy to a so-called hostage economy from late 1950s, extracting a labor force and a variety of forms of economic assets from the Japanese Korean community by holding Koreans in Japan as hostages.

This hostage economy emerged in late 1950s in North Korea and because of its features, we can call it as such. First, North Korea received a great deal of daily necessities from the returnees. The returnees moved to North Korea believing the propaganda of North Korea, Choch’ongnyŏn, and the Japanese mass media. But the returnees were not guaranteed a stable living as the propaganda promised. And those who were ensured jobs, educations, and lives in Pyongyang were mostly Choch’ongnyŏn executives and their offspring (Han, S. 2007: 44, 88-91). Most of the other returnees were placed outside Pyongyang. The most critical issue they faced was poor living conditions due to the shortage of daily necessities.31 The miserable living conditions of early North Korea came to be known through various means, including letters from the returnees to their family members and relatives in Japan. The letters that mentioned poor living environments were censored by North Korean authorities, so living conditions were mentioned indirectly instead of directly, but in a way the letter recipients could understand.32 The returnees sent letters saying they 31

For the poor living conditions which the returned Koreans in Japanese experienced, refer to the following data. Han, S. (2007); Sakanaka et al. (2009: 282-292).

32 A returnee told his family when he repatriated that if he could not live in North Korea, he would send a letter telling his family to come after having so-and-so (a 3-year-old child) married. Since it would be some twenty years before the 3-year-old child married, it was a secret code meaning they should not come (Min, G. 1962: 6364). Lee, Yong Soo was a Choch’ongnyŏn executive whose family member returned,

Rethinking the North Korean Repatriation Program 239

required almost all of their everyday needs, ranging from daily necessities like toothpaste, soap, clothing, and footwear, to school supplies and medical supplies. 33 And when they could not even buy subsistence goods with money, they asked family members and relatives in Japan to bring them daily necessities instead of money when they visited North Korea.34 In reality, to examine the amount of money the returnees carried with them (Sekino 1960: 102), the money which those in the first repatriation group took was 8,120 yen per person on average, but those in the second repatriation and later gradually took less money. By the 31st repatriation on July 22, 1960, the average amount was only 828 yen per person, according to a survey.

We cannot know the exact statistics on the amount of goods sent to the returnees, but we can assume that a considerable amount of supplies was conveyed to North Korea through the fact that the returnees all sent letters requesting daily necessities. 35 The goods that the returned carried with them were not only for their personal use, but some of them were circulated in North Korean communities. The supplies from the returnees were like currency in North Korea, where daily necessities were severely scarce.36 The

33

34

35

36

and he says that his repatriated relative sent him a letter that the relative was living well in the countryside, as when they had taken refuge before Japan was defeated.

The comparison of the life in North Korea to refugee life implied that living there was hard.

There are many letters from the returnees asking for daily necessities, based on letters collected by Min, G. (1962: 191-219), Kang, I. (2006), Yang, Y. (2007).

Refer to Min, G. (1962: 192) for the content of the letters.

For example, Kang Il Mae’s mother is said to have spent 100,000 to 200,000 yen on goods to send to her returned son, just on one occasion in 1960. To examine Japan prices in 1960, the starting pay of a bank clerk was 15,000 yen, and the annual income of a salary man was 500,000 yen, while a day laborer’s daily wage was 407 yen.

Meanwhile, 10 kilograms of rice cost 847 yen, and one bowl of ramyŏn was 45 yen.

Accordingly, it is assumed that a large amount of daily necessities were sent to North Korea if the value of a single shipment was 100,000 to 200,000 yen (Kang, I. 2006: 4749).

According to Lee, J. (2009: 218-219), a Japanese Seiko watch was said to have been sold for 400 to 500 won each among the materials the returnees took with them in the 1960s. Considering the pay condition of 1962 (Korea Institute of National Unification 2006b: 140), miners and steel industry laborers earned about 90 to 100 won, textile factory workers about 30 to 40 won, engineers with a Bachelor’s degree in engineering

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approximate 100,000 returnees comprised just a minority in North Korea at large, but their influence on socialist North Korea was not minor. The returnees influenced the formation of a capitalist consumerism and a black market, but it is obvious that daily necessities, consumer goods, school supplies, medical supplies, and such that were scarce in North Korea could be provided to the communities.

Second, among the belongings brought by the returnees were many items that could be directly used for economic construction. According to the Japan Ministry of Justice (Immigration Bureau of Japan 1971: 78), the baggage that the returnees took by the sixth group to on January 29, 1960 contained 73 vehicles (such as cars, trucks, and buses), 165 bicycles, 14 typewriters, 32 sewing machines, and 83 items of manufacturing machines and equipment.

The gross weight amounted to 2,704.475 tons. And according to other data (Sekino 1960: 92), the cargo conveyed to North Korea by the returnees in the 47th repatriation group on November 18, 1960 was 129,703 items weighting 5,643.582 tons. These supplies contained not only the personal needs of the returnees, but included items selected by Choch’ongnyŏn as necessary for North Korea’s economic development. According to Cabinet research data (Cabinet Intelligence and Investigation Office 1968: 69), Choch’ongnyŏn pointed out that some returnees took goods that were not requisite for North Korean economic development but were for speculative, or selfish, intentions, and the returnees ended up asking their families or relatives in Japan for daily necessities and reported to Choch’ongnyŏn that they needed supplies conveyed to North Korea.

This was confirmed by the increase in the weight of the returnees’ cargo although the number of returnees after 1965 dropped to below 300.

According to data (Cabinet Intelligence and Investigation Office 1968: 69), after the weight of the average returnee’s belongings exceeded 2 tons per person, the weight of the average cargo per capita steadily increased with 124th homecoming group of April of the same year taking 3.4 tons, the 142th group of October 1966 took 3.2 tons, the 147th group of March 1967 took 3.1 tons, the 148th group of April took 3.6 tons, the 150th group of June took earned 60 won, and someone in a light industry earned 25 won. So, one Seiko watch amounted to about 6-12 months’ income.

Rethinking the North Korean Repatriation Program 241

4.3 tons, and the 151st group of July took 5.8 tons, respectively. The most important reason for the weight increase in returnees’ cargo per person was that they included many industrial machines and equipment necessary to run the heavy machinery and factories. According to data (Cabinet Intelligence and Investigation Office 1968: 70-71), among the cargo sent to North Korea were all sorts of industrial machines and equipment as well as automobiles from the 122nd return of 1965 to the 155th of 1967 when the repatriation project was ceased. We cannot be sure with accuracy how much the machines and the equipment were actually utilized in North Korea,37 but it is certain that those goods played a key role in accomplishing the first seven-year plan, for a considerable amount of goods were shipped into the country. North Korea compensated for the economic loss due to the decrease in foreign aid with the manufacturing equipment that the returnees brought with them.

Third, there were many technicians among the returnees. As described above, Choch’ongnyŏn was ordered by North Korea to let technical experts and entrepreneurs repatriate first in July 1961. According to Joung, Eun Lee’s study (2009: 215), technician groups were formed with 50 to 60 members each, divided by occupation.38 What is important is that the repatriation of technicians was carried out by the organized leadership of Choch’ongnyŏn following North Korea’s directions, though it was also executed individually.

According to data (Cabinet Intelligence and Investigation Office 1968: 69), it is said that Choch’ongnyŏn ordered technicians to compile reports 37

According to testimony, the machines and equipment the returnees took were not all used in industrial sites and were neglected. Hong, Sang Gong who was the teacher at Chōsen Daigaku and an executive in the commerce and industry division of Choch’ongnyŏn said that the returnees took cutting-edge machines and equipment of the time, but actually North Koreans did not know how to use them and eventually ignored them in many cases (The Institute for Northeastern Asia Studies 2004: 95-96).

Lee, Young Soo also told that his relative had bought woodworking machines at a cost of 200,000,000 yen or so and took them with him when he repatriated, but he could not utilize all of it.

38 For example, a vinyl-processing technical group, sewing-machine manufacturing group, underwear group, vinyl shoes group, leather shoes group from Osaka, and a net group and veneer group from Aichi prefecture, a clothing group from Gifu prefecture, a bag group, automobile maintenance group, plastering group, manufacturing publishing group from Tokyo were formed and repatriated (Joung, E. 2009: 215).

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on groups of technical experts and entrepreneurs detailing the amount of individual investments, hardware, and raw materials when they returned.

And Choch’ongnyŏn directed them to surveys and report returnees who could provide equipment, documents, and details on facilities, as well as on the equipment, materials, and data beyond that which was for personal use after they returned to North Korea. Thus, North Korea made use of cuttingedge Japanese technology, hardware, and equipment acquired by holding the technicians effectively hostage.

Fourth, another example of how this was a hostage economy was the donations by Koreans in Japan who dealt in commerce and industry. The repatriated Japanese Koreans by 1967 numbered 88,611, 94.9% of the total.

From then on, only 4,728, or 5.1% of the total, returned from 1971 when the return project recommenced until 1984 because North Korea was no longer recognized as the “earthly paradise” among the Japanese Korean community any longer. Accordingly, North Korea felt it hard to expect labor, daily commerce, machines, and material from the Japanese Korean community from the restarted repatriation campaign in 1971.

Instead, North Korea changed its homecoming project into extracting capital from Koreans in Japanese who dealt in commerce and industry and had financial strength. The extracting method was to use the Homeland Visit Groups. North Korea began to form Homeland Visit Groups made up of respective occupations: people of in arts and culture (artists, athletes, etc.), educators, students, scientists, and merchants and industrialists when North Korea recommenced the homeland campaign in 1971. Among these groups, the Homeland Visit Group composed of Koreans in Japan who dealt in commerce and industry and shows a phase of the typical hostage economy.

There were many Koreans in Japan who dealt in commerce and industry whose family members and relatives had returned to North Korea. They visited North Korea to meet their family members through the Homeland Visit Group when the homeland campaign restarted in 1971. But the meeting was accomplished by paying money to North Korea authorities. According to Han, Wook Soo, it is said that the leaders usually paid 10 million yen and the others 3 to 7 million, for a total of 50 million per each visit to North Korea as participants of Homeland Visit Groups in the 1970s, though there was no set amount of money. We cannot be sure how much the Koreans in Japan

Rethinking the North Korean Repatriation Program 243

who dealt in commerce and industry paid to North Korea, but supposedly a considerable amount of money was sent to North Korea, for Korean Japanese Commerce and Industry Assemblies of every region in Japan visited North Korea to see their family members.39 North Korea took enormous capital from the Korean Japanese for the purpose of family reunions.

Fifth, another phase was the tremendous capital taken to North Korea by the returnees. The capital included the payments made by the returnees and the remittance from their family members in Japan. The payment of the returnees decreased after the first repatriation as illustrated above. The major reason was that they could hardly get daily necessaries with money. On the other hand, remittance was done by two methods: one was by sending money through the Chōsen (Chosŏn) Credit Association and another was through family reunions of Homeland Visit Groups in which the family members directly sent money. In Japan, the average remittance from the first return to the 37th return in September 1960 per capita through the Chōsen Credit Association was 16,000 yen to 30,000 yen, which was greater than the money taken directly by the returnees. 40 The total was 127, 540,173 yen. Aside from this, the money that was sent by family members of the returnees was allegedly substantial after those family members were allowed to visit North Korea via the Homeland Visit Groups from the 1970s. We are, however, unable to know see exact amount.41 39

As to the reason why it is difficult to ascertain how much money the Japanese Koreans who dealt in commerce and industry paid to North Korea authorities, Han, Wook Soo said, “At the time, Choch’ongnyŏn could not donate to North Korea publicly.

They did it off the record, secretly. Because once the donation was revealed, who and which branch paid would be known immediately. And the tax problems arise. Japan authorities would search for the source of the money sent to North Korea, then the tax problem would arise. In the end, the headquarters of Choch’ongnyŏn would find itself in trouble, so they did everything in secret (Nam, K. et al. 2010: 140).

40 Through the letters of Kang Il-mae’s elder brother, it is claimed that there were many letters demanding the remittance from the middle of 1970s, so her mother sent 20,000 to 30,000 yen irregularly (Kang, I. 2006: 109-119).

41 Joung, Kap Yeol, who returned in 1959, graduated from Kim Il Sung University, and worked in a National Science Society physics laboratory, said that he received $300 to $500 yearly from a Japanese relative who visited North Korea in a homecoming visiting group. In North Korea, there was a domestic currency for public use and an

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The 100,000 or so repatriated Japanese Koreans were a strong motive for the change from the aid economy to the hostage economy in North Korea.

One of the reasons the North Korean economy from the 1960s could sustain itself was that it could be provided with daily necessaries, capital, technology, and production equipment from the Japanese Korean community by holding the returnees hostage. North Korea could establish many factories around the 1970s with the various resources extracted from those above. In particular, on May 26, 1973, Kim Il Sung instructed the Koreans in Japan who dealt in commerce and industry to revive the manufacturing sector. According to Hong, Sang Gong (The Institute for Northeastern Asia Studies 2004: 104), Kim Il Sung’s instruction aimed at setting up an industry superior to that of South Korea by bringing funds and technology from the Koreans in Japan who dealt in commerce and industry. Also, Kim, Il Sung issued an instruction outlining and urging investment by merchants and the industrialists in the presence of representatives of Choch’ongnyŏn merchants and the industrialists on February 23, 1968. Following the instructions, the North KoreaChoch’ongnyŏn economic cooperation and interaction prospered. According to Hwang, Young Man, the central chairperson of Korean Residents Union in Japan, about 120 members of the Japanese Korean community who dealt in commerce and industry and were pro-Choch’ongnyŏn invested 15,000,000,000 yen at that time. The homecoming project was a practical economic remedy to compensate for the economic loss caused by a decrease in foreign aid and actually, significant labor force, daily necessities, capital, technology, and production equipment were invested in North Korea through 1967 when the homecoming campaign and homecoming agreement ended.

When the homecoming project recommenced in 1971, many factories were set up through the infusion of capital and technology by Koreans in Japan who dealt in commerce and industry. Consequently, we can say that the massive repatriation campaign developed from 1958 acted as an important force that enabled the conversion of North Korea from an aid economy to a exchange currency which could be converted for foreign exchange. With exchange currency 1 won amounts to domestic currency of 50 won. Two hundred won of exchange currency equaled $100. It has been said that it would take ten years for an ordinary worker to save $100 (Oguma and Kang, S. 2008: 167).

Rethinking the North Korean Repatriation Programâ&#x20AC;&#x192; 245

hostage economy.

V. Conclusion: The result of the hostage economy The return project was a pragmatic economic cure to overcome the adversity of the rapid decline in aid from socialist countries in the late 1950s. That is, the repatriation project played a significant role in maintaining the North Korean economy by holding hostage the 100,000 returnees. Of course, North Korea could also get political benefit collaterally through the homecoming project. But the project brought North Korea practical economic gain. The positive aspect of the homecoming project on the North Korean economy was that the country could supplement its insufficient labor force and utilize the tremendous capital, technology, and manufacturing machines provided by the Japanese Korean community. But the hostage economy made North Korea weaker in the end. The North Korean economy had such a highly controlled economic system that it could develop without being influenced by external forces in the short term. But a controlled economic system has the limitation that it cannot support itself without external inflow of resources and capital needed for production in the long term. North Korea maintained a controlled economic system in the way it self-rehabilitated by mobilizing domestic reserves and extracted a variety of resources necessary for production from the Japanese Korean community rather than attracting the investment of foreign capital through opening when foreign aid decreased in the late 1950s.

The significance of domestic reserves in North Korea is that it can be a staple source of preserving production without additional investment.

The resource-supplying method of mobilizing domestic reserves is still the main way of resource provision. But the resource mobilization method relying on internal reserves obviously reveals the actual limitation that there is no countermeasure when it is depleted. In addition, it brought about a bureaucratization of the department and officials managing economic resources and instituteâ&#x20AC;&#x2122;s egoism such as saving the producerâ&#x20AC;&#x2122;s goods or labor force voluntarily to secure scarce production resources in the manufacturing

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department. This phenomenon derives from the North Korean economic system in which the state supplies the production line with limited resources so the line can accomplish the planned goal as ordered by the government, mobilizing domestic reserves on its own. The return of Japanese Koreans was carried out to deal with limitations in North Korea’s labor force, and enabled the influx of capital, technology, and manufacturing machinery, but it could not be sustained indefinitely. Also, North Korea did not pay attention to the investment in the production line or quality improvement with the resources extracted from Koreans in Japan. Consequently, the change in the economic system of self-reliance and the limits of the hostage situation forced North Korea to depend on resource extraction from within rather than one from outside, making itself more closed. This closed nature of resource mobilization made North Korea unable to establish a competitive economic structure that could actively deal with the changes in the international economic environment. The feebleness of the hostage economic system became evident in that North Korea could not get economic aid from socialist communities and extract resources from the Japanese Korean community any longer after the collapse of the Soviet bloc in the 1990s and the embargo of the Japanese ship, Man’gyŏngbong, in 2006.

These days, North Korea has not received aid from the old Soviet bloc, nor has it gained any material aid from Japanese Korean community. In reality, North Korea has sustained its economy with aid from South Korea, China, and international organizations. There is a difference between the two types of aid. The current aid acts as a buffer that prevents North Korea’s economic crisis from becoming worse, while the aid from socialist countries after the war contributed to its structural stability by establishing a foundation for recovery from the damage due the war and to economic reconstruction. This becomes evident if we examine the amount and application styles of aid from international organizations (except China) to North Korea from 1995 to 2005. According to Stephen Haggard and Marcus Noland (Stephen Haggard, Marcus Noland 2007, 134), international organizations of this period gave $2,427,000,000 in support to North Korea. Of this, 67% was in food aid, and 9% fell under the category of agricultural restoration and development.

That the aid was centralized on food aid and agricultural recovery rather than manufacturing basis, increase, or technology investment means that

Rethinking the North Korean Repatriation Program 247

the characteristic of foreign aid has been done to prevent the exacerbation of economic crisis, unlike in the past. As to why the foreign aid suppliers have not supported areas other than food and agricultural, Stephen Haggard and Marcus Noland (2007: 136-138) accurately indicated that North Korea approached the economic crisis not in a systematic, political aspect, but as that of natural disaster and a decrease of international trade. North Korea has the intention that it only needs to acquire the amount of aid that can maintain the economy without aggravation, rather than aid that can trigger systematic change.

Thus, the most realistic prescription to cure the current economic crisis is to reform North Korea’s economic structure into one that has the ability to stand on its own and can be managed actively instead of the current feeble economic structure, which is not responsive to changes in the international economy environment. Though the year of kangsŏng taeguk (“strong and prosperous country”) begins in 2012, there is a high possibility that the North Korean economy will be stuck in a state that is impossible to revive, if a strong country in science and technology cannot be accomplished, because it is one of the three pillars of a strong and prosperous country. So North Korea has to find the spark of economy recovery in resource mobilization from the outside, not from within. Integrated into the international economic system through opening up, North Korea can be offered many benefits in various ways because the opening can attract various goods, services, systems, and ideas.

But a prerequisite should be whether they can change their systems. There should be a systematic apparatus that can control the friction among interests, for overseas investment and resource introduction can be accomplished only when there is no conflict of interest between the foreign suppliers and North Korean recipients. Therefore, a systematic reform is mandatory so the interests between the both parties do not conflict, if North Korea wants the interests of the suppliers who provide the investment and resources and that of North Korea as recipient to be harmonized. In the end, North Korea will have prospects for the future when the policymakers in North Korea correctly perceive the changes in the international economic environment and prepare for systematic change to respond to the changes.

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REFERENCES Books and Articles in Korean

Academy of Social Science. The Complete History of Korea. Pyongyang: Kwahak Paekkwa Sajŏn Ch’ulp’ansa (『조선전사 28』).

Chin, Hee Gwan. 1995. “The Study on the Change of Relationship between North Korea and Choch’ongnyŏn.” Security Studies 25: 149-182 (“북한과 조선총련 의 관계변화에 관한 연구”. 『안보연구』 25: 149-182).

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Kim, Gwi Ok. 2010. “Korean Division and Korean Diaspora: Focusing on Korean Residents in Japan.” Proceeding of the Summer Symposium of The Korean Association of North Korean Studies (“분단과 전쟁의 디아스포라: 재일조선인 문제를 중심으로”. 북한연구학회 하계학술회의).

Kim, Young Soon. 1999. “The Process of the Establishment of ‘An agreement on Return to North Korea Between Japan and North Korea: Return to North Korea by Koreans Residing in Japan.” Journal of Japanese Culture 7: 377391 (“일북의 「귀국협정」 성립과 그 경위: 재일조선인의 북한으로의 귀국”. 『일본문 화학보』 7: 377-391). . 2000. “Return to North Korea by Koreans Residing in Japan Based on “An Agreement on Return to North Korea’.” Journal of Japanese Culture 9: 405422 (“‘귀국협정’에 따른 재일조선인의 북한으로의 귀국”. 『일본문화학보』 9: 405422).

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Koh, Young Hwan. 1992. Pyongyang 25 Hours. Seoul: Koryŏwŏn (『평양 25시』).

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Korea Institute of National Unification. 2006a. The Formulation Process of North Korea’s Political System through Oral-Stated Materials: Japan and Germany.

Seoul: Sunin (『북한체제 형성과 발전과정 구술자료: 일본·독일』) . 2006b. North Korean Information on Germany. Seoul: Sunin (『독일지역 북 한기밀 문서집』).

Lee, Ju Cheol. 1999. “A Study on the Adjustment by the North Korea Regime of Korean Residents in Japan.” The Korean Journal of Unification Affairs 11(1): 107-129 (“입북 재일동포의 북한 체제적응에 관한 연구”. 『통일문제연구』 11(1): 107-129).

Nam, Keun Woo. 2011. “A Study on the Formation and Deterioration of Labor Culture in North Korea: The Industrialization Era.” Korean Journal of International Relations 50(4): 159-183 (“북한 노동문화의 형성과 균열에 관한 연구”. 『국제정치논총』 50(4): 159-183). , et al. 2010. The Unification Movement of Overseas Korean in Japan through Their Life Histories. Seoul: Sunin (『구술로 본 해외 한인 통일운동사의 재인식: 일본지역』).

Yang, Moon Soo. 2004. Economic Structure in North Korea. Seoul: Seoul University Press (『북한경제의 구조』).

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Books and Articles in Other Languages

Cabinet Intelligence and Investigation Office. 1968. “Return to North Korea by Koreans Residing in Japan (2).” Monthly Survey 150: 62-73 (“在日朝鮮人の 北鮮帰還について(下)”. 『調査月報』 150: 62-73).

Haggard, Stephan. 2007. Translated by Lee Hyoung Wook. Famine in North Korea: Markets, Aid, and Reform. Seoul: Maeil Business Newspaper (『북한 의 선택』).

Han, Suk Gyu. 2007. Stories of People who Return from Japan to North Korea.

Tokyo: Shinkansha (『日本から「北」に帰った人の物語』).

Immigration Bureau of Japan. 1971. “Statistics on the Repatriation to North Korea after 1959.” Monthly Immigration 131: 60-78 (“北鮮帰還に関する協定 等資料および暫定期間中における北鮮帰還 関係者統計について”. 『入国管理月報』 131: 60-78).

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Jang, Myoung Soo. 2003. Plot: North Korean Homecoming Project of the Japanese Red Cross Society. Tokyo: Gogatsushobo (『謀略·日本赤十字 北朝鮮‘帰国事業’ の深層』).

Japanese Red Cross Society. 1956. The Truth of the Return to the North Korea.

Tokyo: Japan Red Cross Society (『在日朝鮮人帰国問題の真相』).

Kang, Chul. 2002. The Chronology of Korean History in Japan. Tokyo: Yuzankaku (『在日朝鮮韓国人史総合年表: 在日同胞120年史』).

Kang, IL Mei. 2006. My Brother Read the Book, I Write the Book. Tokyo: Seiunsha (『本を読む兄本を書く妹』).

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Ministry of Foreign Affairs of Japan. 1960. The Recent State of Our Diplomacy (『わ が外交の近況』). . 1960 (1.16). The Situation in North Korea (『北朝鮮事情』).

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Oguma, Eiji and Kang, Sang Jung. 2008. The Memory of First-Generation Korean Residents in Japan. Tokyo: Shueisha (『在日一世の記憶』).

Park, Kyoung Sik. 1983. The Movement of Korean Residents in Japan after Liberation. Tokyo: The Institute for Asia Studies (『朝鮮問題資料叢書 第9卷: 解放後の在日朝鮮人運動 I』.

Reporters who visited North Korea. 1960. The Record of North Korea. Tokyo: Shindokshosha (『北朝鮮の記録: 訪朝記者団の報告』).

Sakanaka, Hidenori, Suk Gyu Han, and Yoshiaki Kikuchi. 2009. The History and Task of Repatriation to North Korea. Tokyo: Shinkansha (『北朝鮮帰国者問題 の歷史と課題』).

Sekino, Shoichi. 1960. “The Repatriation to North Korea of Korean Residents in Japan.” Reference 120: 89-103 (“在日朝鮮人の北鮮帰還問題”. 『レファレンス』 120: 89-103).

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『창작과비평』 33(3): 97-113).

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Ethnic Studies 34: 164-201 (“김일성의 재일조선인 귀국정책”. 『민족연구』 34: 164-201). . 1959. The North Korea of the 38th Parallel. Tokyo: Shinnihon-shupansha (『38度線の北』).

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The U.S. Carter Administration and Korea in the 12/12 Incident: Concession of Moral Diplomacy*

Park, Won Gon** The Carter administration knew that the 12/12 incident that occurred in South Korea in 1979 was a coup d’etat that would hamper the country’s process of democratization.

However, it did not take positive action to thwart it. According to the relevant materials, including declassified documents, the Carter administration detected the possibility of a coup d’etat in South Korea and de cursory efforts, including informing the South Korean government of such, what it actually implemented on December 12, 1979, and its stance in the period following the incident, was nothing more than passive adaptation to the altered situation. Such an attitude taken by the Carter administration was the result of the domestic factors that were prevalent in Korea at the time, such as the absence of an optional faction due to the inability of the Choi Gyu-ha administration and the fear of a recurrence of a coup d’etat, combined with the securityrelated concerns pertaining to Northeast Asia in the shape of confusion in South Korea and the North’s miscalculation. Simultaneously, the Iran hostage crisis in the American Embassy in Iran in the same year also served as a factor that impacted the way the Carter administration responded to the 12/12 incident in South Korea.

Keywords: the 12/12 Incident, the Carter Administration, Chun Doo-hwan, Park Chung-hee, the US hostage crisis in Iran, Korea

*

**

Translated from the article published in The Korean Journal of International Studies 50(4), 2010 with permission from The Korean Association of International Studies.

Research Fellow, Director of Office of External Cooperation, Korea Institute for Defense Analyses

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I. Introduction The “12/12 coup d’état” of December 12, 1979 placed Korea, which had finally freed itself from Park Chung-hee’s (Pak Chŏng-hŭi’s) prolonged oneman rule, back into the hands of a military dictatorial rule. Especially as the power of the new army group became the principal agent that suppressed the May 18 Kwangju democratic movement in 1980, the tragedy of modern Korean history began with the 12/12 incident.

However until now, despite that two decades have passed since the end of the 12/12 coup, there has been no definitive end to the controversy concerning the U.S. response. This controversy was heightened because the Carter administration pursued policies that placed a great importance on human rights, integrating “moral value” to its foreign policies (Carter 1977; 1988). In fact, the Carter administration’s foreign policy emphasized moral diplomacy since his inauguration in an attempt to differentiate itself from previous administrations.1 There have been two arguments regarding the Carter administration’s response to the 12/12 coup. First is the claim that the United States actively supported the new army group. The foundation of this claim is the so called “hegemonic tradition,” that the U.S. favors realist interests, especially security interests, over moral issues in determining its foreign policies. America’s Korea policy, in line with such considerations, placed most importance on the security of the Korean peninsula, and the Carter administration despite its support for moral diplomacy was not an exception. Accordingly, Shorrock claims that the U.S. was devoted to preventing “complete chaos” on the Korean peninsula and did not focus on who became the internal principal agent (Shorrock 1996). Samsung Lee also states that the U.S. actively cooperated with the new army group to maintain Korean stability. The U.S. was momentarily surprised at the unexpected event, but they soon accepted 1

For negative assessments of the Carter administration’s foreign policy see, Hoffmann (1977-78); Kirkpatrick (1981); Spencer (1988); Fontaine (1977); Stoessinger (1985); Kaufman (1993), For positive assessments see, Jones (1988); Hargrove (1988); Rosati (1994).

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the new army group and sought a cooperative relationship. Lee explained such attitudes of the U.S. as “asymmetrical dual policy”—choosing to place priority on cooperation with the new army group given the policy choices of pursuing normalized relations with the new army group or insisting on democratic change (Lee 2007: 612-619).

On the other hand, there are arguments claiming that the U.S. was originally against the coup. At the Korean Congressional Special Committee hearing regarding Kwangju, the U.S. claimed that they did not know of the 12/12 incident beforehand, and that they had been concerned about the possible halt in the process of democratization that the U.S. government considered extremely important. The U.S. position was that the Department of State warned of a “serious adverse effect” on U.S.-ROK relations in regard to this incident, and that they had passed on U.S. complaints through various channels. In addition, although the U.S. was aware of their limited influence on Korean domestic politics, they believed that the 12/12 incident did not make democratization of Korea entirely impossible and accordingly, continuously asserted the realization of the democratization schedule to the Choi Kyu Hah administration.2 William Gleysteen, then U.S. ambassador to Korea unveiled similar claims in his memoirs. America strongly opposed the 12/12 incident and there were no changes to the belief that a civil government must remain in control.

However, he also disclosed that the U.S. took the 5/16 incident as a lesson and did not take the same countermeasures such as unrestrained criticisms or demands of military return (Gleysteen 1999: 77-98). According to Wickham’s memoirs, then-commander of U.S. forces in Korea, he made stronger objections about the military than had Gleysteen (Wickham 1999: 83).

Such testimonies conflict with the research previously introduced.

According to previous research, there is a possibility that the U.S. had prior knowledge of the 12/12 incident; after the incident they actively cooperated with the new army group, and in regards to democratization they raised 2

“United States Government Statement on the Events in Kwanju, Republic of Korea, in May 1980 (June 19, 1989),” in John A. Wickham, Korea on the Brink: From the “12/12 Incident” to the Kwangju Uprising, 1979-1980 (Washington DC: National Defense University Press, 1999), pp. 199-201.

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questions only to the level of maintaining their dignity. Yet according to statements by personnel, the U.S. did not have prior knowledge of the specifics of the 12/12 incident and after it broke out, they utilized the maximum possible pressure to limit military influence, and made efforts to continue the democratization of Korea. In other words, the U.S. did not acknowledge the new army group nor did they give up their role in the democratization of Korea.

This research will shed light on the contradicting arguments and interpretations by using declassified documents and materials. First, it will reorganize the declassified documents and memoirs to determine whether the U.S. had prior knowledge of the 12/12 incident, and their reaction on the day of the incident. By looking at the Carter administration’s level of acknowledgment and the extent of countermeasures, it can be discovered whether the U.S. aided the new military group’s rise to power by abetting the 12/12. This research also intends to investigate the U.S. policies after the incident. It will analyze how their policy direction changed and how they operated their Korean policy in the aftermath of the 12/12 incident. It also tries to determine if the U.S. sought solidarity with those in power who were able to effect instant stability, regardless of the characteristics of those agents, rather than questioning the anti-democratic trait of the coup? Or did they place more importance on the democratization of Korea, resulting inpointing out the injustices despite causing possible instability on the Korean peninsula?

This paper will also shed light on historical truths, analyzing the process of American foreign policy and its execution towards Korea. To do this, this paper adopts actor variable as well as the domestic, regional, and global levels of analysis. It attempts to trace the perceptions and attitudes of actors who played a central role in different levels of policy decisionmaking—Wickham, the Commander of the U.S. Forces in Korea, Gleysteen, U.S. Ambassador to Korea, President Carter, Secretary of State Vance, and Assistant Secretary Holbrooke. Specifically, by analyzing the changes of each actor’s perception and policy proposals after the incident, this paper will show how their different perceptions and opinions were adjusted to form the final policy outcomes. Also, based on these analyses it intends to deduct domestic, regional, and international level variables that influenced the actors’ perceptions and decisions. In short, this research paper will reconstitute the

The U.S. Carter Administration and Korea in the 12/12 Incident 257

situation to determine the Carter administration’s Korean policy formation.

II. DID THE U.S. HAVE PRIOR KNOWLEDGE OF THE 12/12 INCIDENT AND WHAT WAS THEIR RESPONSE The U.S. had relatively accurate prior knowledge of the 12/12 coup, and they reported this to the Korean government. Commander of U.S. Forces in Korea Wickham, revealed that they had contrived relatively accurate information on the possibilities of military “unrest” at the end of November to the beginning of December in 1979. Wickham had heard from the Chairman of the Joint Chiefs of Staff Lee Hyung Geun that there was a possibility of a group of junior level generals with key actors from the 11th and 12th graduating classes of the Korea Military Academy who were inciting disorder and rebellion.

The reason was their extreme dissatisfaction with the current circumstances and politicians. He was informed that they might attempt to seize power before the presidential election. Wickham notified the Minister of National Defense Roh Jae Hyun (No Chae-hyŏn) and later the Deputy Commander in Chief Ryu Byung Hyun (Ryu Pyŏng-hyŏn) of this, but Korea regarded this as merely a rumor and did not take any measures. Wickham claimed to have also notified Jim Hausman, a political advisor (Wickham 1999: 49-51).

The information that Wickham had obtained was, in the end, valid. He was correct about the primary actors, the justification they claimed, and the motivations of the coup being factions within the military. The question is whether this information was shared with the U.S. Embassy in Korea and reported to Washington. If, as Gleysteen claims, the Embassy and the Commander of U.S. Forces in Korea maintained good relations, they would have shared this information. Also, considering that Wickham informed the political advisor Hausman, we cannot rule out the possibility that he also notified Washington. Also, the period when he obtained the information was the end of November, and considering that he notified Roh Jae Hyun in December, there was surely enough time for this notification to be made.

Gleysteen also mentioned that U.S. intelligence had knowledge of Chun Doo Hwan’s conspiracy. His memoirs reveal that Wickham notified Korea of strange movements centered around the 11th and 12th graduates of the Korea

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Military Academy. Also, Gleysteen states that U.S. intelligence sources had knowledge of some kind of conspiracy run by Chun, but was not reported until the day after the 12/12 incident (Gleysteen 1999: 78). In fact, U.S. intelligence admitted to having intelligence on the coup conspiracy. However Gleysteen showed an ambiguous attitude regarding his acknowledgment. He merely claims that he did not come across any “reports” from intelligence, and whether he knew of this information is not mentioned. Also, Gleysteen did not reveal whether the U.S. intelligence reports reached Washington.

Nonetheless, Gleysteen did not have any information on the new army group’s conspiracy until November 29 at the earliest. In a telegram that he sent to Washington on November 29, he did not mention any possibility of a coup, and rated low on the possibility that any general form of a coup might be carried out by the military. It was the end of November to the beginning of December that Wickham acquired information on the movement of factions within the military, centered around the 11th class graduates, and thus this information would have been passed onto Gleysteen sometime after that.

The “Weekly Situation Report: Korea” prepared by the U.S. State Department a week before the outbreak of the 12/12 coup does not contain any information regarding the incident. In this report, the Korean military was mentioned only to inform that there was a division of opinion regarding Chung Seung Hwa’s (Chŏng Sŭng-hwa) claims for the elimination of Kim Dae Jung. It also refers to Chun Doo Hwan (Chŏn Tu-hwan), but only to mention that he was involved in the debate regarding Kim Dae Jung. 3 However, reference to Chun is counterevidence against the fact that the U.S. was paying attention to Chun regarding other matters. Also, because this report was not designated as a “Cherokee” document, which are important documents regarding U.S. policies towards Korea, it did not include sensitive information such as the possibility of military rebellion.

Piecing together the circumstances, it is possible to make the following inferences: Wickham, Gleysteen, and Washington all knew about Chun Doo 3

Telegram from the SECSTATE Washington to American Embassy in Seoul, “Weekly Status Report - Korea,” December 7, 1979, Department of State [below DoS], Don Oberdorfer Files [below DOF], Box No. 3, Dept of State [below DoS], Telegram, 1979, National Security Library [below NSL], George Washington University [below GWU].

The U.S. Carter Administration and Korea in the 12/12 Incident 259

Hwan’s new military coup by December at the latest. First, as Gleysteen’s testimony suggested, if U.S. intelligence sources had this knowledge, it is certain that high-ranking officials in Washington were also informed.

Gleysteen’s claims that he did not have knowledge of the coup is interpreted as that he did not see the specific contents of the report from intelligence sources; he would have acquired the information from Wickham. It would have been the decision of Washington that allowed Wickham to provide such intelligence to Korea on December 4. This is because given the policy decision-making process of the U.S., the provision of such important intelligence is a matter not decided unilaterally by a Commander of U.S. Forces, but through discussion with higher authorities.

If the U.S. had known the possibility of the 12/12 coup, why did they not actively seek to prevent the incident, or after it broke out, to intervene?

The U.S. reaction on the day of the incident was passive. In fact, Wickham did not have the will to restrain the coup. In principle, Wickham was one of the most important actors in reacting to the circumstances of the 12/12 military confrontation, since the operational control was in the hands of the Commander of the Alliance. However, Wickham’s role was limited because a coup is a mutiny in which there has been a rejection of the command system.

In particular, Chun’s new army group had mobilized the Defense Security Demand and private groups under conditions in which there was no Chief Martial Law Administrator. Moreover, given that the Army Headquarters was also attempting to mobilize military units, it was unlikelly that Wickham’s operational control could actually be exercised. As Wickham had claimed, 12/12 could have been an internal problem of the Korean Army.

However, Wickham did have the means and opportunity to respond to the 12/12 military rebellion, though he did not utilize them. Following Roh Jae Hyun’s escape to the Eighth U.S. Army on the 12 th and because the Commander in Chief of the Combined Forces Command who headed the unit’s operational control and the Minister of National Defense who headed the prerogative of supreme command were together, if there had been a desire, they could have carried out an active response. The core actor monitoring the 12/12 incident was Minister of National Defense Roh. Chun’s military group demanded consent for the arrest of Chung Seung Hwa, the Chief Martial Law Administrator, by pressuring president Choi.

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Choi, meanwhile, asserted that he could not give consent without consulting the Ministry of National Defense. At the same time, Army Headquarters personnel who resisted Chun’s rebel forces were requesting Roh Jae Hyun’s approval to mobilize forces to suppress the rebellion. In other words, the circumstances were that, the situation would develop according to whomever Roh sided with. At this important moment, Roh was at the U.S. Eighth Army bunker with Wickham, who had operational control over mobilizing rebel force troops and units that could repress the rebels.

Wickham, when he detected partial movement of the military at around 8 pm on December 12, inspected the signal axis and command system of the Combined Forces Command with Ryu Byung Hyun, the Deputy Commander in Chief for the Command. He confirmed that there were no peculiarities, and that there were no signs of North Korea’s movement or unusual signs in the contents while monitoring them. At around 11 pm they inspected the military for possible mobilization and its allegiances with Wickham’s help because Roh and Kim Jong Hwan, the Chairman of the Joint Chiefs of Staff had already escaped to the eighth U.S. army (Wickham 1999: 53, 58-59).

At around 8 pm when Chun’s new army group arrested Chung, the Army Headquarters fully comprehended the circumstances and decided to suppress the rebellion. Accordingly, then Commanding Officer for Capital Defense Command Jang Tae Wan requested Commanding Officer of the 3rd Corps Lee Gun Young for the Capital Mechanized Infantry Division and mobilization of the 26th infantry division, from divisions that did not participate in the coup. Lee’s position was that he would mobilize the army immediately after confirmation by the Minister of National Defense (Jang 1993: 132). The 26th division and the Capital Mechanized Infantry Division were divisions under the operational control of the Combined Forces Command. Thus, with the consent of Wickham, who had the operational control, and decision by Roh, who was able to command the army by being delegated with the operational control from the president in cases of emergency, suppressing the rebels was possible because there was an army ready to be mobilized.

However, as the U.S. revealed at the Korean Congressional Special Committee hearing on Kwangju, Wickham urged the units loyal to the Korean Ministry of National Defense, who might respond to those responsible for the coup, that their movement should be restricted to prevent

The U.S. Carter Administration and Korea in the 12/12 Incident 261

any clashes (Wickham 1999: 197). He reasoned that because the situation was still unclear, a clash based on erroneous information could be inevitable. He persuaded Roh to wait until daybreak emphasizing the clear guidelines that stipulated that not ona single Korean unit should be moved (Wickham 1999: 58-59). The point here is that since there was at least 6 hours’ leeway because if the suppressing army decided not to act, the consequences would be to afford the rebel army time to complete its plan.4 If the level of concern was that of a “mistaken collision,” when considering the possible clash resulting from suppressing the rebellion, the conclusion is that from the beginning, Wickham had had no desire to intervene.

Iin addition to this, at the time of the incident, Wickham asserted that he did not know which division of the army was movigng, and when he did gain knowledge he claimed that it was too late. MoreverWhat’s more, Wickham said that there was nothing to do but accept the consequences because even if they did formulate orders, they would have been ignored (Wickham 1999: 5960). There have been controversies regarding whether Wickham did not have information on the movement of units controlled by the Combined Forces Command. In particular, there were arguments that regardless of Wickham’s claims, the Combined Forces Command would have known about the movement of Roe Tae Woo’s 9th division.5 The 12/12 incident was a military rebellion; the army went into action without notifying superior authority, and thus the headquarters may not have had detailed knowledge. However, after the 10/26 incident, the U.S. was satisfied with the founding of the Combined Forces Command, and it was concluded that despite the confusion of the 10/26 incident, U.S.-Korean cooperation was prompt and effective and was carrying out its function well. The U.S. had immediate access to intelligence on the circumstances through the Combined Forces Command channel; what’s more, the organization of martial law armies was also carried out

4

Gleysteen recollects that Roh and Kim came to the bunker at around 9 pm. Gleysteen (1999), p. 78. If his claim is right, this means that he had allowed more time to the coup forces.

5 Lee claims that considering the capabilities of intelligence of the U.S., they should have known about the movement of the 9th division much earlier than what they claimed.

See, Lee, S. (1993: 155).

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legitimately under the supervision of the Combined Forces Command.6 Thus, we cannot completely rule out that Wickham knew about the movements of the unit troops. Separate from the period of acquiring knowledge on unit movements, there is a problem in that there were no measures taken on the signal axis about the person with operational control having violated the command system. This is because the normal process is that the person with the operational control must order the return of the units who leave the realm of control back to their prior positions.

At dawn Wickham confirmed the success of the coup and claimed that it had “ended.” In the telegram Wickham sent to the superior office, he said that the Korean army would take care of problems like the 12/12 incident.

He urged the U.S. to emphasize refrainment, that there might be danger of a coup, and to prepare for external threats. Wickham acknowledged that this approach, a “bystander” response, was discordant with the Carter administration’s policy of promoting democratization of Korea and minimizing the power of the military (Wickham 1999: 63-65).

Another important U.S. actor at that time was Gleysteen and his response was also passive. Gleysteen responded negatively towards the 12/12 coup. At dawn on the 13th, Gleysteen unofficially contacted president Choi and the new army group of Chun. His messages said the U.S. viewed the military incident very negatively, and that the military usurpation of power would negatively influence the American public, media and Congress.7 At the same time, he ordered that sensitivity was necessary in official responses. Gleysteen defined the 12/12 incident as a c oup d’état in which a minority of a junior group in the military carried out a military takeover through a meticulous plan.8 However the response he suggested was for Washington to abstain 6

Telegram from the SECSTATE Washington to American Embassy in Seoul, “Text of Scope Paper Re State Funeral for Korean President Park,” November 1, 1979, DoF, Box No. 3, DoS, Telegram, 1979, NSL, GWU, p. 3.

7 Telegram from Secretary of State to American Embassy in Seoul, “Military Power Play in South Korea,” December 12, 1979, DoF, Box No. 2, Chun 12/12 Coup, National Institute for Korean History [below NIKH].

8 Telegram from American Embassy in Seoul to Secretary of State, “Younger ROK Officers Grab Power Positions,” December 13, 1979, DoF, Box No. 2, Chun 12/12 Coup, NIKH.

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from officially defining the incident as a coup but to regard it as an internal military proble, so that the Koreans could save face.9 Accordingly, the first U.S. official statement did not specify the term “coup d’état.” The proposal focused on the claim that whatever forces that attempted to undermine the process of promoting democracy would have a deleterious effect on their relationship with the U.S., as well as security guarantees concerning of North Korea.10 Later, Gleysteen revealed in his memoirs that at the night of the 12th and dawn of the 13th, he placed utmost importance on preventing two things from happening: conflict within the Korean military that might aggravate the North Koreans, and the defeat of Korea’s political liberty and civil government. Yet, of the two, Gleysteen claimed to have been on “special alert” regarding the former. Also, at the time he remembered that he had been critical of the American response to the 5/16 coup of Park Chunghee (Gleysteen 1999: 80-81). Immediately after the 5/16 coup, then-United Nations Forces Commander Magruder and the Chargé d’Affairs of the U.S. Embassy in Korea Green announced an official statement asking all the troops under the authority of the United Nations Forces Commander to support the Korean government led by Chang Myon, which was officially approved through a legitimate procedure.11 Gleysteen saw the actions of the UN Forces Commander and the Ambassador supporting the Democratic Party government and being publicly against the coup d’état as inappropriate.

From the beginning, Gleysteen neither wanted to nor did stop or suppress the coup. He claimed that what was most important was to settle the damages done (Gleysteen 1999: 80) Washington had knowledge and constant new intelligence of the Korean coup incident almost in real time. In an NSC memorandum written when the coup was just completed in the morning of the 13th Korean time, which 9

Telegram from Secretary of State to American Embassy in Seoul, “Military Power Play in South Korea,” December 12, 1979, DoF, Box No. 2, Chun 12/12 Coup.

10 Telegram from Secretary of State to American Embassy in Seoul, “Press Statement on Korea,” December 13, 1979, DoF, Box No. 2, Chun 12/12 Coup.

11 Telegram Form the Commander in Chief, U.S Forces Korea (Magruder) to the Joint Chief of Staff,” May 16, 1961, FRUS 1961-1963, Vol. XXII, pp. 449-51, Recited from Tae Gyun Park, Allied State Empire: Two Myths of the U.S.-Korea Relations (Seoul: Changbi Publishers, 2006), pp. 202.

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was the afternoon of the 12th in the U.S., Nick Platt, an NSC Asia Specialist Advisor to Brzezinski, an Assistant Special Security Officer, acknowledges that the 12/12 incident was indeed a coup by which Chun Doo Hwan usurped power.12 At around 9 am on the 13th, Washington confirmed that the requests of the new army group including the replacement of the Martial Law Commander Chung were limited and judged that power usurpation would not occur immediately. However Washington understood the motivation of the new army group, knowing that replacement of the Martial Law Commander was connected to power usurpation. Despite this, Washington accepted Gleysteen’s proposal and avoided officially calling the Korea situation a coup. Accordingly, Washington corrected the former statement by the Department of State that there was an important military power struggle by saying that the statement was not an official statement of the U.S., but an uncertain prediction of the situation.13 In other words, the initial reaction of Washington was in accordance with their knowledge that the 12/12 incident was really a coup by Chun’s new army group which was after power. Later Washington decided on passivity based on Gleysteen’s proposal, avoiding intervention or defining the situation as a coup.

Piecing everything together, Washington knew that success of the coup would negatively effect the democratization of Korea. However as Gleysteen revealed, they were more concerned about the possibility that a military clash within the South could result in a military clash on the Korean peninsula, than the defeat of political liberalism in Korea. In other words, on the day of the incident, the Carter administration’s actions reflected their security interests priorities over that of Korea’s democratization.

12

Memorandum for Zbigniew Brzezinski from Nick Platt, “Korean Coup,” December 12, 1979, National Security Council [below NSC], Declassified Documents Reference System [below DDRS].

13 Telegram from Secretary of State to American Embassy in Seoul, “Military Power Play in South Korea,” December 12, 1979, DoF, Box No. 2, Chun 12/12 Coup.

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III. ASPECTS OF THE U.S. RESPONSE AFTER THE TWELFTH 1. Wickham’s Awareness and Response Wickham was a bystander on the day of the incident, but after the 12 th he showed a tough stance against the new army group to the point of contradicting Gleysteen. On the 13th when he met with Roh Jae Hyun, he criticized the actions of the new army group, claiming that they not only would impede political change, but also threaten domestic order and expose the country to the North’s threats. Also, the actions of the new army group would impact Korea-U.S. relations and result in a total reconsideration of their Korea policy, including the withdrawal of U.S. forces in Korea, technology transfer, missile technology development, arms sales, economic aid, CFC responsibilities and authority reinforcement (Wickham 1999: 69).

This warning was much more severe than Gleysteen’s position: the latter claimed that America should not threaten Korea by referring to measures that were neither possible nor would be carried out. Gleysteen admits that he and Wickham did not share the same views (Gleysteen 1999: 87). At the end of December, Wickham, as one of the most important actors of the coup, delivered a message on the U.S. views on military intervention in Korean politics during a face-to-face talk with Lee Hee-sung, who became the Army Chief of Staff. At that time he warned the possibility of the U.S. reconsidering their defense program in Korea (Wickham 1999: 83).

With this, Wickham submitted a case report to the superior office on the 12/12 incident (Wickham 1999: 94-97). The main argument by Wickham can be divided in two. First, the 12/12 incident was a rebellion by Chun’s new army group carried out to usurp power, and the U.S. should have made an effort towards continuing Korea’s democratization process. Wickham did not name Chun’s new military group as ‘coup forces,’ but unlike Gleysteen, used strong expressions such as ‘rebellions’ to make criticisms. Secondly, he claimed that the new army group, made operational control ineffective and the level of security more critical, there was a need for appropriate measures.

Wickham further argued that measures to strengthen the operational control of the Combined Forces Command were necessary so that the same actions

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taken by the 9th division of the 12/12 could not take place again.

Only by looking at the above telegram can we see that Wickham took the situation more seriously than Gleysteen, and requested for more serious measures to be taken. Wickham tried to avoid direct contact with Chun Doo Hwan as much as possible, as distinct from Gleysteen who met Chun after the coup on the 14th. It was in February 1980 that Wickham first met Chun.

However on the next day of the coup, the 13 th, Wickham suggested knowledging Chun’s new army group and cooperating with them. From a bystander attitude on the 12th, Wickham moved towards claiming that they now needed to work closely with the new leadership (the new army group), investigate to what extent the Korean political development could be recovered with the cooperation of the new army group, to pursue internal and external stability.

The inconsistency of Wickham’s external statement and internal intelligence report resulted from his questions focusing not on the coup’s antidemocratic attributes, but on the damage of the CFC’s authority. In regards to the 12/12 incident, Wickham reveals that the reason for his resentment was Roe Tae Woo’s disregarding the chain of command and moving a part of the 9th division into Seoul (Wickham 1999: 70, 59-60). In other words, he was angry about the damage inflicted on the operational control. It was thus Wickham’s position that the circumstances could be accepted if preventative measures against the reoccurrence of such incidents were taken, and apologies were made. Officers amicable to the new army group and who had been close with Wickham at that time had significant influence on Wickham’s change of attitude. Wickham had been maintaining a good relationship with then CFC Deputy Commander in Chief Ryu Byung Hyun, who was later appointed as Chairman of the Joint Chiefs of Staff by the new army group.14 In fact, they were together at the time of the incident.

Influence by CIA’s Korean branch manager, Bob Brewster, influence also contributed to Wickham’s acknowledgment of the new army group. Brewster actively spoke for the Chun’s new army group and mediated the relationship 14

Wickham mainly consulted Ryu regarding many issues in Korea. Telegram from American Embassy in Seoul to the SECSTATE Washington, “Political Development in South Korea” December 7, 1979, DOF, Box No. 3, DoS, Telegram, 1979, NSL, GWU.

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between them and other American officials, and Wickham’s advisory groups also agreed to his “practical perspective” (Wickham 1999: 79).

2. Gleysteen’s Position As to Gleysteen, then-U.S. Ambassador to South Korea, his initial response was negative though he later accepted reality and tried to deal with the damage already done. In a report about the 12th that was filed on the 13th, Gleysteen defined the incident as a coup initiated by Chun’s military group to usurp power and stated that there should be no possibility of showing tolerance or compromise. However it was also a conclusion that they should accept the new army group as a political reality (Wickham 1999: 49-51). This suggestion ignored the coup’s continuation by maintaining a passive response.

In other words, Gleysteen in fact recognized the new army group right after the coup, and saw that they had to continue regarding them as a partner to solve future problems.

However Gleysteen’s position did not mean that this halted U.S. efforts in the democratization process of Korea. In Gleysteen’s meeting with President Choi on the 13th, he delivered the message that the U.S. would continue supporting the liberalization process of Korean politics, and that he wanted the presidency of Choi Kyu Ha to continue.15 Holbrooke made similar claims in Washington in his meeting with Kim Yong Sik, the Korean Ambassador to the U.S. The U.S. warned that if the 12/12 incident impeded the process of political liberalization in Korea or resulted in oppressing freedom of expression like emergency decree no. 9, there would be serious consequences for Korea-U.S. relations.16 The problem was that U.S. critiques of the coup, were made against a weakening Choi administration and a strengthening new military group, so demanding a democratization schedule was not practical. American pressure and criticism should have been directed towards the new army group, but 15

Telegram from Secretary of State to American Embassy in Seoul, “Situation Report No. 4 0600 Hours (EST) 12/14/79,” December 13, 1979, DoF, Box No. 2, Chun 12/12 Coup.

16 Telegram from Secretary of State to American Embassy in Seoul, “Korea Focus: ROK Ambassador Kim,” December 15, 1979, DoF, Box No. 2, Chun 12/12 Coup.

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Gleysteen’s attitude favored “mutual adjustment for continued cooperation” rather than what was suggested by the previous telegram on the 13th, which was “warning, and indifferent attitude.” He acknowledged reality rather than using force and criticism. The first example of this was Gleysteen’s request to meet Chun on the 14th immediately after the coup. By meeting Chun after his talk with President Choi, Gleysteen recognized the gravity of Chun’s rise as a central axis of power.

Gleysteen’s response after the incident, which concentrated on recognizing the reality of the coup instead of applying force and criticism, was in opposition to all forms of sanctions against Korea. However, Gleysteen opposed the sales of F-16s and the co-production of the F-5E, and claimed that postponement or cancellation of the SCM should be carried out.17 Gleysteen sent his second telegram outlining the development of the incident on December 28, intending to wrap up the situation. In this telegram Gleysteen clarified his support for the Choi administration, his intention of maintaining a routine military channel with the new army group without returning to previous circumstances, maintaining military stability and civil government of Korea, and his wish for abstinence of the opposition group and those not yet in a position of political power.18 In other words, he gave up suppressing the coup, recognizing the reality of the new army group and cooperating with them to minimize the possible damage that can be inflicted upon Korea or the United States.

Such response was a consequence to the tendency to prioritize stability of Korea rather than its democratization. Gleysteen, although he perceived the Choi administration as incompetent, did not immediately accept the new army group as an alternative power, but left possibilities open and established a relationship with them.

17

Telegram from American Embassy in Seoul to Secretary of State, “Korea Focus: Relations with ROK Military,” December 28, 1979, DoF, Box No. 2, Chun 12/12 Coup.

18 Telegram from American Embassy in Seoul to Secretary of State, “Second Look at December 12 Incident,” December 28, 1979, DoF, Box No. 2, Chun 12/12 Coup.

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3. Washington’s Perception In the case of Washington, top-ranking officials such as President Carter and Secretary of State Vance had a negative perception of the 12/12 incident and sought firm sanctions. The assessment of the incident by Carter and Vance was twofold: one was the view that the new army group violated the operational control of the CFC by mobilizing front line unit in a coup, and the second view was concerned with the possibility of hindering the political democratization of Korea.19 In other words, they maintained basic awareness towards the democratization of Korea. Accordingly, Washington ordered the U.S. Embassy in Korea to propose sanctions that could be mobilized but eventually it failed due to Gleysteen’s firm opposition. Also, Washington was concerned that Gleysteen’s request for a face-to-face talk with Chun might appear as if the U.S. acknowledged Chun’s acquisition of power, but they accepted his proposal that such a talk was necessary to pass on the serious concerns of the U.S. government.20 In fact, Washington shared Wickham’s perception of the 12/12, but followed Gleysteen’s proposal in their response.

Such a response by the Carter administration was one that embraced Holbrooke’s claims. Holbrooke’s basic perception of Korea’s circumstances and policy directions were concentrated on stability than democratization.

Via a telegram that Holbrooke sent to Gleysteen on December 4, 1979, he ordered necessary measures to be taken to prevent Korea from becoming another Iran, notifying Gleysteen of the mood in Washington regarding the hostage situation at that time. Not only the executive but also the Congress stressed the shock of the Iran hostage incident, and emphasized that the U.S. should not take any action that may result in confusion or instability of their allies.21 19

Telegram from Secretary of State to American Embassy in Seoul, “Korea Focus: General Thought,” December 18, 1979, DoF, Box No. 2, Chun 12/12 Coup.

20 Telegram from Secretary of State to American Embassy in Seoul, “Korea Focus: Your Discussion with MG Chon Tu-Hwan,” December 18, 1979, DoF, Box No. 2, Chun 12/12 Coup.

21 Telegram from the SECSTATE Washington to American Embassy in Seoul, “Korea Focus—Nudging ROK Political Leaders,” December 4, 1979, DOF, Box No. 3, DoS,

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At that time in Korea, third party forces and students dissatisfied with the Choi administration united to intensify the anti-governmental demonstrations and as result, from the end of November, 200 people were arrested. Holbrooke connected this situation with the Iran situation, and ordered that American influence should be maximized to minimize collision.

Especially, he delivered a message to the third party Christian forces who were leading the demonstrations demanding their halt, because there was danger to the street demonstrations in that it may bring about coercive measures by the government, resulting in chaos similar to the situation at the end of Park Chung-hee’s time. Holbrooke ordered Gleysteen to seek restraint and compromise with both the government and the third-party forces, but Gleysteen revealed that the goal of such measures was to make the Korean government’s trust increase with the U.S., a goal concentrated on the Korean government.22 As a matter of fact, sending a message to the thirdparty Christian forces was an action taken to show the Korean government; whether or not the forces accommodated this and halted their demonstrations was not important. Holbrooke, taking a realistic stance of placing importance on stability, ordered a policy towards the direction of cooperating with those in power than the promotion of democracy.

Holbrook also placed significance on preventing the possibility of such incident being repeated than the possible negative impact it would have on Korean democratization, since it may cause serious instability in the country.23 Thus, Holbrooke focused on preventing conflict with the new army group; he cooperated with them, in order to resolve the crisis and bring stability. As a means to carry out this policy, he made Choi clearly reveal the democracy schedule to prevent the aggravation of demonstrations. Washington accepted Holbrooke’s demands and organized their policy towards the direction of preventing another coup caused by faction within the military and at the same time, continued the momentum of the democratization schedule with

Telegram, 1979, NSL, GWU. Ibid.

23 Telegram from Secretary of State to American Embassy in Seoul, “Korea Focus: General Thought,” December 18, 1979, DoF, Box No. 2, Chun 12/12 Coup, NIKH. 22

The U.S. Carter Administration and Korea in the 12/12 Incident 271

the Choi administration’s cooperation.24

IV. ELEMENTS OF MAIN CONSIDERATIONS FOR THE U.S. RESPONSE The perceptions and attitudes of important relevant actors in the Carter administration admit that the 12/12 incident should be defined as a coup d’état and an event that countered the democratization of Korea. However, the result was a policy that prioritized maintaining stability in the country.

Wickham did in fact raise a question to the problem, but his reaction was more about the violation of the operational control of the CFC rather than the anti-democratic nature of the incident, whereas Gleysteen wanted an early solution to the problem for stability from the beginning. On the other hand, Carter and Vance perceived the 12/12 as an incident that would hinder Korean democracy, but showed acceptance of Holbrook’s security-first-policy.

In short, the Carter administration responded passively on the 12 th, and afterwards sought early acceptance and cooperation with Chun’s new army group.

In this case, what is the central variable that affected the Carter administration’s response? Washington’s response on the 12th showed that the Carter administration’s hierarchy of preference in their policy choices was not much different to any other administration’s policy towards Korea in times of threat. The Carter administration had been pressuring the Park Chunghee administration with emphasis on human rights issues in his Korea policy (Fowler 1999; Park, W. 2007: 23-52). However his response to the 12/12 incident was a result of applying one of the main interests of the U.S. since 1945—stability on the Korean peninsula; Carter administration’s “moral diplomacy” could not avoid impact.25 Especially, because internal unrest in within the South could be linked to external threat, the U.S. regarded the 24

Telegram from Secretary of State to American Embassy in Seoul, “Korea Focus: Your Discussion with MG Chon Tu-Hwan,” December 18, 1979, DoF, Box No. 2, Chun 12/12 Coup, NIKH. 25 After 1945 the order of American priorities were 1) Korean security, 2) Economic goals 3) Korean democratization. For further details see, Ha, Y. (1987: 416-423).

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former no less serious than how they approached the latter.26 However, whereas the Carter administration’s response to the 12/12 incident did show the priority of America’s traditional consideration of security in Korea, when it is more closely analyzed, the response was a result of complex and mutual interactions among domestic, regional, and global level variables. When these variables did not mutually interact with each other, in other words if they are not simultaneously considered or mutually linked, we cannot rule out the possibility that the Carter administration’s moral diplomacy would have had greater influence than what actually happened.

The first element that influenced the Carter administration’s policy was the possibility of continued rebellions within the Korean military, even after the 12/12 incident. This possibility of reoccurrence was connected to the possibility of misinterpretation by North Korea in terms of the regional context of the North and South, which is again linked to a global context, a necessity to maintain stability in Northeast Asia to deal with the Iran hostage situation. Such linkage was how the Carter administration’s policy was affected. After the Soviet’s invasion of Afghanistan on December 12, 2979, the importance of strategy according to Cold War thinking was added to their Korea policy by Washington’s realists. Accordingly, the Carter administration did regard Korea’s democratization important, but they preferred to promote stability of the Korean military due to concerns of disruption of stability that can result from another coup.

At that time, the U.S. was seriously concerned about the possibility of military action against the Chun’s new military group. Gleysteen analyzed, in a report written on the 13th, that they could not completely overrule the possibility of a reverse coup or similar movement by another dissatisfied group,27 and when he met Chun on the 14th and heard that there was the possibility of unrest within the Korean military, he recollected that he was 26

Lee Cheol Soon differentiates U.S. perception of Korean threat into “internal” and “external”, and claims that the internal threat was perceived as a serious threat due to its close relationship with a significant threat, North Korea (Lee, C. 2000: 14).

27 Telegram from American Embassy in Seoul to Secretary of State, “Younger ROK Officers Grab Power Positions,” December 13, 1979, DoF, Box No. 2, Chun 12/12 Coup, NIKH.

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“shocked.” Gleysteen, concerned of the possibility of another military clash that could threaten U.S. interests, consistently proposed to Washington that they must make stability of the Korean military as one of the priority concerns of their Korea policy. Such a possibility of a coup continued until the early 1980s, continuing the tension for the United States. Wickham received a request for help from generals in the Korean military planning a reverse coup at the end of January 1980, but he declined (Wickham 1999: 77-79; Gleysteen 1999: 93-97). Through this experience, the U.S. arrived at a conclusion that they had no choice but to place importance on the relationship with Chun for stability within the Korean military. Thus, although they did not give positive acknowledgment, they took a position of tacit approval towards Chun’s new army group in order to prevent security threats of internal clash within the military.

The second element that had impact on U.S. policy was their distrust of the Choi administration. Gleysteen had doubt that the Choi administration could successfully carry out the democracy schedule. He expressed his distrust of the Choi administration in the process of political liberalization of Korea since 10/26. He especially showed explicit dissatisfaction when Choi continuously delayed the initiation of the schedule despite the numerous proposals that were made. Accordingly, Gleysteen gradually showed a position of not trusting the Choi government’s leadership.

As the 12/12 incident broke out, doubts about the Choi administration’s role and ability increased. Gleysteen emphasized several times on the day he met Choi, the 13th, that it is imperative for Choi to continuously carry out the functions of a president. However, he had made assessment that Choi had lost the already weak foundation of his support and thus he has no choice but to be swayed by the new army group.28 Wickham also assessed Choi to be lacking powerful leadership and ties with the military (Wickham 1999: 94).

After all, the U.S. recognized Chun’s new army group without much hesitation or concern, as one of Korea’s significant political bodies as a result of two considerations: one was the concern that the Choi administration 28

Telegram from American Embassy in Seoul to Secretary of State, “Discussion of Military Grab with President Choi,” December 13, 1979, DoF, Box No. 2, Chun 12/12 Coup, NIKH.

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is not capable of carrying out the democracy schedule, which is deemed to bring chaos, on time, and the second was the interest of preventing another coup for stability. It was the judgment of the U.S. that there was a need to maintain an amicable relationship with Chun, the newly rising “big shot” in political power, in order to maintain stability in Korea.

If these two considerations outlined here started in the domestic levels of Korea and affected the regional levels, the hostage incident had impact on the international levels of the U.S. in relation to the Korea policy, affecting the entire American foreign policy. After the collapse of the pro-U.S. government in Iran, the Carter administration made a judgment that there was a need for a governmental structure that could win public support through political liberalization in order to maintain stability. However, with the Iran crisis, Washington concentrated on the Iran issue, and it took on a more realistic view regarding stability to be a priority. Accordingly, the case of Korea was placed along these lines; the U.S. felt the need for stability first, regardless of who the political forces were.

At that time, there was a change in the U.S. president’s policy because of the Iran hostage situation. Apart from the conflicting views of Vance and Brzezinski since the beginning of the administration, there also were differing perspectives among the NSC staffs. While Brzezinski claimed that they had to be ready to use military force if necessary to solve the problem, Vance emphasized that dialogue and negotiation without provoking Iran was best. Some NSC staffmembers with a realist perspective proposed, holding up the situation of the hostage incident, that the administration move towards placing stability and security as priority; they interpreted the hostage situation from a security and strategic aspect by linking it to the USSR, and viewed that the situation could act positively for the Soviets. It was their judgment that the Soviets could strengthen the leftists in Iran by using the incident, or bandwagon with Iran’s anti-Americanism to prevent anti-Soviet forces in Iran.29 Also, when the State Department, concerned with the safety 29

Memorandum for Zbigniew Brzezinski from Paul B. Henze, “Thought on Iran,” November 9, 1979, NSC, DDRS: National Foreign Assessment Center, “Soviet Efforts to Benefit from the US-Iran Crisis,” December 1, 1979, Central Intelligence Agency [CIA], DDRS.

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of the dispatched diplomats, considered the return of some family members and employees, NSC’s realists criticized that the executive is in a situation of panic, and proposed an active policy of sending American military forces to protect the diplomatic offices and residences. They claimed that the State Department’s attempt derived from naïve and idealistic thinking, and that the administration’s persistence for “moral diplomacy” needed to change.30 However, such offensive position of realists had a facet of arbitrariness.

With the fall of the Pahlavi Dynasty of Iran, the U.S. lost an intimate ally in the Gulf region, proving to be negative for the supply of oil. However, it was unrealistic to claim a security threat by linking the Iran hostage situation to Soviet expansionism. Using the CIA’s initial December report, realists claimed that there was a possibility for the Soviets to utilize the Iran situation but the August report concluded that the fall of the Pahlavi Dynasty was not an occurrence advantageous to the Soviet Union. The argument that the U.S. had lost a buffer zone in the Gulf region to balance against the Soviet Union was only relevant in the case that the Soviets could influence the Iranians into becoming a pro-Soviet state. However, Iran’s change showed the tendency of Islamic fundamentalism, which was not an advantage to the Soviet Union.31 The Soviets also judged that, considering their problems in Central Asia, it was not bad that the Pahlavis suppressed the appearance of Islamic fundamentalism. According to the circumstances, Vance saw the appearance of Khomeini as negative to both the U.S. and the Soviet Union (Vance 1983: 346). Thus, the loss of an allied state in the Gulf region was detrimental for the U.S. in terms of balance of power, but as Brzezinski claimed it was not as serious as to have impact on the Soviet’s advancement into Afghanistan (Brzezinski 1983: 356).32 On the contrary, NSC advisors, who placed importance on moral considerations, placed focus on the problem of anti-Americanism in the Islamic world rather than emphasizing the security and tactical aspect of 30

Memorandum for Zbigniew Brzezinski from Paul B. Henze, “The U.S. and the Islamic World,” November 27, 1979, NSC, DDRS. This was written by Henze but contains the consent of a total of 10 NSC advisors.

31 Memorandum, “Iran and the USSR after the Shah,” August 17, 1979, CIA, DDRS. 32 Brzezinski claims that if Pahlavis were not discrased, the Soviets would not have easily invaded Afghanistan.

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the Iran situation. The U.S. government’s support for the Pahlavis was what caused the Iran situation, and they saw that the lack of understanding of Islam by the U.S. should be self-reflected. Accordingly, they suggested that the U.S. start creating a more productive relationship with Islam with an open mind.33 The two perspectives outlined above existed in Washington at the time, but the overall atmosphere moved towards strengthening pragmatic approaches; even parts of the U.S. Congress expressed the intention of breaking away from moral diplomacy. Since its inauguration, the Carter administration had expressed a negative stance towards the CIA’s clandestine operations; it made efforts to retain transparency by changing laws that required the CIA’s cooperation with Congress and decreasing the budget for such operations and personnel involved.34 However, after the breakout of the Iran incident, some congressmen from the House Intelligence Committee persuaded Carter of the importance of certain CIA operations and that they must be strengthened and expanded.35 It was the core of the administration’s moral diplomacy, “abolition of secrecy” that was questioned.

The atmosphere in Washington developed towards legitimizing whatever means necessary to solve problems regardless of moral considerations, rather 33

Memorandum for Zbigniew Brzezinski from James M. Rentschler, “Moslem Emotions and Anti-American Sentiment: Back to Basics,” December 3, 1979, NSC, DDRS. Robert Hunter, Garry Sick, Bill Griffith gave consent on the report.

34 President Carter dismissed George Bush, then CIA director and appointed Stanfield Turner, announcing his severance from the past. In declaring the cessation of CIA’s clandestine operations he diverted from the 60-year tradition of allocating 60% of the budget decreasing it to 5%. Also, in order to achieve transparency of the CIA, he made Congress receive constant intelligence and authorized the latter to monitor the former. However since the end of 1979 as monitoring of the CIA weakened, the Intelligence Oversight Act was passed, lowering the extent that the CIA has to report to Congress. As a result, since the end of 1980 like Turner’s recollection there were new initiations of clandestine operations all over the world. For more details see, Rhodri Jeffreys Jones, The CIA and American Democracy (New Haven: Yale University Press, 1989); Mark M. Lowenthal, US Intelligence: Evolution and Anatomy (Washington DC: Praeger with CSIS, 1984); Stansfield Turner, Secrecy and Democracy (Boston: Houghton Mifflin, 1985).

35 Letter from the Permanent Select Committee on Intelligence to President Carter, December 18, 1979, U.S. House of Representatives, DDRS.

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than emphasizing self-reflection in, for example, supporting the dictatorship of the Pahlevis or not attempting to adequately understand Islam. Support for minimizing moral diplomacy was strengthened by the security and strategic perspective that linked the Iran hostage situation with the Soviet Union.

In this way, proponents of pragmatism used the Iran situation by exaggerating its threat. And yet, there were practical benefits to the iran hostage situation in that it demonstrated the impact regime collapse of an allied state can have. This lesson was then used to inform Washington’s response to Korea’s domestic situation, which lent authority to Holbrooke’s argument that Korea should not become another Iran.

The Carter administration’s moral diplomacy could not stop the collapse of the government of an allied state, of which one result was U.S. citizens being taken hostage. Given this, it was difficult for the U.S. to to take into considerations human rights in its response to the 12/12 incident. In other words, pragmatists felt foremost that they had to prevent the same problems they had experienced in Iran resulting from military clashes. As a consequence, the instability of Korea’s domestic politics was widely accepted in Washington.

And yet giventhere was no anti-American sentiment in Korea at the time, which was a central factor in the Iran hostage situation. Robert Rich, then Chief of the Korean bureau of the U.S. Department in State, recollects in his memoirs that although it was proposed at the White House and Congress that Korea may become the second Iran, it was also raised in the State Department that this was less likely to be the case (Fowler 1999: 284). Thus, the policy principles of Gleysteen and Holbrooke for prioritizing stability in Korea, just like the security impact that was linked to the Iran situation, derived from realistic considerations they preferred rather than the calculated possibilities or predictions regarding the development of situation.

V. CONCLUSION The Carter administration had prior knowledge of the possibility of the 12/12 military coup d’état. However contrary to some claims, the administration did not intentionally hide or diminish that fact, but rather concentrated its effort

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on preventing the coup by informing the Korean government. However their response on the day of the incident and their policy after the incident took the form of adapting to the new circumstances. Although the U.S. viewed this as a military rebellion that undermined democratization in Korea, they responded passively in consideration of maintaining stability on the Korean peninsula. They also did not exclude the appearance of Chun Doo Hwan’s new army forces’s . If the U.S. had actively promoted the democratization of Korea, they would have suppressed and acted forcefully against the new army, which had attempted to overturn the Korean political power dynamics.

This does not mean that there were no disputes in the decisionmaking process of the Carter administration’s response. President Carter and Secretary of State Vance regarded the incident as a military coup and concentrated on its anti-democratic nature; they continued their interest in Korean democratization. In the end, however, they could not overcome traditional interests of the U.S. in Korea which focused on stability on the Korean peninsula. What’s Mmoreover, the Choi administration’s incompetence was the decisive factor that limited U.S. intervention. It is entirely possible that the situation following the incident could have been different if the Choi administration had actively expressed asked for help from the U.S. Choi’s lethargic response to the coup provided justification for the U.S.’s passive response as well, since both the motivation and justification for intervention must be supported by the government directly affected. So long as the current government existed, the constitutional process could be nominally maintained, which in turn made it difficult for the U.S. to justify intervention. Chun’s new army group had considered this outcome as well.

Accordingly, the new army did not make overtaking the Choi administration their first goal, but taking over the military by eliminating Chung Seung Hwa, the Martial Law Commander.

Lastly, the Iran hostage incident also impacted the Carter administration’s fundamental policies, thus significantly influencing their Korea policy. The U.S. was in a very difficult situation of having its own citizens held hostage, making a practical approach to improving security of its allied states of paramount importance; this position was reflected in the U.S.’s Korea policy.

Consequently the Carter administration’s response to the 12/12 incident was a case in which its most actively advocated ‘moral diplomacy’ was not

The U.S. Carter Administration and Korea in the 12/12 Incident 279

applied, but instead used a more pragmatic approach resulting ffrom security interests, the passivity of the Korean government, and the outbreak of other gobal events.

REFERENCES Primary Sources

Declassified Documents Reference System, “Human Rights, 1977-1980,” Library of Congress.

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Documents of Jimmy Carter Library Relating to Korea, 1977-1980, National Institute of Korean History.

Don Oberdorfer File, National Institute of Korean History, National Security Archive, Washington DC; Gelman Library, George Washington University.

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Ha, Young Sun. 1987. “Is the U.S. an absolute variable of the Korean Democratization?” Shindonga July (Seoul: Donga) pp. 416-423 (“미국은 한 국 민주화의 절대변수인가”. 『신동아』 7월호).

Jang, Tae Wan. 1993. The 12.12. Coup and I. (Seoul: Myungsung) (『12 · 12 쿠테타 와 나』) Lee, Cheol Soon. 2000. “A Study of American Policy toward Korea during the Korea’s First Republic, 1948-1960,” PhD dissertation at Seoul National University (『이승만정권기 미국의 대한정책 연구(1948-1960)』 서울대학교 대학 원 박사학위 논문).

Lee, Samsung. 1993. U.S. Korea Policy and Korean Nationalism (Seoul: Hangilsa) (『미국의 대한정책과 한국민족주의』).

Lee, Samsung. 2007 “Bloody Passage to the Korean Democratic Cause through the Gwangju Incident and U.S. position: Fatal asymmetric Korea Policy of the U.S. in 1979-80.” The May 18 Memorial Foundation, Democratic

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Foundation of 5.18 and Politics, History, and Society (Seoul: Shimmian), pp. 612-619 (“광주를 통한 한국민주주의에의 유혈통로와 미국의 위치: 1979-80 년 미국 대한정책의 치명적 비대칭성”. 『5·18 민중항쟁과 정치·역사·사회』).

Park, Tae Gyun. 2006. Allied State Empire, Two Myths of the U.S.-Korea Relations.

(Seoul: Changbi Publishers) (『우방국 제국, 한미관계의 두 신화』).

Park, Won Gon. 2007. “Cater Administration’s Human Right Policy towards Korea: Reinterpretation of 1979 Summit.” American Studies 30: 23-52. (“카 터 행정부의 도덕주의적 외교와 한국정책: 1979년 카터 대통령 방한의 재해석”. 『미 국학』 30: 23-52).

The May 18 Memorial Foundation. 2007. Democratic Foundation of 5.18 and Politics, History, and Society (Seoul: Shimmian): 612-619 (『5·18 민중항쟁 과 정치·역사·사회』: 612-619).

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Brzezinski, Zbigniew. 1983. Power and Principle: Memoirs of the National Security Adviser, 1977-1981. New York: Farrar, Straus, Giroux.

Fontaine, Roger W. 1977. “The End of a Beautiful Relationship.” Foreign Policy (Fall 1977).

Fowler, James. 1999. “The United States and South Korean Democratization.”

Political Science Quarterly 114(2).

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Jones, Charles O. 1988. The Trusteeship Presidency: Jimmy Carter and the United States Congress. Baton Rouge: Louisiana State University Press.

Jones, Rhodri Jeffreys. 1989. The CIA and American Democracy. New Haven: Yale University Press.

Kaufman, Burton I. 1993. The Presidency of James Earl Carter. Jr. Lawrence, University Press of Kansas.

Kirkpatrick, J. J. 1981. “Dictatorship and Double Standards.” In H. J. Wiarda, ed., Human Rights and U.S. Foreign Policy. Washington DC: American Enterprise Institute.

Lowenthal, Mark M. 1984. US Intelligence: Evolution and Anatomy. Washington DC: Praeger with CSIS.

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Rosati, Jerel A. 1994. “The Rise and Fall of America’s First Post-Cold War Foreign Policy.” In Herbert D. Rosenbaum and Alexej Ugrinsky (Eds.). Jimmy Carter: Foreign Policy and Post-Presidential Years. Westport: Greenwood Press.

Shorrock, Tim. 1996. “U.S. Leaders Knew of South Korean Crackdown.” Journal of Commerce. February 27.

Spencer, Doanld S. 1988. The Carter Implosion: Jimmy Carter and the Amateur Style of Diplomacy. New York: Prager.

Stoessinger, John G. 1985. Crusaders and Pragmatists: Movers of Modern American Foreign Policy. New York: W. W. Norton.

Turner, Stansfield. 1985. Secrecy and Democracy. Boston: Houghton Mifflin.

Vance, Cyrus. 1983. Hard Choice: Critical Years in America’s Foreign Policy. New York: Simon and Schuster.

Wickham, John A.1999. Korea on the Brink: From the “12/12 Incident” to the Kwangju Uprising, 1979-1980. Washington DC: National Defense University Press.