The End of Developmental Citizenship?:

Economic Restructuring and Social Displacement in Post-Crisis South Korea

Chang Kyung-Sup, Ph.D

Professor of Sociology

Seoul National University

changks@snu.ac.kr

Contents of the Paper

1. Introduction 2. Developmental Citizenship vs. Social Citizenship 3. Financial Crisis Resolved through Proletarian Crisis 4. Bipolarization and On-the-Job Poverty 5. Arrival of Jobless Industrial Capitalism 6. Transition to Social Citizenship? 7. Exiting Jobless Industrial Capitalism 8. What Alternative? A Middle Way Politics? -------------------- * Please do not quote (except the summary of the paper).

Materials prepared for conference presentation only. Many tables and figures prepared for visual presentation here, while their sources are duly identified, have been directly extracted from the original publications and web print pages.

Presentation Summary

1) A decade after what South Koreans call “the IMF crisis” has transformed the South Korean economy and society in an irreversible direction. Although they have seemingly resuscitated their economy in a way as impressive as their earlier industrial buildup, most South Koreans express increasing fatigue and hopelessness about their socioeconomic status.

Presentation Summary

2) During the pre-crisis three decades, grassroots South Koreans had been enfranchised by the successive developmentalist governments in what I propose to call developmental citizenship. Then the South Korean developmental state managed to industrialize and expand the national economy at a pace that could incorporate almost all economically motivated individuals through increasing jobs and better incomes – but not through comprehensive social security benefits that, in European welfare states, constitute “social citizenship” in T. H. Marshall’s explanation. South Koreans responded to this dynamic economic process by fully mobilizing private material and human resources as economic investment.

Presentation Summary

3) The economic crisis of 1997 and its emergency rescue measures – in large part recommended by the IMF – dealt a fatal blow to this state-grassroots interactive developmentalism. As clearly shown in formal statistics, labor shedding was the most crucial measure for rescuing South Korean firms a big part of which were on the verge of bankruptcy. Even after the breathtaking moments were over, most of major firms continued to undertake organizational and technological restructuring in an employment-minimizing manner, and thereby got reborn as globally competitive leading exporters.

Presentation Summary

4) The sustained economic growth buttressed by phenomenal increases of export by a handful of major chaebol firms has not been accompanied by meaningful improvements in grassroots employment and livelihood. Instead, temporary and underpaid jobs have become normal, and on-the-job poverty has increased sharply. Income inequality has kept expanding continuously, and even those under absolute poverty lines have drastically increased in numbers and proportions.

Presentation Summary

5) Such social polarization may now worry major South Korean firms far less than before because they are not as much dependent upon domestic labor supplies as before and potentially because their ownership, if not their management, has been internationalized at appalling speeds. Foreign corporate shareholders would not wish for more when South Korea’s economic growth is accounted for mostly by rapidly rising corporate income (as opposed to stagnant labor income).

Presentation Summary

6) The two relatively less conservative (not progressive!) governments under Kim Dae-Jung and Roh Moo-Hyun respectively did try to come to grassroots South Koreans’ rescue by providing various elements of the “social safety net”. However, even after increasing social expenditure many years, South Korea’s public budget for social security, not to mention its social services, is nowhere near those of serious social policy states in the West. Income transfers through public welfare programs seem to have only marginal effects on reducing inequality and poverty.

Presentation Summary

7) Too many South Koreans appear both helpless and demoted as shown by various actions of exiting or wishing to exit the jobless industrial capitalist system: exit from the (flexible) labor market (i.e., frenzied pursuit of jobs in civil service and public corporations); exit from the economy altogether (i.e., massive youth withdrawal from job search, often called “disappointment unemployment” or silmangsileop); exit and indirect exit from the country (i.e., sustained outmigration and sending children abroad in massive numbers); exit from the family (i.e., delaying marriage, divorcing, reducing fertility, deserting or separating from family, all at disconcerting rates); and even exit from existence (i.e., committing suicide at internationally headline-making rates).

Presentation Summary

8) More disheartening than these social and economic miseries is South Korean politics. A presidential election approaching just several months away, all these economic troubles and social dilemmas of grassroots South Koreans apparently fail to constitute a serious political agenda. This inefficacious governance system (in which almost every politician proclaims to be “centrist” for the sake of ideological safety) is quite likely to accelerate desperate individual actions of exiting for many years to come.

2-1. employed people and unemployment rate, 1963-1997 (NSO, 1988, Fifth Years’ Economic and Social Change Seen through Statistics, p.97)

_________________________________________________________ total number of unemployment employed persons (1,000) rate (%) _________________________________________________________ 1963 7563 8.1 1970 9617 4.4 1980 13683 5.2 1990 18085 2.4 1997 21048 2.6

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2-2. sectoral composition of employment, 1963-1997 (NSO, 1988, Fifth Years’ Economic and Social Change Seen through Statistics, p.99)

_________________________________________________________ agriculture/ manufacturing/ services fishery mining _________________________________________________________ 1963 63.0 8.7 28.3 1970 50.4 14.3 35.3 1980 34.0 22.5 43.5 1990 17.9 27.6 54.4 1997 11.0 21.4 67.6

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2-3. average monthly wage of regular employees by industry, 1970-1997 (1000 won) (NSO, 1988, Fifth Years’ Economic and Social Change Seen through Statistics, p.105)

___________________________________________________________ entire manufacturing construction finance, real nonfarm estate, etc. ___________________________________________________________ 1970 17.8 14.3 24.2 37.9 1980 176.1 146.7 257.7 281.6 1990 642.3 590.8 745.4 852.3 1997 1463.3 1326.2 1623.6 1646.3 ___________________________________________________________

2-4. government expenditure in social welfare, etc., 1957-1997 (NSO, 1988, Fifth Years’ Economic and Social Change Seen through Statistics, p.125)

___________________________________________________________ total health, defense expenditure in social % 100 million won security % ___________________________________________________________ 1960 420 5.2 35.0 1970 4413 4.0 23.2 1980 76820 6.7 30.6 1990 332961 9.8 20.0 1996 838410 10.2 15.0

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2-5. household expenditure in education, 1963-1997 (NSO, 1988, Fifth Years’ Economic and Social Change Seen through Statistics, p.224)

_____________________________________________________________ urban rural -------------------- -------------------- annual % of annual % of educational total educational total expenses living expenses living in won expenses in won expenses _____________________________________________________________ 1963 4200 5.6 2650 3.4 1970 22320 7.2 14185 6.8 1980 125676 5.8 200283 9.4 1990 664704 8.1 862435 10.5 1997 1903380 10.6 1753798 10.3 _____________________________________________________________

2-6. savings and investment rate, 1953-1997 (NSO, 1988, Fifth Years’ Economic and Social Change Seen through Statistics, p.121)

_____________________________________________________________ savings rate l -------------------- domestic total total private portion investment rate _____________________________________________________________ 1953 13.1 11.1 14.7 1960 9.0 5.0 10.0 1970 18.1 12.1 24.3 1980 23.2 18.1 31.9 1990 35.9 27.4 37.1 1997 34.6 24.3 35.3

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3-1. corporate performance per worker during crisis (The Bank of Korea, 1998, "The Analysis of Corporate Management in the First Half of 1998“, unpublished survey report)

Analysis of Corporate Management Performance in the First Halves of 1997-1998 (n=2,328) __________________________________________________________ Performance item 1997 1998 __________________________________________________________ Total sales increase rate 9.1 5.0 Sales profit ratio 7.5 8.8 Total profit ratio 1.4 -0.4 Per worker sales increase rate 13.9 20.0 Per worker value-added increase rate 11.4 9.3 Per worker expense increase rate 8.3 -4.7 Worker expenses to sales ratio 12.0 9.4 Finance costs to sales ratio 6.2 9.3 Total debt ratio (year-end for 1995-97) 396.3 387.0 __________________________________________________________

3-2. post-crisis unemployment rate (NSO, 2006, Social Indicators in Korea 2006, p.237)

3-3. employment by work status,1985-2006 (NSO, 2006, Social Indicators in Korea 2006, p.244)

3-4. gap between regular and non-regular workers, 2003 (Yoon Jin Ho, 2005, p.120)

4-1. average monthly income of urban worker households (NSO, 2006,Social Indicators in Korea 2006, p.216)

4-2. household income by richest 20% vs. poorest 20% (www.yonhapnews.co.kr (Yonhapnews),15 May 2007, based upon data from the National Statistical Office)

4-3. GINI index before and after crisis (Lee Hyun-Ju, et al., 2006, p.67)

4-4. poverty rate before and after crisis (Lee Hyun-Ju, et al., 2006, p.61)

4-5. proportion of on-the-job poverty before and after crisis (Lee Hyun-Ju, et al., 2006, p.132)

5-1. jobless economic growth (10,000 new jobs per 1% growth) (www.president.go.kr (Blue House Briefing), 29 March 2006)

5-2. jobless export growth (new jobs per billion won export) (www.joins.com (JoongAng Daily), 20 December 2006)

5-3. % labor income vs. % capital income, 1980-2004 (The Bank of Korea, Jan 2005)

5-4. individual vs. corporate disposable income growth (Yoon Jin Ho, 2005, p.115)

5-5. foreigner shareholding in major South Korea companies (2006 end) (www.heraldbiz.com (Herald Business), 23 April 2007)

6-1. social expenditure vs. GDP in 2004 in international comparison (www.khan.co.kr (Kyunghyang Daily), 4 March 2007, based upon data from OECD)

6-2. relative poverty rate(% less than 50% of the median income) before and after public transfers (Ku Inhoe, 2006, p.113)

6-3. GINI indices of market vs. disposable income (Ku Inhoe, 2006, p.109)

7-1. workplaces preferred by youth aged 15-24 (2006) – exit from the market (www.chosun.com (Chosun Ilbo), 5 December 2006)

7-2. economically inactive youth aged 15-24 – exit from the economy (www.donga.com (Dong-A Ilbo), 4 March 2007, based upon data from the National Statistical Office)

7-3. heads of dispersed families, 2006 – exit from the country (NSO, 2006, Social Indicators in Korea 2006, p.206)

7-4. age at first marriage be sex, 1990-2005 – exit from the family (NSO, 2006, Social Indicators in Korea 2006, p.191)

7-5. crude marriage and divorce rates,1990-2005 – exit from the family (NSO, 2006, Social Indicators in Korea 2006, p.182)

7-6. total fertility rate, 1985-2005 – exit from the family (NSO, 2006, Social Indicators in Korea 2006, p.150)

7-7. elderly living alone or with spouse only,1995-2005 – exit from the family (NSO, 2006, Social Indicators in Korea 2006, p.200)

7-8. suicide rate of OECD countries (per 100,000) – exit from existence (www.donga.com (Dong-A Ilbo), 19 September 2006)

Thank You

3-2. post-crisis unemployment rate (NSO, 2006, Social Indicators in Korea 2006, p.237) – to be used later

_________________________________________________________________________________________ total / farm nonfarm / men women / up to high college / youth middle school or more aged school 15-29 _________________________________________________________________________________________ 1997 2.6 0.7 2.9 2.8 2.3 2.2 3.3 3.0 5.7 1998 7.0 1.8 7.7 7.8 5.7 7.9 8.3 5.9 12.2 1999 6.3 1.7 7.0 7.2 5.1 6.9 7.6 5.4 10.9 2000 4.4 1.3 4.8 5.0 3.6 4.6 5.1 4.2 8.1

2001 4.0 1.2 4.3 4.5 3.3 4.0 4.6 4.0 7.9 2002 3.3 1.0 3.6 3.7 2.8 3.0 3.7 3.7 7.0 2003 3.6 0.9 3.9 3.8 3.3 3.0 4.3 3.6 8.0 2004 3.7 1.1 3.9 3.9 3.4 3.3 4.5 3.5 8.3 2005 3.7 1.0 4.0 4.0 3.4 3.3 4.6 3.4 8.0

2006 3.5 1.2 3.7 3.8 2.9 2.4 4.1 3.4 7.9 _________________________________________________________________________________________

3-3-1. employment by work status,1990-2006 (NSO, 2006, Social Indicators in Korea 2006, p.244) – to be used later

_____________________________________________________________ total wage % employees workers in -------------------------- 1000 persons regular temporary daily _____________________________________________________________ 1990 10950 54.2 29.0 16.8 1995 12899 58.1 27.9 14.0 2000 13360 47.9 34.5 17.6 2005 15185 52.1 33.3 14.6

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