South Koreans spent this year's May Day holiday as you'd expect the inhabitants of any vibrant economy -- shopping.
The nation's more than 5 percent growth rate was corroborated by the masses filing through -- and spending money in -- the city's shopping districts. One, known as Myeung-dong, seemed especially animated as pop stars showed up to perform. That is, until some party-crashers arrived.
Just as Britney Spears-wannabes sang on a makeshift stage, dozens of anti-General Motors Corp protesters, banners in hand, filed through the crowd. In Korean, they chanted "Save Daewoo, Save it Now." The activists, employees of the same Daewoo Motor Corp purchased this week by GM, weren't a happy bunch.
The scene aptly dramatized the polarizing forces gnawing at the economy -- and indeed, Korean society -- at the moment.
On the one hand, Korea is one of the world's fastest-growing economies; it's expected to expand at 5.7 percent this year. The trend is returning living standards to pre-Asian-crisis levels and giving the nation an air of confidence missing for some time. On the other hand, labor strife is on the rise, and then some.
On Tuesday, for example, protesters wearing red headbands crashed GM's long-awaited signing ceremony. They attacked guards and shouted "General Motors leave." GM officials tried to downplay the fiasco, which forced the event to be relocated. To them, GM's pact to buy US$1.17 billion worth of Daewoo assets was what mattered, not labor rallies.
Nothing could be further from the truth. In recent days, commentators and investors have waxed on about how GM will treat Daewoo. Will folks in Detroit be sensitive to Korea's ways of doing things? The real question, however, may be how much say GM will have in its Korean investment. What if Korea's famously militant labor unions don't play along? It's not hard to figure out why labor groups are miffed: Globalization is rapidly changing life as this nation of 47 million knows it. Making Korea a bigger force in the global economy will require lots of restructuring, and unionized workers will be hit hard. They're fighting change, pitting them against the Kim Administration, which is pushing for it.
That tension makes Korea a fascinating test case of the pros and cons of opening up to the global economy. Within Asia's fourth-largest economy, you find powerful arguments for globalization and forceful ones against it. That's why the legacy of Kim Dae-jung's presidency is so pivotal for the entire global economy.
To the pro-globalization crowd, Korea is a clear success story because it stayed open after the 1997 Asian crisis and now it's prospering. Those opposed to the trend also claim Korea as their own, pointing to the social and political tensions bubbling up here. Hence Korea's place at the epicenter of the open-economy debate.
The Daewoo story is important for another reason: The company's history is a microcosm of Korea's in recent decades.
Daewoo's rise from practically nothing in the 1960s and its collapse in the 1990s traces the nation's own economic fortunes.
The company's success proved that Korea could in fact go from a poor agricultural economy to one that could compete with Japan -- and perhaps even the US.
At the same time Daewoo was zooming along, Korean per capita income soared. That was, until the Asian financial crisis shoulder-checked Koreans back many a year. Daewoo slid too, into bankruptcy, as fate would have it. In 1998, it began talks with GM -- its old ally -- over buying some of Daewoo's assets.
Daewoo's rise and fall mirrors Korea's. Like the nation, Daewoo was hit hard by the Asia crisis because it had overexpanded, was on the hook for outlandishly high pay packages and had been supplied with seemingly limitless bank lending.
By the time Asia's crisis arrived in 1997, Korea's auto industry had enough capacity to export more than four times the cars consumers wanted. When Daewoo collapsed, it was paying too much to workers it didn't need and carrying more plants at home and abroad than it needed. It had little choice but to face reality, which meant bankruptcy -- the biggest in Korean history.
That humiliating step didn't end Daewoo's ordeal, however.
Korea's militant labor unions argued that employee contracts remained valid and dug in for a long battle. In short, when the bad times arrived, generous labor union contracts made it virtually impossible for executives to cut jobs.
It may be 2002, but Korea is still grappling with the disconnect between companies that want to become globally competitive and workers fighting those efforts. In this way, the global economy also has much riding on Kim's success.
If Korea stays the course and the nation prospers, pro-globalization forces will have their argument to keep markets open. If not, the trends toward market opening could continue to slow down. That's not because protesters and activists want them to, but because leaders of key nations may be forced to close their economies, making them less vulnerable to the whims of markets.
The good news is that Kim's government remains committed to the global economy. If ever there were a time for South Korea's emergence on the world stage, this is it. Korea, more than ever, is thinking about its role in the world and what it can do to contribute to Asia and the global economy.
Yet, as Daewoo's case suggests, Seoul has more convincing to do at home than abroad. International investors, hopeful about Korea's outlook, have been pouring into its markets. That trend could be damaged if labor unions here stall the nation's efforts to reap the full benefits accorded to the most open economies.
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