The Koreas

South Korea Needs a Welfare State

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The Koreas

South Korea Needs a Welfare State

As a developed country, the South Korean government must do more to make the economy fair for all.

Broadly speaking, post-democratic transition South Korea (from 1987 on) can be divided into two periods: before 1997 and after.

The 1997 Asian Financial Crisis (known locally as the “IMF Crisis”) hit South Korea particularly hard. In exchange for an International Monetary Fund (IMF) bailout package, South Korea implemented structural adjustment policies. One such adjustment, made to the Labor Standards Act, introduced systems for rationalization at Korea’s biggest firms. The Act on the Protection, Etc., of Dispatched Workers was also implemented; this bill recognized the right of employers to hire temporary workers on short-term contracts. In short, employees became dispensable and employment uncertain. “Lifetime employment,” a short-lived phenomenon in the era of South Korean democracy, was over. The effects are now making themselves seen.

Earlier this week, Hankyoreh ran an article entitled “More than 2 million in S. Korea living as subcontractor workers.” The article can be read as a condensed history of post-1997 labor relations, or how the IMF crisis restructured South Korean society. The author notes that despite a full recovery from the crisis by 2003-2004, the restructuring of labor relations has generated a new problem. While businesses recovered lost capital, the issue of irregular employment has remained and, in many ways, been institutionalized.

The author of the Hankyoreh article doesn’t mention it, but what happened in South Korea in the late 1990s is not unique to Korea. The rise of “nonstandard work” is happening all across the world. Indeed, sociologist Gøsta Esping-Andersen, best known for his book The Three Worlds of Welfare Capitalism, has identified the increase of part-time and temporary work as a primary trend in post-industrial societies.

Global context and timing is important, because when something happens in world-history time tends to effect how it happens. For example, the timing of South Korea’s industrialization (“late” in historical time) meant that it needn’t worry as much about creation or innovation, and could instead focus its attention on “learning” or adopting existing technologies. This is a main contribution of Alice Amsden’s highly regarded study of South Korea’s industrialization, Asia’s Next Giant: South Korea and Late Industrialization.

The context and timing of Korea’s labor problem is not particularly good. The time in world history for welfare state expansion seems to have passed. When the rest of the developed world was expanding social safety nets and other welfare state policies, South Korea had only just hit its industrialization stride. Now, in South Korea’s post-industrial period, where employment uncertainty is on the rise and welfare protection needed, the global trend is towards retrenchment, not expansion, of social safety nets.

If there is one thing South Korea is known for, it is its interconnectedness to and dependence on global capitalism and the ideas that underpin it. As goes the world, so goes South Korea. It wasn’t just the fact that long-time opposition candidate and man-of-the-people Kim Dae-jung presided over the implementation of the IMF-backed adjustments; South Korea began its drift towards neo-liberalism many years before then. It began in the 1980s, when Korea was sending its bureaucratic elites to the United States for economic training; the 1980s just so happened to be the high point for neoliberal thought. It’s no coincidence, note Chang Ha-joon and Peter Evans, that the bureaucrats who were trained in the United States later dismantled their own bureaucracy (the Economic Planning Bureau). But it is ironic.

Of course, it needn’t be this way. In fact, political scientist Joseph Wong found in his comparative study of Taiwanese and South Korean health care systems that the “politics of democratic transition” lead to welfare state expansion in the immediate post-transition periods. Retrenchment isn’t inevitable. Governments must simply be incentivized to expand social policies — and willing to pay for it (i.e, raise taxes).

Whether the dismantling of Korea’s developmental state in the early- to mid-1990s actually lead to Korea’s financial crisis, as Chang argued in 1998, is a matter of debate. But what seems more certain is that the state and society in post-1997 Korea are badly out of sync (as are state-society relations elsewhere). South Korea has one of the world’s biggest economies, shouldn’t it follow that the state ensure that all is fair? Or, as pro-Union MP Gordon Brown once said: “From each according to his ability to contribute, to each according to his needs. And that is the best principle that can govern life of [a] country today.”