Deepening social crisis underpins South Korean protests

By Ben McGrath
29 November 2016

Over the past five weeks, millions of people have poured onto the streets in South Korea to demand the resignation or impeachment of President Park Geun-hye over a scandal involving her longtime confidante Choi Soon-sil. Choi, with the aid of presidential secretaries, has been accused of creating a slush fund for Park, as well as taking part in deciding policy matters despite holding no governmental office.

The crisis reflects deep divisions within the political establishment, including Park’s ruling Saenuri Party, opened up by the worsening global economic slump and rising geopolitical tensions. For those taking part in the protests, however, the hostility to Park is being fuelled not only by the various allegations of corruption but more broadly by her administration’s sustained attack on working and living conditions.

The crisis of global capitalism has gripped South Korea no less than other countries. Last quarter, the economy grew by just 0.7 percent. The Bank of Korea is predicting that growth this year will reach only 2.7 percent and 2.8 percent next year. Exports fell to 3.2 percent in October from a year ago, generating worry in business circles. Exports to China, South Korea’s largest trading partner, have declined for 16 consecutive months. These trends are a far cry from the economic expansion South Korea once enjoyed as one of the supposed Asian “miracles” with annual growth rates of over 10 percent.

That high growth was extracted through the extreme exploitation of workers under the former military dictatorship. As workers fought back, the political establishment turned to so-called democrats like Kim Dae-jung to further their agenda. Since the Asian Financial Crisis of 1997-1998 both the democrats and conservatives have privatized national industries, leading to massive job losses, and casualized the labor force, turning positions into low-paid, part-time jobs.

Big business has been demanding deeper inroads into the social position of the working class, particularly greater “labor flexibility”—that is, the ability to fire workers and slash wages without restriction. However, the Park administration has been unable to force through her plans for this so-called labor reform.

At a recent event hosted by the Korea Economic Research Institute and the Korea Economic Association, participants attacked workers for “low productivity” and resort to strike action. “In the South Korean labor market, which is characterized by the lack of ease of employment and dismissal, some militant labor unions are engaged in irrational labor movements these days to affect the majority of workers,” said Jo Jang-ok, head of the Korea Economic Association.

For the working class, though, conditions are becoming unbearable. In the struggling shipbuilding industries, massive job cuts are underway. At the three largest manufacturers, Hyundai Heavy Industries, Daewoo Shipbuilding and Marine Engineering and Samsung Heavy Industries, 20,000 jobs have already been slashed as the companies undergo restructuring. An additional 20,000 workers are expected to be sacked by the end of the year. At the same time, the government is planning to bail out the companies to the tune of $9.6 billion through 2020.

While the so-called militant unions in the Korean Confederation of Trade Unions (KCTU) have staged some token strikes, in reality they have accepted the job cuts, with unions at smaller shipbuilders being in “harmony mood” with the companies.

Last month the unemployment rate reached 3.4 percent, according to Statistics Korea. For young people, the rate was 8.5 percent. However, the statistics do not take into account those who have stopped looking for work or are underemployed in part-time positions. The total real unemployment rate is likely around 10 percent, while according to Lee Jun-hyup of the Hyundai Research Institute, one in three young people aged 15-29 can be considered unemployed.

South Korean students spend long hours studying to enter top universities in the hope of finding employment after graduating, only to face a dwindling job market. There are 653,000 people currently preparing for jobs, the highest number ever. They are not counted among the unemployed, but are working toward passing exams or gaining additional licenses and certificates to improve their chances of finding a job.

Many students have expressed anger toward Park and Choi, who used her connections with the government to secure placement for her daughter at the Ewha Womans University, one of the country’s top institutions. For working class students, entry to these elite schools is already barred by high tuition fees and the cost of after-school academies and tutors necessary to pass the entry exams.

The top-ranking Seoul National University (SNU) has witnessed a sharp decline in the number of students accepted from regular high schools, that is, those without special or elite status. The proportion of SNU students from these schools fell from 56.43 percent in 2010 to 42.5 percent in 2014.

In 2012, only 1 percent of students from the lowest-income bracket were enrolled at elite schools like SNU, Yonsei University, Korea University and Ewha Womans University. The average for all four-year universities was 3.2 percent.

For working families, education is just one major cost driving up household debt, which reached an historic high of $1.1 trillion at the end of June, and is still growing. Housing under South Korea’s rental system demands people take out large loans nearly equal to the value of an apartment. While the government plans to implement a debt service ratio indicator to protect banks, as interest rates are likely to rise, households will be left on their own.

People are also increasingly cancelling installment savings accounts before reaching maturity as they can no longer afford to put money aside for the future. In September, cancellation of these savings accounts at six major banks stood at 45.2 percent, up 2.6 percentage points from the previous year.

“Installment savings accounts are the last bastion of protection and people tend to hold them until the last minute,” a bank official told the Korea Times. “The rise in the early cancellation rate can be seen as an indication that households are facing more difficult financial situations.”

Poverty is widespread, particularly among the elderly. In February, the Korea Herald cited a Korea Institute for Health and Social Affairs report which found that poverty rates were rising for households with breadwinners aged 34 or under, and with breadwinners over 65. For the elderly, the rate increased from 63.1 percent in 2006 to 63.8 percent in 2014—the highest of any advanced industrialised country.

None of the establishment parties has any answers to this deep social and economic crisis. The main opposition Minjoo (Democratic) Party of Korea, the People’s Party, and the Justice Party are all directing the public’s anger toward Park in the hopes of boosting their chances in next year’s presidential election. This includes their supporters in labor unions like the KCTU. Their denunciations of Park are to obscure the fact that the current conditions in South Korea are not the product of a single corrupt leader, but of the bankrupt capitalist system.