Labor and Politics in East Asia: The Case of Failure of the Encompassing Labor Organization in Korea

Abstract

Olsonian theory supposes that when labor unions are organized in an encompassing manner at the industrial and national levels, they can better prevent collective action problems and bring about more stable industrial relations. This theory regards the encompassing labor organization as a positive institution. However, the Korean case shows weak theoretical and empirical relevance for the proposition, as institutionalized talks between government, business, and labor did not contribute to establishing stability in industrial relations. In some respects, the situation only worsened. The Korean case therefore suggests that the optimistic propositions of encompassing organizations of labor require a careful reassessment. Key words: South Korea, economic development in East Asia, industrial relations Introduction The East Asian developmental state model that achieved industrialization through the state's strategic intervention has been challenged since the late 1990s by the neo-liberal paradigm, which emphasizes free markets and comparative advantage in international trade. East Asian states enforced market-oriented policies to create a more flexible labor market and a more competitive corporate structure. In the case of Japan, however, the unemployment rate increased owing to the corporate structural adjustment drive implemented during its long-term depression in the 1990s, which made employment and subsistence of labor the focal point of industrial relations. In an attempt to overcome the crisis, the employers' organization and the federation of unions reached an agreement on the stability of employment.1 It has been argued that the joint consultation system based upon harmony and cooperation contributed to the stabilization of industrial relations and the recovery of the economy in Japan. What about the case of Korea? The Kim Dae-jung government (1998-2003) initiated a social pact between the government, business, and labor in an attempt to overcome the economic crisis of 1997. It launched the Tripartite Commission on January 15, 1998 and succeeded in persuading business and labor to reach the so-called 9 February Social Pact, which stipulated a mass redundancy of regular workers and dispatched workers. However, the Tripartite Commission, in effect, stopped operating as the Korean Confederation of Trade Unions (KCTU) and the Federation of Korean Trade Unions (FKTU) had seceded from it in February and April 1999, respectively. The third period of the Tripartite Commission was reluctantly resumed in September 1999, but the KCTU still refused to return to the bargaining table. The socioeconomic condition of the concluding social pact in 1998 was poor. Since his days as a presidential candidate, Kim Dae-jung had considered introducing social corporatism2 as well as a tripartite social pact with a focus on realizing stable industrial relations.3 However, the 9 February Social Pact of 1998 was the result of the government's coerced political bargaining between business and labor. It did not result from a rational choice of participating actors. The existing studies proposing to introduce a social pact in Korea expected that the corporatist way of interest mediation would contribute to economic stabilization and development.4 It was based upon the Olsonian logic that the stability of industrial relations can be better achieved when labor organizations are encompassing-that is to say, when they are centrally organized at an industrial or a national level rather than consisting of individual, firm-based labor organizations such as are usually found in the Anglo-American world.5 However, the social pact lasted for only a year in Korea. Since 1999, it has not been revived. Neither business nor labor appears to have any intentions to continue working on interest mediation through the Tripartite Commission. Moreover, it is doubtful that the Tripartite Commission had practically contributed to creating stable industrial relations. …