Labor regulation and economic change: a view on the Korean economic crisis

Abstract

This paper examines the internal structural conditions of the current Korean economic crisis with a special focus on the issue of labor regulation. This paper argues that the Korean economic crisis was structurally conditioned by the internal political processes that resulted in the crisis of labor regulation, which in turn negatively affected the competitiveness and profitability of Korean industries. From the 1960s to the mid 1980s, repressive and militaristic regulation practices imposed on labor facilitated the intensive mobilization of labor and conditioned the rapid economic growth in South Korea. In the late 1980s, however, these practices became ineffective in labor mobilization as a result of democratization and workers' empowerment. After the repressive system of labor regulation was dismantled, social actors, such as the state, business organizations, and labor unions, made diverse efforts to build a new system of labor regulation, which was unsuccessful. This crisis in labor regulation has negatively affected the growth of the Korean economy, and structurally conditioned the 1997 financial crisis. Under specific conditions, such as financial liberalization, the weakening of industrial policies, and the financial crisis in Southeast Asia, this crisis resulted in the financial turmoil in 1997.