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This is to certify that the

thesis entitled

The South Korean Automobile Industry:
A Political Economic Analysis

presented by

Kwangmin Park

has been accepted towards fulfillment
of the requirements for

M.A. degree in Sociology

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. Date 22 f—Eflyfifil /?57

 

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MSU Is An Affirmulve AdlorVEquel Opportunity Inetltulon
WWI

THE SOUTH KOREAN AUTOMOBILE INDUSTRY
: A POLITICAL ECONOMIC ANALYSIS

BY

Kwangmin Park

A THESIS

. Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

MASTER OF ARTS

Department of Sociology

1989

ABSTRACT

THE SOUTH KOREAN AUTOMOBILE INDUSTRY: A

POLITICAL ECONOMIC ANALYSIS

BY

Kwangmin Park

The main purpose of this study is to examine the
capitalist development of the South Korean automobile
industry within a Marxian framework in which three
institutional actors of the state, capital and labor have
been interwoven during the period of 1945 to the present.

Under the assumption that capital accumulation
manifests itself in the expansion of monopoly capital on the
one hand and in the relative exploitation of labor on the
other, the rapid expansion of the Korean automobile industry
is argued to stem from structural dynamics in which initial
capital accumulation had a momentum for the later
monopolization under the privilege of the state.

Based on the fundamental premise of the hostile

Kwangmin Park

relationship between capital and labor, it was claimed that

the South Korean state has actively played the promotional
role in capital accumulation for capital while limiting the
portion of labor in its contribution to the accumulation.

ACKNOWLEDGMENTS

I would like to give my great thanks to Dr. Richard
Hill who has helped me finish this study from the beginning.
Not only did he help me on the research but he guided me to
target the area of my thesis. Also, I'd like to extend the
appreciation to Dr. Ruth Hamilton and Dr. Kevin Kelly, both
of whom patiently read my early draft and recommended many
useful comments.

‘ My Korean colleagues in the sociology department are
also deserving of my thanks for their critical discussions
with me. In addition, I would like to thank Sangki Han for
his helpful comments and the time he took in discussions
with me, his insight was greatly appreciated.

Finally, I'd like to say thank you to my wife and
children for being patient and supportive of me during the

writing of this thesis.

ii

TABLE OF CONTENTS

I. INTRODUCTION .0.0.0.0.0....OOOOOOOOOOOOOOOOOOOOOOO l

A. AN INTRODUCTORY REMARK OOOCOCCCOC0.0.0.0...000000 1
B. THEORETICAL ISSUES OOOOOOOOOOOOOOOOOOOOOOOOOOO... 3

II. THE RATIONALE AND PURPOSE OF THE STUDY ............ 10
III. THE SCOPE AND METHOD OF THE STUDY 0. O OOOOOOOOOOOOOO 13

A. THE SCOPE OF THE STUDY 00....OOOOOOOOOOOOOOOOQOO 13
B. THE METHOD OF THE STUDY OOOOOOOOIOOIOOOOOOOOOOOO 15

IV. A POLITICAL ECONOMIC ANALYSIS OF THE KOREAN
AUTOMOBILE INDUSTRY OOOOOCOOCOOOOOOOOCOOOOOOOOOOO 18

A. THE PRIMITIVE STAGE OF THE KOREAN AUTO INDUSTRY
(1945-1961) ................................... 19
1. THE MERCANTILE NATURE OF CAPITAL ........... 22
2. THE RELATIONS OF CAPITAL TO STATE .......... 26
3. THE UNSTABLE STRUCTURE OF THE LABOR FORCE .. 34

B. THE FORMATION OF THE AUTO INDUSTRY (1962-1973) . 35
1. FOREIGN LOANS AS A SOURCE OF CAPITAL

ACCUMULATION ............................... 37

2. THE EMERGENCE OF MONOPOLY CAPITAL .......... 40

3. THE NATURE OF KOREAN MONOPOLY CAPITAL ...... 42

4. THE RELATIONS OF AUTO CAPITAL TO CHAEBOLS .. 47

5. THE IMPLEMENTATION OF STATE'S ECONOMIC PLAN. 48

6. THE MAKING OF WORKING CLASS ................ 51

C. THE 'TAKE-OFF' OF THE AUTO INDUSTRY (1974-1984). 53
1. EXPANSION OF THE MONOPOLY CAPITAL .......... 54
2. 'AUTO CAPITAL' ............................. 60
3. LABOR'S WORKING CONDITIONS ................. 65
4. THE STATE'S ROLE IN PROMOTING THE AUTO
CAPITAL .................................... 74
5. THE STATE'S CONTROL OF LABOR ............... 77
6. THE LABOR MOVEMENTS ........................ 82

D. THE EXPANSION OF THE AUTO INDUSTRY
(1985-PRESENT) ................................. 85
1. THE CURRENT DEVELOPMENT OF THE AUTO
INDUSTRY ................................... 86
. THE CHANGING RELATIONS OF THE STATE
TO CAPITAL ................................. 88
LABOR STRUGGLES AND EFFECTS ................ 90
THE LINKAGE WITH THE WORLD ECONOMY ......... 95

be.» M
ee

iii

V. CONCLUSION OOOOOOOOOOOOO0.0.0.0.000...0.0.0.000...

VI. IMPLICATIONS OOOOOOOOOOOOOOOOOOOO0......

APPENDIX 00.0.0000...0..OIOOOOOOOOOOOOOOOOOOOO00.00....

ENDNOTES 00.......OOOOOOOOOOOOOOOOOOCOCOOIOOOOOOOOOOOOO

BIBLIOGRAPHY 0.00.00.00.00.00000000000000000000.0.0....

LIST OF TABLES

iv

102
165
197
108

113

LI ST OF TABLES

1. Trends of the Leading Industries in S.Korea
(19605, 708, 805) ................................ 20
2. Foreign Aid from the 0.8. (1945-1961) .............. 27
3. Contents of Foreign Aid (1945-1961) ................ 31
4. Number of Employees in the Labor Force (1953-1968) . 35
5. Amounts of Foreign Capital (Loans and Investment)
(1962-1971) ....................................... 38
. Increasing Trend of Large Companies (1955-1983) .... 41
. S.Korean Chaebols: Distribution of Ownership (1982). 43
. Stock Ownership of Banks by Chaebol (%) ............ 46
. Increasing Trend of Wage Workers (1968-1980) ....... 52
0. A Comparison of Major Chaebols' Subsidiaries
(1974, 1986) ....................................... 55
11. Conglomerates' Share in Manufacturing (%)
(1973-1982) 0000000000000...ooooooooooooooooooooooo 57
12. The Consolidation of Firms by Major Chaebols
(1960-1986) coco...coco...0000.00.00.00.00000000000 59
13. Employment in the Manufacturing Sectors by Chaebols
(1977-1982) coco-coo...oooooooooooooooooooooooooooo 61
14. The Percent of Employment by Hours Worked Weekly
(1969-1984) ......OOOOOOOOOOOOOOOOO....OOOOOOOOOOOO 66
15. A Comparison of Weekly Worked Hours by Country in
Manufacturing (1982) ............................... 67
16. Average Monthly Wage Ratio By Country .............. 68
17. Rate of Wage Increase Compared to Productivity
Increase (1971-1980) ococo.so.oooooooooooooooooooooo 70
18. A Comparison of Hourly Compensation By Country
(1977) oboe-cocoa...a.one.ooooooooooooooooooooooooo 71
19. Wage and Labor Productivity by Country
in the Auto Industry (1985) ....................... 73
20. Number of Labor Disputes By Union Existence
(1975‘1979) 90.000.00.000...coco-00.000.000.00...so. 79
21. Union Membership and Union Organization Rate
(1955-1981) 00000000000000.0000...00000000000000... 84
22. Number of Labor Disputes and Reasons (1974-1981) ... 93
23. Ratio of Exports to the Production of Vehicles
(1977-1987) coco...coco...sooooooooooooooooooooooooo 97

I . INTRODUCTION

A. An Introductory Remark

Over the last twenty-five years, the Republio rf Korea
(S.Korea) has become one of the fastest growing industrial
countries. Like other Newly Industrializing Countries
(NICs).[1] S.Korea has been credited with a remarkable
statistical record, especially in terms of growth rates in
income and GNP per capita and manufacturing employment,
output and exports. In particular, the automobile industry
(auto vehicle or auto industry) has demonstrated dramatic
growth. For example, whereas its production capacity was
merely 2,000 units in 1962, S.Korea produced around 1
million of cars in 1987.

Since the initial shipment of Ponys - one model of
Hyundai's passenger car to the Canadian market in 1984, the
amount of automobile exports has increased substantially.
The amount of automobile exports reached about 675,000 -over
half the total units produced in 1987. Thus, it is not
surprising that the United States (the largest importing
country of S.Korean automobiles produced in S.Korea) watched
the S.Korean automobiles make aggressive inroads into the
domestic market.

In general terms, the auto industry requires huge

amounts of capital. Many of the largest global companies

2

such as General Motors, Ford, and Toyota etc, are auto
makers. The world auto industry has been virtually
dominated by those Big Companies. For example, out of the
total output of vehicles in 1983, these three firms
accounted for 45.7 percent of production while ten leading
producers controlled 86.4 percent (Jenkins, l987:2). The
production of auto vehicles of S.Korean manufacturers is
“second only to Japan in East Asia. No other country in
Eastern NICs has been able to launch the same large-scale
mass production project with their own internal resources.
However, we see 'successful' auto industries in some Latin
American NICs. For example, Brazil had already-developed
auto industry in the 1950s and produced around 1.2 million
motor vehicles in 1980 while S.Korea had only attained a
level of 123,000 thousand units.[2]

One of the critical factors affecting the growth of the
Brazilian auto industry was the strong involvement of TNCs
(Transnational corporations) since the late 19103. Ford
Motors of the 0.8. set up Brazil's first assembly plant.
Since the initial start-up of vehicle production, 0.8. and
European TNCs have expanded assembly operations in Brazil.
Thus, the current picture of the Brazil auto industry
involves its domination by auto TNCs.[3] In terms of the
vehicle production, Volkswagen ranked first in 1976,
followed by General Motors and Ford. (R.Kronish, 1984:77

table 3.1)

3
Like Brazil, Argentina and Mexico provide a parallel
example of domination by foreign capital in the automobile
industry; The leading auto industries in Brazil, Mexico,
and Argentina are entirely owned and run by TNCs of the
United States (GM, Ford, and Chrysler), Germany

(Volkswagen), Italy (Fiat), France (Renault), Japan (Toyota,
Nissan) and so on.

On the contrary, the S. Korean auto industry presents a
very different picture. In S.Korea, there are no TNCs who
entirely own and/or participate in the management of local
auto firms. At best, GM has half of outstanding equity
shares in Daewoo Motors. What this fact means is that the
Korean domestic auto companies control their own resources

independent of the TNCs.

B. Theoretical Issues

The recent literature on the growth of the newly-
industrialized countries (NICs) or semi-industrialized
countries has posed a number of questions.[4] Among those
issues which Jenkins (1985) summarized in accounting for the
relationship between internationalization of capital and the
NICs, the following two questions seem to deserve our

attention for later analysis.

4
(1) What are the major factors underlying the
industrial growth in the semi-industrialized
countries? Are they external or internal, i.e.,
capital accumulation on a world scale or state's

policies towards more ‘open' market strategies?

(2) To what extent has the growth of the semi-
industrialized countries been associated with the
activities of the transnational corporations (TNCs)?
Has semi-industrialization been associated with a

significant indigenous base of accumulation? (p.60).

At first glance, one can see that the analytic
distinction between these two questions is not so clear.
For the 'externality' of the first question is not very
different from the TNCs' activities in the second.
Likewise, the state's strategy is closely related to
indigenous capital accumulation. Keeping in mind the
interlocked relations mentioned above, let us move on.

To answer these questions, we need a comprehensive and
detailed analysis. Undoubtedly, they are not easily
answered at the level of a specific industrial sector, i.e.,
textile, electronics, or automobiles and so on.
Nonetheless, i4: is difficult to deny that those studies
make a partial contribution towards clarifying these

questions, despite their limits to generalization. ‘For

5

example, Jenkins' (1987) thoughtful study on the issue of
semi-industrialization of Latin American countries such as
Brazil, Mexico, and Argentina was accomplished through the
detailed analysis of the automobile industry within the
framework of internationalization of capital, interplayed
between TNCs and 'host' countries. And Cho (1985a) provides
an explanation for export-oriented industrialization, by
examining textile and electronics industries in S.Korea
within the framework.of the world economy. Again, in the S.
Korean context, Cho (1985b) suggests a changing pattern to
the international division of labor, in her study of an
electronics industry which has moved its production sites
from a developing country to the Silicon Valley in the
United States.

One of the common modes of inquiry in those studies
appears that there are many stresses on externality of the
world capitalist economy. [5] Let me again take an example
from Jenkins (1987). The development of the auto industry
among those countries specified above is explained by the
global movement of capital (internationalization of
capital). Moreover, he tries to show a similarity to his
<earlier study (1985) among seven major semi-industrialized
countries involved in manufacturing automobiban Hsa
orjjreibthz rE the development of those countries is the
interaction between the government's policies and the major

auto TNCs. What is of interest is that S. Korea, one of the

6
countries in his category of semi-industrialized countries,

is treated as an exceptional case. Therefore, the export of

automobibaf unrluced in S. Korea in recent years was seen as
deriving from "autonomous expansion by local capital", not
from TNCs, as in most other semi-industrialized countries.

As far as the S. Korean auto industry is concerned, it

is possible to locate the source of capital movement in the
auto industry as internal to the nation. Yet, it does not
deny the significance of global capital in the world
economy. For instance, the recent exports of S. Kbrean
automobiles of Daewoo and Kia to the 0.5. is closely
connected with GM and Ford Motors, respectively. But the
interplay between the local capital and the TNCs can not
adequately explain the way in which domestic capital has
been accumulated for the later development in what
conditions. Rather than focussing on conditions external to
S.Korea, more concentration is required on the internal
structure of the country.

In Latin America, the United States after World War II
had been deeply involved in the construction of the economy.
In the process, TNCs developed interests in the auto
businesses of those countries. Despite the internal
differences Jenkins (1987) claims among those three
countries - the nature of states and labor union, etc, it is

the TNCs capital that contributed to the current state of

their auto industries. Depending on the internal or

7
historical specificities, Jenkins found a different degree
of the development among their industries. For example,
Brazil has successfully induced TNC-investment because of
its ability to reduce labor disputes. What is important
here is the fact that the primary force of the development
is the existence of large capital (in this case fbreign

direct investment).

Given that the capitalist development of the automobile
industry is due to the process of capital accumulation in
that industrial sector, it is quite reasonable to take into
account the capitalist industrialization in developing
countries in the broader frame of view (capital accumulation
is not, of course, a purely economic matter, but it entails
social relations of capital and labor). Even if defined as

such, it is true that there are various interpretations to

Third World industrialization. As mentioned previously, I
will focus primarily on the internal questions.

It was Hamilton (1983) who helped to integrate the
conceptual dilemma between “impossibility" and
”inevitability" pose by the dependency schools and Warren's
theory (1980) respectively. According to Hamilton, the
former fails to explain the internal dynamism, by solely
emphasizing the imperialist capital logic of self-expansion,
thus denying any possibility of capital accumulation in
peripheral countries. Meanwhile, Warren is criticized for

preserving the linear moving force of capital and neglecting

8
the limits and constraints imposed on it, despite his
profound insights into its internal factors. Hamilton
utilizes a: 'combined' analysis which locates both the
appearance of industrialization of a certain form in the
changing structure of class relation and sets it within the
international capitalist economy.

Turning to the specific case of S. Korea, the rapid
development of industrialization was often attributed to
such structural factors as foreign capital, cheap labor
costs, and the government's export-led strategy.
Considerable literature focused either on the dependent
nature of economic growth and the incorporation of its
economic structure into the global division of labor
(imperialism), or well-planned government's development
strategies. They explain in one way or another how the
nation has grown from an agricultural society and has
rapidly industrialized within a short time of twenty-five
years or so.

From a dependency perspective, the huge amounts of
foreign capital (over 40 billion dollars in 1987) was
crucial to the current economic growth. It also placed
greater emphasis on the imperialist character of world
economy and how rapid economic growth (industrialization)
would be impossible but for the expense of the working
class. In general, the overtones of its interpretatnni

carried the unstable nature of development by largely

9
focusing on the vulnerability of S. Korea to external
forces.

We also find many 'official' explanations of the
subject matter before us. They usually gave the priority of
causality for the S. Korean economic growth to the
government‘s strong commitment. According to this view, it

becomes clear that the state is regarded as a neutral agent,

having no class interests. The state is aloof to the
'1ower' level of economic sphere. In an extreme case, it
would be claimed that when the state's poliotaf -ana ptnjby
established, there are few concerns about the economic
growth in the future.

In examining the rapid capital accumulation of the S.
Korean auto industry in this study, I intend to focus on the
internal (rather than external) dynamics leading toward the
rapid capital accumulation on the basis of inter-relations
of three institutional actors - capital, labor, and state.
Thus the following is taken as an analytical framework: 1)
the nature and processes of capital accumulation in general
as well as in the auto industry; 2) the role played by the
state in promoting or providing favorable conditions under
which capitalist classes could turn them to their benefits;
3) the role of foreign capital in various forms in the
course of industrialization; and 4) the workers costs
embedded in reproducing the capitalist relations of

production whereby capital was accumulated.

II. THE RATIONALE AND PURPOSE OF THE STUDY

In terms of both questions and framework posed above,
the rationale behind the selection of the automobile
industry as a subject matter is closely associated with the
critical recognition that, by contrast to the studies on
Latin America countries, few scholarly works exist dealing
with the auto industry of S. Korea within the framework of
political economy - understood as a part of capitalist
development. In other words, most studies done by S. Korean
scholars usually placed a greater emphasis on the
development of the S. Korean auto industry from an
'official' viewpoint.[6] Yet there are considerable amounts
of literature on the auto industry with reference to the
world market. They are either concerned with the current
pattern of circulation of automobiles and the prospect of
the industry, or treat the industry as a subject of
exploring or at best testing within a theoretical model-
i.e., relocation of production sites.[7].

Therefore, in these works it is extremely difficult to
single out such a critical insight as I try to do - a
significant and comprehensive analysis ‘of the particular
case of the Korean auto industry. In other words, it
becomes inappropriate to construct 'intended' theoretical

references from those works with a possible exception of

general conceptualizations of how the world auto market has

10

11
developed or what it is goiex to become, etc. What is
lacking in those studies is a specific analysis of the
industry in such a way as to provide a systemic account of
the structural dynamism underlying the changing pattern of
development drawing upon the concrete relation of, say,
production. Nonetheless it is still understandable because

they are not interested in such matters that I prefer.

Contrary to those studies, however, Jenkins (1987)
provides a very insightful analysis of the pattern and

development of the auto industry in Brazil, Mexico and

Argentina within the framework of ”Marxian political

economy”. In the process, as mentioned earlier, he provides

an account of the complex interplay between transnational
corporations and the 'host' countries in historical and
politico-economic context. By comparing the different
history and political economy of the three countries, he
came to the conclusion that diversities manifested in those
countries were the outcomes of both the forces of capitalist
development in the form of TNCs and the specificity of their
historical nature and labor movements.

The way in which he explained the dynamic pattern of
development of the auto industry is firmly grounded in the
framework of Marxian political economy, whose perspective is
altogether neglected within the 'mainstream' discourse. Its
explanatory power is deeply rooted in its accounts of not

only the phenomenal characteristics but also those inner

12

mechanisms underpinning the fact. Yet there is a problem in
attempting to apply directly his analytic framework to our
questitni because there exist clear differences in the
historical process between S. Korea and those Latin America
countries. Elsewhere, Jenkins (1984) acutely recognizes
this issue by saying that it must be taken into account by
"different models of capital accumulation and the part
played by specific national conditions and the role of the
state in the emerging pattern of differentiation" and a
"focus (Hi the need to explain how particular relations of
class forces enabled certain states to create local poles of
capital accumulation."

From the whole consideration thus far, our research
question can be formulated as follows: if not due to TNCs-
involvement in the evolution or growth of the S. Korean auto
industry, how can large domestic capital be accumulated so
rapidly? 'This questibn leads further to subsequent ones.
What is the internal mechanism to speed up the development
of the auto industry, especially in relation to the stall:e
and labor? Utimately, I would expect some contribution
towards a conceptual clarity of the 'untouched' subject of
the development of the S. Korean auto industry through the

empirical analysis of our question.

III. The Scope and Method of the Study

A. The Scope of the Study

Recognizing that S.Korea's 'independent' capitalist
development process began in 1945 with the end of Japanese

colonial imperialism, this study has the temporal scope of

post-1945 for the analysis of the subject matter. For a
heuristic and analytic purpose the whole time span from 1945
to present is divided into four distinct sets of time
periods. This periodization rests on the primarily
developmental stages of the auto industry. One of the
factors in the process of development that I consider most
influential is capital accumulation. The relatively
capital-iehaeftga eihqna rf the auto industry requires a
certain quantity of capital that is not necessarily demanded
in light consumer industry. Like many world auto companies,
the S. Korean auto industry was controlled by large monopoly
capitals.

In this study I refer to the development of the
industry as a process of capital accumulation by big
corporations. Thus I have little interests in the technical
or sophisticated linkages between the terminal (or assembly)
and the parts industry. Of course the interdependent nature
between those divisions in the process of producing cars is

very important. However, I have no intention to see the

13

l4
connection so that their divisions and linkages will be
regarded as an attribute in the broad frame of development
process of the S. Korean auto industry.[8]

Yet it should not be taken to assume that the capital
accumulation in the S. Korean auto industry has taken place
in a vacuum minus the structural relations of the government
and working class. The analysis of the three institutional
agents is the very heart of this study. According to the
discussion above we have the following sets of period: (1)
'Primitive' (1945-1961), (2) Formation (1962-1973), (3)
'Take-off' Cl974-1984), (4) Expansion (l985-Present).
Although there are no clear-cut points to separate each
period, it will nonetheless help to grasp the development
pattern of the amto industry following the process of
capital accumulation.

In the substantial analysis I use the terms such as
'Korean monopoly capital', 'capital in general', 'auto
capital', 'labor struggle' which need some clarification
before going further. The general reference of these terms
are basically derived from Marx and his followers. By
Korean monopoly capital I refer to a specific type of
capital in the Korean context (Chaebols) - its discussion
will be addressed later in the course of analysis. The term

'auto capital' means terminal auto companies collectively in
reality. In the frame of the relation of Chaebols to auto

capitals I modify the original concept of 'capital in

15
general' to simply refer to the Korean monopoly capital
(Chaebols).[9] Lastly, once the capitalist relations of
production have been set in motion in S. Korea, '1abor
struggle' involves the connotation of both class struggle
and class conscirusness.

Beyond the abstract level of analysis, I also try to
clarify the development of capital accumulation in the

aspect of class relations between the Korean monopoly

capital, state and labor. On the one hand, the accumulation
process has to be grasped in the ‘capital's logic of
motion', its actual bearers are no other than the capitalist

classes (industrial or mercantile capitalists) on the other.

B. The Method of the Study

The main characteristic of this study's method can be
found in its utilization of documents. A large amount of
research data has been drawn from secondary sources of
scholarly works (including articles), newspapers, news
journals (including professional ones) and so forth. In the
consideration of theoretical issues, existing academic
literature is the main part of referent sources, whereas I
used newspapers and journals as well as the literature for

the substantial analysis of the specific phenomenon

16
manifested in the auto industry of S. Korea. Yet, there is
no clear methodological criterion to do so. Rather, it
depends on the nature of topics and problems posed by each
case.

A brief discussion of the procedures involved in the
data collection would be helpful for understanding the
organization of this study. I had in mind two criteria in
the selection of data when I decided to write a thesis on
the automobile industry in S. Korea. The first is
associated with the theoretical considerations which are
parts of literature that I have read and kept.
Specifically, those have to do with the discussion of
capitalism, capitalist development, the relationship between
capital and labor, state, labor market, etc. etc. The
second is on the facts. Concrete facts were needed to
demonstrate the reality at issue and support the theoretical
arguments.. Those real facts reside either in the condensed
form of tables or are scattered throughout the literature.
Among other things, I found very pertinent to my interest
such data sources as the Automotive News, Business Week, 335
Eastern Economic Review, New York Times, Wallstreet Journal
and so on, in addition to the works of individual scholars.

It would be time-consuming and tedious to pick out the
most relevant material among the infinite body of raw
materials relating to this study without specific

guidelines. Fortunately, the criterion that I set up

17
contributed to mietjtwtex rtherwise extraneous efforts.
Based on the theoretical considerations, such categories as
"production", “capital", "labor/labor strike”, "state's
policy", "working conditions", etc. were prepared to divide
the raw materials to be collected as the first step. Yet

the process of categorization of data does not directly make
it ready to be analyzed. It must pass through the process

of interpretation for the final purpose.

However, interpretation of raw material is not a major
effort as far as my topic is concerned. The fragmented facts
especially presented in newspapers and journals require some
attention to fit them into the proper place. The most
difficult part lies in the collection of sufficient
materials associated with the 'private' corporate data such
as amount of profits, control practice of capitalists over
workers, profit repatriation abroad, financial flows between
Chaebols and their auto firms and so on. Within the limits
this study had to rely on more aggregate interpretations in

some C8888 o

IV. A POLITICAL ECONOMIC ANALYSIS OF THE S. KOREAN

AUTOMOBILE INDUSTRY

It is helpful to take an overview of the discussion in
each section. One can find a pivotal theme worked out in
the subsequent sections. It is the process of capital
accumulation on the part of both the Korean monopoly capital
and auto capital. In the process, one can also recognize
the emphases put on the relations of the state to capital
and labor, of capital to labor. Through the historical

frame of periodization, I intend to provide

progressive/transformative characters of the relations.

In the Section A (1945-1961), I take into a general
preliminary account of the formative picture of the Korean
monopoly capital within the structural conditions imposed by
external forces (Liberation, Korean War, Foreign Aid etc).
One of the major characteristics of the auto industry in
this period was literally primitive.

One can see the formation of auto capitals in the
Section B (1962-1973). But they were still premature.
Much focus is given onto the process of capital accumulation
(of the Korean monopoly capital. And the state came into
fore as an active agent to lever the direction of the Korean
monopoly capital. Despite their formative nature of the

auto capitals, some of them had an intimate linkage with

much bigger capitals (parent companies).

18

19
The main point in the next Section (1974-1984) is the
growing capacity of the Korean monopoly capital as well as
auto capitals with strong patronage of the state. On the
other hand, it is claimed that workers cost in the capital
accumulation is significant. And finally (l985- Present),
some of the changing features of the whole preceding

discussions are laid out with the consideration of world

economy. These brief accounts become more comprehensive and

explicit when moving into the each Section.

A. The Primitive Stage of the Auto Industry (1945-1961)

Viewed by industry which has been dominant in S. Korean
economy since 1960s, the automobile industry is one of the
lately developed industries representing the growing
economic capacity of S. Korea along with computer or semi-
conductor industry in this decade. (see Table 1) The
current development of the auto industry may have its origin
in 1955 when two local auto companies began to rebuild
military auto parts into civilian jeeps.[l0] However, it
was in 1962 that S. Korea had an automobile assembly plant
which produced a tiny number of vehicles through the

assembly of imported auto parts at the small plant.[ll]

20
Table 1

Trends of Leading Industries in S. Korea

 

 

1960s 1970s 1980s
Textile,Cement, Steel,Petrochem. Semi-conductor,
Fertilizer. Construction,Shoes Computer,Machinery
Plywood Textile,Electronics Automobile

 

In addition, the composition of the current auto
majors in S. Korea - Hyundai, Daewoo, Kia, and Ssangyong
Motors - has no direct relations with the 'out-moded'
assembly production system in this period. What this fact
means is that there have been significant transformative
events in the development history of the S. Korean auto
industry. For example, the first auto firm of Shinjin Motor
Co. was finally transferred to Daewoo Motors in 1983 when it
acquired the management control from the joint-venture
company of GM-Korea.[12] Based on these information, it
is of necessity to ask how then the S.Korean auto companies
are now credited to the recent dramatic growth. One may
attribute the source of expansion to the development of
technology cumulated from the experience in manufacturing

auto parts or assembling them in earlier times. Of course

21
technology is very instrumental in the especially capital-
intensive industry like automobiles. But it is second to
the existence of capital. In this sense we can recognize
the overwhelming emphasis put on the foreign capital in the
capitalist development of Third World countries.

With the importance of material base for the
development of the S. Korean auto industry in mind, I lay

out some preliminary accounts of the process of primitive
accumulation in the broad framework of S. Korean political
economy. Yet it must be reiterated at this POiDt that even

if external influences were decisive in the making of Korean

society from this period my major concern will be located in
providing a peculiar kind of internal structure in which the
material base of the capitalist industrialization of the
auto industry was ultimately established.

As briefly mentioned at the outset, until 1962 the
S.Korean auto industry remained as a status of assembler
from imported parts and were composed of small scale part
and component workshops. At this stage of development of the
auto industry, no modern manufacturing system of vehicles
was established. There were only firms which repaired and
built vehicles for military use as well as rebuilding
military Jeeps for civilian use. Put differently, there
were any significant interests on the part of capitalists to
have auto businesses for making profits. More important is

the fact that the socio-economic structure was not

22
compatible to their eager concern with capital accumulation.
How then later will we be able to see the capital
accumulation in the sphere of the auto industry despite the
assumed structural obstacles? This prime question can be
further paraphrased as follows: What was the situational
conditions of capitalist classes in general? What was the
source of capital in primitive accumulation? Which part the
government had played in 'civil society'? What was the
industrial structure and how was the working class? Were
there any influences of world economy on the S. Korean
society? Those subsequent questions surely seems
sufficient and important to deserve a separate analysis in
detail on each case. Yet the whole questions should be

taken into account although we have limited space.

1. Mercantile Nature of Capital

It is commonplace that in the development of capitalism
of West capital has initially been generated in the
mercantile, not in the industrial form. The decisive
distinction between the two forms can be drawn in the
marxian discourse from the manner in which profits are

realized in either production or circulation sphere. This
is based on the 'labor theory of value' which means that all

surplus value distributed among society takes form of

23
interest, rent, and profit and the source of surplus value
stems from the capitalist relations of production in which
exploitation of capitalist from workers at the point of
production is the necessary mechanism as far as the
capitalist production goes on. [13] From this formula, the

difference now becomes clear between mercantile and
industrial capitalists. While the latter accumulates

capital through the direct appropriation of surplus value,
the former does so by utilizing the opportunity accrued
from trade. Thus the profits that merchant capitalists
obtain is no other than a realization of surplus value in
the production. In the real world, however, it is extremely
difficult to define a society as exclusively either
mercantile or industrial because both are components of the

process of capital accumulation,i.e., production, exchange,

distribution of surplus value.

In the Korean context during the period (1945-1961),
the dominant characteristics of capital is mercantile in the
sense above. This does not deny any existence of industrial
manufacturing factories. According to Cumings (1984), pre-
colonial manufacturing industry in S. Korea was established
by Japanese imperial Zaibatzus and the number of industrial
workers marked 213,000, excluding miners. But the mere
existence of industry and its workers does not necessarily
create the dominant Korean capitalist class, because few of

Korean industrial capitalists was allowed to enter the

24
business although significant infrastructure of railroads,
telephone, roads, etc. might contribute to providing a
favorable condition for later industrial capitalists.

In the independent development of a Korean economic
structure after the emancipation, there were three
opportunities for capital accumulation which made later
capitalist industrialization possible: 1) the participation
in the distribution of the appropriated properties during
the period of 1945-1950, 2) the utilization of the economic
aid of the United States during the period of 1950-60, and
.3) the inducement of foreign capital through international
loans after l960.[l4] In this section the first two is
taken into account.

The primitive accumulation took place through the
take-up of the various kind of property owned and run by
Japanese such as land, buildings, mines, enterprises, bonds,
securities, gold etc. According to a statistic, the total
assessment of those vested property amounts to about 80
percent of the gross property in S. Korea.[15] It was
possible to accumulate when the properties reverted to the
state was disposed to a minority of Koreans. Of course,
although the amount of capital proper accumulated during
the colonial rule can not be neglected, the fact that the

great portion of capital has to be redistributed to a small
number of domestic bourgeoisie is of crucial importance.

One important aspect as regards the process of disposal of

25
reverted properties is that those properties were allocated
at a very cheap price to those who had in one way or another
a connection to government officials or were landowner under
the colonial rules.[l6] Thus, the benefits was restricted
to a very few number.
However, Korean War (1950-1953) destroyed the overtaken

factories as well as facilities of key industry such as

roads, rail, harbor, etc. Accordingly, the material base
for reproduction of capital was heavily undermined. In such
a situation in which capital could hardly find a way of
self-expansion, i.e., shortage of primitive capital, foreign
aid from the United States played an important role in
rehabilitating the process of primitive accumulation until

late 19508.

Foreign aid funds in various forms such as GARIOA
(Government and Relief in Occupied Areas), SEC (Supplies
Economic Cooperation), PL 480 (Agricultural Trade
Development & Assistance Act), ICA (International
Cooperation Administration), CRIK (Civil Relief in Korea),
UNKRA (United Nations Korean Reconstruction Agency) were
flowed from the U.S. within a certain period of time. Table
2 shows the trend of the U.S. aid funds according to
specific purposes. From the Table, it is possible to point
out at least two distinct features. First, the total amount
<xf foreign aids in dollar terms marked around 3.1 billion

dollars except military aids during the year of 1945-1961.

26
Compared to GNP during this period, the figure is never
insignificant. This external source of capital definitely
served as one of sources for primitive accumulation during
this period together with allocation of the vested
properties. Secondly, majority of those aids were granted
free in the donation form. Although the figure has dwindled
since 1964 when the S. Korean government implemented
economic development plan, there seems no disagreement that
the total amount of grant-in-aids contributed to making the
primitive accumulation in S. Korea. Then what kind of
effects did these enormous quantity of aids make on the
determination of capitalist class in S. Korea? For
explanation of this question we have to take into account

the relationship of capitalist to the government.

2. The Relations of Capital to State

As a category distinct from capital and labor, the S.
Korean state has been brought into fore after Liberation in
1945. Despite the fact that political legitimacy out of
Japanese colonial rule was obtained, it is difficult to deny
any possibility of the state's political dependency on

external influences during this period since, as seen above,

the material conditions to stand on its own was to a great

degree provided outside. Besides the political reason

27
Table 2

Foreign Aid from the U.S. (l945-l961)*

(unit:million dollar)

 

Year Total GARIOA SEC PL480 ICA CRIK UNKRA

 

 

1945 5 5 - - - - -
1946 49 49 - - - - -
1947 175 175 - - - - -
1948 180 180 - - - — -
1949 117 - 117 - - - -
1950 59 - 49 - - 10 -
1951 107 - 32 - - 75 -
1952 161 - 4 - - 155 2
1953 194 - - - 5 159 30
1954 154 - - - 83 50 21
1955 237 - - - 206 9 22
1956 327 - - 33 271 - 23
1957 383 - - 46 323 - 14
1958 321 - - 48 266 - 7
1959 222 - - 12 208 - 2
1960 245 - - 20 225 - .-
1961 199 - - 45 154 - -
Total 3,135 409 202 204 1,741 458 121

 

Note: * includes economic aids excluding military aids.
Source: Bank of Korea, Yearbook of Economic Statistics
(Seoul: BOK). cited from Chung, I.Y i‘The Unfolding of Aia
Economy” in Theory of the Korean Capitalism (Seoul: Kachi,
1984), p.139.

 

28

underlying the huge economic supports of the U.S.,
especially since the Korean War, the first regime of Rhee
had IN) stable popular foundations among 8. Korean people.
Unlike other nationalist leaders (Kim Gu and Cho Man-Sik)
who had struggled against Japanese imperialism during the
hardship of colonial rule in the country, Rhee spent much
time in America for the nation's liberation. This fact
indicates a clue to explain that Rhee even under patronage
of U.S. after returning to S. Korea did not have political
connection with domestic nationalists. The weak political
foundation led him to go in hand with land lords who were
then dominant ruling class until the emergence of industrial
capitalist class.

In addition, severe ideological battles between Right
and Left had played a decisive role in determining the
state's political attitude towards the ultra-anticommunist
and authoritarian direction. This anti-communists attitude
of Rhee regija oie ca obainby reflected in its crush on the
labor movement led by Leftist organization of Chen Pyong
(National Council of Korean Workers), which was established
in 1945 and included 500,000 union members under the 16
:nation-wide industrial unions.[l7] In the process, the
government promoted and supported a labor organization
organized by a Right political group.[18]

The fact that government leading bureaucrats were

recruited from the dominant ruling class (largely land

29

lords) characterizes the relationship between the state and
ruling class as symbiotic at least in the political
sense.[l9] What is more important is their political
intervention in the economic sphere. As a matter-of fact,
the mercantile capitalist classes had proliferated in such a
general political-economic and specific political
connection to the government in the process of allocation of
material sources for their 'primitive‘ accumulation. Now it
is necessary to see how the process took place.

As argued earlier, the nature of capitalists during
this period was characterized as not industrialists but
merchants who made profits through trade. The primary
structural conditions were provided by a series of events
that occurred in this period. Those are the experiences of
the political liberation which was kept away from many
industrial factories located in the Northenn part of the
peninsula, the Korean War (1950-1953) which destroyed the
remaning factories in the South, rampant ideological battles
which caused relatively little energy from the government to
foster economic growth, economic instability of high
inflation caused by the Korean War, dominantly agricultural
economic structure, etc. In brief those factors limited the
capitalists energy for doing their businesses in
manufacturing industrial products. Rather, for example,
they sought to concentrate on trading business by

exploiting inflation at maximum degree.

30
Under the unfavorable conditions for industrial
capitalists, foreign aids played a critical role in
determining the mercantile nature of capitalism at that
period. As shown earlier, the total amount of foreign aids
was about 3.1 billion dollars excluding military support

until 1961. What draws our attention is the fact that large
portion of the funds consisted of consumer goods. Out of

total amounts of aids 81 percent hold consumer goods such
as foods, clothing, medicine, fertilizers, raw cotton, etc.

In other words, there was little capital equipments or
facibthtaf hsih ina cifto jaief rf production in
manufacturing.

The imported raw materials provided an important basis
upon which some consumer industries was flourishing. The
early Korean commercial capitals which were largely
accumulated in the 'unproductive' way became to invest in
the profit-guaranteed 'three white industries' - spinning
and textile, flour milling and sugar refining. Under the
conditions of monopolist dominance of the consumer industry,
as discussed later, Korea's typical monopoly capital
(Chaebols) was able to emerge.

In addition, PL 480 (an aid fund of surplus
agricultural products shipped in 1956-1961) was amounting 2
billion dollars and made tremendous impacts on the rural
sector. The huge amounts of imported surplus products

caused directly the domestic agricultural price to decline.

31
Table 3

Contents of Foreign Aid (1945-1961)

(unit: million dollar)

 

 

 

Aids Period Equipment Consumer Goods Total
GARIOA 1945-48 30 (7%) 379 (93%) 409
ECA.SEC 1949-53 6.2 (3%) 196 (97%) 202
CRIK 1950-56 - (0%) 26(100%) 26
UNKRA 1951-61 86 (70%) 36 (30%) 122
FOA.ICA 1953-61 485 (28%) 1,260 (72%) 1,745
PL480 1956-61 - (0%) 203(100%) 203
Total 608 (19%) 2,531 (81%) 3,199

 

Source: Bank of Korea. cited from Chang, S.H "The Process of
Dependent Economic Structure on the U.S. after Liberation"
in K.H.Song and H.C.Park (eds). The Reflection on 40 Years

after Liberation (Seoul: Tolbegae,1985), p.106.

32

If the rice price were 100 in 1956, for instance, it
dramatically plummeted at 93.4 in 1958 and 82.5 in 1959.
The situation was not much different in the case of barley.
(Chung, 1984:154) ‘This fact inevitably stimulated the
process of decline of agriculture and impoverishment in the
rural sector. The devastating situation in agricultune
could serve as a potential conditions for the creation of
low-wage working class in the course of industrialization of
the next period (1962-1973).

As for the relation of state and capital in this
period, as implied, the whole series of events was not
possible without the state's direct intervention from the
receipt and allocation of foreign aid funds, to the
agricultural price policy. For the making of monopoly
capital, the provision of puivileged favors to a few
'domestic compradores' was crucial and in a sense
inevitable. Let us explain briefly the logic underlying
that situation.

The best access to those revenue sources on the part of
capitalists was the use of political connections. They
recognized and played on the urgent need for political
funds on the part of politicians and the prevalent
corruption of high-ranking bureaucrats. With limited
capital funds available domestically, the state opted for
reliance on foreign sources for financing in the private as

well as the public sector. I make illustrations to provide

33
such a close symbiotic relationship between the state and
capital.

The first case that occurred in 1952 was related with
the state's 'unfair' assignment of foreign exchange of over
3 million dollars to few private companies which was
originally bound to be invested for certain needs for the
countryu Those companies could make enormous 'extra'
profits by taking advantage of monopolizing prices whose
products (i.e., grains and fertilizers) were imported
through the illegally allocated money. In return for this
favor they offered a large contricution to the regime's
campaign for a constitutional amendment that permitted the
regime's next presidency. Another instance of political
manipulation involved disguised government subsidies in the
form of financial loans. In 1957, the regime exerted
pressure on the Korean Reconstruction Bank to grant a large
loan to twelve big companies for the professed purpose of
helping reconstruct the nation's industry which was
suspected not to do. Likewise they gave a contribution at a
certain percentage of the loans as political
donations.(K.Kim, 1976)

In short, those windfalls accruing from the close
relationship between the state and domestic capital were one

of the most chief sources of revenue accumulation in S.

Korea. Jones and Sakong (1980) commented in this terms:

34
"...(a major characteristic of Korean entre-
preneurship in the 1950s was that it was far
easier to make money from government-derived
favors than from productive competitive activity
and entrepreneurs naturally followed their pocket

books." (p.57)

3. The Unstable Structure of the Labor Force

After Liberation, the S. Korean government enacted a
far-reaching land reform program in 1949. Even if the land
reform permitted farmers to have their own land, the
serious chronic problem of land fragmentation was far from
solved. (In 1962 miniature farms (under 0.5 hectares)
composed 44 percent of the total and small farms (0.5-2.0
hectares) 51 percent.(Hamilton, 1983:155) What made things
worse, was the arrival of surplus huge shipment of grain
(mostly wheat, barley and rice) from the U.S. under the PL
480 plan. This material force and later low grain price
policy by the state not only hindered the growth of Korean
agriculture, but enforced large number of rural labor force
to get out of land.[20] Here it seems helpful to note that
the total number of employees between 1953 to 1960 had
steadily increased, while wages workers whom firms employed
more than 5 remained almost unchanged in number. (see Table

4) Given the potential labor force leaving out of rural

35
area, the stagnant figure of wage workers proper would imply
that the urban industrial sector did not contribute to
absorption of the labor force who then fell into urban
"lumpen-proletariats”. Or from the point of capital, we can
say that the industrial capitalist production was not
dominant in this period. However the rapid process of
proletarianization of rural population took place in the

second period of planned industrialization (1962-1973).

Table 4

Number of Employees in the Labor Force (1953-1960)

 

 

Year Populationl/ Employment Unemployment
(thousand) Total WorkersZ/ (thousand)
1953 13,552 7,291 240 596
1956 12,431 7,827 220 358
1957 13,919 8,076 245 277
1958 14,230 8,784 236 334
1959 14,658 8,768 204 347
1960 15,049 8,521 235 434

 

Note: 1/ population of above 14 years old.

2/ workers employed in firms who have more than 5
workers ‘

Source: Bank of Korea, Yearbook of Economic Statistics
(Seoul: BOK), various issues.

36

B. The Formation of the Auto Industry (1962-1973)

As seen in the following discussion, one of the
momentous forces for levering the S. Korean economy was.
foreign capital. But unlike other developing countries the
form of foreign capital taken in S. Korea was not TNCs's
direct investment but loans from the major international
banks, i.e., World Bank or AID etc. During this period,
however, most of the S. Korean auto companies contracted
various joint venture with the auto TNCs. Yet it should be
noted that the primary purpose of joint ventures was not to
acquire capital but technology. For example, Hyundai
Motors had a technical c00peration with the British
subsidiary of the Ford Motor of the United States in 1967
and Kia Motors contracted a technical joint venture with
Honda Motor of Japan in 1971. Only Shinjin (now Daewoo)
Motors had both capital and technical contract with Toyota
Motor of Japan in 1966.(Korea Exchange Bank, 1978:8)

There can be two plausible interpretations. One is
that the major auto TNCs had little interests in capital
joint venture for their profit-making because the S. Korean
domestic auto market was extremely limited in absolute size
and relatively to that of Latin America countries where
major auto TNCs already invested enormous capitals. The
other reason may be found in the state's regulation to

prevent direct capital investment.

37

1. Foreign Loans as a Source of Capital Accumulation

In the previous section, we have seen a structural
mechanism through which Korean capitalists were able to
accumulate capital initially in 'non-productive' ways. The
overall discussion will be helpful to understand subsequent
'pnocesses of capital accumulation and simultaneously rapid
decomposition of rural labor population for either
subsidizing industrialization or remaining urban reserve
army or petty bourgeois. The most conspicuous historical
event which is regarded as a dividing point between the
first and second took place in the political arena in 1961.
Military regime made its appearance and left tremendous
consequences on S. Korean society from economy to ideology.

It was since the early sixties when the state had
become at the front of the screen of economic affairs. Also
it was the first history of S. Korea to open the era of
military-authoritarian regime when General Park took power
in 1961. Foreign aids tended to decline in quantity since
late 19503 and the government recognized the necessity of
economic growth as an urgent alternative for political
legitimacy. Dominant TNCs in the world economy had invested
increasing in peripheral countries for locating cheap
production sites. Perhaps this period can be best described
by the new'ihternational division of labor in certain

industrial sectors (textile and electronics). In the Korean

38
context, however, foreign capital (direct investment) was
not significant in absolute and relative terms. During
1962-1971, the amount of total foreign direct investment in
S. Korea was $117 million dollars. This figure becomes tiny
when we see the amounts of foreign loans (public or
commercial) in Table 5. From this table, it can be claimed
that the economic 'boom' in the same periods had little to
do with foreign direct investment. Then we have to look

into foreign loans in some detail.

Table 5
Amounts of Foreign Capital (1962-1971)

(unit: million dollar)

 

Period Total Loans Direct Investment

Amount Amount % of Total Amount % of Total

 

 

1962-66 312 291 93% 21 7%
1967-71 2.999 2,903 97% 96 3%
Total 3.311 3,194 96% 117 4%

 

Source: Bank of Korea, GNP in Korea (Seoul: BOK, 1982)

39

There can be pointed out two things regarding foreign
loans as a source of capital in that period but in a
situation of giving great efforts onto the industrialization
on the part of the government. As seen in Table 5, foreign
direct investment was not so much important as loans in
terms of amounts of money and more its influence on the
formation of S. Korean capitalism towards dependence on
external forces. One of points to note is that the state
could stand above the capitalist class since it controlled
the flows of loans from transaction to disposal through the
state-owned bank like Korean Industry Bank etc. This
capital capacity which was endowed to the state was enough
to direct the course of industrialization.

In relation to capital, this state's monopoly of the
loans could stand on the dominant‘ vantage point over
capitalist classes which were eagerly seeking to expand
their business. But except some of public sector, the
capitalist economy was the responsibility of capitalists.
So, iJ: is not difficult to reckon on the relationship
between the state and capitalist classes in respect to
”cooperative transactions“ under the condition of economic
development. .What needs our attention is the way in which
those foreign capitals have been allocated to whom and

where.

40

2. The Emergence of Monopoly Capital

We have seen the source of capital accumulation in the
previous period as mercantile profits with close linkage to
state bureaucracyu ‘At any rate, the so-called 'primitive
accumulation' was achieved during the period. Beginning
industrialization proper since early 19603, the source of
capital accumulation was cheap labor power together with the
foreign loans. In that sense genuine capitalist relations
of production started to operate.

In Korea, the nature and process of monopoly capital
has been different from those in Western countries.
Although Marx and his followers did not give much efforts on
the analysis of monopoly capital in any greater detail, as
Baran and Sweezy (1966) argue, we can get some ideas of how
monopoly capital has grown.~ For Marx, it was treated as
concentration and centralization of capital within a branch
Mn competitive capitalism. What needs to note is the
argument that those process of capital had taken place in
the course of competition among many capitals. ' For the
time being I take this 'law of motion' of capital as a frame
of reference for our analysis. Later on we will see further
distinct characteristics of Korean monopoly capital with the
reference offered by Baran and Sweezy.

Conditioned by various historioibby given structures

that I accounted for previously, S. Korean capitalist class

41
had relied on the state for an easy access to material
sources. The reliance of capitalists on the state has
become intensive when they recognized the necessity of more
capital to increase their business. As one of indices to
show the formation of monopoly capital, the trend of number

of factories employing more than 500 hundred workers
dramatically increased, 18 in 1955, 26 in 1959, 72 in 1963,
189 in 1968. (see Table 6)

Table 6

Increasing Trend of Large Companies (1955-1983)

 

Year Number of Large Companies* % of Total S. Korean

 

Employment
1955 18 11.7
1959 26 11.9
1963 72 22.2
1968 189 31.3
1973 402 43.7
1978 643 43.9
1983 574 37.3

 

Note: * large companies employing more than 500 workers

Source: Kim, H.K (1985) p.189

42

One of the distinguishing characteristics of the Korean
monopoly capital is ownership by family.[21] Considering
the relative short history of Korean enterprises, it is
understandable that many corporations are still owned by the
founder's family members. According to the Korea
Productivity Center, corporate ownership is very narrow,
with more than 80 percent of the stock held by 10 or fewer
capitalists in half of the 390 surveyed companies. (FEE.
Eastern Economic Review Feb.11, 1988). As Table 7 shows, the
ratio of family ownership of Chaebols - a conglomerate or a
financial clique in Korea - is much higher than those of
non-Chaebols. Chaebols own more than 30 percent of the

listed corporations' stock.

3. The Nature of Korean Monopoly Capital

In the Korean context, the nature of capital, including
definitely auto's has quite distinct feature in form. The
typical character of capital in S. Korea is to be found in
Chaebol. Most of the major Korean Chaebols were formed
during the course of the rapid economic growth, although
they were different in terms of formation timing and type.
The formation of Korean Chaebols has a definite relation
with state as implied earlier discussion. In brief, they

were shaped through various supports of the government.

43

Table 7

Korean Chaebols: Distribution of Ownership: PerCent

of Stock Ownership (1982)

 

 

 

Family & Affiliated

Company Relatives Enterprises Total
Chaebol Top 10 13.44% 18.99% 32.43%
30 19.29% 14.93% 34.22%

40 18.65% 10.99% 29.64%

Average 17.71% 14.96% 32.67%
Non-Chaebol 20.96% 2.99% 23.95%

Source: Lee, H. and Chung, K. (eds.) The Structure and

Strategy of Korean Corporations (Seoul:

182.

 

Bupmunsa,

44

The concept of Chaebol originally appeared in Japan.
In the strict sense, however, Chaebol is different from
Japan's Zaibatzu. Whereas Zaibatzu no longer depends
exclusively on family ownership, Chaebol - except .in rare
cases - do not share power with professional management
talents in its ownership. Thus the Chaebol may be defined
as a business group consisting of large companies which are
owned and managed by family members or relatives in many
diversified business area.[22]

The origin of Chaebol was rooted in the proliferation
of consumer industry of so-called three 'white industry' as
shown earlier. How were Korean Chaebols able to accumulate
their capital? Obviously, they utilized various devices
for access to the sources of capital accumulation (political
connection is a outright instance as seen earlier). The
other specific channels were either monopoly profits or
utilization of different exchange rates for the aids
products. Here let us consider the 'benign' relations of
state to capital in 19608.

It was during the process of industrialization focused
on exports that the relationship between the state and
Chaebols became more conspicuous.“ Undeniably, the
incredible growth of S. Korea was initiated and steered by
the government. Since many -Korean Chaebols owed their
success much to government supports, a close relationship

between government and Chaebols has been inevitable. For

45
example, we have seen that a close relationship with the
government was essential for Chaebols to receive the large
benefits that have been critical to their successful
capital accumulation.

The close state-capital relationship in S. Korea is
often referred to as "Korea Inc." However, there are
distinct differences between ”Korea Inc.” and ”Japan Inc."
For example, the latter denotes a government-business
partnership in which the policy reflects a consensus between
equals. In Korea, the government sets the policies and
capitalists follow more or less. In this way, S. Korea is
an unusual mixture of free enterprises and state direction.
The government's strongest weapon has been its control of
credit over private enterprises. The S. Korean government
announced banking liberalization plans in 1983, yet the
government still does not permit domination of banks by an
industrial Chaebol. However, the ownership of major
domestic banks by leading Chaebols is no significant at all
as Table 8 indicates - the rest of bank stocks are owned by
the state.

From our discussion, we can carefully indicate that the
tie-up of Chaebol with the Korean government seems too much
intense to go beyond the degree to which P. Evans once
termed the ”triple-alliance” among TNCs, domestic
capitalists, and the authoritarian regimes in the Lathi

American countries. In the Korean context, it was perhaps

Table 8

Stock Ownership of Banks by Chaebol (%)

46

 

 

 

Chaebol ChoHeung Korea Hanil Bank of Comm'l Bank
First Seoul

Hyundai* 2.14 9.35 7.27 11.93 -
Daewoo* 1.23 23.82 2.22 5.29 4.48
Samsung 8.34 5.69 9.27 - 15.97
Lucky-Gold 1.71 5.30 5.87 - -
Hanjin - - 8.45 - -
Taekwang 3.77 - - 4.56 -
Ssangyong* 5.57 - - - -
Daelim - - 9.29 - -
Shindongah 7.98 7.24 - 9.90 -
Dong Ah* - - 10.03 - -
Hanil-Kukje 4.05. 2.18 3.69 - 1.91
Total 34.79 53.58 56.09 31.68 22.36

 

Note: * means those Chaebols that have auto subsidiaries.

Source: World Bank,

Transition, 1987, p. 92.

Korea 8

Managing the Industrial

47
inferred from the fact that TNCs were not in any
considerable extent involved in the process of primitive
accumulation at the premature stage of the industrialization
until late 1950s and thus the S. KOrean state has more

exerted its power through the control of financial credits.

4. The Relation of Auto Capital to Chaebols

Most of the current major-auto companies was
established during this period such as Shinjin (now Daewoo),
Hyundai, and Asia.[23] In order to understand the
developing process of the 'auto capital', it will be helpful
to look at the peculiar characteristics of monopoly capital
in S. Korea.

As Table 8 shows, we can recognize that most of
Chaebols who have auto corporations hold a considerable
share of bank stocks such as Hyundai, Daewoo, Ssangyong and
Dong-Ah Group. This fact would imply that there is indirect
relationship between financial capacity of those Chaebols
and their auto companies. If we take a look at the
financial network between the parent company and its
subsidiaries, it will be clear that this is so. As defined
as family-controlled set of companies,'the owners of each
company under Chaebols are in most cases family relatives of

the founder. For example, the president of Hyundai Motors,

48
Chung SeYong is brother of Hyundai Groups's founder, Chung,
Ju-Yong. The tight family-ties in. Korean Chaebol in
managing the whole business is in fact one of most distinct

characteristics.

5. Implementation of State's Economic Plan

(1) In General

The most conspicuous structural factor to define this
period is implementatiOn of industrial strategy directed by
the Five-Year Economic Plan. In terms of industry, so-
called lixht industries like textile and electronics were
dominating the industrial structure and also provided
material bases for later industrialization emphasizing heavy
industry such as steel, shipbuilding, petrochemicals, and
automobiles. In political sphere the first military regime
began to operate since 1961.

One of manifestations of the regime's politics is
represented by authoritarian repressive apparatus. Compared
to early regime, the present one can be sail to enjoy a
stronger autonomy (power) vis-a-vis the dominant capitalist
class as well as working class. Besides explicit control of
military the regime manipulated the two classes of capital

and labor through the state' functionaries (i.e., Korean

49
Central Intelligence Agency) based on Park's personal
experience during the service of the Korean Army.

What is at issue is the relation of the state to the
domestic capitals and the implication of the relationship to
the socio-economic structure of the country. The typical
showcase to indicate the state‘s centrality was formulated
as an economic plan organized by the high brains of the
regime. It was later found out that although the state was
energetically devoted to economic development at that
period, the underlying rationale was to acquire legitimacy
among people, especially farmers and fishers in the country
side. Thus it was no accident that the priority of the plan
was given to the ”rural development". Yet the initial
project did not work so well because the rural develOpment
stood in conflict with the industrialization process through
which the state intended to upgrade the economic status of

the country.
(2) The Auto Industry

Based on the understanding of the peculiar character of
Korean Chaebols, it seems now adequate to show how the state
functioned in directing the auto industry in this period.
The development of the auto industry encountered a turning
point when the state undertook a series of measures to

promote the industry as a part of the First Five-Year

50
Economic Development Plan (1962-1966).

The government enacted the automobile industry
protection law which provided tariff exemptions for parts
and components imports, tax exemptions for assemblers, and
import prohibitions on complete cars. It also set up a
Five-Year Automobile Development Plan. As a part of this
new government polioy, the first modern assembly plant was
established by the Seanara Automobile Co. in technical
cooperation with the Nissan Automobile Company of Japan.
Production was started with semi-knocked-down parts in a
small plant with a capacity of 6,000 passenger cars a
year.(Korea Exchange Bank, 1978) The Seanara Automobile
Co., however, was forced to shut down due to the foreign
exchange crisis of 1963 which made it impossible to
continue to import parts and components from Japan. The
production of parts was subcontracted out on the basis of
competitive biddiex. Thereafter the number of automobile
assemblers proliferated rapidly. Among these new firms were
Shinjin, Hyundai, Asia, and Kia which started originally as
bicycle manufacturer and expanded into two-wheel and three-

wheel commercial vehicles.

51
6. The Making of Working Class

Capital as a social relation inevitably contains the
capitalist relation of production. As the process of
capital accumulation proceeds, the capitalist production
relation has expanded - "increase of the proletariat"
(Marx:1967, 576) decomposition of agricultural sector and
expansion of urban industrial sector. In the Korean
context, along with the process of monopolization of
capital (or rapid industrialization) the structure of labor
force has changed. The expansion of the wage workers in the
capitalist production sector is the major outcome of the
process. 'Fhe total wage workers increased from 1,528,775
(21.8 percent) in 1960 to 5,456,964 (43.0 percent) in 1980
out of the total employees. (see Table 9)

The fact that wage workers have increased in number
since 19603 reflects the expansion of the capitalist
production relations on the one hand and simultaneously the
decomposition of the rural sector much the same as in the
British case - Enclosure. The rapid process of
industrialization brought into being the huge influx of
rural population into the urban areas. The surplus
population which was not absorbed in the urban industry
remained as a reserve army in the form of 'lumpen
proletariat" or small self-businessmen. It was their
existence to push the wages of industrial workers in the

“formal sector“ down. Apparently, this structural

52
Table 9

Increasing Trend of Wage WOrkers (1960-1980)

(unit: 1,000)

 

Year 1960 1965 1970 1975 1980

 

Total Employees 7,028 8,206 9,745 11,830 12,048

Wage-Workers 1,529 2,523 3,904 5,125 5,457

(Percent) (21.8) (30.7) (40.0) (43.3) (45.3)

 

Source: Bae, M.K (1985) ”Industrial Development and
Structural Changes in Labor Market:The Case of Korea",

Institute of Developing Economics, p.67.

53
change of the labor force took place owing to the objective
realization of the 'capital logic' with definite connection
to the state's design. For it was the state' purpose to
create the surplus population through the low grain price
policy of agricultural products, which, by encouraging
rural-urban migration and providing cheap food for city
workers, has actually contributed to the transformation from
agricultural ixHx: industrial capital by making industrial

investment more profitable.

C. The 'Take-off' of the Auto Industry (1974-1984)

After the oil crisis and the state's policy called the
'Long Term Development Plan' for the motor vehicle industry
in early 1974, the S. Korean auto industry entered a stage
of 'mass production'. The main purpose of the plan was to
increase the ratio of localization of the auto parts and
components production. Not surprisingly, during this period
Hyundai Motors produced a Korean model of the passenger car
named Pony. Under the state's plan which encouraged major
auto companies to make a huge investment in equipment and
facilities in production, the production capacity of
vehicles rapidly has escalated since 1974, 73,000 units in
1974, 166,200 in 1975, and 220,000 in 1976. (Korea Exchange

Bank, 1978) In surface, it is true that there is a definite

54
correlation between input of capital facilities (dead
capital) and output of products (automobiles) in positive
terms. It is also true in the 'hidden abode' that. there
exists a creation of surplus value from workers (living
capital) for the capital accumulation.

In this section we take a look at the way in which the
Korean monopoly capitals (Chaebols) have expanded under the
state's support on the one hand and by expuoiting cheap
labor power on the other. Also we will see how the state
had managed the 'labor problems' and how workers struggled
against the objective conditions imposed in the course of

industrialization.

1. Expansion of the Monopoly Capital

It was seen in the preceding discussion that the Korean
monopoly capital, Chaebols made a genuine appearance after
19603. 'There were only three companies - Samsung,.Lucky,
and Ssangyong which had more than two subsidiaries in
19503.(Kim, H.K. 1988:173) It was after the economic
development plan was implemented through two pivots of
foreign loans (rather than foreign direct investment) and
export-oriented strategy that the process of monopolization
accelerated under the government's privileged favors. The

Korean Chaebols extended their business to heavy-chemical

55
industries initiated by the Third Five-Year Economic
Development Plans (1972-1976) and they came to dominate the
national economy. In this context, Table 10 shows that the
largest four Chaebols increased their number of subsidiaries
by more than twice between 1974 and 1986. From these
examination, one can recognize that the process of monOpoly
of giant companies has conspicuously proceeded since mid-

703.

Table 10

A Comparison of Major Chaebols' Subsidiaries

(1974 and 1986)

 

 

Chaebol Groups 1974 1986
Samsung 14 24
Daewoo 10 25
Lucky-GoldStar 12 26
Hyundai 6 25
Total 42 100

 

Source: The Company Yearbook, Daily Economic
Papers (Seoul: 1986) cited from Kim, H.K (1988)
Monopoly Capital and Wage Labor in Korea

Seoul: Kachi. p.174.

56

Based on the capital accumulated by largely special
favor and credit of the state, Chaebols could accelerate to
intensify monopolization of capital through either new
investment or consolidation of companies during the 19703.
Explaining it a different way, in the course of a crash
industrialization strategy, achieved at the cost of an
enormous input of foreign capital (with more than $46
billion ix: 1985), virtually the whole economy has fallen
under the domination of about 50 Chaebols.

Production and marketing everything from bread to
aircraft engines (Samsung), from razor-blades to TV sets and
from toothpaste to microchips (Lucky-Goldstar), from
automobiles to ships and from housing units to furniture
(Hyundai), and from heavy machinery to automobiles from
apparel to ships (Daewoo), they have literally left no stone
unturned in their expansion and control of domestic markets.
For instance, the number of manufactured items nonopolized
by one group rose from 8 in 1982 to 10 in 1983; from 13 to
18 for items by two groups; from 37 to 43 for items
controlled by three makers. (Far Eastern Economic Review
July 19, 1984) Table 11 will help to provide a clear
picture of the tendency of monopolization of capital in
terms of the manufacturing capacity.

It was known that the net sales of the 50 largest
Chaebol groups in 1983, according to a newspaper survey in

S. Korea, hit Won 53 trillion ( $66.25 billion), up 3.7

57
Table 11

Conglomerates' Share in Manufacturing (%)

(1973-1982)

 

 

Chaebols 1973 1975 1978 1980 1982
Top 5 8.8 12.6 15.7 16.9 22.6
10 13.9 18.9 21.1 23.8 30.2
20 21.8 28.9 29.3 31.4 36.6
3“ “‘a. 00a. 34.1 36.“ 40.7

 

Source: Lee,Y.K. (1985) "Conglomeration and Business
Concentration: The Korean Case" Seoul: Korea Development
Institute. p.32. cited from World Bank, Korea: Managing the
Industrial Transition, 1987. and Koo,H. (1984) "The
Political Economy of Income Distribution in South Korea: The
Impact of the State's Industrialization Policies" M

Economy 12(10), p.1032

58
percent from 1980. (Far Eastern Economic Review July 19,
1984) To appreciate the magnitude of this figure, it should
be remarked that S.Korea's GNP in 1983 totalled only Won 58
trillion. Furthermore, among the 20 largest companies
listed in 1983, 15 were owned by the 10 largest Chaebols. In
1984, the five largest Chaebols - Hyundai, Samsung, Lucky-
Goldstar, Sunkyong, and Daewoo - had total sales of close to
$50 billion, or more than half of the country's GNP. (223

Korea Times, Feb.18, 1986) Although the story of growth is a

 

part and parcel of S.Korea's "economic miracle“, the way in
which they have concentrated so much is largely through
cheap preferential loans, government protection and low
wages.

In terms of concentration of capital, Chaebols have
continuously consolidated other companies throughout their
history. {The way they increase their capacity was either
investment in other sectors or take-over of the existing
firms. As Table 12 shows, the largest Chaebols of Samsung,
Hyundai, Daewoo, and Lucky-GoldStar together expanded their
number of firms from 17 before 1960 to 152 until 1986.
Among other Groups, Daewoo runs first in terms of the number
of firms owned; it grew by 7 firms to 43 firms during the
same time span. Ssangyong Group undertook Dong-A Motors in
1986 and Daewoo Group actually took over the right of
management of Saehan Motors in 1982 and owned half of the

equity. And Kia Motors also subsidiarized Asia Motors in

59
Table 12
The Consolidation of Firms by Major Chaebols

(1960-1986)

 

Chaebols Before 1961-70 1971-1980 1981-1986 Total

 

 

1960
Samsung (1) 7 6 9 1 23
(2) 5 6 5 l6
Daewoo (1) 2 4 12 7 25
(2) 12 6 18
Lucky-Gold(l) 5 7 9 5 26
Star (2) 4 3 3 10
Hyundai (1) 3 2 18 2 25
(2) 3 5 8
Ssangyong(1) :2 4 '6 1 l3
(2) 1 3 3 7
Total (1) 19 23 54 16 112
(2) - 10 29 22 61

 

Note: (1) denotes Foundation and (2) Undertaking or Merger.
Source: Daily Economic Papers, The Company Yearbook
(Seoul,l986) in Kim,H.K (1988). p.173.

60

1976. 'Thus, even within the auto industry where domestic
market has been dominated by few monopoly capitals, the
centralization of capital by much bigger capitals operated.

Together with the capital concentration, there has
proceeded the concentration of labor force by the giant
capitals. That is, the process of monopolization of capital
occurred at the same time when the labor force was
concentrated on the Chaebols. Table 13 demonstrates that 30
largest Chaebols in manufacturing sectors employed 20.5
percent in 1977 and 24.5 percent of the total labor force in
1979 and since then the ratio decreased to the portion of
18.6 percent in 1982. Yet it can be said that the

proportion of labor force is still high.

2. Auto Capital

At this point it is necessary to mention concisely the
relationship between 'capital in general' (Chaebol Groups)
and 'auto capital' (auto companies). Most of the major auto
capitals in S. Korea belongs to Chaebols such as Hyundai,
Daewoo, Dong-Ah, Ssangyong, etc. And Kia Motors together
with Asia Motors belong to the parent company of Kia which
has 10 affiliated companies. What this fact means is that
those auto companies have been able to develop as their

parent Groups have done, with other circumstances being

61
equal. Hyundai Motors is the best example in this regard.
The origin of Hyundai Group dated back in 19503 when the
founder, Chung Ju-Young started his business in brick
construction. As seen before, Hyundai Group developed like
other Chaebols fueled by the state's economic development
plan since early 19603. In the process of expansion of the
Chaebol, Hyundai Motors was established in 1967 and began
operations tflua following year through a technical tie-up

with Ford Motor Co. (Korea Exchange Bank, 1978)

Table 13

Employment in Manufacturing Sectors by Chaebols

 

 

(1977-1982)
Chaebols 1977 1978 1979 1980 1981 1982
Top 5 9.1 9.5 10.5 9.1 8.9 8.4
10 12.5 13.9 13.5 12.8 12.8 12.2
20 17.4 18.2 20.0 17.9 17.0 16.0
30 20.5 22.2 24.5 22.4 20.8 18.6

 

Source: Lee,K.O (1985) The Consolidation of Firms and
Concentration of Economy Seoul:Korea Development Institute.

p.97.

_62

Given the close family-tie ownership and management in
Chaebols as seen earlier, we can assume at the most
rudimentary level that Chaebols' capital capacity has much
to do with their auto business. In fact, Hyundai Motors
allowed foreign capital as late as in 1982 when Mitzubishi
held 10 percent of equity share. Except Daewoo Motors, the
major auto capitals in S. Korea had little capital shares
with auto TNCs. Kia Motors made a recent capital joint
venture with Ford Motors (10 percent of equity share) in the
United States.

In: that context, all of the S. Korean auto firms are
now under the control of Chaebols. Those Chaebols are
Hyundai, Daewoo, Ssangyong, and Kia although the last of Kia
Industrial Co. does not have as many affiliated companies as
the others. The most typical case can be found in the shift
of ownership from Shinjin Motor Co. through Saehan Motors to
the current Daewoo Motors. Daewoo Group acquired its right
of management of Saehan Motors in 1983. Also, Ssangyong
Group likewise undertook Dong-A Motors in 1986. (Korea
Automobile & Transport Worker's Union, 1987) From the fact
of those Chaebols' acquisition, it can be claijal that the
process of monopolization did not differentiate the auto
industry.

The process also indicates the 'necessity' of large
capital in the auto industry which requires relatively

capital-intensive and high technology insofar as the S.

63

Korean auto companies are forced to compete in the world
market. But the above analysis is not fully adequate to
explain the specific pattern of develOpment in the auto
industry. It was the state's intervention that we have seen
the specific moments of development pattern in the auto
industry. For example, when the economic recession of oil
shock in 1972 and its aftermath debilitated the reproduction
of the S. Korean auto capital, the government took a major
step in its development strategy for the automobile
industry, realized in the Long Term Automobile Promotion
Plan in early 1974. The pivotal point of the policy was to
switch from joint ventures to the manufacture of a genuinely
Korean model and to the full localization of automobile part
and components production (Korea Exchange Bank, 1978)

Encouraged by the new strategy, large investments have
been made by assembly companies to expand their capacity as
well as raise the domestic contents of parts and components.
The annual assembly capacity reached 156,000 units by the
end of 1977 in the case of passenger cars. Three different
cars were developed and assembled out of mostly domestic
parts and components- Pony (Hyundai), Brisa (Kia), and
Camina by GM-Korea (now Daewoo). Production developed more
rapidly after the introduction of the long-term car
promotion plan of 1974, which encouraged private companies
to achieve greater economies of scale in production. [24]

By 1979, the 200,000 unit mark had been reached for the

64
first time. This was not followed up with further growth
because of the sharp economic recession caused by severe
political turmoil in 1980, when production fell off by 39.8

per cent and the operation rate fell to 34.3 per cent, from
71.6 per cent in 1979.

After the losses of the early 19803, recovery came
rapidly as the demand for passenger cars matched the
strength of demand in the domestic economy, stimulated by
the falls in the price of oil and gasoline tax. This was
aided by the practicality and attractiveness of new models
such as Hyundai's Pony 2 and Kia's Bongo microbus in the
domestic market. At this point it is of importance to note
that the S. Korean government has contributed to utilization
of "surplus“ (in Baran's sense, 1966) of comercial taxi
produced by the domestic car makers - Shinj in and Hyundai
Motors for instance besides direct purchase of various
vehicles for governmental usage. The production figure for
1985 was around 387,000, 583,000 for 1986, and over 1
million units for 1987. Passenger cars are the most
numerous type of vehicle produced by S. Korea, accounting

for 70.0 per cent of all assembled models during 1985.

65

3. Labor's Working Conditions

Under the pmessure of the reserve army at least, the
working class in the industrial sector had to endure low
wages, dangerous working surroundings, and so on. In terms
of absolute surplus value, the S. Korean workers definitely
contributed to its creation. As Table 14 shows, the number
of workers (including managers) who worked more hours has
increased year by year. Also we can see the average working
time spent by manufacturing workers beyond 48 hours
standard. Simply put, they worked for their companies
between 2 to 8 extra hours if the standard 48 hours per week
rule were kept.

The indirect evidence of the creation of surplus value
can be more apparent when taking a look at Table 15. But
the longer working time on the part of the S. Korean workers
does not mean the direct indication through which we can
infer the relative extent of exploitation of capitals to

labor without considering wage levels.

66
Table 14

The Percent of Employment by Hours Worked Weekly

(1969-1984)

(unit: hour)

 

Year 1-35 36-44 45-53 54- Average Hours Worked per

 

Hours Week in Manufacturing
1969 17.5 20.6 22.2 39.7 56.3
1970 19.3 23.0 20.4 40.3 52.5
1975 12.6 17.2 19.6 50.6 50.5
1980 10.3 17.9 21.3 50.5 53.1
1981 9.8 18.0 23.1 49.1 53.7
1982 8.4 15.9 19.9 55.8 53.7
1983 9.1 17.1 19.6 54.2 54.4
1984 8.7 16.1 20.5 54.7 54.3

 

Active Population,

(Seoul:

EPB,1985).

Source: Economic Planning Board,tearbook of Economic

67
Table 15
A Comparison of Weekly Worked Hours by Country

in Manufacturing (1982)

 

Country 1960 1965 1970 1975 1980 1981 1982

 

Korea n.a. 57.0 52.3 50.0 53.1 53.7 53.7
Japan 47.8 44.3 43.3 38.8 41.2 40.9 40.8
Taiwan n.a. n.a. n.a. n.a. 50.9 48.4 48.1
U. S. 39.7 41.2 39.8 39.5 39.7 39.8 39.9

 

Source: International Labor Organization. 1982. Yearbook

of Labor Statistics.

This can be further proved by considering the wage
levels. The relative low wages Korean workers earn are
shown below in Table 16. With the wage of 0.8 workers at
1.00, the average-monthly wages of Korean manufacturing
workers ranked just one tenth and one fifth of Japanese
workers. From those figures, it can be safely argued that
the condition of social reproduction of the Korean workers
was far below the similar industrializing countries, let
alone Japan and U.S. According to official FKTU (Korean
Federation of Trade Unions) statistics, the minimwm living

expenses for an average family of five in May 1983 stood at

68
Won 547,893 (US $685) a month, with 32 percent of that sum
going for food, 21.3 percent for housing and 11.5 percent

for education. By contrast, monthly salaries for all
industries during that time averaged Won 284,392 or about
half the cost of living.(Far Eastern Economic Review July

19, 1984) 'The great difference between wages and living
costs can be said to force them to make their lives
extremely difficult and to demand wage increase.[25]

Since the determination of wage level has to do with

productivity of labor, it is necessary to see how they are

Table 16
Average Monthly Wages and Ratio By Country

(unit: US dollar)

 

 

Year Korea Japan U.S.

(% of US) (% of US)
1981 1.17 (0.11) 6.18 (0.57) 10.79 (1.00)
1982 1.25 (0.11) 5.70 (0.49) 11.52 (1.00)
1983 1.30 (0.11) 6.13 (0.51) 12.04 (1.00)
1984 1.36 (0.11) 6.35 (0.50) 12.59 (1.00)
1985 1.38 (0.11) 6.64 (0.51) 13.09 (1.00)

 

Source:

 

Multinational Monitor Feb. 1987

69
related for tuna clear understanding of the objective
situatUMi in which Korean workers had been involved in the
process of capital accumulation. That is, the extent of the
relative exploitation of surplus value will become obvious.
(Far Eastern Economic Review Feb.11, 1988)

During the whole 19703, the average increase rate of
labor productivity far exceeds that of real wage. As seen
in Table 17, however, in some period (1976 to 1978) the
reverse situation occurred. It was the main reason
underlying the economic prosperity, mainly due to the
construction boom in Middle East countries. Accordingly,
the naive interpretation of the figure might obscure the
exploitative relationship between the two factors.

The same situation can be found in the case of the auto
industry,i.e., expdoitation of surplus value. It is noted
that the level of wage in the auto industry is in most cases
higher than other manufacturing industries because of the
high skill requirements in the most production processes.
In a study on the relationship between wage levels and labor
control policy in the Brazilian automobile industry, John
Humphrey (1980) provided an evidence of higher wage levels.
In the S. Korean auto industry, we can see the similar
condition. According to the Korean Ministry of Finance, the
average hourly wage in 1984 for the overall manufacturing
sector was $1.46, a rate that does not include benefits

while the automotive sector was slightly higher at $1.64 per

70
Table 17
Rate of Wage Increase Compared to Productivity Increase

(1971-1980)

 

 

Real wage Labor productivity
Year increase rate increase rate
1971 1.7 8.9
1972 5.2 7.7
1973 8.0 8.3
1974 6.1 10.1
1975 3.3 11.0
1976 ' 17.5* 6.8
1977 19.9* 10.2
1978 18.0* 11.5
1979 8.4 15.5
1980 -4.1 10.4
Average 8.4 10.4

 

Note: * The major reason of rapid ieonaifa rf real wage

in those years lies in the economic prosperity caused by
construction 'boom' in Middle-East oil countries which made
a huge revenue by raising oil price since 1973. Thus it has
little to do with domestic working conditions.

Source: Dong-A Daily News (3 Dec. 1981) cited from H.Koo
(1984) p.1033.

71
hour.[26] ‘Yet the advantage of higher wages in the auto
industry should not be taken to imply that workers in auto
companies earn sufficient wages to socially reproduce
themselves. For the amount of wages was seen earlier to
fall far below the standard living costs in urban areas.
Moveover, the relative lower level of wages that S. Korean
auto workers can be made explicit in comparison to that of

Brazil and Mexico, let alone Japan and the United States.

Table 18

A Comparison of Hourly Compensation By Country

 

(1977)
United States 5 11.59
West Germany 9.46
Japan 4.61
Mexico 2.73
Brazil 1.97
South Korea 1.08

 

Note: Hourly compensation includes hourly wages,

as well as employer contributions to statutory,
contractual, and voluntary insurance and to other
benefit programs for employees.

Source: Citibank, Monthly Economic Letter (Dec.1978):

15. cited from R. Kronish (1984) p.84.

72

As seen in the Table 18, the workers in S. Korea get
less gain the time input to the production process. (It was
estimated that the direct labor costs of a S. Korean small
car at $300, compared with $800 for a similar Japanese model
and $1,800 for an Amerioie jrlabfl Np orurse, it does not
necessarily mean that the Korean workers are more exploited
and thus auto companies in S. Korea more obtain profits than
the counterparts since social reproduction costs varies
according to the level of the general economic develOpment.
However, we consider labor productivity and labor expense
comparatively in Table 19, the picture becomes more clear to
view the extent of relative surplus value the S. Korea
workers create.

From the following data, it can be explained that the
lower ratio of wages in S. Korea contributes more
considerably to determine the extent to which the Korean
workers were relatively exploited in relation to the similar
level of labor productivity, compared to definitely the U.S.
and other countries. In addition, the common practice of
overtime work, to which wages are not fairly counted to
meet, is a possible multiplying factor. The labor strike
occurred at a plant of the Daewoo Motors in 1984 was caused
by among others things excessive overtime work. (Daewoo
Labor Union, 1985. p.3)

From this analysis, I argue that the reality of

exploitation of surplus value has not changed since the

73

Table 19

Wage and Labor Productivity by Country in the

Auto Industry (1982)

 

Wage/Ratio U.S Korea Brazil Mexico

 

Hourly Wage($) 19.37 1.95 3.66 3.55

Ratio of Labor

Productivity 1.00 0.90 0.80 0.85
to US
Ratio of Wages 1.00 0.11 0.24 0.22
to US

 

Source: The Economist Intelligence Unit, Foreign
Outsourcing by US Auto Manufacturers, 1985: cited

from H. Kim (1988) p.333.

inauguration of capitalist production system since the early
19603. In fact, this point is one of my themes as a basic
integral element along with the state's “collective
capitalist" practices and monopoly capital's incessant
pursuit of profit-maximization for the explanation of the

development of the S. Korean auto ielustry.

74

4. The State' Role in Promoting the Auto Capital

In the previous part, we have seen both the way in
which the S. Korean government has encouraged Chaebols to
accumulate their capital and objective working conditions.
Here I will provide the specific role which the state has
played in promoting in the auto industry and also in
controlling labor organizations through its legal apparatus
(labor laws).

When the second oil shock came and sales crashed
beginning from 1979, the weakness of the auto industry
devoted heavily to the domestic market was exposed (it needs
be recalled that until 1984 the auto exports did not exceed
20 percent of total production, see Table 20). Apparently,
the rate of export in 1980 increased compared to the
previous years - from at best 15 percent to 20 percent. But
it is easily found that the actual amounts of export rather
declined by around 7,000 units. What directs our attention
is the dramatic reduction in the production side.
Production declined from 200,000 to 120,000 units during
only one year - 40 percent.

In such a devastating situation, to help the car makers
regain their strength, the S. Korean government of Chun, who
took the power backed up by military in 1980, tried to
rationalize the auto industry which was overcapitalized in

the 19703. The industry was destined to be reorganized by

75
the government in 1980 which ordered a merger between
Hyundai Motors and Saehan Motors (now Daewoo Motors).
(Automotive News_July 7, 1986) In March 1981, however, the
government had to change the initial order because GM Motors
demanded a 50 percent share of the proposed company, and
insisted to disinvest if the reorganization went through.

(Multinational Monitor June 1981) The main reason behind

 

the breakdown of the merger plan driven by the state was
thus attributed to the fact that GM owned 50 percent of
Daewoo Motors whose equity amounts to US $26.8 million. In
any event, Hyundai and Daewoo were banned from the
production of lixsht vans and trucks in the 1- to S-tones
payload class. (Korea Exchange Bank, 1984 :5) In addition,
the government decided to prohibit a joint venture between
Samsung Group (one of the largest Chaebols) to make cars in
S. Korea. (Automotive News June 3, 1985) Therefore, the
Hyundai Motors and Daewoo Motors were guaranteed to take
advantage of a large enough market'base for their economic
operation.

At the same time, Kia could enjoy the government-
sanctioned monopoly on sales of light vans and minibuses in
S. Korea from 1981 until the start of 1987 when the company
actually began to participate in the market of passenger
cars. The exclusion of Samsung and permission of Kia to
make automobiles was a government move which would slam a

door for Chrysler but could open one for Ford Motor

76

Co.(Automotive News March 2, 1987) At least here the
government's strategy can be explained by the concept of
'relatiwe autonomy" because it could achieve the initial
purpose of preventing excessive competitions among large
auto companies in the passenger cars market by excluding
Samsung from the scene although it failed to merge Hyundai
and Daewoo. At the start of 1987, as the prescription
period expired, the S. Korean government liberalized the
passenger car market so that Kia began to produce small cars
for domestic and export purposes. Thus, the competition in
the domestic market has been intensive and is expected to be
more.

The state's subsidy in auto companies is never
neglected in accounting for the survival (in case of
hardship) or development of the auto industoy. To take a
example, it is well known that the price of Hyundai's
passenger cars exported to North America (Pony or Excel)
was far below compared to their counterpart of Japan's small
cars. Besides the difference of labor costs between S.
Korea and Japan, the S. Korean state subsidized Hyundai
Motors by pricing highly the same cars sold in the domestic
market. According to Asiaweek, Pony's export prices ranged
from $2,400 to $3,000, while its local price was set at

around $5,000-$5,400. (March 20, 1981)

77

5. The State's Control of Labor

Mid the dynamic and antagonistic relationship between
capital and labor, the S. Korean state has played the active
role in the reproduction (of capitalism by taking side on
capital. On the premise of rapid economic development, the
state promoted Chaebols to monopolize the economy on the one
hand and simultaneously oppressed working class through its
authoritarian apparatus. Until recently we can say that the
state has been a ”collective capitalist“ in the above-
mentioned sense. The story of state's labor control is not
of course unique in S. Korea. There has numerous studies on
the issue in the developing countries.

A typical example in the Korean context is to be found
in a set of studies performed by AMEQ. The overall tone of
the case studies is to explain the nature of "super-
exploitation“ of female work force employed in the Masan
Free Trade Zone, located in the southern part of the
peninsula (the purpose to decide the location was to make it
efficient to ship products made in Masan to Japan) and
government's strategies to provide the favorable climate for
the Japanese investment by preventing new labor unions.[27]

Labor Laws were the most direct and powerful measures
through which the state had ever commanded to manage the
labor affairs. Throughout the history of economic growth in

S. Korea since 19603, there has existed various labor laws

78

which were invented, revised, or repealed according to
changing circumstances. In relation to especially industrial
workers and their union organization, two pathbreaking
state's decisions on the labor affairs would deserve a
detailed discussion since those labor regulations among
other things made a profound influence on the hostile
relationship between capital and labor.

Those steps took place in 1973 and 1980. In the
revision of labor laws in 1973 one of the most striking
features was that the unit of labor union changed from
industrial labor unions (i.e.,~Metal Trade Labor Union or
Transportation Labor Union, etc) to company ones (i.e.,
Shinjin Motor Labor Union). However, it is not the
necessary case for workers to organize their unions on the
level of company at their disposal. The prohibition of
workers' right to organize larger labor unions was
undoubtedly intended to restrict their collective action in
a nassive scale. In addition, the 1973 revisions of labor.
union laws and labor dispute settlement laws further
permitted the intervention into the labor unions by the
state's authorities. (J.Lim, 1985) As a result, it was
difficult on the part of workers sufficiently to demand
their rights on the basis of the labor laws. In fact,
during 1975 to 1979 the large number of the labor disputes
that took the various forms such as strike, sit-down, or

hunger strike, etc. had happened in the absence of labor

79
unions. (see Table 20)

Despite the continuous labor struggles, the outcome was
the more oppressive countermeasure against workers. In the
process, one of the labor disputes that ultimately
culminated in the downfall of the Park regime in 1979 took

place in a work place.[28]

Table 20

Number of Labor Disputes By Union Existence

 

 

(1975-1979)

Year Total Union Existence
Yes No

1975 133 66 67

1976 110 56 54

1977 96 65 31

1978 102 42 60

1979 105 52 53

 

Source: Shim-Han Young-Hee (1987) ”Social
Control and Industrialization in Korea“

Korean Social Science Journal vol(13), p.119.

80

The new installed regime of Chun, who took the power by
the military coup in 1980, was no better than the previous
ha its concern with labor affairs. Rather the labor laws
became more sophisticated and repressive by revising them in
the early period of the regime. Among other things the
Labor Management Council law was newly enacted, purportedly
to pave the way for a smoother resolution of labor-capital
disputes, but in the end recognizing the government's right
to intervene in wage disputes. The result of this change was
an emaciation of the FKTU to lead union activities, to
promote actively the democratic operation of its
organization, to hold the initiative for independent
bargaining and, if necessary, to strike for the benefits of
its members. (Far Eastern Economic Review July 19, 1984)

In the political unrest that followed the 1979
assassination of president Park, with the imposition of
martial law in May 1980, the FKTU's top leadership was
purged on assorted charges of corruption and ineptitude.
This included senior officers of the FKTU and most of the
presidents of the then 16 national federations. Those who
cooperate with the state, however, may benefit generously.
For instance, the president of the FKTU at the time of the
military coup, was promoted eventually to the position of
Minister of Labor.

The revisions of the Labor Union Law by the Chun regime

which have reduced the role of the FKTU and the national

81

federations indicates a certain ambivalence over the utility
of these organizations as vehicles for controlling or
coopting the industrial labor movement. The Labor Dispute
Adjustment Law essentially makes the worker's ultimate
weapon - the strike - illegal and prescribes lengthy
procedures for government conciliation and mediation of
disputes. These procedures make it very time-consuming and
costly for workers to strike. Its most recent revision
prohibits interference by ”third parties” ie qetre
ippitns.[29] Such a prohibition reflects the government's
effort to stamp out the influence of activist Christian
groups, especially the Urban Industrial Mission - an active
religious group which has been deeply involved in supportive
activities in exalting urban industrial workers's rights in
their fair relations with management.; Eventually, the Labor
Management Council Law promoted the cooperation of labor
interests into mechanisms controlled by the state.

When looking at both years of 1973 and 1980 closely, we
can find an interesting commonality. The state's control of
labor was resurrected more vehemently in a moment of
political turmoil under which economic crisis was serious.
Let me explain it one by one. The authoritarian regime of
Park intended to keep the state's power through the Martial
Law called Yu-shin (national-wide reform including the
suspension of Congress) in 1972. Behind the 'fatal dose'

there was a drastic economic recession in late 19603.

82
Likewise the Labor Law in 1980 was enacted after the
political turmoil of "the Spring of Seoul" when the
military-backed government of Chun seized power. From the
point of view of both capital and labor, the 'unintended
consequences' of those political events made a decisive
impact on the power relations between them. In addition, to
promote the investment of foreign capital the state issued a
special law whose purpose was to restrict the activity of

labor unions in the foreign-owned enterprises.

6. The Labor Movements

Thus far we have seen the 'objective conditions' of
- working class in general as well as auto workers. What is
then the expression of the workers under such conditions
explained in terms of the state's oppression and capital's
attack against them? The only way available to them is to
struggle against those obstacles by exercising their power
through organizing effective labor unions. In this sense,
it is of special importance to see how the labor unions had
developed under what conditions and what they achieved
through their struggle.

One of major features as regards labor movements in S.
Korea has to do with the traditional cozy relationship
between labor organization and governments. As briefly

discussed in the first part, the FKTU originated from No

83
Chong which was established to counterattack the Leftist
labor unions - Chen Pyong in the 19503. The close relations
between government and the labor union organization should
not fairly represent the workers' interests.

Before the revision of the labor laws in 1980, the FKTU
often served to mobilize and manipulate industrial workers
within a framework of sanctioned, coopted and inefficient
activities. The organization of worker interests withhn
such an institution had the dual advantages for the regime
of regulating union activities while projecting an image of
support for a modern, albeit paternal, system of labor
organization. In addition, abuse of office by union
officials has been a real problem at all levels, especially
within the FKTU. (J. Lin, 1985) .

The relatively lower rate of organization of labor
unions in a legal form involves a direct, though aggregate
expression of limited workers interests. Until 1980 it
stayed well around 20 percent. Even worse in 1980 was the
case.’

The FKTU is now made up of more than 3,500 enterprise
unions, with a total of almost 1.2 million workers. Union
are limited to representing workers at only one company,
though. Each of the enterprise unions must belong to one of
the federation's 16 industrial unions. Reform-mined workers
are trying to break from their enterprise-based unions and

form what they say would be more representative industrial

84
unions, though still under the FKTU umbrella. If they
succeed in forming new industrial unions, they will have a
voice in the FKTU leadership and could push it towards
taking a more militant tone. In 1987, more than 1,400 new
unions were fOrmed, most of them during the heady strike-
filled days of August and September, but those inside the

labor movement say that many of them are now adrift. Most

Table 21

Union Membership and Union Organization Rate

 

 

(1955-1981) (Unit: 1,000)
Year No. of Workers Union Percent of Union
Employed Members Organization

1955 - 189 -

1960 - 334 -

1963 1,120 224 20.0)

1965 1,360 302 22.2

1970 2,386 473 19.8

1975 3,295 750 22.8

1979 4,642 1,088 23.4

1980 4,747 948 20.0

1981 4,965 818 16.5

 

Source: Shim-Han Young-Hee (1987) p.106.

85
of the new union leaders are inexperienced in the skills
required to actually run a union, such as collective

bargaining.

D. The Expansion of the Auto Industry (1985-Present)

From the previous discussion, we have seen that the S.
Korean major auto companies have strengthened their capacity
to open new era within the ownership and managerial network
of Chaebols which have kept close linkage with governments.

In the particular relationship between Chaebols and the
state in S. Korea, it can be carefully indicated that
Chaebols can undertake with the concentration of capital
large investment projects in such industries as
semiconductors, aircraft, shipbuilding and automobiles. In
many Third World countries, these projects can be undertaken
only by state enterprises. But in the increasingly
competitive and rapidly changing world economy, many state
enterprises, due to thein cureaucratic and inflexible
organizational structure, are likely to have a difficulty
time adjusting to those external changes. Secondly, Chaebol
groups have made the Korean economy less dependent on the
TNCs.

This is certainly related to the strong state's

intervention polioy as seen thus far. In the similar

86
context, Mandel (1985) observed that the Korean financial
capitals (Chaebols) are competing with Mitzubishi, Mitsui,

and Dai Ichi, not controlled.

1. The Current Development of the Auto Industry

The most distinctive picture in the recent S. Korean
auto industry can be best described as an enormous expansion
of production and exports of vehicles. The units of vehicle
production increased from 265,000 in 1984 to 975,000 in
1987. The export of vehicles also increased from 52,000
units in 1984 to 675,000 units in 1987. The rapid growth of
production and sales is however responsible for three
companies - Hyundai Motors, Daewoo Motors, and Kia Motor
which have accounted for 98.0 percent of the total vehicle
production in 1985. In terms of the vehicles production,
Hyundai Motors almost has dominated the industry by
occupying 64 percent in 1985 while Kia Motors held 22
percent and Daewoo Motors just 12 percent. The Hyundai
Motors' domination becomes more intensive in the production
of passenger cars. The company accounted for 85 percent of
total production in the same year.

Naturally, domestic market share of vehicles is divided
by those companies. In 1985, Hyundai Motors accounted for

45 percent, Kia Motor for 32 percent and Daewoo Motors for

87

17 percent. Here it seems necessary to comment on the
monopoly of vehicle industry by three najor companies. As
well explained so far, those three auto firms are
subsidiaries of their Chaebol Group - Hyundai, Daewoo and
Kia. Although Kia has no more affiliated companies than
Hyundai and Daewoo, there is no doubt that the affiliated
companies are now under the influence of Kia. O n c .e
considering the number of auto companies in S. Korea, the
extreme monopoly of one company can be a suitable reflection
of capital centralization. It is not so much highly
concentrated in the Latin American countries. In Brazil and
Mexico, Volkswagen company, the largest TNC in terms of
production, accounted for just 39 and 31 percent in 1983,
and Ford for 35 percent in Argentina in the same
year.(Jenkins, 1987:5) Such an extreme congested phenomenon
in the S. Korean auto industry can be explained by in part
the capital centralization which has proceeded in the course
of the rapid conglomerate consolidation process since mid-
19703 as seen earlier.

Returning to our issue of the monopoly situation in the
S. Korean auto industry, a significant change has been
observed since 1987 when the government regulation of
preventing Kia Motor from producing passenger cars expired.
(The purpose of the regulation was to keep safe auto
industry which was at that time overflowed.) After re-entry

of Kia Motor to the domestic market of passenger cars, the

88
leading auto companies have suffered from a significant loss
of market share. This further urged them to locate
marketing places outside in that competition of marketing
as well as production is getting more intensive. For
example, recent sales location of Daewoo Motors in Eastern
countries (i.e.,Czech, Hungary) can reflect its efforts of
escaping hard competition in the domestic market.
(Automotive News Sept.14, 1988) This marketing strategy
might give rise to an inevitable tension with GM. Moreover,
since Daewoo Motors plans to make the company public, the
strain will become more intensive. (recall GM holds 50 %

equity shares)

2. The Changing Relations of the State to Capital

Thus far we have seen the S. Korean state changing in
its form depending on the structural conditions (largely
‘material base) and the peculiarity of regimes' leader
(civilian or military). Especially in relation to
capitalist class, I have argued that the state was in a
position to be a 'cooperator'. In this section I will
discuss this issue in some detail because there were in fact
state's activity against capitalist interests.

It can be controversial whether the S. Korean state has

consistently taken side on capital. Of course, there were

89

significant moments when the state took measures in order to
reconcile the balance between monopoly capital and small
capital or labor. The 'Anti-Monopoly Act' and revision of
the Commercial Code which outlawed any more take-overs
through mutual holdings of equity share among Chaebols Group
companies can be taken as a conflict between the state and
capital. In fact, as we have seen in Table 12, in 19803 the
number of cases of consolidation/take-over conglomerate by
major Chaebols has reduced. (83 cases in 19703 to 38 since
1981) Yet it needs much caution to conclude that the state
and capital have been at odds in that the former would
concentrate on the reproduction of society in a desirable
way. As Block (1977) argues, there is likely to happen that
the state's activity runs against some capitalist class for
the purpose of “capital in general', i.e., the whole social
reproduction. The reason is that the state has different
interests from those of the capitalist class who lacks class
consciousness as a whole unlike state's managers.(Block,
1977:9) At any rate, the form of state will change
depending on the material conditions on which it is based
for its own reproduction (through, i.e., tax). For example,
we saw recently a political transformation towards democracy
although its content is not fully qualified. This outcome
was made possible mainly due to workers' struggles, not to a
few of reform-minded political leaders.

From a different viewpoint, the changing relationship

90
between the state and Chaebols can be conceptualized “from
dominance to symbiosis" as Kim (1987) suggests. According to
Kim, the relationship between the two agents has moved from
clear dominance by the state in 1961 with the rise of the
Park regime to a more symbiotic one in the Chun regime in
1985. Furthermore, it was expected that the changing role
of the Chaebol vis-a-vis the state could lead the latter
into a position where it has to be more flexible to the
needs of foreign capitalists as well as local capitalists.
In the similar veieW th tf naoaehby observed that the
Chaebols are winning a degree of independence from the
government when the Korean economy remains highly

centralized. (Far Eastern Economic Review Feb.1l, 1988)

3. Labor Struggles and Effects

Recently in the S. Korean auto industry, there was a
significant event to effect the relatively stable structure
of the ielustry. It was severe labor struggles prevailing
in the whole nation. What is of importance is that those
occurred in large companies such as Hyundai, Daewoo, Kia.
One of the most intensive struggles took place in Daewoo
Motors in Bypung, suburbs of Seoul. From 1985 to early
1988, workers demanded their rights of proper wages,
democratic labor union, improved working conditions, etc.

We can notice the root of those labor disputes in relation

91

to the previous discussion. I provided the material
conditions which would contribute to the eruption of class
conflicts in the form of labor struggle. of course the
material conditions are major factors leading to the
struggle. 'The class consciou3ness of workers has changed
from “ix: itself” tn) "for itself“ through the various
channels of consciousness raising efforts initiated by
primarily Christian, Students, and 'pseudo-workers.'tNH
Those practices of rasing workers awareness of their
objective conditions have been without interrupt followed
since 19703.

Here we have a problem to be solved. Why then in the
past did not such a massive labor movement take place?
Given that the current material conditions would be even no
better than those in the 19703, how can we explain the
current event? There appear two alternatives to answer
those questions. One of them is attributed to external
forces of either material or ideological coercion. The
repressive state apparatus is the main entity. Through
regulatory legal power the state has in fact limited the
workers activity as seen earlier. If we accept this
assumption, the question followed immediately should be
this: is there any difference between two time spans? If
so, how can we prove it? As fully recognized, one of the
main features in the S. Korean auto industry as well as the

whole economy is their dramatic growth basically at the

92
expense of the industrial workers. The social inequality as
the result of the growth became clear in every sector.
Workers' struggle is one of expressions to improve the
conditions of their devastated lives.

In the S. Korean auto industry, likewise others, wage
demand is the first and foremost catch-phrase for their
struggle. There are numerous cases of workers' demand for
'fair wages' in the auto sector. For example, the main
motive behind the severe strikes occurred at Hyundai auto
plant in Ulsan was due to their low wages. Hyundai auto
workers of 20,000 in Ulsan, the largest industrial complex
in S. Korea, earn about $3 an hour without fringe benefits
in 1987.(Automotive Industries Oct.1987) Working condition
was ru> less an important reason. Labor unrest spread
nation-widely in 1987 as thousands of workers joined in new
protests seeking improved working conditions.

While the workers were under severe difficulty of
subsistence, the fact that the companies makes a tremendous
profit was enough to stimulate them to seriously contemplate
their 'relative deprivation' (against company). The profits
(of company is not the direct motive of the labor struggle
but a serves as a stimulant. It was reported that car
companies are enjoying- record profits and sales in 1987.
Hyundai Motors posted a 15 percent gain in earnings in the
first half <>f 1987.. reaching 20.6 billion Won ($25.5

million).[31l

Table 22
Number of Labor Disputes and Reasons

(1974-1981)

 

 

Year Cases Wage-related Shutdown, Working Others
(%) Issues dismissal conditions
1974 102(100) 67.5 - 10.7 21.8
1975 133 48.1 12.8 10.5' 28.6
1976 110 61.8 10.0 14.5 13.7
1977 96 68.8 8.3 9.4 13.5
1978 102 72.5 3.9 8.8 14.6
1979 105 63.8 10.5 - 25.7
1980 206 61.2 10.7 7.8 20.4
1981 186 57.5 10.8 19.4 12.3

 

Source: Shim-Han Young-Hes (1987) p.118.

94

The demand for the democratic union is no less
important motive of the underlying workers' resistance. As
shown before, the labor was run in an authoritarian manner
in which the majority of the workers did not have a voice in
the decision making. The strike that occurred in 1988 can
be seen as an indicator of what the workers wanted. Korean
workers have been demanding higher wages and improved
workers' right, including a voice in management, the
rejection of existing pro-management trade unions and the
election of new unions officials to represent their
interests in labor negotiations. Disputes at Hyundai Motor
and other Hyundai Group companies surfaced late April in
1987, when employees of the Hyundai assembly.plant in Ulsan
and other Hyundai plants in the Ulsan industrial complex
rallied to demand the resignation of incumbent labor union
leaders. Workers are seeking the election of new union
leaders by the direct vote of the company's employees.

The effect of such a serious workers strike was
enormous. First of all, it directly caused the lower
production of cars. The actual number of vehicles produced
in 1986, around 583,000 fell far behind the production
capacity of 1 million. It is not surprising that the
'unexpected' labor strikes frequently caused government
estimates of vehicle production or exports to greatly
digress from the original target.

The labor struggle also contributed to the critical

95
political transformation in 1987 just like the pmevious
struggle in 1979 which led to the downfall of the Park
regime. The labor disputes followed the street
demonstrations in early 1987 that forced the government to
promise widespread political reforms, press freedom and
direct presidential elections. The picture of a disciplined
and compliant Korean workforce is changing dramatically as
workers begin Ix) assert their right in the new and freer
political climate. Thus we can say that the labor dispute
is one of the prices to be paid in the democratization
process in S. Korea as_Far Eastern Economic Review titled it

as “The price of democracy“ (Jan. 28, 1988)

4. The Linkage with World Economy

It is very obvious that the world political economy has
made a great impact on the S. Korean economic development.
It ranged from the political independence in 1945 to the
current import protectionism and pressure on liberalization
of the S. Korean domestic market.

As far as the development of the S. Korean auto
industry is concerned, as argued thus far, the foreign
direct investment had little to do with it other than the
local capitalists which succeeded in capital accumulation

partly due to foreign loans. Now let us take a look at the

96
external force and the way and implication in which internal
forces (the state, capitalists, and working class) responded
to it.

The most conspicuous 'dependency' lies in the market.
sphere - the objective phenomenon of S.Korean auto
industry's dependence on the external market does not
necessarily involve the implication posed by a ”dependent
development” perspective because other developed countries
like Japan and Sweden would fall into this category of
dependent development. As provided in the early discussion,
the S. Korean auto companies shipped around 300,000 units of
vehicles in 1986,and expected to ship 583,000 in 1987. From
the view of capital, it is of necessity for the auto
companies looking for the foreign market to satisfy the
realization of surplus value which has not been valorized by
the domestic demand. Unlike Latin America countries-
Brazil, Mexico, and Argentina, S.Korea's vehicle exports
have contributed to this realization in the auto industry.
According to Jenkins (1987), the proportion of export sales
to total production in the three countries from 1966 to 1970
did not exceed 6 percent. (Jenkins, 1987:106) On the
contrary, the export of cars from Korea started in 1975,by
1977 exports had already reached 11% of the total production
this rose to, 17% in 1978, 30% in 1985, and 51% of 300,000
out of 583,000 units in 1986. (see, Table 23)

97

Table 23

Ratio of Exports to the Production of Vehicles

(1977-1987)

 

 

Year Production (A) Export (B) Ratio (B/A)
1977 85,210 9,136 10.7 %
1978 158,958 26,296 16.5
1979 204,447 31,976 15.6
1980 123,135 25,074 20.4
1981 134,234 26,283 19.6
1982 162,590 19,859 12.2
1983 221.019 24,449 11.1
1984 265,361 52,248 19.7
1985 378,162 123,110 32.6
1986 583.000 300.000 51.5
1987 975,000 675,000 69.2

 

Source: Appendix 1 and KAICA

98

When the country's overall economic dependence on the
U.S. amounts to 40 percent in value terms in 1986, the
magnitude of automobiles' dependence on foreign market can
hardly escape the vulnerability to the external conditions,
i.e., import protectionism. For example, Canadian
Government announced that a new 6 % duty on autos imported
from developing countries would take effect on
Jan.1,1987.[32] As far as the auto industry is concerned,
we can recognize two factors behind such a critical
dependence on foreign market; production capacity goes
highly beyond the domestic demand and a certain amount of
vehicles produced in S. Korea was initially designed to
export to the U.S. by the contract of joint venture. (Daewoo
Motors and Kia are the cases)

Despite its unstable base for sales, the exports of
vehicles accrued an enormous profits. In 1986, S. Korea
earned an automotive trade surplus of around $1 billion with
the United States and expected $2.5 billire te hsa prbbrwing
year. (Automotive News March 2, 1987) However, it is too
hasty to anticipate the successive profitability in the
future. For the United States is anxious to reduce the
chronic trade deficit with every efforts, which reached
overall $170 billion in recent years. S. Korea is still a
minor part of the grand figure, but becomes important since
its surplus is growing fast. In 1986, the nation's overall

trade surplus with the United States marked $7 billion, but

99
it incurred a $6 billion deficit with Japan.[33]

Recently, it happened that the auto majors in the U.S.
induced 'foreign capitals' to find a way of investment in
the United Sates. In fact, lots of Japanese auto
multinationals already opened their production processes in
many sites of the U.S. (R. Hill, 1988) This trend of
'reverse-NIDL' can be properly understood by taking account
of international politics as well as the economy. For
example, the enormous trade deficit of the U.S. to Japan
could encourage the U.S. government to 'force' Japan to
produce vehicles in the US, with an anticipation of reducing
hostility of unemployed American auto workers.

'The construction of auto plants in Canada by Hyundai
Motors was seen in the same context as Japan's. There is a

political factor underlying the decision of Hyundai;

To boost its position in the Canadian market,
Hyundai has announced C$2.5 million (US$1.89
million) in an Ontarir plant producing electrical
automotive parts. The move appears to be largely
political for the South Koreans who are eager to
show thein orjjthjaeh hr Canada and to prevent any
backlash against the sudden success of thein oin
jieqpioturers who have resisted investing in
Canada. (Far Eastern Economic Review Feb.21 1985)

(DE course, the nature of politics between Hyundai and
Japanese auto majors is different in terms of dependence and
dominance on the foreign markets. In case of Hyundai, the

politics seems to more depend on the conditions of the

100

Canadian Government. Despite the investment, the Government
declared that a new 6 percent duty on autos imported from
developing countries would take effect on Jan.1, 1987.
(Automotive Newstune 3, 1985) Moreover, Canada's revenue
department ruled that Hyundai cars have been dumped on the
Canadian market and imposed stiff provisional import duties
on the S.Korean autos; Hyundai has provided further (cost
and price data to the revenue department, which may result
in a reduced dumping charge.(Wallstreet Journal Nov.25,1987)
The Canadian Import Tribunal said evidence submitted to the
Federal Revenue Department indicates that the Canadian auto
makers are being hurt by so-called dumping of Korean-made
Hyundai cars on the Canadian marketgthis case is the first
.dumping action brought by auto makers in Canada against a
foreign auto producer. (Wallstreet Journal Aug.l7, 1987)

In the similar vein, import protectionism should be
explained in terms of politics as well as economy. As to
the S. Korean auto industry, the adjustment of exchange rate
will make a great effect on exports of vehicles as well as
other export items. The exchange rate of $ US to Won
declined drastically from 1 to 1,000 in 1984 to 1 to 700 in
early 1988. What is important here is that the rate is
expected to decline for a considerable time. Thus, it is
said that Koreans who rely on the overseas market will be
forced to stop their business if the exchange rate goes

below 700. (Dong-A Daily News Aug.23, 1988)

101

To prevent export growth from prompting a protectionist
backlash in the U.S., the Korean government has confirmed it
would liberalize imports of cars with engine larger than 2
liters.(Automotive News Feb.9, 1987) As shown earlier, the
country already opened its capital markets such as bank,
insurance, and stock etc. However, the auto ielustry has
been strictly protected from foreign cars. But at this
point it is safe to say that the foreign cars will not hold
any significant market share in the present situation in
which the imported cars would be subjected to a 100 percent

tariff if these luxury cars were to sell in S.Korea.[34]

V . CONCLUSION

What can be drawn out from the analysis of the
particular capitalist develOpment of the S. Korean auha
industry? It was made explicit that what makes it so
distinct from others, say Latin American countries lies in
the internal organization of three acting agents of the
state, capital, and labor. By examination of the relational
context in which the S. Korean auto industry has been deeply
associated, three points were put forward: (1) the
monopolistic character of the auto capital that is
intimately related with the development of its Chaebols; (2)
besides the primitive accumulation of the Chaebols, once the
capitalist relation of production was set in motion, the
relative and absolute exploitation of labor were explicit
integral constituents of the accumulation of capital; (3)

the whole process of capital accumulation was mediated and
escalated through the state's intended activities in both

sides of capital and labor.

Insofar as empirical data are allowed to show, foreign
capitals in the form of direct investment had little to do
with the developing process of the monopolized auto
capitals. Rather, in terms of technology and external
market, the extent of 'dependency' on which they had relied
to work out expansion and realization of capital has tended

to increase as long as capital is globalized.

102

103
The extremely concentrated monopoly situation in the S.

Korean auto industry is likely to enhance capital's relative
autonomy vis-a-vis the state. In view of the government,
that is, the growing importance of the industry (in the
aspects of foreign exchange, close linkage to other related
industries such as machinery, chemicals, tire and so on) and
its Chaebols' increasing responsibility in economy would
help to precipitate the state's liberalization policies.
This new pattern of relationship between the Chaebols and
state was described as the succinct concept of "from
dominance to symbiosis“. But I argued, citing Block (1977),
that the nature of the capitalist state is 'pro-capitalist'
at least in the respect of the reproduction of the
capitalist social reproduction.

In confrontation of labor struggle, the S. Korean auto
capitals is moving towards a more capital-intensive
manufacturing system for the compensation of the rising
'wage cost'. Unlike easy-movable production locales in the
textile and electronic industries, the auto capitals
introduced automated equipment for efficiently dealing with
the problem of labor and productivity. Automated
manufacturing by robots can be the highest stage of a
capitalist production organization although a complete
replacement of workers by robots leads to a crisis of
capitalism.[35] At any rate, it was estimated in 1985 that

the level of automation in the production process of welding

104

spot in S. Korea was only 35 percent while it reached 70 to
96 percent in the U.S and other advanced capitalist
countries. (Automotive News March 18, 1985) In order to
compete well, for example, Hyundai Motor Co. recently
established an affiliated company of Hyundai Robot
Industrial Co. which is capitalized at $27 nullion dollars
and plans to produce several kinds of robots (i.e., spot-
welding robot).(Automotive News Sept.19, 1988)

Finally, the theoretical conclusion to draw is not
quite solid as I asserted in the course of overview of the
existing literature related to the capitalist development in
the auto industry. Still a theoretical statement can be
possible as far as S. Korean capitalist development goes.
The development process seems more likely to be the typical
case when capital accumulation expresses itself in the

mixture of capital to labor.

VI. IMPLICATIONS

There are recently significant changes in the S. Korean
auto industry in many aspects. In the political sphere, the
new government of Rho has announced a political reform
toward democracy. As implied in this study, one of the
major driving forces underlying the dramatic political
transformation is owing to the labor's struggles associated
with increasing class consciousness. In economy, the large
Chaebols have to concede the workers' demand in that the
democratic labor unions are allowed to establish and they
achieved an wage increase as well.

In the auto industry, due to the workers's strength the
auto companies can no longer rely upon the advantage of
cheap labor. This fact directly caused them to seriously
think about the production process by automation. In some
of the plants of Hyundai Motors the automation was
implemented. But the new plan which builds a large robots
with the technological tie-up with Suzuki will change the
current production system.

In the domestic market, the re-entry of Kia's passenger
cars has a great effect on the market share which has been
divided by Hyundai and Daewoo Motors. Hyundai lost its
market share form 70 percent to 55 percent in 1987. Daewoo
fell behind Kia. What needs attention here is the problem

of excessive competition among passenger carmakers over the

105

106
domination of the small domestic market as compared to their
production capacity. This traditional phenomenon of
overproduction in capitalism would impact the industry
toward 'falling rate of profits' or 'countertendency' by
continuous technological innovations, 'scientific
management' etc. In exports, they have to encounter
severe competitions with rival companies with price,
marketing, and sales in North America. Especially, the
great hardship Daewoo Motors experienced in recent years led
it to seek new marketing places of the Western and Eastern
Europe countries (Czech, Hungary). This marketing strategy
can invoke or represent a potential tension with GM.
Moreover, since Daewoo Motors plans to make the company
public, the strain will become more intensive. (recall GM
has 50 percent equity shares) Increasing protectionism and
import liberalization of foreign cars operate as a potential
threat to the progressive growth of the industry in the

future.

Appendix

107

Trend of Vehicle Production (1962-1987)

 

 

Year Passenger Trucks C§uses Total
Cars

1962 1,710 67 - 1,777
1963 1,063 191 - 1,254
1964 216 33 - 249
1965 106 35 - 141
1966 3,117 313 - 3,430
1967 4,983 1,385 236 6,604
1968 11,630 5,085 942 17,657
1969 19,494 9,618 1,882 30,994
1970 14,487 10,529 3,803 28,819
1971 12,428 7,511 3,063 23,002
1972 9,525 6,542 2,581 18,648
1973 12,428 10,069 3,494 26,314
1974 9,069 17,276 3,945 30,290
1975 18,498 14,973 3,808 37,279
1976 26,701 19,376 3,468 49,545
1977 43,981 35,776 5,453 85,210
1978 86,823 64,856 7,279 158,958
1979 113,564 78,576 12,307 204,447
1980 57,225 53,857 12,053 123,135
1981 68,760 52,116 13,358 134,234
1982 94,460 47,199 20,594 162,590
1983 121,987 73,438 25,594 221,019
1984 158,503 80,304 26,554 265,361
1985 264,458 84,614 29,090 378,162
1986 456,994 90,758 35,248 583.000
1987 - - - 975,000

 

 

Source: Korean Automotive Association, microfiche (1987)
and Automotive News

ran—1 —J"dl.u‘ (1' _
_v

1 0 8
ENDNOTES

[1] "Countries commonly given 'newly industrialized ' status
[the NICs] include Argentina, Brazil, Greece, Hong Kong,
Republic of Korea, Mexico, Portugal, Singapore, Spain,
Taiwan, and Yugoslavia”. Yet lists vary, depending on the
criteria applied.

[2] For a general overview of the development of the auto
industry in Latin America countries of Brazil, Mexico, and
Argentina, see R.Jenkins (1987) Transnational corporations
and the Latin American automobile industry and Kronish and
Mericle (eds) (1984) The Political Economy of the Latin
American Motor Vehicle Industry.

 

[3] For example, foreign ownership in the Brazilian terminal
auto industry in terms of share of production was at 100
percent. The rate of foreign ownership in Amgentina and
Mexico was a little bit lower. Jenkins (1987) p.62 table 4.1

[4] The two concepts are interchangeable. Some Marxist
scholars prefer to use semi-industrialized (dependent)
countries to NICs. For example, see Mandel (1984)
'Semicolonial Countries and Semi- Industrialized Dependent
Countries” '

[5] ZIt is extremely difficult to discern the emphatic
differences between internality and externality for a proper
explanation of the capitalist development within a country.
Reflecting the debates around the issues, Fernando Cardoso
asserted a conceptual necessity called “double
determination“ - a task requiring the “formulation of
concepts linked to the effort to explain hOW'internal and
external processes of domination relate to one another"
(Cardoso, 1973:143).

[6] It is true that the subject of auto industry is handled
as a government project by government-sponsored institutions
like Korean Development Institute. Two articles are
avaibicba pthhtex this purpose.

F7] This represents implicitly the fact that the auto
industry has been viewed as a 'suitable' topic by those who
were interested in the changing pattern of development per
se without consideration of the politico-economic factors.
Ben Dankbaar (1984). ”Maturity and Relocation in the Car
Industry” Development and Chan e. 15:223-250. Sanjaya Lall
(1980). ”The InternationaI Automotive Industry and the
Developing World" World Development 8:789-812. George Maxcy
(1981). The multinational automotive industry New York: St.
Martin's Press.

 

109

[8] For a useful analysis of the relations between terminals
and suppliers of the auto industry in the Latin American
context, see Jenkins (1987) pp.119-139.

[9] This part of definition although revised is entirely
stimulated by Marx's in Capital and his 'orthodox' follower
Roman Rosdolsky (1980) in The Makinggof Marx's Capital

[10] Yet the production of parts and components grew
rapidly, largely due to the increasing replacement demand
for military vehicles, as well as for civilian motor
vehicles rebuilt from military equipment.

[11] Total units of vehicles marked just 1,777 and did not
exceed 10,000 until 1968. (microfiche) Korea Auto Industries
Coop. Association ”Korea - Production 1962-1985“ p.101.

[12] Throughout the history of the Korean auto industry, the
most frequent shifts of ownership can be found in the
formation of Daewoo Motors. The present Daewoo Motors
originated from Shinjin Industry in 1955 which later shifted
to Shinjin Automobile Industry. The latter was jointed with
General Motors in 1972 and changed its company to GM-Korea
which was renamed to Saehan Motors in 1976. Lastly in 1983
Daewoo held its management from GM and came into existence
as Daewoo Motors since.

[13] For a helpful explanation of this kind of capital
circuit, see Fine and Harris (1979) Rereading Capital New
York: Columbia University Press.

[14] 'Those three opportunities of 'primitive accumulation'
are widely accepted by most of Korean scholars, i.e., see
Cho, Suk-Choon (1982). ”The Korean Labor Union Organization
and the Administration of Labor Affairs," Korean Journal of
Public Administration. 20 (2).

[15] The whole properties were reverted to the U.S. Military
Government Office [1945-1948) which began to dispose of them
in 1947. Among other things, 5,000 small enterprises were
disposed until 1948 when Korean government was settled.
‘Youn-hwan Kim. at al. (1983) The Recognition of the Labor
Problems in Korea. Seoul: Dongneyk. p.38.

[16] The rest of reverted properties were transferred to the
Korean government and numbered 29,1835 items. The 'windfall'
of involvement in the process of their disposal stimulated
the serious speculation on the part of politician-brokers.
This is closely related with the transformation of
'traditional' mercantile capitals to industrial capitals.
Hyun-chae Park. et al. (1987) The Recognition on Korean

110
Society (I) Seoul: Hanoul. p.28.

[17] The Chen Pyong was established and led largely by
socialists who had involved in labor movements during
Japanese rule. The inheritance of revolutionary labor
movements directed the Chen Pyoung towards the unity of
economic and political struggle, democratic centralized
administration. Kim, H.K. (1985) “The Development of Working
Class, its Internal Composition and Class Consciousness” pp.
54-5. in Park, B.C & Kim, H.K The Capitalism in Korea and
Labor Problem Seoul: Tolbagae.

[18] The nature of No Chong was not so much labor union as
anti-communist political fraction to smash the Left-labor
union for the purpose of expanding the power of workers
oriented to Right. Kim, H.K. p. 56.

[19] The vacuum of administrative bureaucrats after
Liberation necessitated the U.S. military Office to turn to
the ex-bureaucrats in Japanese rule who were from the landed
class. The symbiotic relation means this 'inevitable'
affinity.

[20] The farmer's grain was purchased at below-market prices
by government and sold, along with imported grains (PL 480),
in industrial cities at below-market prices. The major
effect of this policy was to keep labor costs down.

[21] The similar family-type ownership in Chile is studied
by M. Zeitlin and R. Ratcliff (1988) According to them,
large corporations in Chile are ordinarily controlled by a
specific family or set of closely interrelated kindred and
thein iffrotihafw cifal re hsatn orjcteal rwnership
interests, reinforced through an intrioiha fthaj rf
intercorporate holdings and interlocking relationships.
What he calls “kinecon group” is "a complex social unit in
which common economic interests and close kinship
relationships are indissoluble” (p.7)

[22] In this sense, apparently the distinction between
Chaebols and 'kinecon groups' is hardly drawn in terms of
ownership of family. But this does not necessarily lead to
[a inference that their social and historical formation is
identical.

[23] Hyundai Motors was established in 1967, Shinjin Motors
and Asia in 1965.

[24] The plan helped to rehabilitate the industry.
Production increased again: 26,000 in 1973, 30,000 in 1974,
37,000 in 1975, and so on until the second oil shock in
1979.

111

[25] According to a Labour Standard Bureau, only 11 percent
of the entire Korean industrial workforce earns enough to
support a family of four during the economic growth rate of
9.6 in 19703. (Sunoo, Harold:1978) Recently, the Korean
government announced that the minimum wage law would be
enacted (M1 Jan.1, 1988 (Business Week Dec.14, 1987). Yet
the amount of $150 monthly minimum wage is not be sufficient
for the actual living costs.

[26]
Countries Korea Japan U. S.
Hourly Wages $2.38 $8.05 $13.42

 

 

‘Notes: ANerage wages excluding benefits for transportation
workers. 1985 for U.S. and Japan: 1984 for Korea.
Source: Automotive News, July 7, 1986.

[27] Masan Free Trade Zone, established in 1970, is the
prototype for the capital-inducing zones. Although the
relative amount of foreign capital (around 90 percent of
Japanese) was not significant, the S.Korean government
provided a extremely favorable investment conditions for the
Japanese capital, i.e., cheap land-use costs, tax holiday,
prohibition of unions etc. For the more information about
working conditions, see Don Long (1979) “Repression and
Development in the Periphery: South Korea” Bulletin of
Concerned Asia Scholars 9(2):26-41.

[28] This labor movement was led by female workers in a wig
manufacturing place located in Seoul during August in 1978.
After the forceful settlement of this event, the opposite
leader of New Democratic Party (Kim, Young Sam) was
discharged because of his reproach against Park's treatment
of this labor affair. This historical dismissal of Kim
evoked resentful criticism among people in Pusan whom Kim
had been long representative of. The so-called Pusan-Masan
turmoil in 1979 again pushed Park to armed settlement. After
.all, Park's political instability caused by 'authoritarian
militarism' resulted in assassination by one of his
intimates.

[29] On surface, the Trade Union Law was strengthened to
enable more workers to organize unions. For instance, a
union now can be organized with the consent of 20 percent of
total workers per workshop. In exchange for this
concession, however, the law forbids a "third party” from
intervening in collective bargaining or a strike. Thus it
was claimed that this measure was instituted to block church
dissents, priests and students from engaging in activities
in support of unionists. Specifically, it has approved

112

successful in restraining the growing power of the Urban
Industrial Mission.

[30] 1M3 a strategy of student movement, their active
involvement:.h1 'worker's life' in workshops is to enhance
the cooperative relationship between workers and student,
otherwise separate one. Because the government pronounced
these student's activities illegal, they have to conceal
their identification as a student.

[31] In the same period, Kia Motors reported sales of 461.4
bibbtre _re *+685 jtbbtrefl, and earned a profit of 143?
billion won ($18.2 ndllion). Automotive News (August 24,
1987)

[32] Automotive News (June 3, 1985). Besides the North
America, the European Commission has stripped S.Korea of all
trade privileged granted under the Generalized System of
Preferences. Far Eastern Economic Review (Dec. 31, 1987).

[33] Automotive News (March 2, 1987). This is an aspect of
international division of labor. The auto multinationals of
GM and Ford wanted to maintain profits rate by investing
part of their capitals to Korea in which vehicles would be
made at a lower price due to cheap labor costs. In so doing,
simultaneously they could escape the labor problem which has
been fierce because of the well-organized auto unions, i,e.,
The United Auto Workers.

[34] The big three auto makers in the United States as well
as in Europe has launched their sales in Korean market. An
$85,000 Lincoln will become reality soon in S.Korea; Ford
will begin exporting 1988 Continentals; GM also is in the
process of entering S. Korea.(Wallstreet Journal March 22,
1988)

[35] Without countertendencies, the total displacement of
workers (living capital) by robots would fail to generate
surplus value, which in turn lead to difficulties in capital
accumulation in a system of the capitalist redations of
production.

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113

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Kim, H.K. 1988. Monopoly Capital and Wage Labor in Korea
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Kim, Y.H. at al. 1983. The Recognition on the Labor Problems
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. 1985. "The Development of Working Class, its
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Lee, H. & K.Chang (eds.) 1986 The Structure and Strategy of
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Lee, K.O. et.al. 1985. The Consolidation of Firms and
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Ihhn, Jong-Yul. 1985. “The Problems in Labor Laws” in Park

Park, [LJ:. et al. 1987. The Recognition on Korean Society
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[Statistics and Other Records]

Asiaweek (March 20, 1981).
Automotive Industries (Oct. 1987).

Automotive News (March 18, 1985).
(June 3, 1985).
(July 7, 1986).
(Feb.9, 1987).
(March 2, 1987).
(August 24, 1987).
(Sept.19, 1988).

 

 

 

 

 

 

Business Week (Dec.14, 1987).
Citibank, Monthly Economic Letter (Dec.1978).
Daewoo Labor Union, Seoul: 1985.

Dong-A Daily News (Dec.3, 1981).
(Aug.23, 1988).

 

Far Eastern Economic Review (July 19, 1984).
(Feb.21, 1985).
(Dec.31, 1987).
(Feb.11, 1988).
(Jan.28, 1988).

 

 

 

 

International Labor Organization. 1982. Yearbook of Labor
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Multinational Monitor (June 1981).
(Feb. 1987).

 

The Korea Times (Feb.18, 1986).

The Republic of Korea, Economic Planning Board (EPB). 1985.
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Wallstreet Journal (Aug.17, 1987).
(Nov.25, 1987).
(March 22, 1988).