Korea, Inc.

forget what you read in the headlines--this politically troubled industrial giant is poised to eat the rest of the world alive

Down the Block from Seoul City Hall, on the tower of the King Sejong Cultural Center Annex, hangs a huge electronic signboard. Each morning this past winter, over the scuttling commuters and shiny Hyundai cars and purple Daewoo buses, through the snow and frigid winds sweeping down from Manchuria, the sign was ticking off the days to the 24th summer Olympics: 619, 618, 617....

Korea is throwing itself a bash next summer. The hosts may be more inclined toward precision (616, 615) than toward exuberance, but make no mistake--the Koreans see the Olympics as an important party, a national debutante ball, a presentation to the world of the industrially mature Korea. The spotlight will be on the nation and its collection of multibillion-dollar conglomerates, the top ten of which account for a third of the country's G.N.P. Visitors will watch replays on Korean-made Samsung televisions, be ferried around Seoul in Hyundai taxis and call home on Lucky-Goldstar telephones. Most of the running shoes worn by athletes and spectators will have Made in Korea sewn into them.

But who can really blame Korea's leaders for wanting to show off? In 30 years, they've transformed their country from a nation of bombed-out rice paddies to one of booming factories. Since 1960, per-capita annual income has soared from a pathetic $80 to more than $2000. The 1986 G.N.P. growth was estimated at 12 percent, not only one of the most impressive economic performances on the planet last year but nearly five times the growth of the U.S.

Just as important--to the Koreans, anyway--they've established themselves as genuine contenders against their historic archrivals in Tokyo: When the Japanese look over their shoulders these days, they see the Koreans bearing down on them. Fast.

Of course, everything that Korea has gained, it also stands to lose. The country's basic lack of democratic rights has long sparked protests, which the various military regimes have simply squashed with a characteristically heavy hand. But Korea's recent economic successes have made the government cautious, the dissidents bold and the military nervous. Now, when students riot in the streets--as they have done so fiercely in recent months--or the opposition party demands reforms, the stakes are high. Korea is finally a major economic power, and the Olympics are one long commercial selling the country's rice-paddies-to-riches story. But if the political problems plaguing Korea worsen, 30 years of accomplishments could disintegrate.

The world waits to see if Korea can solve its internal problems. If stability is maintained and the Olympics go off without tear-gas clouds floating over the track-and-field events, the Americans and the Japanese will still have special reason to be nervous.

While American athletes are winning medals on the balance beam and the running track, Korean workers will be taking home the real pocketable, spend-able gold in the shipbuilding and electronics and economy-sedan competitions. In those events--despite their small population, political insecurity, lack of resources and a dozen other hurdles--the Koreans have already shown themselves to be true contenders. If you're skeptical, consider that in 198(5, when Korea started shipping inexpensive front-wheel-drive Hyundai Excels to America, sales quickly exceeded 168,000, making the Excel the most popular first-year foreign model in the history of the auto industry. Within 17 months, it had topped VW, Mazda and Subaru to become the fourth-largest-selling import in the U.S., despite the fact that it had only limited geographic distribution.

Other telling examples can be pulled from the shelves of your local computer store, where Daewoo's Leading Edge has been seducing customers with high-end IBM-PC compatibility at a low-buck price. Go to your local car dealership and test-drive either the new lord Festiva or the Pontiac LeMans, both built in Korea. Or check your VCR or stereo. Ignore the brand name, turn it around and check the plate on the back: There's a good chance it was made in or around Seoul. Ditto for small appliances and audio and video tapes. Often, you'll find the Korean goods in discount stores, significantly underpricing their more established rivals, much in the same way the Japanese did in the early Sixties. You remember the days when the words Made in Japan meant shoddy, tacky and, mostly, very, very inexpensive.

Today, of course, those words mean something entirely different, and that's one of many lessons that have not been lost on Korea. One Korean company, Lucky-Goldstar, already owns seven percent of the microwave-oven market in the U.S., with its low-end, dirt-cheap models; but the company has already started branching out, leaving behind the discount ghetto with a new line of flashy, upscale microwaves.

It's a trend we've seen before, and if it continues, a great many workers in Detroit and California and the Carolinas may come to sense-without the benefit of an electronic signboard-that their days are numbered.

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Around American business schools, people tell the story about a Korean executive who was complaining about his workers. "Those on the day shift," he said, "are so much more productive than those on the other shift."

"Two shifts!" his American friend yelped. "If you're worried about productivity, the first thing you should do is add a third shift, like we do in the U.S."

"How wonderful," the Korean replied quizzically. "But doesn't that require a 36-hour day?"

It's a story, but it's no joke.

At the heart of the Korean miracle is a group of multibillion-dollar corporations called chaebol (literally, "financial clans"), and the success of these chaebol is based squarely on Korean laborers, the hardest-working men and women in the world.

Meet Chung Seong Yul: It's four I\M. on a Saturday in the Hyundai Motor Company assembly plant in Ulsan, a port town on Korea's southeast coast. Conditions are far from ideal. The plant is unheated despite the crisp Korean winter. The noise in the press shop, where doors and panels are punched out, is deafening and the men wear no ear protectors. But the plant is nevertheless efficient. Electronic signboards overhead track production against goals: 347, 348.... Today, a new car is being minted every 57 seconds.

Chung is a trouble shooter, chasing down a bad connection on a red Excel GL, one of 250,000 cars that Hyundai intends to export to the U.S. this year. When he quits work at eight P.M., Chung--like all his fellow workers on the assembly line--will have logged 60 hours for the week, just as he had the week before and the week before that. He will earn $600 for the month, plus bonuses.

He's not eager to be interviewed. His job is to chase ghosts out of cars, not make small talk. Only at the urging of a company interpreter does he slide into the open, his screwdriver remaining poised in the air. Since his $600 a month is good money by Korean standards, I ask how he's spending it. He saves almost everything, he replies. Single and 29, he'll spend Saturday night in his dorm room--provided by the company, a five-minute walk from the plant. He'll read, then sleep. On Sunday, he'll visit his family, a short bus trip away. Come Monday at eight A.M., he'll be under another Excel.

I tell him that by American standards, he works long hours. He shrugs. I ask him if he'd like more work. He shrugs again, then admits that he gets tired on his current schedule. "But if the company needs me to work more hours," he says, "I'll work them." He nods impatiently toward the car, indicating that he has work to do, and crawls back under the bumper.

As I start to walk away, his head pokes out by the front wheel. "You must remember," he calls after me, "not every worker has the privilege of working overtime."

In short, Chung is the perfect employee: diligent, disciplined, dedicated to country, family and, of course, the Hyundai Motor Company. And he is hardly an isolated case. The average work week in Korea is more than 54 hours, and most work for less pay. Much less.

Some numbers must be crunched, others can be swallowed whole, but some can only be choked on. According to recent U.S. Bureau of Labor statistics, Korean auto workers such as Chung average $1.82 an hour, compared with $8.04 in Japan and $19.99 in the U.S. Overall, an American worker expects to pull in $12.97 an hour. His Japanese competitor makes $6.45. And Koreans, at $1.41, provide more than just bargain-basement muscle. Unlike their counterparts in Bangladesh and India, Koreans are educated--they boast more than a 95 percent literacy rate, among the highest in the world.

And it isn't only the Chungs of Korea who put in the long hours. White-collar workers commonly work more than 60 hours a week. At Daewoo, which in addition to computers produces ships, pianos, T-shirts, components for the American F-16 fighter jet and thousands of other products, office workers get Sundays oil'. Period. They also have an annual vacation of three days, one of which is a Sunday. While there's a company policy granting them one additional day off each month, most workers decline the holiday, opting instead for a cash bonus.

As Daewoo executive S. B. Lee puts it, (continued on page 148)Korea, Inc.(continued from page 82) "We all feel very responsible for the company's performance, so--if we have nothing else to do--most of us prefer to take our holiday at our desk."

Nothing else to do? If the concept of leisure doesn't spring to mind, perhaps it's because Koreans don't have a tradition of free time. For young men and (rarely) women in and around Seoul, after-hours activities are usually limited to eating and drinking.

It's not just the workers who sacrifice. Kim Woo-Choong, Daewoo's chairman and founder, is a Spartan of commerce who works 12-to-15-hour days and travels more than 200 days a year. He reportedly has not taken a holiday in the 20 years since he started the company. And for that, he draws a salary of about $100,000 a year--no stock options, no bonuses. Profits, according to Kim, are for reinvesting.

The company always comes first, even if Kim has to find some surprising rationales for that policy. "Daewoo people, including myself, believe that working diligently does not harm the family," he once said. "Indeed, I feel that the destruction of family life occurs due to immoral conduct, when there is too much free time."

It would be swell if Americans could treat this as nothing more than a cultural peculiarity--Indians let their cows run loose in the streets, the English drive on the left and Koreans work like pack mules. Unfortunately, like the Japanese before them, the Koreans have a direct impact on American jobs. While Hyundai puts affordable cars in driveways all over the U.S., other Korean companies have teamed up with American firms--Daewoo is making cars inexpensively for G.M. and Kia is churning them out for Ford. That may be a smart move for Ford and G.M., but it's one that makes Detroit auto workers nervous. Very nervous.

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"Why do the Koreans put up with it?" is the normal gut reaction to all this. In modern business parlance, the query becomes "What is it about the Korean style of management that motivates workers so profoundly?"

Ask Y. K. Kim, a 27-year-old technician on Samsung's VCR line at Suwon, an hour's drive from Seoul. Enjoying a cigarette during his afternoon break, Kim laughs at the idea that his 11-hour workday is unusual. He's happy because he makes S300 a month and expects to move into the company's free dorms soon. Even more important, Samsung offers on-the-job training that could bring him raises, promotions and more exciting work. "This is a good job," Kim says emphatically. "You can never be sure, but it's very likely that I'll stay with Samsung forever."

Like the 50 or so other young men on break, Kim is dressed in a dark-blue uniform. The office staff has its own uniform. And on the color-TV line, the young women building JC Penney and Curtis Mathes television sets wear blue jumpers and tan scarves. The scarves also serve as a subtle indication of rank: Workers' are trimmed in blue, supervisors' in white.

The uniforms, the subsidized housing, the assumption that a job is a job for life--it all has a familiar ring. Look around other Korean corporations and you'll see the morning exercises, the singing of company songs, the quality circles. It's no surprise that Korean management looks a lot like a scale model of the Japanese system.

The similarities are not accidental. Lying a little more than 100 miles apart across the Sea of Japan, the two countries have had more than a millennium of interaction. Typically, that has meant war, rape and plunder, but there have been other relations as well. From 1910 to the end of World War Two, Japan occupied Korea and introduced 20th Century industrial practices; and since then, Japan has served as an example of manufacturing prowess. Most Koreans--even though they are chauvinistic as a rule and fiercely so when it comes to the Japanese--proudly admit that they've borrowed wholesale the Japanese management style.

They're not alone. Americans have also crammed at the school of Japanese management, but many of its practices are obviously ill suited to the U.S. This approach flourishes in Korea, however, for the cultural reasons that it works in Japan: The workers share a common history and common values.

"It isn't necessary to motivate Koreans," says Shin Young Chul, managing director of the Korea Management Association. "We are all alike. We all understand that we must work hard, very hard, if we are to survive."

It's easy to watch news reports of students demonstrating in the streets and assume that Korea is a divided society. But the ties that bind Koreans go beyond political differences. Because they have the same roots and they understand one another, because Confucian traditions include an abiding respect for authority and a love of harmony, they basically get along with one another. And they have other strong reasons for minimizing their differences.

"We have to have a warm atmosphere here in the office," Lucky-Goldstar's Choi Young Taek says. We are relaxing in a cozy-meeting room on the 17th floor of the Lucky-Goldstar building. The office next door, however, is a different world. It's crowded and chaotic. Choi, who is a manager for public relations, does not enjoy a separate office or even a low partition. He has two subordinates' desks flanking his and six more just a couple of feet away. Another bank of desks lies beyond and others beyond that--perhaps 30 desks in all.

"Korean workers select a company, first of all, on the basis of office atmosphere," Choi claims. "Money comes second." Why? "Because we spend so much time in the office, we see our fellow workers more than we see our real families. So the office must be like a family, too."

That sense of family doesn't end with the office. It extends over the entire country of 42,000,000 people. Granted, there is genuine opposition to Chun Doo Hwan's dictatorial policies, and that opposition is growing increasingly bold. But overarching all the debates and demonstrations, there is the threat of North Korea, a military giant by Third World standards, with which the South is still technically at war.

Thirty-four years after the fighting stopped, South Korea remains on a military footing. The daily papers carry word of the latest North Korean provocation. Posters in Seoul's bustling restaurants exhort citizens to report suspected spies. The military and security police are on duty not only along the DMZ but also on city street corners and freeway toll booths. And even the civilians ape military protocol: Hotel doormen salute patrons. Shipbuilders at Hyundai Heavy Industries salute a new ship as it is christened. Executives at Daewoo salute chairman Kim.

A defensive mentality even runs through Seoul's new development. City expansion has been heavily concentrated in areas south of the Han River, according to a longtime American resident of Seoul, "because people here still remember what happened when the North Koreans invaded in 1950. They blew up the bridges, and anyone caught on the north side of the river went through hell."

The threats don't come from just one direction. "Ironically, we owe much of our success to the North Koreans," Korea Management's Shin claims. "But also the Japanese. We arc eager to work hard, because we want to beat the Japanese."

The Koreans are fixated on competing with their island neighbors. They view the North Koreans as powerful and a little wacko-a genuine short-term threat. But recalling what has happened to their country over the centuries, they see a long-term danger in Japanese economic domination. And they are passionate about it. "We are poorer than the Japanese," says a Hyundai spokesman. "Our technology is less advanced. If we are to beat them, we must work harder. When they work eight hours, we must work more. Much more."

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Although it may sound strange to Americans, Koreans can rebel against the government and still remain loyal to their employers, "South Koreans Riot in Night, then go Dutifully to work," noted a New York Times headline in June. The Korean commercial family--welded together by a common heritage, common enemies and common poverty--remains tightly knit.

But any therapist will tell you that a close family is not necessarily a healthy family. And Korea's clans show clear signs of pathology.

Harry Kamberis, who heads the Seoul office of the Asian-American Free Labor Institute, part of the A.F.L.-C.I.O.'s International Affairs Department, is familiar with the peculiar psychology of the Korean economy. "Managers here like to talk about the entrepreneurial spirit in Korea and about how one guy created Hyundai out of nothing," he says. "Well, he didn't create it out of nothing. He created it out of personal contacts with people in power. I've seen the kind of government incentives they have to do things or not do things. The government decides how these guys are going to act."

Government interference in private business is staggering by American standards. Bureaucrats control imports, exports, loans, wage levels and take-overs. Perhaps the most legendary example of Korea's state-controlled capitalism came about in the Seventies, when the late president Park Chung-Hee asked Daewoo chairman Kim to take over a shipyard that was half finished and deeply in the red. Kim demurred. Undeterred, Park announced the take-over anyway while Kim was out of the country.

Korean officials and the chaebol seem to have reached an accommodation, with the government wearing the pants in the relationship. But in any family, not everyone gets to be Mom and Dad. Put government and the chaebol and labor together and guess who becomes the kids. And, as in families everywhere, Korean parental authority is based on a murky blend of love, understanding, gentle cajoling, brute force and terror.

Day to day, the chaebol looks after the workers. At the Samsung industrial park at Suwon, employees have a clinic with two doctors in attendance; they enjoy lunchrooms with free hot meals and a soccer pitch that they can use in their minimal free time. Across the highway are the subsidized apartments and dorms. The conglomerates also show a certain sensitivity to the events that are important in a Korean's life. In those companies that have labor contracts, there are often relatively liberal vacations for family occasions: For his own wedding, an employee gets seven days off; for a grandparent's 60th birthday, one day; for the death of a grandparent, five days.

At the same time, though, chaebol control often translates into petty intrusions on workers' lives. Hyundai men are instructed to keep their hair trimmed above the ears. Women who work for Korea Air, part of the Hanjin group, are forbidden to wear blue jeans--even off the job. Workers at both Hyundai and Daewoo have been forced to take part in company-sponsored savings programs, which is painfully like having your father invest a quarter of your allowance in savings bonds.

But those are only lightweight tram-plings of what Americans consider inalienable rights, a sort of economic "tough love." For other workers, especially those in the smaller factories, the Korean commercial family is nothing short of abusive.

Young people entering the work force undergo the worst exploitation. "The companies use a system that was popular in the U.S. in the early days of the Industrial Revolution," Kamberis explains. "They have dormitories so that they can keep the workers--typically young girls--entrapped on the compound. They have forced overtime, so that they work 12 to 14 hours a day, six and sometimes seven days a week. They don't leave until their supervisor leaves, and if he decides to stay and stay and stay, then they stay."

The garment industry is among the most notorious in Korea. Those fashionable Korean-made clothes so common in U.S. stores are often made in sweatshops using the two-tier system. "You take a regular-size room with an eight- or nine-foot ceiling," explains a labor economist, "and put in a second floor, so you get twice as many people in the room. That's real common."

The North American Coalition for Human Rights in Korea, a watchdog group formed by Protestant and Catholic mission agencies, has a list of other abuses. Executive director Pharis J. Harvey says that for the past two decades, South Korean workers have suffered from the highest rates of job-related accidents and deaths. "Child labor still exists. And wages remain very, very poor. It's not uncommon for wages, even in chaebol-related companies, to be less than 100,000 won [roughly SI20] per month, which is considerably below subsistence level."

Harvey also cites problems with rampant lung and other occupational diseases. Working long hours, with few breaks, handling hazardous materials in poorly ventilated areas, some laborers become permanently handicapped. "As of a few years ago," he says, "most workers in electronics manufacturing were losing their eyesight within four or five years. That is, they lost so much eyesight that they couldn't continue working. And then they lost their jobs."

Another group, Washington, D.C.-based Asia Watch, has detailed even more horror stories of Korean management: laborers forced to work 24-hour shifts, company stores that charge more than o(T-site retailers, workers docked three days' wages for a one-day absence, factories so cold that workers suffer frostbite.

It's also part of the system that workers are seen and not heard. If they raise their voices, they run up against a vicious tradition of labor repression--one that seems to have more in common with America circa 1910 than with modern Japan.

Labor activists in Korea risk harassment by promanagement workers or by company thugs. Griping workers have been kidnaped, beaten with lead pipes, sexually abused, taken on long car rides, dumped at the edge of town. They are also likely to be fired and blacklisted from employment at other companies. "The government maintains lists of known labor-union activists, which are made available to companies for use in their personnel offices," Harvey explains.

And the government is not shy about inviting itself into labor negotiations, playing the role of disciplinarian. In some cases, activists have been arrested after an agreement has been reached with the corporation. But arrest is too neutral a word when the result is beatings, electric shocks, cigarette burns, water torture. Organizers can also be pressed into the army for extended periods of "purification."

The punishment can be even harsher if the activist has some advanced education. "The government is freaked out by the idea of the students and workers' joining forces," explains a priest who has worked just outside Seoul for the past three years. "So they've made it illegal for university students and graduates to take jobs as laborers." But there arc not enough jobs for graduates, so many arc forced into blue-collar jobs, where they are known as "disguised workers."

"It's OK if they're not exposed," Kamberis explains. "But if they're caught, they can be fired for falsifying their work documents. And if they've been caught organizing, it can be an automatic two years in prison."

The chaebol are publicly sensitive to the subject of workers' rights, because they have an embarrassing record and because they stand to lose crucial trade preferences from the U.S. if Congress finds them in violation of internationally accepted labor standards. When asked, the chaebol. will explain that unions aren't necessary. When difficulties arise, management-worker committees resolve them.

But in a country where (low) wages and (long) hours are set by the government, what kinds of problems do such committees tackle? At the Hyundai Motor Company, workers on the assembly line complained only about the company policy stipulating military-short hair for men. Too much money and too much of their free time was going toward haircuts. After deliberating, the committee announced a new policy: A company barber would roam the assembly line, providing subsidized trimming. End of controversy.

Unions do exist in Korea, and some have limited clout. But when collective bargaining takes on a political cast, when it is tied to the opposition or affects a favored export industry, President Chun takes a very hard line.

"This government is totally paranoid," Kamberis claims. "These guys decide how the economy is going to be operated, where the emphasis will lie. They have a mania about controlling every detail. They want a predictable inflation rate, a predictable G.N.P. growth, a predictable political situation. But labor is a variable they can't predict, and it angers them."

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Many Koreans have learned to love their work, and most of the rest have learned to keep their mouths shut. But Korea is facing a crisis. Because a technological society requires education, because it's very hard to make people both smart and docile, times are changing.

Behind the move toward democracy are the students, who have ideas and the organization to do something about them. In these turbulent days, they are also very vocal, which, in a country where torture is an everyday event, shows unusual courage. In its ham-handed and paranoid way, the government takes the students seriously. During the 1980 riots in the southwestern city of Kwangju, the military killed--depending on who tells the story--between 200 and 2000 people, mostly students. If that seems like a very skittish reaction on Chun's part, it's not entirely without reason: Massive student demonstrations brought about the downfall of Syngman Rhee in 1960.

If Chun thought that the threat of massacre might act as a disincentive to further protest, he was mistaken. This past summer, students throughout the country were taunting the man responsible for Kwangju. On the quiet days, thousands were marching. On the other days, they were throwing gas bombs, blocking traffic and tearing up pavement to bombard the police. They were mixing it up with the security apparatus, even at the risk of another Kwangju.

All that makes for a very anxious prosperity in Korea. And the anxiety builds with every tick of the Olympic clock. The world-wide focus on Seoul is being exploited by the opposition, which is pressing for democratic reforms and a direct presidential election in 1988, when Chun is scheduled to step aside. But the police and the military and the chaebol have ample reason for holding tenaciously to traditional labor and political relations. After you rail against their methods, you must return to one bright, hard truth: They have succeeded, with a vengeance.

From an American-standpoint, it would be lovely if the Korean economy exploded from all the forces welling up inside it. In the short term, it would mean one less strain on the balance of payments, and Americans would not have to compete against qualified laborers who work grindingly long hours for subsistence wages.

But that relief would pass quickly. Korea matters most not as an industrial powerhouse, not as a magnet for American jobs, but as a harbinger of a bleak new season in international business. If (or, in some minds, when) the lid blows off in Seoul and Korea's economy falters, the American worker will still be facing tough new competition. In fact, many Korean companies complain that Korean workers are already too expensive. At the huge Hyundai shipyard in Ulsan, they say that in ten years or so, the Indians and Pakistanis, who work for a fraction of Korean wages, will be taking away ship and oil-rig contracts, in the same way that, a decade ago, the Koreans took contracts away from Japan. Taiwan is a contender in electronics and the manufacture of small appliances. Open a personal computer sometime and see how many chips are labeled el Salvador or Malaysia.

And, the Koreans say, if you want to see a real economic specter, look to their north, past their feuding cousins. The People's Republic of China has a billion people who work very, very cheaply. Not only do they share a common heritage but they also respond very well to the slightest capitalistic incentives, as changes in their agricultural output have shown. Recent retrenchment notwithstanding, the old hard-liners are dying off, and the industrial base is improving. The Chinese have been exporting quality garments for some time; and now, as a Samsung employee anxiously points out, they're exporting television sets.

The Chinese won't threaten too many American jobs next year or the year after. But they're coming, and they'll be hard to shake. And it's worth noting that Peking has announced that it may want to host the Olympics in the year 2000. Maybe the Chinese just want to invite the world over for the usual orgy of sports and flag waving. On the other hand, maybe they think it'll be time for a coming-out party, a presentation to the world of another industrially mature nation-only this time, that nation will be backed by the muscles and brains of one fifth of the human race.

Start counting.

"'The destruction of family life occurs due to immoral conduct, when there is too much free time.'"