4 - 10 January 2001
Issue No.515
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Al-Ahram Weekly On-line 4 - 10 January 2001 Issue No.515 |
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Merger madness
Even as they were being forcibly evicted by riot police last week, the 15,000 striking bank workers at the Kookmin and Housing Bank and Commercial Bank in the South Korean capital Seoul were defiantly pledging to continue their struggle into the new year. Meanwhile, the government ruled the strike illegal, and threatened to arrest all union leaders.
The workers are protesting the banks' projected merger with Goldman Sachs of the United States and Insurance International of the Netherlands, which they fear will result in massive lay-offs. The banks riposted that their merger would create the largest bank in South Korea, and tie in with the International Monetary Fund's (IMF) requirement to restructure the ailing banking sector. Restructuring, however, comes at a price: analysts estimate that the government's plans will result in 75,000 job losses in the banking and business sectors alone.
On the surface, it seems that the South Korean economy has brilliantly recovered since the dark period of the 1997-98 economic crisis. Following the fall of the country's Gross Domestic Product to minus 6.7 per cent in 1988, growth picked up dramatically in 1999 to reach an impressive 12.8 per cent in 1999. Based on the strength of such figures, neo-liberal analysts hailed Korea's remarkable revival. Proclaiming that the country's success story was contingent on President Kim Dae-Jung's neo-liberal course, they triumphantly lauded his reform programme. The success was attributed to following IMF standard prescriptions, tight fiscal and monetary policies and increased liberalisation.
These figures, however, masked disturbing underlying ripples. While it is true that Korean state coffers are brimming with international reserves, foreign investors hold more than $60 billion in the country's stock market. Controlling an estimated 30 per cent of speculative and flight-prone capital, they could easily pull out if they suddenly lose confidence again -- just as they did in 1997 -- and thus precipitate another reverberating crash.
Besides remaining vulnerable to speculative attacks and potential capital flight, the Korean economy is also reeling from the after-effects of the initial stock market crash. Despite phenomenal growth figures in some sectors (Samsung, Hyundai, Lucky Goldstar and SK realised an average growth of 21 per cent in 1999), a considerable chunk of the corporate system is crumbling.
The country's giant conglomerate, the Hyundai chaebol, is being liquidated. It has $46 billion in debts. Daewoo, another manufacturing giant, collapsed last year. Still reeling from the 1998 crisis and from slumping world demand in the high-tech market, the manufacturing sector remains heavily indebted. The combined debt of the country's four biggest chaebols is estimated at $122.8 billion, down by only 15 per cent since 1998. Following financial insolvency and investor jitters in the wake of the Daewoo bankruptcy -- the largest bankruptcy case in corporate history -- the stock market has fallen by 30 per cent this year.
While it is true that unemployment has decreased in absolute terms, falling from seven per cent in 1998 to five per cent in 2000, the figures are deceptive. The Korean Ministry of Labour says that 52 per cent of the labour force are working in part-time or contract jobs. According to even the most conservative official estimates, the number of unemployed is expected to increase from the current 800,000 to some 1.2 million following the projected business and banking restructuring. This means that one in five households would be left without regular incomes by next spring. Labour "flexibility" legislation has destroyed millions of jobs in a country that has long prided itself on providing job security for life.
Since the Kim Dae-Jung administration's deregulation of foreign investment, transnationals move the economy at will and market volatility is rampant. As a result, the disparity between rich and poor has reached its highest level in recorded modern history. South Koreans now derisively refer to the rise of the 20/80 society: the 20 per cent elite vs the 80 per cent poor. As if this was not enough, the 20/80 equation is at risk. Additional mergers, which are high on the Korean government's agenda, will further destroy entire categories of jobs.
In South Korea, and elsewhere around the world, the race is on between transnational corporations to see who can create the largest monopoly and thus most effectively control global market prices. Merger mania has in recent years demonstrated that market deregulation can make or break corporations. Paying the price for such unbridled liberalisation, workers worldwide are being laid off by the hundreds of thousands.
Regardless of this casualty figure, deregulation of the market remains on the agenda. The "free" market tenet, in effect, dictates the consolidation of monopolies. Statistics confirm the trend. Worldwide, an estimated 2,500 mergers occurred in the first trimester of 1999, with the price tag of $411 billion -- a 68 per cent increase over the 1998 first-trimester mergers.
In the scramble to reach the top, the law of the jungle prevails. The logic is simple: "big, bigger, biggest." As recently as 1998, only 200 transnationals controlled the worldwide production of all goods and services, including manufacturing, banking, wholesale and retail trade, agricultural production and distribution, and the entire gamut of both legal and illegal financial services. Since 1998, the 200 have regrouped through fresh mergers into even more formidable monopolies. Gobbling up the competition in a single mouthful ultimately guarantees their success.
However, over and above the profit motive, corporate survival has become contingent on carving out market monopoly niches. The logic of unbridled capitalism has pushed corporations to branch out, consolidate and merge in order to resist the potential onslaught of the other predators. In a world that thrives on disruptive change and radical uncertainty, nobody is safe.
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