Market and Society in Korea: Interest, Institution and the Textile Industry (Routledge Advances in Korean Studies)

Market and Society in Korea

How did industrial structures in textiles evolve in the absence of sophisticated marketsupporting institutions? Assessing the roles of capital, labour, and state, Dennis McNamara discovers a distinctive style of interest bargaining to bridge uncertainties and foster entrepreneurship. The textile industry serves as a microcosm of the broader social changes of the past five decades. Dramatic transitions from family firms to professional capitalism, from state direction to regulation, and from company unions to industry federations take centre stage. Moving among executives, labour leaders, and state officials, the author charts development across the crucible of contending interests. Stretching from high technology to labour-intensive production, the textile industry offers a new profile of democratization and market liberalization, and recently of globalization and adjustment in the wake of the Asian financial crisis. Rather than pluralism, corporatism, or clientelism alone, multiple competing channels address market imperfections and the inadequacy of institutions. This mosaic of different forms of trust, termed syncretic capitalism, channels interest conflicts and promotes the compromises necessary to bridge periods of crisis and concentrated growth. Interviews with firms, labour offices and government bureaux give human detail to the Korean growth and adjustment story. Market and Society in Korea provides a narrative of industrial families and state leaders, conglomerates and organized labour contesting, competing and sometimes cooperating in the making of an industry. The concept of syncretic capitalism taps the variety of societal forms of governance to balance the current emphasis on state-led development in South Korea. The first comprehensive review of the past and present of a leading sector, the volume offers a new interpretation of society and market in South Korea. Drawing insights from the New Economic Sociology, this study sheds new light on social systems of production in the South Korean Miracle. Contrasts with Thailand and Japan bring the Korean experience of interest contention into a comparative context of Asian capitalism. Dennis McNamara is the Park Professor of Sociology and Korean Studies at Georgetown University, Washington, DC. His publications include Corporatism and Korean Capitalism, Trade and Transformation in Korea, 1876–1945 and Textiles and Industrial Transition in Japan. He serves as President of the Economy and Society Research Committee of the International Sociological Association, co-chairs the Korea Seminar at the Foreign Service Institute of the US State Department, and is a member of the Council on Foreign Relations in New York.

Routledge Advances in Korean Studies

1. The Politics of Economic Reform in South Korea A fragile miracle Tat Yan Kong 2. Market and Society in Korea Interest, institution and the textile industry Dennis McNamara 3. Social and Economic Policies in Korea Dong-Myeon Shin

Market and Society in Korea Interest, institution and the textile industry

Dennis McNamara

London and New York

First published 2002 by Routledge 11 New Fetter Lane, London EC4P 4EE Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 Routledge is an imprint of the Taylor & Francis Group This edition published in the Taylor & Francis e-Library, 2004. © 2002 Dennis McNamara All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data McNamara, Dennis L. Market and Society in Korea: interest, institution and the textile industry/Dennis McNamara p. cm Includes bibliographical references and index. 1. Textile industry—Korea (South) 2. Korea (South)—economic conditions—1960– I. Title HD9866.K62 M38 2002 338.4’770095195–dc21 2001058890 ISBN 0-203-36165-2 Master e-book IS BN

ISBN 0-203-37423-1 (Adobe eReader Format) ISBN 0-415-27481-8 (Print Edition)

Contents

List of tables List of abbreviations Introduction

vii ix 1

1

Market and society Trust and transaction Brokering interests Syncretic capitalism

6 7 12 21

2

Industry formation, 1945–60 Enterprise: Kyungbang and Taechang Birth of a spinning industry Politicized interests Conclusion

24 27 30 36 41

3

Industry growth, 1961–79 Enterprise: Dainong and Kolon Spinning moguls Birth of a synthetics industry Contested interests Conclusion

46 50 55 57 62 71

4

Industry maturity, 1980–2000 Enterprise: Kabool and SK Chemicals Spinning moguls Synthetics firms moguls Consolidating interests Conclusion

75 78 87 91 95 101

vi

Contents

5

Capital Four firms: Dongil, Choongnam, Samyang and Saehan Adjustment Changing interests Conclusion

105 108 112 121 126

6

State Interest groups Interest versus interests Conclusion

130 132 140 147

7

Labor Labor organization Institution and interests Conclusion

152 156 161 166

8

Conclusion Coordination: Korea and Turkey Autonomy: Korea and Thailand The future: Korea and Japan Borders in Asian capitalism

169 170 173 177 184

Notes Bibliography Index

188 223 246

List of tables

1.1 2.1 2.2 3.1 3.2 3.3 3.4 4.1 4.2 4.3 4.4 5.1 5.2 5.3 5.4 7.1

Three modes of interest exchange Spinning moguls, 1959 Patterns of Korean industrial organization Two features of Korean textile development Dainong and Kolon, 1992 and 2000 Spinning moguls, 1979 Synthetics moguls, 1979 Kabool Textiles, offshore subsidiaries, 1999 Kabool and SK Chemicals, 1992 and 2000 Spinning moguls, 2000 Synthetics moguls, 2000 Selected textile moguls, 1992 and 2000 Spinners’ offshore investment 1999: single projects Spinners’ offshore investment 1999: multiple projects Social systems of production in Korean textiles Dual pyramid of organized labor in textiles

21 31 41 47 51 56 58 80 85 87 92 108 116 117 128 156

List of abbreviations

AID CKTU DTECEN DYETEC EG FKI FKTU FKTWU FOA GSM GTC HCI ICA ICFTU ILO JETRO JICA KCCI KCFA KCTU KEAT KEF KFTWU KIET KITA KOFOTI KOILAF KOTRA KRB

Agency for International Development Confederation of Korean Trade Unions (Minjung nochong) Taegu Dyeing Industrial Center Korean Dyeing Technology Center ethylene glycol Federation of Korean Industries (Han’guk Gyeongjein Yeonhaphoe) Federation of Korean Trade Unions (Han’guk Nodong Johap Chongmaeng Nochong) Federation of Korean Textile Workers Unions (Jeonguk Seomyu Nodong Johap Yeonmaeng) Foreign Operations Assistance General Services Manager of the US Department of Agriculture General Trading Company Heavy and Chemical Industries International Cooperation Agency International Confederation of Free Trade Unions International Labour Organization Japanese External Trade Organization Japan International Cooperation Agency Korea Chamber of Commerce and Industry (Daehan Sansanggong Hyeopbeuihoe) Korea Chemical Fibers Association (Han’guk Hwaseom Hyeophoe) Korea Council of Trade Unions Korean Export Association for Textiles Korea Employers’ Federation Korean Federation of Textile Workers Unions Korean Institute for Industrial Economics and Trade Korean International Trade Association Korean Federation of Textile Industries (Han’guk Seomyu Saneop Yeonhaphoe) Korea International Labor Foundation Korea Trade-Investment Promotion Association Korea Reconstruction Bank

x

Abbreviations

KTDI MCI MOCIE MOTIE OECD OEM PET SWAK TPA TPH TWARO

Korea Textile Development Institute Ministry of Commerce and Industry (Sanggongbu) Ministry of Commerce, Industry and Energy (Saneop Jaweonbu) from February 24, 1998 Ministry of Trade, Industry, and Energy (Sanggongbu) from March 23, 1994. Organization for Economic Cooperation and Development Original Equipment Manufacture polyethylene terephthalate Spinners and Weavers Association of Korea (Daehan Bangjik Hyeophoe) terephthalic acid Daehan Bangjik Hyeophoe, Seomyu yeonbo (Cotton Annual) Textile Workers, Asian Regional Organization, of the International Textile and Garment Workers Federation

Introduction

The summer of 1998 brought little joy to South Korea. The weakness of the local currency against the dollar forced up prices of daily imported necessities such as gas and oil, at the same time highly indebted firms drastically reduced bonuses, work schedules, hiring, and even employees. A disciplined populace quickly mobilized frugality campaigns, organized labor agreed to compromise on layoffs and a new government pushed reform at the once famous and now increasingly infamous conglomerates or “jaebol.” As Koreans struggled with tight budgets, reduced incomes, and fading consumer dreams, bewildered bankers, policy-makers, and scholars pondered how the vaunted juggernaut of Korean state and capital could unravel so quickly. Ranked as the eleventh largest economy worldwide and a major trade partner for the USA and Japan, the specter of a banking collapse or widespread default on foreign loans at Korea’s massive conglomerates quickly captured the attention of foreign governments, the International Monetary Fund and World Bank. Adjustment to avoid a Korean meltdown mobilized the resources and expertise of the IMF, prompted the USA and Japan to promise further credit lines as necessary, and brought intense international scrutiny of the Korean political economy. Western experts publicly questioned the credibility of the Bank of Korea and the Finance Ministry and their reports on the amount of foreign exchange reserves, or on the extent of foreign loans outstanding. IMF officials themselves were reportedly shocked at the extent of the crisis when they finally went themselves to Seoul in the fall of 1997 to negotiate a $57 billion rescue package. Credibility or trust has been one of the keys to rapid Korean economic growth, enabling both state and entrepreneur to jointly assume massive responsibility in the building of markets and creation of demand. Lin Chenyuan, president of Chunghwa Picture Tubes in Taipei offered one profile of his Korean competitors and their crisis.1 This financial crisis is mainly over credit. If we want to compete with Korean companies, it’s not like competing with a company but with a country. These companies—Samsung, LG Daewoo—are supported by the Government in terms of cheap finance. They didn’t care about supply and demand… The Koreans dumped the price to get cash, and if a customer pays in one

2

Introduction

month, they give a 3 percent discount. We have to match this or we will lose customers. In the absence of sufficient demand in domestic markets, Korean state and capital joined forces to penetrate markets abroad in both the export push of the 1960s, and the heavy and chemical industries campaign of the 1970s. Stabilization measures under Presidents Chun and Roh in the 1980s again demanded credibility and cooperation among state, capital, and now labor in keeping prices down and restructuring failing firms. Market liberalization and political democratization over the past decade raised hopes for an end to close, sometimes collusive ties between government and private capital, at the same time new market opportunities and greater access to foreign capital prompted growth and Korean expectations for higher status in international trade regimes. Membership in the prestigious OECD as well as the International Labor Organization, and appointment of a Korean diplomat to a vice-presidency at the World Trade Organization brought higher status and heightened credibility, but also closer international attention to market dynamics, business-state ties, and industrial relations within South Korea. International pressure constrained the earlier pattern of close business-state ties, but offered little institutional support for more open, transparent ties. Credibility in the globalized Korean markets of the 1990s stretched beyond Korea’s borders to trust between international banks and manufacturing and trade partners abroad, but remained anchored at home in ties between state and capital evident in negotiation of macro-economic policy, priorities of economic diplomacy, and infrastructure projects. If the financial crisis of 1997 has shaken international investor confidence in South Korea’s banks and firms, scholars look more broadly to trust as a means of reducing the transaction costs of monitoring adherence to agreements between supplier and consumer, or of litigation to recover disputed revenues or defective supplies. Rapid economic growth through penetration of foreign markets from the 1960s would suggest effective structures of credibility at home between Korean state and capital. Yet four decades of growth from the 1950s do not suggest a conventional, Western capitalist model of cohesive institutions of market, state, and civil society. Indeed, apart from a competent state bureaucracy for industrial planning and direction, and of large-scale company organization in the form of jaebol effective for rapid growth, observers often cited the weakness or absence of necessary complements such as an autonomous and credible legal system for property disputes and contract, anti-trust offices ensuring a level playing field for multiple market entrants, an autonomous system of banking and finance, or a credible and extensive local stock market for raising capital. Prosperity despite the obvious gap between institution and economic growth was one pressing anomaly bedeviling scholarly efforts to explain Korea’s rapid ascent to the stage of leading trading nations. President D.J.Kim’s government now echoes IMF calls for greater “transparency,” i.e., a clearer definition and enforcement of property rights, more consistent and credible accounting practices.

Introduction

3

A code word for better institutional procedure, “transparency” has emerged as a theme not only for IMF demands and local compliance, but also within Korea for jaebol reform and the popular demand for an end to collusive ties between state and capital. One immediate result of the IMF era has been closer scrutiny of financial links between state and jaebol, among subsidiaries within the jaebol, and better accounting of actual amounts of loans, their sources and collateral. A window has finally been opened on the variety of networks linking state and capital in Korea’s remarkable run from poverty and war to prosperity and status among the ranking economic powers. The recent crisis has shed new light on adjustment across Korea’s major leading industries, but has been particularly revealing in industries already well along the road of decline and restructuring such as textiles. Many of the major textile jaebol have submitted plans for rescheduling of loans, and two firms, Dainong and Hanil Synthetics have gone into default and remain under bank supervision. Textiles offers an extensive chronicle of industrial origins, growth, and maturity, a rich historical context for sorting out the origins and change in the networks and institutional structures channeling interest exchange and now under scrutiny in the current crisis. More importantly, changing patterns of interest contention across the five decades of textiles in the Republic tell a story of trust and transaction in very turbulent times of reconstruction, the export boom, market liberalization, and now adjustment. Establishment, extension and integration of a complex, serial line of production for export were the joint goal of state and capital that brought Korea among the world’s leading textile manufacturers and exporters. Rapid recovery of the spinning industry in the 1950s, dramatic growth of exports and development of synthetics in the next two decades, and brief years of prosperity prior to demands for adjustment have given mills and state alike a hectic, bumpy, but wildly successful ride from rags to riches. Chronological compression is thus one feature of an industry, which has rushed from origins to maturity and decline in just five decades. Coordination or integration of a vast serial line of production for export has been a second, continuing feature of textiles in Korea, often joining state, capital, and labor in a common project of growth. The need for coordination and concerted action to meet dramatic changes of a fast-growing and now fastfading industry, in addition to the conventional demands for trust in market transactions, have encouraged a combination of often conflicting forms of interest exchange which I term syncretic capitalism. A blend of clientelist ties between state as patron and corporation as client, corporatist ties joining the organized interests of capital and state bureaucracies, and contractual, legal ties between state and firm as well as among firms have distinguished interest exchange in the textile industry. Although each mode alone can enhance trust in transactions, a combination of all three can provide remarkably flexible and complex bases for ensuring credibility in the absence of adequate institutional support. I distinguish the origins and operations of each in the textile chronicle. I track clientelism, corporatism, and contract in business-state ties across years of establishment,

4

Introduction

growth, and maturity in spinning and synthetics, looking carefully to firm, association, and state office. A chapter on exchange at selected leading firms offers a detailed contemporary picture of continuity and change as textile moguls hustle to specialize, diversify, and move production offshore. This picture of the firms is complemented with a chapter on the interests and organization of labor, contrasting industrial relations of the past decade with the past year of crisis. A concluding chapter on syncretic capitalism looks to the past for local precedents, to the present for comparisons with other sectors, and to the future for a prognosis on multiple interacting modes of interest contention in Korea’s political economy. As I bring this study to a conclusion in the spring of 2001, I stand in awe at the parade of changes in textiles and the Korean political economy over the past nine years. This study parallels an earlier project on adjustment in Japan which I published under the title, Textiles and Industrial Transition in Japan, an initial effort which taught me a great deal about the industry, offshore investment, and about international textile markets. A Fulbright Research Fellowship in 1992 supported the initial phase of the Korea study, bringing me to firms, labor unions, and government offices. Research grants from Georgetown University permitted two to three months of summer study in Korea in each of the next four years as I extended from Seoul to outlying suburbs, and then to Taegu to learn of dyeing and finishing, of mid-size and small firms, and of labor relations. Meanwhile the industry had changed. Mills that had still been flourishing in 1992 began to suffer from growing imports in the liberalized domestic market, and declining competitiveness of its lower value-added exports. The Spinners and Weavers Association of Korea invited me to the world gathering of the International Textile Manufacturing Federation in Seoul in October of 1992, an impressive event showcasing the maturity of the Korean industry. Four years later an official of the Ministry of Trade, Industry, and Energy invited me to crisis seminars convened to discuss collective solutions to the industry’s mounting problems. Yet a third unexpected change in adjustment within and beyond textiles awaited me upon returning to Seoul in the late spring of 1997 with the bankruptcies at Hanbo, Kia Motors, and then the largest spinner, Dainong, an ominous prelude to the looming financial crisis that fall. Intent on finishing a study which had suddenly taken on a new dimension, I hurried back to Seoul in January and then in March of 1998 to witness what now had earned the pretentious title, the “IMF Era.” It is indeed a new era of political economy on the peninsula, complete with a new political administration under President D.J. Kim. A common theme of trust and interest exchange draws the chronicle of the textile adjustment together with the recent crisis of finance and organization across the Korean economy. An industry pattern of interest contention and compromise, which I term, “syncretic capitalism,” has gained new significance in the era of IMF mandated reforms. An international community of states and markets which long tolerated the widening gap between economic growth and institution aggravated by recent efforts at market liberalization, and by democratization efforts in state-business ties and industrial relations, now demands structural reforms as the basis for a massive line of credit, and ultimately, for regaining

Introduction

5

credibility among the capitalist powers. The IMF call for transparency now challenges patterns of syncretic capitalism which served state and capital well in developing a formidable line of serial production for export across the peninsula, and particularly in ensuring the credibility of exchange in the absence of reliable, autonomous institutions of finance, market. Now two years later I concluded research in the summer of 2001 with a final visit to Taegu and a look at the industry’s future envisioned in the Milano Project. Despite turmoil, which frustrates observers eager to sketch a clean, static picture of what is an intensely dynamic even chaotic sector, the chronicle of textiles in Korea is indeed a proud history, literally of rags to riches. Prior to the IMF Era, Korea’s competitors in Indonesia, Thailand, Taiwan and the People’s Republic of China were envious of Korea’s extensive, integrated line of production, close ties between makers and marketers, and sensible and credible state policy. People at mills and government and trade offices across Korea and Southeast Asia have graciously given of their time to lend shape and shade to a picture where frame and proportions are culled more broadly from the study of Korean society. I probe past and present to capture the deeper continuities often overlooked in the rush of industrial change, thus to bridge industry and society to learn of both. I am grateful to the many who have welcomed me into their work and hope this volume may bring clarity to their past and insight to their future.

1

Market and society

South Korea survived the IMF crisis once again confounding her critics despite a series of crises and a credit guarantee of $58 billion. Somewhere between markets and miracles, crises and financial credibility, lies a story of growth and recovery significant well beyond the peninsula. “Cronyism” in government, banks and conglomerates appeared the easiest explanation for the sudden reversal from the envy of developing nations to the infamy of the IMF’s largest bailout. Cronyism would include the moral hazard of permitting firms to amass debts so large that state-controlled banks fear to foreclose lest they bring the banks down with them. Cross-shareholding and cross-debt guarantees within the mid-size and larger Korean jaebol would be further evidence, creating a “web of interlocking ownership and indebtedness.”1 But unraveling the nexus of Korea, crisis, and cronyism across three years of financial and corporate restructuring has not proved easy.2 Some identified the problem with a lack of transparency constraining the free hand of the market. Western principles of transparency can be traced to scholars such as Max Weber who singled out the rule of law or “legal-rational authority” as a key feature of modern industrial society. Administration by transparent and usually codified procedures superseded rule by custom or personal ties. A distinction between meritocratic norms based on law and procedure, versus ascribed norms of kinship, status, etc., remains a defining feature of contemporary capitalism. Impersonal contract and anonymous dynamics of supply and demand have likewise been recognized as features of the modern market economy. The growing autonomy of markets unfettered by social relations of kinship, religion, or politics has been a hallmark of industrialization. But an Asian model of embedded capitalism with state and society penetrating the boundaries of supposedly autonomous markets was widely cited as a positive factor in the growth of the “Asian Tigers” until the tragic financial crisis in Thailand, Indonesia, and South Korea in the summer of 1997. Although instrumental in earlier growth, the débâcle of highly indebted banks and firms, weak currencies, and plummeting real estate prices initially signaled the demise of state-intervention and oversight of markets, and of close business-state ties between government and Korea’s huge jaebol. US Federal Reserve Chairman Allan Greenspan hailed the convergence towards a free-market capitalist model

Market and Society

7

in place of an Asian model of market constraints.3 An interplay of market and society has led still others recently to highlight the often opaque rooting of the economy in social relations despite its relative autonomy in contemporary society. As South Koreans put the crisis behind them to enter the new millennium, it was trust and accountability rather than market transparency that captured public opinion.4 Reforms in law, corporate structure and practice might promote a structural transparency, but what more basic solidarity would give force to the law or meaning to the practice? This study examines the interplay of formal and informal institutions in the evolution of the Korean textile industry since 1945. Spanning the growth and maturity of South Korean capitalism, technologyintensive and labor-intensive sectors, local manufacture and global trade, the industry serves as a microcosm of the broader social changes of the past five decades. How did Korea’s industrial structure, particularly the “serial line of production” in textiles evolve in the absence of sophisticated market-supporting institutions? The concept of “syncretic capitalism” taps the variety of societal forms of governance to balance the current emphasis on state-led development in South Korea. Trust and transaction The new Economic Sociology has begun to transform our understanding of exchange.5 Three distinct approaches of market and society highlighted in a recent study have particular relevance for the study of South Korea.6 Oliver Williamson for instance, has drawn attention to the role of rational actors constructing institutions to achieve their interests. His earlier work on institutions has been widely cited in scholarship on a rational actor model of exchange agents, as well as on the primacy of the market as governance structure for organizing competition in predictable ways. The concept of transaction costs refers to the “comparative costs of planning, adapting, and monitoring task completion.”7 A second approach includes the work of Karl Polanyi and more recently of a group of Economic Sociologists led by Mark Granovetter with emphasis on norms and values, as well as on social institutions critical for the success of economic organizations.8 Looking to the economy as an “instituted process,” these scholars point to a skein of economic and non-economic institutions that embed or root market in society.9 “Trust, reciprocity, and long-term strategies— prerequisites for a capitalist economy—require communities, associations, and/or networks for their existence.”10 Yet a third approach would highlight political power in the formation of institutions, with economic actors using opportunities created by the state to manipulate governance modes to their advantage. This effort includes much of the work on state among political economists, but also recent sociological studies of polity and markets. Fligstein, for instance, cited the metaphor of markets as politics “as the unifying construct which focuses on how social structures are produced to control competition and organize the firm.”11 Attention to economy as instituted process and the embedding of such processes within polity and society provides continuity across these various perspectives.

8

Market and society

Hamilton and Biggart singled out institutional environments distinctive to Japan, Korea and Taiwan, or “socially constructed normative worlds in which organizations exist.”12 Hollingsworth and Boyer highlighted a cultural context in which the structure and idea of institutions are “symbolically grounded, organizationally structured, technically and materially constrained, and politically defended.” They tried to capture the interaction of market and society with the term social system of production including industrial relations, the structure of firms, sectors, and the state, and conceptions of fairness as well as wider norms and principles of economic action.13 However, it is less “social” as opposed to “political” or “economic,” than what I would term “societal.” It is seldom overtly systemic, and the complex ebb and flow of interactions among different actors and structures is often difficult to identify. The authors are closer to the mark with their term “social configurations.” Moreover, perhaps the most basic interaction is between production and consumption, rather than simply production. Nonetheless, their approach alerts us to the complexity of governance, rather than simply state, market, firm or network, and to cultural or historical roots, as well as political economy. This is particularly relevant to the study of South Korean political economy where governance is usually limited to study of state management, or at best state “coordination” of the market through policy networks.14 I am far more interested in modes of societal coordination, though not excluding a role for the state. But modes of coordination may not be comparably articulated or “systemic,” and indeed one key to coordination of market and society in South Korea has been the interplay of formal, established systems with more informal patterns based on school, family, and other interpersonal links. Japan has been described as a densely articulated society with social relations defined in multiple complex patterns.15 One also finds similarly complex relations defining status and identity in the society of Korea’s textile industry, but with far more instability, particularly in the years of rapid economic growth. Second, the term systems connotes a coherence which is not the case in much of the textile chronicle in South Korea. The key dynamic is not the transparent demarcation and limits of individual systems, but rather the brokering and bending of borders among competing patterns of governance. Third, a focus solely on domestic “social systems” turns the research focus to the variety of institutional coordinations within a society rather than across societies. International aid, the lure of export markets, external pressures for democratization and market liberalization, and recently opportunities for low-cost production offshore have deeply affected patterns of coordination within the textile industry. Moving from the theories of change to concrete interactions between market and society raises intriguing questions. How has market been embedded in South Korean society in the building of a textile industry? What institutions or systems among state, capital, and labor distinguish the birth, growth, maturity and decline of the industry? What captures my attention is cohesion and direction across the turbulent, hotly contested process of building an industry demanding risks and remarkable commitments. How did workers, executives, and

Market and Society

9

bureaucrats forge the bonds of trust necessary for dramatic economic and sociopolitical transactions in the absence of a transparent, reliable system of institutions? The theories above generate themes of trust and power. Scholars have long emphasized the importance of what Emile Durkheim termed the “non-contractual elements of contract,” or the pre-existing social bonds that give meaning and continuity to the laws and organizations governing market exchange.16 James Coleman wrote of social capital to denote the ability of people to work together for common purposes in groups and organizations. More generally, “human capital” would include patterns of interpersonal and group association critical not only for the market, but for the entire range of association from friendships and family to large-scale organization. Comparing north, central, and southern Italy, Robert Putnam distinguished traditions of “vertical dependence and exploitation” from “civic traditions.”17 Civic traditions constitute a critical base for social capital “such as trust, norms, and networks, that can improve the efficiency of society by facilitating coordinated actions.”18 Tensions between precedents of vertical dependence and interdependent civic traditions help explain the often confusing patterns of exchange in South Korea as well, where capitalist institutions with shallow roots stand in sharp contrast to deeply veined cultural continuities of kinship, region, school or military duty, and authority patterns. Since coordinated actions can reduce “transaction costs” or the expense of monitoring and enforcing agreements in the market, Putnam and Francis Fukuyama argued that social capital rooted in civic traditions promotes more efficient economic organization and performance. Putnam went so far as to suggest civic traditions as a “uniformly powerful predictor of present levels of socioeconomic development.”19 But it seems clear that some “civic traditions” may lead to graft and collusion in the flux of rapid economic growth, particularly in the absence of strong institutions of surveillance. A second problem is transparency and equal access to such traditions. Civic traditions evident in local organizations in South Korea remain rooted in ties of family, region and school, and are often singled out as impediments to growth rather than a base for efficiency. Continuing Putnam’s emphasis, Fukuyama concluded that “social capital has a significant impact on the vitality and scale of economic organizations.”20 He singled out the USA, Japan, and Germany as “high-trust” societies better able to create and sustain large, private business organizations. On the contrary, low-trust societies such as Italy, France, China, and South Korea with strong kinship groups and a penchant for small-scale organization appeared less capable of large-scale organization utilizing advantages of scale and scope to reduce transaction costs. The contrast between particularistic or ascriptive ties of kinship with more impersonal ties of intermediate organizations recalls the earlier “vortex theory” describing the South Korean polity of the 1960s, or Nicole Biggart’s emphasis on patrimonial ties. Henderson’s premise of weak intermediate organizations between family and state highlights a tradition of vertical dependence in Korea.21 Vertical patterns of authority, whether with state as senior partner in the alliance of business and state, or with authoritarian state

10

Market and society

and management controls on labor appear salient in the textile chronicle. The assumption in much of the literature on trust would limit solidarity to horizontal relations, but how is the kind of trust that promotes long-term commitments of capital and labor established, rather than simply imposed, in vertical patterns of coordination?22 If patterns of industrial organization in South Korea appear consistent with Fukuyama’s criteria of low-trust societies, how do we account for high rates of economic growth? Recognizing the Korean exception of low-trust market ties impeding large-scale industrial organization, yet successful large-scale business groups, Fukuyama conceded that strong state intervention to create the jaebols overcame a cultural focus on the family and historical proclivities toward smallscale organization.23 He described the jaebol as a successful state-directed organizational strategy to overcome divisive cultural particularism. Harnessing cultural and historical precedent to the challenge of industrialization appears a common task across developing societies. The fact that state and the peculiar blend of family capitalism and entrepreneurship at the leading jaebol played a major role in South Korea is clear, but is only part of the story. More significant for the comparative study of development, and for understanding Korean society, is the story of how workers, executives, and bureaucrats competed and compromised to forge the solidarity necessary in building industry. Adam Seligman offered two insights to take us beyond Fukuyama’s challenging thesis: interpersonal trust among often anonymous individuals is a consequence of the complexity of modernity, and in the West has its origins in individualism. Complexity would suggest trust is an evolving issue, and perhaps structured differently according to the specific market challenge. Patterns of trust within and between firms, and among state, capital, and labor may be deeply affected by import-substitution efforts as opposed to an export-orientation, or by a shift from local markets to export markets, and then to production offshore. The Korean experience raises a second and far more profound question of culture and political economy, East and West. If generalized trust is qualitatively different from “primordial attachments to kith and kin,” what is the role of those primordial bonds in buttressing or impeding a modern orientation to individuals and abstract principles rather than to solidarity groups” in a more communitarian society without the ideological and social bases of Western individualism?24 Specifically, how were historically embedded bonds of solidarity melded into bases of trust in South Korea’s development trajectory? State, society and sector Many have lauded the prominent role of the Korean state in development, although not all would follow Fukuyama in crediting the state with such a major contribution to industrial organization.25 An emphasis on how the state interacts with the business community takes us beyond the box of bureaucratic insulation and autonomy. Attention to societal governance evident in indigenous institutional patterns stretches our vision beyond a business elite and state actors to labor, to

Market and Society

11

the role of associations among capital and labor and their interface, to ideology and practice within firms and within sectors, and to family and intermarriage. Biggart and Guillén recently examined the South Korean auto industry from the perspective of an “institutional logic.” They looked to the internal coherence and organizational patterns of firm, industry and society that “inform action and meaning.”26 Comparative advantage was their subject, institutional patterns favoring large firms, and vertical relationships versus smaller firms and horizontal relationships their analytic focus. This broadly comparative perspective admirably taps wider patterns of state and enterprise, but does not shed light on the story of institutional formation or take us into the crucible of contention over resources where boundaries of interest and institution are brokered. Their premise of an “internal coherence” in firm, industry, or society may well be only the conclusion of an intriguing story of how a common direction that was forged. The textile chronicle continues this focus on leading actors in the economy, but with more attention to the patterns of social organization which bind them. But why focus a study of South Korean market and society on a largely labor-intensive, light industry such as textiles in a nation of heavy and high technology industries? Autos, steel and ships, hand-held phones, computers and computer chips now distinguish this booming industrial platform. Although textiles no longer command the high ground as a leading employer, the industry is still an export powerhouse, a state priority as source of foreign exchange and a regional employer, and the envy of many developing nations. Strong exports coupled with relatively low levels of consumer textile imports permit huge trade surpluses in the sector. I am less interested in the contemporary salience of textiles than in their historical significance for the development of South Korea’s political economy. Alice Amsden concluded that Korean cotton textiles did not play the role of “leading sector” in enterprise organization. Few contemporary jaebols invested in spinning, and few of the earlier spinners evolved into diversified conglomerates. Its significance as a pioneer sector rests rather, she argued, in patterns of government intervention to get “the prices right.”27 Cotton textile and weaving firms did indeed remain specialized as spinning companies, in large part due to market opportunity. Their special early relationship with the state, and then evolving role of independence from the state was significant far beyond textiles. I look to cotton textiles and synthetics upstream, and to dyeing, processing and cutting and sewing of garments downstream. Most leading jaebol expanded into synthetics, and trading arms of Daewoo, Samsung and others were leading exporters of garments. What is most significant about state policy and practice in the sector is extension and coordination of supply and demand upstream and downstream along a long line of textile production for export. The South Korean state worked with the industry as leading partner in import-substitution, the shift to exports, the Heavy and Chemical Industries Campaign with synthetics and it chemical inputs, and later with industry adjustment programs. Textiles in South Korea were important also in the formation and growth of enterprise, but not specifically for diversification from cotton spinners into major diversified

12

Market and society

jaebol. But the diversified jaebol are only a part of the Korean economy. We also need to explain specialization in such areas as spinning and weaving, dyeing and processing. Both spinning and synthetics firms have pioneered South Korean investment in large-scale production offshore, particularly in South-East Asia and China. Finally, links between upstream textile producers and small and medium-size firms downstream continue to provide an important historical and contemporary profile of sub-contracting. The industry has also been significant in the formation of business associations, as evident even recently with the chairmen of Sunkyong and Kyungbang serving at the helm of the Federation of Korean Industries, and from Samyang at the Korean Chamber of Commerce and Industry. Apart from state and capital, the industry has played a formative role in the Korean labor movement. Patterns of paternalism in this labor-intensive industry can be traced back to precedents of company dormitories and company schools. The industry’s “company unions” and labor federation boast a pedigree dating back to the 1950s. State labor controls, developed for the industry in the 1960s, became the target for precedentsetting, large-scale labor action at spinning and garment firms in the next decade. Labor leaders from the industry moved up into positions at the nation’s peak labor organizations. Others have highlighted the role of the industry in societywide patterns of development. Unger, for instance, surveyed the wider impact of labor training in textiles for a developing nation, and of entrepreneurial experience in production, management, and marketing.28 Brokering interests Social systems of production alert us to the rooting of economy within a specific cultural and social context, and to the complexity of governance beyond simply market and firm. Continuity rather than distinction between social and economic exchange draws attention to the integration of societal and market dynamics in the development of an industry. Multiple modes of interest brokering provide a focus for unraveling the various conflicting and sometimes supporting channels of representation to gain opportunities in industrial change.29 Ranging along a continuum from client to contract, I look to families and favors, to associations and adjustments, and to bureaucratic methods and market patterns that reinforce authority and trust. Interests (ri) and reason (hamni) represent two sides of collective action. A tension arises between private and public interests, the interest of a firm versus industry interests, or specific policies to bring greater efficiency to market dynamics by creating and then integrating various sub-sectors within an industry.30 Although the exchange of interests provides a focus important for a theoretical and comparative understanding of Korean capitalism, the arena for interest exchange remains the continuing reorganization of textile sub-sectors into a balanced and reliable line of production for export. Schmitter neatly captured the basic economic drives of capitalism: “quest for profit (or ‘maxi mizing discounted net assets’), allocation by competition, drive toward expansion and

Market and Society

13

tendency for accumulation.”31 The Chinese character ri can be translated as “interests” or “profit” or “advantage,” and often carries a negative connotation of selfishness in Korea’s more communitarian culture. Nonetheless, economic and political interests drive capitalism in Korea as elsewhere in the international system of markets and polities. State, labor and the business community each play a part in linking interests to rational patterns of organization. Agreements on assignment of export quotas, of capacity expansion, of raw cotton imports, or of credits for improving technology, etc. offer evidence of how interests are actually negotiated and concluded. “Rationalization” (hamnihwa) is probably the most frequent Korean translation for industrial reform and denotes a reorganization to better address market imperfections. Y.H.Lee argued that the Korean state even in the 1990s continues to promote conditions for “optimally effective, rather than free, competition.”32 State and industry in South Korea appeared eager from the outset to localize textile production, and indeed, expand that production line both upstream and downstream. The focus of adjustment was thus not simply investment or marketing of individual firms, but ever more efficient integration among the firms to promote a societal goal of serial production. One consistent state priority across the five decades of Korean textiles has been a better balance of supply and demand along the line. The state has consistently promoted localization of higher value-added sub-sectors such as upstream petrochemical inputs to ensure a reliable supply at reasonable prices from domestic sources. Sectors within the industry have been less keen on integration whenever forced to purchase locally at prices above international market prices. Yet spinners, weavers and processors appear generally to support localization and indeed, to use state support to extend the production line within their own conglomerates whenever possible. What has survived the IMF crisis and may indeed explain the remarkable resilience of the Korean political economy, is an interplay of society and market evident in contention and compromise of interests. The interplay is evident in legislation and state intervention, oligopolies and familial patterns of concentration, in labor policy and practice, and in cultural patterns of trust and historical precedents of exchange and negotiation. Exposes of state favor and business collusion remind us of the persistence of particularistic, ascriptive ties between state and big business in the Republic’s social system of production.33 Four decades of state targeting of firms for subsidies and investment opportunity from 1948, and the consequent competition to curry state favor through political contributions leaves us with a difficult question: how did particularistic ties evident in collusion between Korean business groups and the state permit growth despite abundant evidence to the contrary in other developing nations? This study offers one answer to the pressing anomaly of why cooperation and competition in Korean textiles did not spiral into rent-seeking. Even recent adjustment in textiles highlights a blend of particularistic or ascriptive ties, more conventional meritocratic procedures, as well as corporatist ties binding state and firm through industry associations. A curious mix then of particularistic

14

Market and society

and universalistic criteria distinguish interest representation in the textile industry, a combination which appears to strengthen trust and assure continuity without discouraging efficiency within oligopolies. How does this affect the dynamism of Korean institutions? Theories of exchange integrate social and economic aspects of interest contention and compromise in the process of industrial adjustment. Paralleling earlier distinctions between generalized and specific exchange, Janet Landa identified social exchange with unspecified obligations of reciprocity, versus economic exchange with clearly contracted obligations.34 Extending the earlier work of Peter Blau, Landa linked social exchange to the literature on exchange networks, whether interpersonal or institutional, and argues that social exchange generates trust among the partners that can reduce transaction costs. Murakami and Rohlen drew upon Exchange Theory to relate market dynamics to institutional factors at an intermediate level of interaction between government and industry, company and union, main firm and subcontractors.35 What they discovered was a continuum between social exchange with unspecified expectations of some future return, and economic exchange based on impersonal contract. Briefly turning to the critical question of cause, they concluded that “a workable system of social exchange in a modern economy patently requires a cultural foundation and yet is also contingent on an economic environment that makes social-exchange solutions viable.”36 Norms and networks of social and economic exchange provide a focus for identifying continuity and change across the decades of growth and decline in Korean textiles. Closer attention to the modes of exchange along this continuum may reveal more of the formal and informal features of interest contention and compromise that define how interests are negotiated. The bartering of political and economic interests can vary across time and across capitalist societies, but usually settles into fairly distinct patterns within any one culture or nation, particularly evident during crises of industrial transition. An Anglo-Saxon ideal of interest negotiation based on law or contract, and of industry adjustment according to market dynamics tends to dominate capitalist ideology and practice in the USA and Britain, emphasizing transparency, meritocratic criteria, and open access to markets. A corporatist pattern more prominent in northern Europe and Japan channels interest negotiation into designated and chartered organizations mandated with negotiation and implementation of agreed upon adjustment programs. Unlike formal patterns of contract or association, informal patterns have been observed in traditional, often agrarian societies defined by hierarchical ties between patron and client. Here a landowning gentry often dominates the peasantry, though a similar ascriptive pattern may persist in industrial societies where continuing crises of authority or market force alternative modes of trust beyond law, contract, or formal association. Although irregularities in one or another mode often absorb the attention of scholars and journalists alike, formal and informal patterns often coexist and may indeed reinforce one another. Indeed, clientelist patterns alone can seldom be found in market societies without some competing institutions based on law and contract encouraging market dynamics.

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The textile transition in South Korea highlights a remarkable penchant for blending and balancing conflicting modes, due perhaps to the multiple crises of internal rule, geopolitical insecurities on a divided peninsula, and rapid growth outpacing institutional consolidation. Crises expose these deeply embedded, often opaque patterns as state and business scramble to survive and succeed under intense international scrutiny from banks, foreign governments, and international trade regimes. Clientelism Clientelism denotes an exchange of benefits between patron, or stronger partner, and client or weaker, dependent partner, in contrast to more bureaucratic, contractual ties. We might extend the analogy to exchange of favors or benefits between organizations as well as individuals, but must emphasize the informal, personalistic, and unequal features distinguishing clientelist ties. “In contrast with the ‘ideal type’ of bureaucratic relationship, the norms of rationality, anonymity, and universalism are largely absent from the patron-client nexus.”37 The feature of informality denotes extra-bureaucratic relations, pursued apart from formal procedure or contract. Carl Landé highlighted the benefits: attached to a bureaucracy it gives subordinate officials a better hope of attractive assignments and speedy promotion while giving their superiors groups of loyal subordinates who will support them in their intra-bureaucratic battles. Attached to business employment it gives some employees protection against dismissal while giving the owner some employees who will direct their loyalty to him rather than to a labor union.38 Beyond firms and government offices, clientelism also plays a role in supplementing exchange in imperfect markets: “the clearest gain from such a relation would therefore appear in situations where public law cannot guarantee adequate protection against breaches of non-kin contracts.”39 James Scott enumerated three factors promoting the “vitality of patron-client structures” in the politics of South-East Asia: 1) the persistence of market inequalities in the control of wealth, status, and power which have been accepted (until recently) as more or less legitimate; 2) the relative absence of firm, impersonal guarantees of physical security, status and position, or wealth; and 3) the inability of the kinship unit to serve as an effective vehicle for personal security or advancement.40 The same thesis appeared prominently in Andrew Walder’s study of Chinese neo-traditionalism, in Jean Oi’s study of rural life in the PRC, and in Shue’s study of particularistic adaptations under market reforms.41 David Wank found clientelistic networks supporting contract to be the critical basis of trust in the transition from socialist to more capitalist commercial economy in China.42

16

Market and society

On the one hand, neo-classical interpretations of Korean economic growth highlight what Karl Polanyi would term markets rather than society. On the other hand, statist approaches until recently highlighted insulation from clientelist ties as a formula for effective state intervention. Meanwhile ethnographers sensitive to embedded social patterns have only recently turned attention to the institutions of Korea’s political economy.43 Despite the general recognition of the “close, and often corrupt, nature of business-government relations” in Korea, scholars have generally examined the structure or function of informal ties more from the perspective of familism in industrial organization than clientelism in business-state relations.44 One exception is Sung Pae who looked to the preference for patron-client politics over pluralistic, interest group politics in Korea. He found that clients prefer to gain their benefits “directly, immediately, and exceptionally, rather than indirectly, collectively, and uniformly together with all of the members of a particular group or association as an outcome of the group’s interest articulation, lobbying, and the subsequent legislation.”45 Nam Changhee traced clientelistic ties back to the colonial period when Japanese colonists cultivated loyal “collaborator-businessmen” and landlords. She documented continuities in South Korea’s First Republic (1948–60) where “some of these former collaborators reproduced the pattern of clientelistic industrialization by instituting a system of reciprocal favoritism between the South Korean state and its large business clients.”46 Highlighting the importance of economic elites for state economic policy, Nam suggested an “asymmetrical interdependence” rather than simply a unidirectional, vertical dependence of client on patron. Reciprocity, unequal but nonetheless strong interdependence, and the preference for immediate and exceptional benefits appear to characterize the historical development of clientelistic ties between South Korean state and big business. Unbounded clientelism permitting a monopoly of government favors could undermine the property rights and basic contractual rules governing vertical integration of multiple sub-sectors in a production line for export. A mixture of clientelistic ties with other patterns of mediation raises issues of boundaries and interactions. While clientelist ties without alternate competing channels of mediation may well impede market dynamics, bounded clientelism constrained by conflicting and sometimes complementary alternate modes may enhance market dynamics. The state appeared at times the most formidable constraint on unbounded clientelism, as documented in Alice Amsden’s thesis of state discipline over firms to insure that incentives received serve wider development goals: “in exchange for subsidies, the state exacts certain performance standards from firms.”47 Studies of patrimonial rule in Korea highlight “discretionary incentives” such as subsidies, tax breaks, licenses, etc., as “prebends” or benefits with moral obligations of reciprocity bestowed by the patron state to insure the compliance of their clients. The same can be said of company preference for bonuses and other discretionary benefits rather than annual wage hikes. Yoo Moon Jee recognized the rational domination of the contemporary Korean bureaucracy, but without the contractual component evident in societies under bureaucratic rule which avoids “free discretion, the old style of patrimoni alism.”

Market and Society

17

Despite the rationality of “neo-patrimonialism” in the Republic, Yoo still found patron-client relationships diffused across all aspects of society, and a continuous competition among clients to gain state favor while simultaneously striving to break their dependence on the state. Looking to conditions favoring introduction of bureaucratic elements to patrimonial rule, Yoo cited “free-floating resources such as manpower, funds, and cultural value systems which are not completely tied to ascriptive and particular groups.” He concluded, “in other words what is required is the possibility for the ruler to organize people and things in ways not completely committed in advance.”48 What Nunes termed a “flux of resources” finds resonance in the Korean case. Reviewing the IMF crisis, Chang Ha-joon argues that “moving the state out” of sectoral industrial policy under the Y.S.Kim government (1992–97) deprived both state and business of a clearly defined legal framework of cooperation, making it easier to “bend rules” for political purposes.49 Deprived of the earlier “rational’ criteria for state intervention, state and business community were more vulnerable to charges of “cronyism” than before. Corporatism Clientelism or neo-patrimonialism alone cannot explain the extensive structuring of interest bargaining prominent among Korean state, capital, and labor in efforts to stem industrial decline. What are we to make of the business associations, the labor federations and unions, and government offices that play such a prominent role in the adjustment process? Clearly, the process of brokering interests has been institutionalized within some well-defined, stable, and enduring Korean industry associations and government offices. Personalism in clientelistic ties stands in sharp contrast to the anonymity of arm’s-length contract and bureaucratic procedure. If clientelism denotes informal relations between an individual or single firm and bureaucracy, corporatism describes more formal relations of power and interest mediation among selected interest groups, with clearer procedures for bargaining and enforcing a consensus. Continuing along the spectrum from client to contract, corporatism appears distinct from pluralist forms of interest mediation based largely on price and contract. Intermediation of interests through long-term, institutionalized ties would distinguish corporatist negotiations from a pluralist competition of interests distinguished by ad hoc groups loosely organized, and mobilized for very specific goals. As opposed to an open arena of interest competition, the structured ties among capital, state, and labor prominent in corporatism appear restricted to select interest groups: “corporatism is a specific sociopolitical process in which a limited number of monopolistic organizations representing functional interests engage in bargaining with state agencies over public policy outputs.”50 Colin Crouch wrote of corporatist strategies to control wage hikes within firms and demands on state resources as “an alternative to replace the plethora of pluralistic interest groups with an orderly, concentrated, and internally disciplined set of organizations.” The strategy is one of mutual commitment or reciprocity:

18

Market and society

“these organizations would share responsibility with the state, using their internal organizational authority to supplement that of the government in bringing order to the competitive struggle.” 51 Schmitter distinguished corporatism as a distinctive type of interest intermediation from corporatism as concertation or a strategy of policy formation and enforcement, but also suggested an elective affinity between “corporatism” and “concertation.”52 Adjustment policy suggests concertation, but analysis of state, association, and firm in South Korea also provides evidence of corporatist organization. Both corporatism and clientelism can help pre-empt social conflict in times of rapid change, but the former remains informal and voluntary, the latter codified in law, and often semi-mandatory if not obligatory for effective participation in the market. The former mode of interest exchange is particularistic and personal, the latter semi-universalistic and impersonal. Yet unlike open contract, a corporatist strategy channels procedural universalism into selected, designated interest organizations. Scholars of Korean political economy have long been intrigued by a statecentered corporatist model. Harmon Ziegler cited continuities between the organic model of state and society in Confucian thought and Western theories of corporatism.53 Bruce Cumings looked to family as metaphor and model, organic solidarity, and hierarchy as basic features of the corporate state of North Korea, features with historical precedents and cultural continuities in the South.54 Guillermo O’Donnell brought the comparative concept of bureaucraticauthoritarianism to the fore with his study of state economic intervention in contemporary Brazil,55 stimulating a flurry of comparative work on South Korea. Lim and Paek traced the origins of bureaucratized, authoritarian rule in the First Republic to the overdeveloped post-colonial state,56 while Im Hyug-baeg underlined the role of the USA in creating an “anticommunist bulwark” to explain the strength of the Rhee state over the local bourgeoisie.57 The authoritarian thesis aligns with wider theories of state corporatism, although most cite political legitimacy rather than industrial deepening to explain state suppression of opposing interest groups. One finds the thesis of bureaucratic authoritarianism cited most often to explain state controls on labor during the so-called Yusin or “renovation” period in President Park’s Fourth Republic (1972– 79).58 Cumings highlighted not the origins, but the economic initiatives of the authoritarian Korean state with his thesis of the bureaucratic-authoritarianindustrializing state.59 Democratization from the mid-1980s sparked discussion of a shift from a state-centered corporatism to a more participatory, societal or “bargained” corporatism.60 The thesis of state corporatism has been examined in both industrial relations and in business-state ties. Choi examined state corporatist strategies of labor control in the Third and Fourth Republics, but has found little evidence of effective control following the labor uprisings of 1987. Park Moon Kyu concluded that among ideal-types of interest representation, state corporatism best described the Korean case, but noted wide differences in the relationship of associations to the state, varying according to the social positions of their

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members. He concluded that the essential linkage between state and society remained “personal linkages” and “mutual confidence” between business and the state.61 Looking specifically to sectoral adjustment, Lee Byoung Doo argued that that a state corporatist role in the development of Korea’s textile industry has been more efficient in making and implementing national goals, than has clientelist politics.62 The long history of both the Korean Federation of Textile Workers, and the Spinners and Weavers Association of Korea provide abundant material for assessing the development and decline of corporatist strategies across five decades of growth. As distinct from corporatist concentration involving a far more comprehensive array of state negotiation with capital, the more limited model of sectoral corporatism offers one direction for structured mediation of change among South Korean state, capital, and labor.63 A transition within sectors from state to societal corporatism may help explain the effects of liberalization in our analysis of bureaucracy, association, and labor union in the restructuring process. Contract Upham probed the interplay of law, institution, and interest formation in his study of post-war Japan. A case study of structural adjustment in petrochemicals highlighted a legal “informality” in state offices coordinating planning and implementing policies. Informality included “avoidance of formal processes implicit in litigation,” or of “procedural formality that would restrain agency discretion.”64 Peter Katzenstein cited Upham’s argument to support his distinction between the “rule of law” in the Western European tradition, and rule “by law” in the post-colonial states of Asia where social rather than legal norms govern the relationship between state and society.65 A parallel distinction has been drawn between legalization in international institutions East and West, with high legalization in Europe and North America, and low levels of legalization in the Asia-Pacific region. Formal institutions based on contractual agreements were contrasted with a more informal, incremental approach to regional cooperation.66 Still others have singled out dimensions of legalization to empirically distinguish the extent of legalization. These would include obligation where actors are bound by a rule or commitment and behavior is subject to scrutiny under general rules. Precision denotes rules which unambiguously define the conduct they require. Finally, delegation refers to the process of granting authority to third parties to implement, interpret and apply the rules. The dimensions define a spectrum from “hard,” to “soft,” and indeed no legalization at all. Moreover, the authors warn that “the degree of obligation, precision, or delegation in formal institutions can be obscured in practice by political pressure, informal norms, and other factors.”67 How can we shed light on this informal side, and gauge its contribution to greater market competitiveness? Debates over the process of democratization have engaged similar issues. O’Donnell highlighted the disjunction between formal rules and behavior in the new “polyarchies.”68 He questioned whether democratic consolidation based

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Market and society

on formal institutions could be “the only game in town.” His foil was Diamond’s thesis that “habituation” in democratic consolidation can be identified with a routinized commitment to formal procedures, such that democracy is the only viable path for achieving interests. Democratic consolidation takes place in norms and behavior on three levels: (1) top elites and decisionmakers; (2) intermediating organizations such as parties, unions, and interest group; and (3) the mass public.69 My study looks to the first two levels with a focus on formal and informal institutions. O’Donnell countered Diamond’s thesis with the fact that highly formalized elections are complemented or constrained by a skein of informal, permanent, and pervasive types of particularistic relationships. Diamond recognized the persistence of such “informalities” but not their possible contribution to democratic consolidation, and more to the point, to greater flexibility in business-state relations. The textile chronicle sheds light on the progress of contract as a governance mode in Korean market and society. But more than simply the obligations of contract and precise rules, I am interested in how those rules were implemented by autonomous third party institutions, on the one hand, and how those contracts were supported and sustained by less formal, embedded networks of family or region, on the other. Few scholars in South Korea would deny the more conventional, open interest group competition in the Republic for government support and access to domestic and foreign markets, but nor would they overlook the relative salience of clientelism or corporatism in the mix with contract relations. Property rights, commercial law, price and contract provide the basis for capitalist exchange in South Korea as elsewhere. Contract and open, competitive, and meritocratic procedures have won wide acceptance in this capitalist society despite persistent efforts to structure markets and monopolize government favor. Even in his contrast of the soft authoritarianism of the “plan-rational” Japanese developmental state from the hard authoritarianism of South Korea, Chalmers Johnson was careful to cite the work of Lim on the “market sustaining” rather than “market repressing” measures of the Korean state.70 Lim argued that the Korean state augmented the market by reducing risks and uncertainties, rather than providing simply rentseeking opportunities. One condition for the dominance of open contracting in markets is exchange based largely on price, which presumes a market system of supply and demand determining price. Price controls or price restraints introduced by the state or state-sanctioned associations, as well as market constraints such as tariffs or indirect subsidies to certain market players, constrain the function of price as the basis of contract. Prices in a more open domestic market and its players have gained an increasingly autonomous role in the growing complexity of Korea’s political economy, superseding or further constraining either clientelistic or corporatist ties, but not without new institutional constraints to insure a more level playing field. Fligstein argued that the creation of market institutions was part of the statebuilding process, and that the goal of states was to provide the institutional conditions for market stability. He then added a more controversial point about

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concentration with his hypothesis that “the entry of countries into capitalism pushes states to develop rules about property rights, governance structures, and rules of exchange in order to stabilize markets for the largest firms.”71 John Goldthorpe’s caution about interest groups acting against market forces in order to monopolize or at least strengthen their market positions, and their penchant for distribution of a “zero-sum kind” appear particularly relevant to South Korea where frequent government criticism of excessive competition may well surprise free market advocates.72 Best known for aggressive intervention in some sectors such as heavy and chemical industries, the South Korean state has generally pursued a dualist strategy of permitting market dynamics free rein in some industries, while intervening in others.73 Institutional development to foster fair trade has been at the center of state liberalization efforts in the adjustment of the textile industry. Syncretic capitalism Discontinuities between “industrialization” measured solely in terms of growth in Gross Domestic Product (GDP), and wider socio-economic development have long plagued the peninsula.74 Industrial transformation provides a unique view of institutional development and institutional change. Questions of trust, transaction, and power drive this study. A thesis of syncretic capitalism offers continuity across a tapestry of historical development and contemporary change. A schematic presentation of syncretic capitalism is presented in Table 1.1. A state role and channels of access to available resources help distinguish each mode. Separate forms of exchange, and the irregularities or excesses associated with each further define borders among the modes. Bordering mechanisms appear critical in maintaining some balance in the cauldron of multiple modes. Reconstruction and reform of lines dividing the modes appear as defining moments in the development of the textile industry, with syncretic capitalism given shape by time and social space as well as formal and informal boundary mechanisms. Multiple modes provide a mid-range theory to draw insights on institutional change into a research focus on the exchange of interests in the development of capitalism. Pioneering studies by Chalmers Johnson and Table 1.1 Three modes of interest exchange

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others distinguishing statist approaches in East Asia from neoliberal approaches in the West have stimulated a variety of studies focusing on the East Asian state and bureaucracy. Scholars of Korean political economy have focused separately on either clientelism, corporatism, or more liberalized market approaches to distinguish periods of state-business ties. I look to state-society interactions rather than simply to state or the business community, and track the interaction of different modes of exchange across three periods of development in Korea’s textile industry. Patterns of Korean industrial organization such as concentration within a family of firms, familism in management and ownership, and close state ties provide the structural bases for syncretic capitalism. Beyond firm and state, market opportunities and imbalances at home and abroad, and the peculiar set of opportunities and constraints posed by the international system also encouraged, even demanded the more flexible, multiple modes of interest bargaining between state and the organized interests of capital in textiles, and to some extent in labor relations as well. Two distinctive features of Korean industrialization, compression and coordination, permitted rapid response to a flux of resources under the watchful eye of a state intent on extending individual interests for the commonweal. One might also point to embedded precedents of clientelism, corporatism, and contract stretching from the late nineteenth century which helped shape the hybrid capitalist model of South Korea today, deeply affected in turn by Chinese suzerainty through 1876, then by Japanese colonial capitalism through 1945, and finally by the USA in a tight geopolitical and economic alliance forged in a hot war, sustained in a long cold war, and continued in prosperity. Lurching from long isolation to colonial dependence through 1945, then liberation and military and economic reliance on the USA through 1960, and finally to independence and prosperity in the next three decades, the Republic has faced yet another struggle in the IMF era to recover financial credibility. The textile chronicle suggests the key to Korea’s version of interest exchange is not simply separate, distinct modes of interest exchange but rather their interaction. Multiple forums permit alternative channels to reinforce commitments in a joint enterprise, and stand ready to address breaches of trust in any one forum. State promises of support for an investment in new technology can be buttressed by explicit contract and legislation, but also by kinship and school ties linking industrialists, politicians, and top bureaucrats, and finally by the oversight and lobbying resources of powerful trade associations. Beyond breach of contract, systemic problems of corporatist collusion, corruption due to patron-client ties, or predatory pricing and dumping products on markets at prices below production cost signal the collapse of bordering mechanisms where neither informal, often personal ties, trade association, nor legal systems have been able to preclude excess. Firms, markets, state, and now an international system of states, multinational corporations (MNCs), and trade regimes all play a role in maintaining boundaries on interest exchange. Cohesive boundaries and flexibility appear critical for the kind of

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interest contention that will push the industry forward rather than pull it back into decline, although industry survival depends on broader factors as well such as market opportunity, relative costs of production, and availability of technicians and technology. How do the various modes of interest exchange come into play in the crises of industrial change, and what balance can be struck among the modes of contract, connection, and association in the effort to shape and adjust a long line of textile production and marketing? What can the evolution of the local industry tell us of the conditions promoting the salience of one or another mode, or of conditions which might affect their interplay in industrial bargaining over the coming decades? The thesis of syncretic capitalism prompts further questions. Is this simply a loose umbrella offering a convenient category for a variety of cases, or an historically grounded pattern that can be identified in each phase of Korea’s development trajectory?75 Is syncretic capitalism simply an earlier stage of interest exchange in an evolution towards a more contractual societal model? Those supporting the convergence hypothesis might suggest syncretic capitalism is dissolving in the rush of globalization toward “best practice” liberated from cultural, historical, or local institutional constraints. Interest exchange among capital, labor, and state in the development of the textile industry is the subject of this book. Three chapters examine periods of industry formation, growth, and maturity, followed by chapters dedicated to the contemporary organization and interests of capital, labor, and state. A theoretical framework emerging out of the historical chronicle provides the conceptual focus on trust, transaction, and power prominent in analysis of the contemporary challenge of adjustment. “Syncretic capitalism” taps the compromise and occasional contradictions between capitalist competition and the demands of collective action evident among an oligopoly of major spinners across the past five decades. The existence of multiple modes along a continuum of exchange helps explain the social-political context of the saneopgye or “industrial world” of textiles, but may not sharply distinguish Korean capitalism from mixed systems elsewhere. I highlight distinctions in the Korean experience with comparisons of Thailand and Japan in the concluding chapter. Yet the persistence of such modes does tell us something of Korea’s distinctive blend of coordinated and compressed development, and even more, the interaction of such modes helps explain the successful bridging of private and public interests in the textile industry. Interaction draws attention to bordering as well as blending of modes, distinction as well as inter-penetration, and especially to crossing boundaries and violation of borders. Neither clientelism, corporatism, nor market contention alone proved adequate to ensure trust, establish shared “conceptions of control,” or reinforce the norms necessary for rapid adaptation in a fast developing industry. This contention was most evident in state-industry relations where a peculiar blend of ascriptive and universalistic ties with business left the Korean state at the extreme edge of a developmental role without falling into particularistic predation, and in the early repression and later reluctant compromises with organized labor.76

2

Industry formation, 1945–60

South Korea is the world’s fifth largest exporter of textiles. The nation ranks fourth in polyester production, the most widely used synthetic fiber, and 15th among world producers of cotton yarn. Textile exports reached $18.4 billion by 1997, 14 percent of total export revenues that year, declined to $16.5 billion in 1998 and then climbed back to $17.1 in 1999, and finally $18.4 billion again in 2000.1 Apart from holding its own in the Asian Financial Crisis despite weak international demand for textiles, the industry annually runs a positive trade balance and in 1999 accounted for 55 percent of Korea’s trade surplus. Among South Korea’s leading jaebol, six of the top thirty firms ranked by sales operate major textile enterprises. These include SK (SK Chemicals) at no. 5, Kolon at no. 12, Samyang at no. 22, Hyosung at no. 24, Saehan at no. 25, and Kohap at no. 27.2 Few industries better represent the rapid, compressed character of Korea’s development path than the multi-sector textile industry, a pioneer in import substitution of the 1950s and export-oriented phases of Korean industrialization in the next two decades. Cotton spinning was among the first industries on the peninsula to confront the challenge of industrial adjustment in the 1970s, well before steel, shipbuilding, autos or electronics. Growth and decline in textile employment offer one measure of expansion and adjustment, rising to a peak of 750,000 workers from 1979– 89, and then falling to 350,000 by 1998 about 15 percent of total employment in manufacturing. Textiles also offer fertile ground for assessing Korea’s recent history of creating comparative advantage by targeting industries for growth, and then coordinating multiple sub-sectors into a diverse, integrated production line for export. A now familiar Korean pattern of carefully planned and highly successful export drives, coupled with furious efforts to localize production of all but initial raw materials had its origins in textiles. Responsibility for promoting investment and monitoring supplies along a long line to capture ever more extensive areas of value-added production fell largely to state, associations, and firms, in contrast to the prominent role of general trading companies in Japan linking mills, weavers and dyers, and fashion houses.3 If state and association cannot be ignored in the trajectory of Korean textiles, mogul mills stand alone at the forefront of growth and upstream adjustment where oligopolies command the high ground of supply and pricing for natural

Industry formation, 1945–60

25

and synthetic fibers. Differences in technology, corporate organization, and scale distinguish older spinning firms from their younger synthetic competitors in the years of industry formation (1948–60), growth (1961–79), and adjustment (1980– present). The extensive capital and sophisticated technology necessary for synthetic fiber production attracted larger investors who built synthetics firms as core enterprises of leading conglomerates such as Samsung, Sunkyong, Kolon, and Samyang. A roster of mogul firms coupled with case studies taps continuity and change in production, markets and finance across the three periods. Mogul spinners scrambled to secure plant and raw materials in the early years, markets and quotas in the growth period, and finance and credit in the recent years of adjustment. Among the earliest of Korea’s industrial firms, dedicated cotton spinners kept to their mills long after larger business groups or “jaebol” diversified out of labor-intensive production, making scale today one salient difference between natural and synthetic fiber producers. This chapter on textiles in the First Republic (1948–60) raises three critical issues. The first is the importance of industrialization in the First Republic for subsequent development. All too often the 1950s are dismissed as wasted years of corruption prior to the disciplined development of the Third Republic. I argue rather that the bases and precedents for Korea’s sophisticated and autonomous serial line of textile production were established at the vertically integrated spinning firms in the 1950s. Second, multiple modes of interest contention first took center stage in this early period, though without the bordering mechanisms necessary for the more cohesive and credible exchange of the Third Republic under Park Chunghee. Third, I argue that patterns of Korean industrial organization such as familism, concentration, and close state relations have their roots in this period of post-colonial Korean capitalism. Certainly there were precedents in the late Chosun Dynasty (1392–1910), and in the colonial years through 1945. Nonetheless, the fact that these patterns finally gave shape to an independent, indigenous capitalism in the First Republic has received very little scholarly attention. Rapid expansion with limited resources fueled intense brokering of interests between state and capital as documented in the records of the National Assembly, Spinners and Weavers Association, and of the US Embassy. Entrepreneurs, politicians, and bureaucrats bartered across a variety of channels running the gamut from informal to formal, ascribed to meritocratic, personal to impersonal. Networks and norms of personal connections linking private firm and state bureaucracy, of cooperation in trade associations, and of contention in markets distinguished enterprise. Changes in firm, local commerce, state bureaucracy, and international political and market systems deeply affect patterns of interest negotiation among the mogul mills. Clientelism appears prominent in the initial years of industry formation, and then corporatism during the years of carefully planned growth from 1961, while more transparent forms of negotiation formalized in contracts and based on market pricing have gained ground recently. But the journey from rags to riches suggests far more than a simple evolution from ascribed or personal ties to impersonal contract.

26

Industry formation, 1945–60

One key issue of collective action in textiles is vertical integration of a line of production, initially to serve the domestic market in place of imports, and later to fuel the export drive. Initially in alliance with Japanese and US synthetics giants, South Korea has now developed an autonomous local production line, the envy of other Asian states. How has Korea achieved such a sophisticated local, regional, and now global line of production? The organization of firms and industries is one reason. Structure and function helped Gary Hamilton and colleagues to distinguish South Korean jaebol from their Japanese counterparts. Ownership by individuals or families in Korea, as opposed to ownership by firms and banks was one distinction. Equally significant for this study is the question of integrating industries within an economy. In contrast to the Japanese business groups (keiretsu) deeply enmeshed in a complex set of long-term subcontracting, jaebol strive to complete the production chain within their own family of firms, relying less on domestic subcontracting relations with non-jaebol firms. Kang documented comprehensive diversification of businesses within the jaebol through takeovers and mergers.4 Woo added market control to the very definition of a jaebol: “a family-owned and managed group of companies that exercises monopolistic or oligopolistic control in product lines and industries.”5 Fukugawa highlighted the rationality of jaebol efforts to integrate serial production within the group rather than subcontracting out parcels of the process. With the relatively poor production infrastructure and techniques for inventory control at the time and the necessity for information management due to the fierce competition among the jaebols, increasing one’s transactions with companies outside the jaebol was conversely even dangerous. The jaebols were motivated to substitute imports in line with increasing demand only in the cases where they could internalize production and the necessary transactions. He concluded that the textile industry was prototypical of this type of integration within the jaebols.6 Hamilton cited one result of such in-house integration: the tendency of Korean jaebol to “segment rather than to integrate the total economy in the way the Japanese business groups do.”7 Vertical integration of production at the spinning mills even in the 1950s stretched from spinning to weaving. Although a leading jaebol today moved out of labor-intensive spinning long ago, the jaebol dynamic persists in spinning, and indeed in the textile jaebol whether in synthetics or spinning. But few jaebol could profitably extend their family of firms across all the sub-sectors of textile production necessary for export, particularly with the advent of more capital-intensive sectors upstream and midstream. Thus the state played a role initially in the rebuilding of spinning and weaving in the 1950s, and later in extending the line upstream and downstream. Perhaps more significant for precedents of governance was the state’s role in balancing supply and demand across the line to insure supplies necessary to capture foreign markets.

Industry formation, 1945–60

27

The trajectory of the textile industry offers a chronicle of such channels among state, textile moguls, and labor, but without the corresponding saga of rapacious profit-seeking and decline. How can we explain growth despite croneyism, collusion, or destructive competition? Formal institutions of finance and market regulation provide a level playing field for capitalism, but how do you develop without such institutions in place? Despite the persistence of clientelistic ties, the industry did not degenerate into corruption and rent-seeking. Despite the persistence of corporatist ties, the industry did not fall into the inefficiencies of collusion which Mancur Olson feared with “distributional coalitions.” Despite the persistence of cut-throat contention to gain market share at home and abroad, the industry leaders did not revert to mutual self-destruction. Even in the early years of well-documented clientelist ties, the textile sector stood apart as the leading producer and employer together with the “three whites” of sugar, flour, and cement dominating industry following the Korean War (1950–1953). At the forefront of the “easy” import-substitution stage of the First Republic under President Syngman Rhee, the sector quickly met the demand of the local population and found itself with surplus capacity by the late 1950s. Such growth is remarkable given the absence of a significant supply of local cotton, of locally owned and managed mills through 1945, and the dearth of both private capital and technology in the 1950s. A subsequent saga of success from 1961 has monopolized most of the attention, but its roots can be found in the formative decade of the industry. Enterprise: Kyungbang and Taechang Close state ties in plant development, finance, and marketing marked the early industry, as did familism and oligopoly at the individual firms. Following the collapse of Rhee’s First Republic, the military coup leaders appointed a tribunal in December of 1961 to investigate “illicit accumulation.” The court found thirty-three government officials and twenty-seven leading entrepreneurs guilty of collusion.8 Prosecutions provide a window on business-state ties leading to concentration through 1960. Investigators discovered the following practices: (1) illicit purchase of national properties or vested enterprises; (2) illicit access to foreign exchange either from banks or directly from the government; (3) unduly favorable bank loan rates; (4) illicit access to goods for trade through government offices, or of licenses for enterprises; (5) extensive and monopolistic access to foreign capital and loans; (6) tax evasion; and (7) sending assets abroad illegally. The court singled out Taechang Spinning and Weaving as the most egregious example of favoritism in the First Republic, operating 12 percent of all spindles in the nation in 1958. Taechang’s Paek Nam-il was fined $2.69 million dollars (350 million won), the largest penalty imposed on any mill,9 forcing Paek’s sale of the firm by 1963 to Seo Kap-heo of Sakamoto Spinning and Weaving.10 Taechang and Kyungbang offer an enlightening contrast in origins and state ties. With the exception of Kyungbang, most of the major spinning mills developed from former properties of Japanese spinners. For instance, the Paek

28

Industry formation, 1945–60

family of T’aechang Spinning and Weaving originally prospered with cotton sales in Seoul’s Chongno commercial district at the turn of the century. The Paeks later expanded into a commercial firm, a trading company, and a smaller textile manufacturing operation during the colonial period, 1910–45. 11 Consolidation of plant facilities at Taechang Spinning in the First Republic followed a familiar pattern: a colonial era, Japanese plant, extensive war damage, and then reconstruction with foreign aid. Japan’s Kanegafuchi (today “Kanebo”) textile firm operated a factory in Incheon from 1936 with 50,000 spinning machines and 1,500 weaving machines, worth a total value of $9.8 million in August of 1945.12 Rhee’s government took responsibility for repair of war damage and renamed the plant Koryeo Spinning. By the time Paek Nam-il gained control of the facility in March of 1956, he was operating about the same number of machines as Kanegafuchi had in place two decades earlier,13 with a capital of one hundred million hwan. Three years later, the firm was registered with a plant of 60,000 spinning machines, 800 cotton weaving machines, and 400 silk weaving machines. What accounts for such rapid growth in the aftermath of war? Pressed to recover industrial resources quickly following the Korean War, the Rhee state was not about to redistribute precious plant resources into a variety of smaller operations. Beyond plant, there was also help in finance with massive amounts of foreign grants.14 The interplay of state and market in the growth of the early textile moguls was apparent at Kyungbang as well. Kyungbang could boast its pedigree as the largest local colonial business group and the earliest large-scale Korean textile venture. The predecessor Kyeongseong Spinning and Weaving Company prospered in the colonial period under the direction of Kim Youn-su and his Samyang jaebol, a family-owned and managed industrial and agricultural combine.15 Patriarch Kim Youn-su continued at the helm of the Samyang firm in the First Republic, adroitly transferring assets from agriculture to sugar production with the establishment of the Wisan sugar refining plant near Ulsan in January of 1956.16 Youn-su had relinquished the helm of the textile venture in December of 1945 to his brother-in-law and long-time associate Kim Yongwan while retaining family investment in the spinning firm that continues today. Renamed “Kyungbang,” the colonial era firm quickly reemerged as a leading spinner responsible for 8 percent of the nation’s spindles in 1958. Venturing beyond industry to the turbulent politics of the First Republic, Kim Youn-su’s cousin Kim Seong-su emerged as a leading figure in the opposition Democratic Party.17 Rhee’s government counted the entrepreneur Kim Youn-su among the opposition, allegedly frustrating his investments with unfavorable interest rates and delayed permissions. Nonetheless, there was a symbiosis of sorts as Rhee needed competent private enterprise, and entrepreneurs like the Kims needed government help.18 Although working with a smaller capital than its competitors operating former Japanese properties such as Chosun (formerly Chosen) or Tongyang (formerly Toyo), the size of Kyungbang’s plant compared favorably with both earlier leaders.19 Kyungbang listed a capital of 100 million hwan in 1956, with a plant

Industry formation, 1945–60

29

including 25,400 spindles and 724 weaving looms,20 but the firm boasted of 40,600 spinning machines and 1,068 looms by 1959 due to grants and reinvestment.21 Although Kim Youn-su had procured credit from the USA channeled through the Rhee administration, he complained bitterly of government interference, high interest rates, and delayed authorizations. He blamed Rhee’s Liberal Party for labor problems at his Wisan sugar plant.22 Meanwhile at Kyungbang, his cousin Kim Yong-wan had led the newly formed Spinners and Weavers Association of Korea (SWAK) from its origins in 1948 through 1952. Soon after the partisan presidential campaign in 1952, Rhee’s administration replaced Kim with their own SWAK candidate, Kang Il-mae of the governmentowned Chosun Spinning. Despite tensions between the more politically involved Kim Seong-su and Rhee’s Liberal Party, and between Kim Yong-wan and the Rhee Administration, both Samyang and Kyungbang gained substantial foreign aid funneled through government offices. Indeed, government support of both Samyang and Kyungbang drew the attention and wrath of military reformers after Rhee’s fall, with family leaders in both firms convicted of receiving special favors (teukhae) in the process of “illicit accumulation.” Kim Youn-su’s son, Sang-hong, prominent in Samyang and a director and major shareholder in Kyungbang, received a fine of $276,000 (36 million won), and President Kim Yong-wan of Kyungbang a fine of $67,690 (8.8 million won). How can we account for early features of familism, concentration, and state ties evident at Taechang and Kyungbang? Long traditions of aristocratic family ownership and management of large agricultural estates perdured until land reform efforts initiated only in 1948. Leading Korean enterprises in the colonial years continued this tradition of family ownership and management, a pattern familiar in industrial capitalism in other developing nations as well.23 Lacking a large pool of experienced executives, or a credible system of stock markets and publicly traded joint-stock firms, family ownership and management helped insure trust, competence, and clear direction in the turbulence of the First Republic. Family direction permitted the continuity and clear authority necessary to foster effective ties with both state bureaucracy and the government party of Syngman Rhee, but also to sustain enterprise in the transition of a military coup and ties with the new military government under Colonel Park. James Coleman wrote of stability affecting the creation and destruction of social capital.24 Stability is assured in formal organizations based on positions rather than persons, but where personalism reigns rather than impersonal procedure, changes in personnel can undermine both networks and norms. Col. Park and his associates chose to fine rather than jail jaebol leaders convicted of illicit accumulation, and then to elicit their participation in the succession of five year economic plans. A pre-existing infrastructure of large-scale plants, economies of scale in cotton spinning, and the urgency of recovery in this critical import-substitution industry, would have scuttled any effort by Rhee’s government to disperse assets and disband the preexisting pattern of oligopoly. Concentration in huge firms such

30

Industry formation, 1945–60

as Taechang or even Kyungbang can be traced back to the colonial textile industry and the influence of large-scale Japanese enterprise investing in plant facilities on the peninsula with advantages of economies of scale. A supply of low-cost labor, protection from textile imports, and a reliable supply of raw cotton from abroad made large-scale plants feasible. The urgency of rapid production to meet the demand for consumer textiles to clothe a refugee population from North Korea and from areas of South Korea devastated by the war, would have hampered efforts to break up the larger plants in favor of newer, smaller plants. The fact that there were few entrepreneurs with the capital and experience necessary for productive use of the vested properties also discouraged dispersion of plant to multiple smaller investors. Third, concentration in an oligopoly of large-scale spinning and weaving firms permitted economies of scale and eased the government’s task of coordinating foreign and local aid for the reconstruction of the industry. Kyungbang and Taechang also illustrate the importance of close ties to both bureaucracy and government party for access to governmentcontrolled sources of capital, plant, and technology. State ties were linked to economic direction, at least to state priorities of returning war-damaged mills back to production as soon as possible, and to US priorities for productive use of foreign aid. Birth of a spinning industry Large-scale cotton spinning mills prospered on the Korean peninsula under Japanese colonial rule from 1910 to 1945. Colonial era mills included the local Kyungbang firm amid an array of Japanese spinning mills, mostly subsidiaries of the major spinning firms in Osaka and Tokyo known today as Toyobo, Kanebo, and Unitika.25 The Japanese textile factories reverted first to the American Military Government in 1945, and then to the South Korean government with establishment of the Republic three years later. US military officials estimated the value of Japanese textile properties in the South at $152 million, representing 11 percent of the total value of Japanese colonial investments in South Korea.26 Large-scale, labor-intensive Japanese spinning mills in the colony gave Koreans little opportunity for higher administration or investment experience, but plenty of experience as workers and even lowlevel managers. The industry certainly impressed a leading US official in the southern part of Korea at the time of liberation in 1945:27 “The most important industry, by far, is textile manufacture. Japanese techniques in this field were as advanced as any in the world, and textile workers were well-trained.” Some features of the colonial textile enterprise survived liberation, such as the scale of plants and the prominent role of the state in financing. The family-owned and managed Kyungbang illustrates the role of family ownership in enterprise which continues today in Korean industry. Labor was tightly controlled in tandem with the colonial state to the benefit of management from the 1930s, although occasional strikes and labor unrest characterized the early colonial years at the mills.28

Industry formation, 1945–60

31

Apart from parallels in plant and political economy, the immediate challenge in 1946 was retooling following the withdrawal of Japanese capital and technology, a task Shoemaker highlighted by citing deficiencies in spindles and raw materials plaguing the transition to Korean control at the mills from 1946. Korea’s postcolonial textile industry was built on the formerly Japanese-owned base of plants and machinery. One survey reported 220,000 spindles at the plants of Kanegafuchi, Toyo, and the Chosen Spinning plant in Pusan in 1945. The Korean-owned colonial era Kyungbang plant outside of Seoul reported 30,000 spindles.29 Soon after the industry recovered from the Japanese exodus in the late 1940s, the Korean War (1950–53) destroyed mills and dispersed workers in Seoul and Taegu, the centers of the industry. The Ministry of Commerce and Industry estimated the industry lost 64 percent of its plant and 67 percent of its machinery during the hostilities. Funding for reconstruction from the United Nations, and local state priorities on recovery in import-substitution industries contributed to a remarkably fast recovery. A government report cited 121,000 spindles in operation by 1953, and nearly 475,000 spindles in place by 1960, about twice the scale of the industry fifteen years earlier.30 A roster of the leading spinners in 1959 is provided in Table 2.1. Table 2.1 Spinning moguls 1959

Sources: Daehan Bangjik Hyeophoe, Seomyu yeonbo (Textile yearbook), annual. The ten mills owned 87% of the total of 496,968 spindles in South Korea at the time. Successor firms are listed in parentheses.

32

Industry formation, 1945–60

Taechang operated a total of 60,000 spindles and 1,200 weaving looms. Keumsong, Chonnam, and Chosun operated more than 50,000 spindles apiece. Concentration of spindles in the ten firms did not necessarily result in economies of scale. Mills soon found themselves saddled with over-capacity, a victim of their own success in the saturated local market, and of US constraints on exports of cotton yarn and fabrics produced from aid-supported imports of raw cotton.31 Mills brought jobs to a hard-pressed population, in addition to providing consumer necessities and substituting for basic textile imports. Mill employment of 6,600 workers in 1948 jumped to 9,250 by 1960.32 Among the earliest of Korean trade unions, the Korean Textile Labor Union Federation was founded March 31, 1954 with 18,000 members.33 The basic form of the company union persisted from the colonial era into the 1950s, and indeed continues today though with considerable variations from the Japanese model. Carter Eckert wrote of harsh working conditions and labor unrest at the Kyungbang plant from 1926. Noise, heat, cotton fiber dust, and 12-hour shifts 30 days a month took their toll on the mostly young female workers. Paternalism was also evident in the firm’s “family” ideology, and the structure of dormitories and schools at the plant. Labor expert Thomas Kochan briefly explained roots of paternalism in the Korean Confucian tradition: “The Confucian heritage implies that top executives are expected to treat their employees in a paternalistic fashion and in return to receive cooperation, respect, loyalty, and acceptance of managerial authority.”34 In effect, the young workers were committed to life in a total institution, a totally administered round of life under company supervision. Workers pressed demands of both wages and working conditions in strikes at the Kyungbang plant in 1926 and again in 1931.35 There is little evidence that conditions significantly improved in the difficult years of reconstruction following liberation and war. I find evidence instead of labor movement repression by the American Military Government (1945–48) in the anti-communist fervor of the south facing a communist neighbor to the north.36 Park Soon-won interviewed two former employees of the postcolonial Onoda Cement Plant in Kangweon Province to learn of labor transitions. Selfgoverning committees at the plant replaced Japanese management, but soon fell victim to factional strife between the right and the left. She cited four continuities evident from the colonial period: (1) over politicization of labor issues; (2) the company union system; (3) the labor-management council system; and (4) strong government intervention and police suppression.37 A chronicle of government controls against labor activities of the Teachers’ Unions in 1960 offers a similar picture of repression.38 Although labor rights were established with legislation of 1953 that guaranteed freedom of association, collective bargaining, and collective action, Rhee’s Liberal Party maintained close controls on leadership at the unions and demanded their political support.39 Labor unions from 1945 through the years of the First Republic acted as “agencies of political organization rather than economic pressure groups.”40

Industry formation, 1945–60

33

Capital and plant Equipped with 30,000 to 60,000 spindles, the mills mass-produced cotton yarn and fabrics with economies of scale that would frustrate smaller producers.41 Thus concentration distinguished the industry already from the years of reconstruction with eight major spinning firms accounting for 85 percent of the nation’s operating spindles by 1959. Dependence on support from abroad also marked the formation of the industry, with the early firms not only built on the base of the former Japanese properties, but relying on foreign aid for plant reconstruction, imported technology, as well as for imports of raw cotton. Unlike the subsequent development of synthetics plants, the spinning mills developed with indirect foreign aid rather than direct foreign investment, maintaining local control and ownership of their operations only through heavy reliance on bank credit monitored by the state. Aid funding for reconstruction from the United Nations and directly from the USA under loans from their International Cooperation Agency (ICA) permitted import of newer Japanese machinery to replace damaged and obsolete machinery, but also aggravated debt to equity ratios. The cash-strapped spinners could barely assemble the funds necessary to support their Association’s purchases of subsidized cotton from the USA: Imports of US raw cotton have been financed through the Bank of Korea by Spinners and Weavers Association of Korea (SWAK), the specified endusers. In the past, the Association has experienced considerable difficulty obtaining sufficient capital to make the required payments for raw cotton. This was caused mostly by the fact that the industry was required to invest such large amounts of money in buildings and now equipment at high interest rates.42 As opposed to applicants winning outright grants, aid recipients for reconstruction and expansion assumed debt obligations, and ICA aid and supplies for plants and technology in manufacturing alone amounted to $57.1 million between 1955 and 1959.43 Tightly controlled spinning firms emerged as highly leveraged operations under owner-managers, the centerpiece of family investment portfolios though few would develop as a major jaebol. Credits were invested also in weaving machines as the Korean spinners opted for integrated production from the outset in order to produce not only cotton yarn but cotton cloth and thus avoid middlemen such as independent weavers and converters.44 These early mills also attempted to manage supplies, production, and sales within their own related firms, replicating an integrated business group dynamic on a smaller scale. They invested in weaving machines to stretch their production line from yarn to fabric, rather than contracting out to smaller, independent weavers in Taegu and Pusan, and in 1959 sixteen member mills of SWAK accounted for all of Korean’s yarn production, but also for about 70 percent of fabric production.45 This initial effort at capturing more lucrative phases of textile production would persist as a familiar strategy at the Korean mills. Unlike their Japanese predecessors, vertical integration of spinning and

34

Industry formation, 1945–60

weaving distinguished the Korean industry with estimates that the mogul spinners were weaving as well with up to one-half of total yarn production.46 A similar goal was evident in joint-purchase of raw cotton by the Spinners and Weavers Association of Korea (SWAK) to pre-empt competition from brokers or trading companies.47 Mills studiously avoided dependence on Japanese trading companies by cooperating in procurement of cotton. We cannot underestimate the importance of SWAK in the recovery, established in 1947 to supervise distribution of aid-supported imports of US raw cotton for the mills. Given the total dependence of the mills on foreign cotton, the semi-official SWAK organization enjoyed a clear mandate for allotment of aid-financed cotton, and commanded considerable resources from its early years. Initial serial production took place within firms, at least to the point of spinning and weaving at the same site. Such efforts to capture profits down the line of textile production resulted in integrated textile plants as well as oligopoly, and high debt ratios. Extensive credits available for plant development distinguished early growth in the Korean industry, and spurred a competition for those funds in an effort to extend production to capture a share in an expanding local market. Availability of financing from state banks such as the Korean Reconstruction Bank, and state-controlled commercial banks for larger enterprises with an established base of technology further encouraged concentration and highly leveraged capital investment.48 Loans to textile firms by commercial banks amounted to about 11 billion hwan in 1957, 13 billion in the next year and 15.9 billion hwan in 1959, ranging between 27 percent and 34 percent of all loans for manufacturing in those three years.49 Foreign aid from the joint Korea-US Combined Economic Board and the International Cooperation Agency brought additional resources beyond the local market, but here also the mills had to compete to gain credits and to balance expansion of plant with projected demand. Markets Markets, as well as access to plant and capital, helped define early textile enterprise. A picture emerges of a market bounded by state controls on interest and exchange rates, and by state-controlled banking resources. At the same time there was competition among the firms to gain credits, and to balance credits and cash flow to sustain purchases of raw materials and machinery in tandem with market demand. In one early example of coordination extending to trade policy, Ministry of Trade and Industry directives of December 1954 and July 1955 prohibited import of finished cotton goods favoring producers at the expense of consumers.50 One observer complained in a leading business journal that government controls in effect constituted the spinners as a cartel, which provided domestically produced cottons which were far more expensive than comparable imports.51 State controls on trade in turn assured access to raw cotton for the licensed importers while restraining foreign competitors.52 But mills which flourished initially in a protected local market soon found themselves with over-capacity and no avenues for export, spurring calls for

Industry formation, 1945–60

35

export opportu nities from an industry now well supplied with raw cotton and machinery. In addition to producing for a local market insulated from international competition, and under constraints on exports of locally produced items, mills had to contend with still other interventions in the local market. Price controls on mill products prompted frequent complaints from the spinners. SWAK reacted angrily to a state campaign to hold inflation down in 1957 which included controls on the price of cotton manufactures, but not on rice and some other consumer products.53 Restrained by government price controls on yarn and cotton cloth, mills found themselves competing not on price but rather in distribution and market share. Controls on inputs also distinguished the early textile industry. The Spinners Association procured and warehoused supplies of subsidized American raw cotton and then allotted portions to each firm at rates below world market prices. Politically sophisticated and well organized, the association lobbied for market controls favoring the mills and opposed controls constraining the mills. No single issue better galvanized SWAK members than the complex procurement procedures for raw cotton confronted by highly leveraged mills in desperate need of reliable supplies to keep their expensive equipment operating.54 An effort to bridge market and state priorities was evident in an industry petition to the Ministry of Commerce and Industry in 1959. SWAK cited the following goals in their plea for a stable supply of raw cotton: (1) strengthen the autonomy of the industry; (2) insure a reliable supply of cotton goods for the consumer; and (3) ease the financing difficulties of individual mills.55 Financial autonomy at the mills and stability was linked with the public good of supplying consumer demand. A chronologically compressed trajectory of transfer of properties, reconstruction and recovery went hand in hand with coordination. Reversion of former Japanese mills to the Korean government, and then to private Korean ownership was one example. Korean managers and workers with long experience in the colonial mills brought the mills back on line once machinery, spare parts, and raw cotton were again available with properties, technology, and raw materials all funneled through state gatekeepers. The foreign origins of not only the properties themselves, but also the technology, raw cotton, and capital necessary to operate the plants further complicated coordination in the First Republic. Equally significant, the Korean state played a major coordinating role in the industry through trade policy, initially with protection from imports of lower count cotton goods. Even the venerable and independent Kyungbang led by opposition leader Kim Seong-su, found itself working closely with state ministries to gain access to financing, as well as to aid-supported machinery and raw materials. Despite often corrupt ties between state and industrialists, spinning plants cut off from supplies of Japanese technology and technicians and then devastated by war were quickly brought back to production in the First Republic. Moreover, I find it remarkable that the mills could have completed importsubstitution and saturated the local market already late in the same decade, and begin exporting. Rapid development in little more than a decade can be traced

36

Industry formation, 1945–60

to the flux of available resources supervised by the state, but also to the entrepreneurial energies of family firms within an oligopoly working in tandem with state bureaucracies. Politicized interests Both clientelism and corporatism helped channel contending interests between capital and state in these formative years of the industry, but clientelism appeared particularly strong. Studies of Korean variants of clientelism include Pae Sung’s review of politics and recent studies of Nam Chang-hee on colonial and postcolonial business-state ties. Pae wrote of Korean clients preferring to receive patron’s benefits “directly, immediately, and exceptionally,” rather than collectively through associations, or individually through direct lobbying in a pluralist competition for state favors. His emphasis on the prominence of the state favors coincides with still other studies of a Weberian patrimonialism in Korea embedded in personal ties between ruler and subjects, as opposed to a more impersonal, rational Western model.56 Apart from centralization around a strong state, Pae also highlighted “insecurity, scarcity, and unfairness” due to weak institutionalization of impersonal procedure. Pae then specified three prominent circles of patron-client ties: the president with his immediate circle of appointed officials, National Assembly members with their constituents, and the bureaucracy with the large corporations.57 Cumings paralleled the Rhee state with the late Franco regime in Spain as “diffuse authoritarianism,” rather than a carefully constructed state corporatism.58 Business-state ties reflected a mixture of corporatist and clientelist strategies that would continue in muted form through the present. Nam highlighted an “asymmetrical interdependence” in ties between patron state and client corporation, given the government’s need for productive investment and industrialization.59 Theorists of corporatism emphasize a bargaining of interests between state and capital, a joint commitment to policy and joint effort of enforcement. Inequalities of clientelism sometimes divert attention from a similar interplay of interests that binds patron to client. Clientelism Finance was a fertile area for patron-client ties with state-controlled banks holding a scarce supply of capital and with low interest rates under government direction. Rampant inflation resulted in close to a negative interest rate, permitting investors fortunate enough to obtain a loan the luxury of investing the money without much thought of debt service, or loaning it out on the curb market at much higher interest rates. The effects of inflation would effectively cover the low interest rate of the original loan. US Ambassador Richard Dowling advised Washington in 1956 of problems in the Korea aid programs: “All banks are controlled by the Government and many banking decisions are influenced by political considerations. There is also an alarming amount of graft and corruption in banking.”60 US Embassy officials observed elsewhere, “politics and influence

Industry formation, 1945–60

37

enter into getting a loan from any ROK bank.” They attributed restrictive state credit policies to efforts to discourage contributions to opposition candidates, and cited “widespread graft and corruption among government officials and the military forces” as one of several factors slowing the rate of development.61 Apart from institutional problems, there were also policies favoring certain sectors of industry. US officials cited concerns in Korea about the over-valuation of the Korean hwan as a hidden subsidy for the spinners resulting in “inordinately high profit margins for cotton mills.”62 Third, there were direct patron-client ties with individual business leaders including Park Chon-il, a secretary to President Rhee and Sull Kyong-dong of Daehan.63 Despite evidence of corporatism with a state-designated trade association, personal ties between individual mill owners and Rhee’s Liberal Party played a major role as apparent in the scandals buffeting the industry late in the First Republic. Ties between state and major spinners included often dyadic, reciprocal, hierarchical, and informal bonds as documented in Korean National Assembly Reports. We read of irregularities in the sale of vested properties involving Taechang Industrial Company, and also the nation’s largest mill, the Chosun Textile Company. In the former case, the government leased and then sold a mill to Taechang by special negotiations rather than public auction. The Minister of Finance pressured the Bank of Korea to provide loans without collateral, and then the same minister authorized the use of $5.5 million of foreign exchange for the company without collateral or auction. Further charges were lodged for corrupt practices in the revolving management of the Chosun Textile Company prior to its privatization in August 1955. Reviewing the process of privatizing the government property, the Assembly later concluded “the Administration had willfully and illegally sold these plants to a small group of privileged individuals at a cheap price by giving them special priority in the auction.”64 In a separate incident, the prestigious Korea Reconstruction Bank was charged with channeling a massive reconstruction loan to twelve large firms that reciprocated with large contributions to the government’s Liberal Party for the spring election campaign of 1958. Keumsung Spinning reaped bank credits of 20 million won ($400,000), equal to the total equity capital of the firm two years later, and channeled 10 million won ($200,000) to the treasury of Rhee’s Liberal Party.65 Control of the umbrella labor association by Syngman Rhee’s Liberal Party offers some parallels to their clientelistic control of capital. The Federation of Korean Trade Unions (FKTU), established soon after liberation, initially won recognition in the international free trade union movement. Affiliation with the powerful International Confederation of Free Trade Unions (ICFTU) led to representation at the ICFTU London Conference in 1949 and Milan Conference in 1951. Rhee’s government did not permit participation at the ICFTU Conference in Tokyo in 1953 on the grounds that FKTU was dissolved and now under reorganization. Rhee reconstituted FKTU leadership with a three member Supreme Executive Council in April of 1954, with the same three leaders also appointed to the Central Committee of the Liberal Party. Yi Chong-

38

Industry formation, 1945–60

seong of the Textile Workers Federation, and union leaders Kim Sun-tae of Chosen Textile and Sin Dong-kweon of Dongyang were elected to the twentymember Committee.66 First Secretary of the US Embassy Sydney Mellon described the Korea visit of Martin Bolle, special envoy of the ICFTU, in July of the next year: “Earlier reports regarding the trade union situation in South Korea and its complete subservience to the Liberal Party and the administration were generally confirmed by Bolle.”67 Alan Strachan of the Embassy responded to the suggestion that the Embassy use its own resources to wean FKTU leaders from government ties: “even should they sincerely want to unshackle the organization from its unhealthy connections with the Government the consequences would most likely result in the dissolution of the KFTU by the Government while they would be deposed as labor leaders.”68 Corporatism Clientelism has dominated the more theoretical literature on the Korean political economy of the 1950s. But if corporatism has received wide attention in studies of subsequent political economy under Park Chunghee, where did it come from? Without a clearer understanding of corporatist roots in the First Republic, we cannot adequately describe either clientelism nor contract in the 1960s. The term state corporatism denotes corporatist representation initiated, supported, and even directed by the state that authorizes centralized sectoral organizations with a representational monopoly. Close cooperation between SWAK and the Textile Bureau of the Ministry of Commerce and Industry appears to fit this profile, as does the extensive and exclusive representation of joint mill interests, whether in procuring raw materials or lobbying for better prices. Beyond an interventionist state and semi-official trade associations with a monopoly of representation for the spinners, we can also cite conditions such as the flux of uncommitted resources which both state and capital were eager to manage. The state could gain legitimacy through proving itself a competent manager, and the entrepreneurs could build their enterprises and gain market share. Both camps desperately needed coordinated action and credible information networks that a trade association could provide. Still other conditions supporting a strong state role in the industry contributed indirectly to corporatist controls. The function of gatekeeper over aid-financed cotton, credits for reconstruction and development from the United Nations and the United States, and loans through state-owned or controlled banks gave the state tremendous leverage in a new industry lacking in both capital and technology. Corporatist precedents in the colonial textile industry, and close colonial state supervision provided a familiar model for state/business links in the industry. The concentrated structure of the industry with its small number of major firms and relatively homogeneity of interests also supported corporatist decision-making. Corporatism denotes state partnership with industry in policy formation and enforcement. With its critical role in consumption, employment, and importsubstitution, the industry drew the close attention and strong support of the

Industry formation, 1945–60

39

Rhee state, including the Ministry of Reconstruction, and the Textile Section of the Ministry of Commerce and Industry. Firms gained access to state resources through both direct contacts between individual firm and government, but also through their powerful trade association, the Spinners and Weavers Association of Korea, or “SWAK.”69 The association bridged the interests of an interventionist state and the rapidly expanding mills, dependent on the state for credit and market access in a tightly controlled local economy. Founded in 1947 during the American Occupation, a small coterie of large mill operators sought a common voice to press their needs before the American administrators, and a structure to organize relief supplies of raw cotton, spare parts, and electric generators. The subsequent administration of Syngman Rhee in South Korea’s First Republic (1948–60) approved the bylaws of the association in August of 1949, and delegated policy responsibilities by redirecting the task of raw cotton procurement from the Office of Supply to SWAK.70 SWAK was responsible for classing, purchasing, transporting, and warehousing raw cotton for member mills, as well as for more conventional tasks of information-gathering and lobbying of government offices. Membership included all the major mills, representing more than 95 percent of spindle capacity on the peninsula. SWAK allocation of cotton solely to member mills effectively barred non-members from large-scale production. Although semi-official duties in cotton procurement, and inclusive membership of all major mills would suggest strong industry representation, the state played a major part in the resources and direction of the organization. American grants and long-term credits for cotton procurement represented the Spinners’ most important resource, although the local government first had to negotiate and approve American aid program amounts, and then channel funding authorization through the Ministry of Finance. Ministries of Finance, and of Commerce and Industry in turn would allocate blocks of funding to the Spinners Association to open letters of credit for cotton purchases. Semi-official status was evident also in cooperation with the Ministry of Finance regarding SWAK access to foreign exchange, and with the Ministry of Commerce and Industry regarding technology and supply of local markets. The state finally inserted its own leadership on the association by inserting the president of the state-owned Chosun Spinning, Kang Il-mae, as SWAK president from 1952 through 1958, an important precedent for the subsequent administration of the association.71 Yet state corporatist strategies did not extend to all sectors of the economy, nor to the organization of labor, leaving the spinning moguls with a narrowly bounded, bipartite tie quite unlike the more comprehensive Latin American variant of tripartite state corporatism. The formative years of the industry offer evidence of a competition between formal, corporatist ties, and informal networks, i.e., “stable, preferential, particularistic, mutually obligated and legally nonenforceable relationships.”72 Rhee’s administration provided protection from foreign investment and imports, and irregular access to credit and other favors in return for donations to his Liberal Party Although the positive role of such networks for establishing trust in the uncertainties of war, reconstruction, and import-substitution is less

40

Industry formation, 1945–60

transparent, the negative aspects of personal, clientelistic ties are well documented. Still more can be said of institutions and practices supporting clientelistic ties between the state or ruling party as patrons, and entrepreneurs as clients, such as draconian measures of Rhee’s Ruling Party for financial support at election time.73 Others have observed extensive irregularities in the state bureaucracy, and favoritism for larger firms that could reciprocate favors. State banks and state-controlled commercial banks, vulnerable to the demands of the ruling party in favoring companies able to provide political support, also played a role. Procedural universalism and bureaucratic insulation that might provide a barrier to clientelism, remained problematic in the First Republic. Conditions promoting clientelism such as scarcity and personalistic rules for distribution of resources, a rugged competition for rents between well-heeled patrons in party and bureaucracy, and a limited number of clients at the mills provided fertile ground for the system of favors in the First Republic.74 A corporatist shell in labor relations such as the FKTU could not muster the resources of SWAK, although close state restraints on labor organization in the First Republic might suggest an initial corporatist framework of control. The state agreed to a remarkably robust legislative package in 1953 insuring labor’s rights including the Labor Standards Law, the Labor Union Law, the Labor Dispute Adjustment Law, and the Labor Relations Commission Law. But in yet another discontinuity between law and practice in the Republic, enforcement was left to a relatively weak labor office within other ministries of the government, with the result that laws were never implemented. This parallels what WooCummings cited as the prevalence of “discretionary rule” rather than the “rule of law” in Korea.75 Collier and Collier cited three dimensions of corporatism: state structuring of group representation, state subsidy, and state constraints on demands, leadership, and internal governance.76 Rhee’s Liberal Party orchestrated the April 1954 Convention reorganizing the FKTU and inserting Liberal Party leadership. But this would have little effect in extending state control beyond Seoul since state structures at the national level were not complemented with regional and local structures to insure a consistent design and implementation of labor policy. Company unions at the plant level remained the main source of labor funding and membership, without effective links to the national federation. Despite state subsidy and state controls at the national level, the absence of a consistent framework of corporatist organization across nation, region, and plant precluded corporatist control or participation, leaving labor vulnerable to clientelistic, familial controls at the individual mills. Contract The brief seven years or so of rapid industry formation from 1953 offer evidence of remarkable market contention to provide basic yarns for the Taegu weavers, of extensive cooperation at SWAK, and of deep connections with the Liberal Party. Corporatism and clientelism provided credibility in lieu of effective institutions of market or state, to insure the trust necessary for long-term

Industry formation, 1945–60

41

investment in manufac ture. Corporatist ties within SWAK, and clientelist ties with the Liberal Party and members of the bureaucracy helped bridge the chaos of a fledgling industry in an unstable political economy. We might cite insecurities of infrastructure in the First Republic, particularly in the years immediately following the Korean War, inconsistent government controls on currency and finance, and constraints limiting spinners solely to a limited domestic market. We might cite also a flux of resources such as the sudden availability of vested properties, of foreign capital through aid programs, and of aid-financed raw materials as a further condition prompting personal ties to insure access to newly available resources. Conclusion We can now summarize basic features of what would become a dominant pattern of industrial organization already evident in the First Republic. A summary of societal patterns, organization, and market controls is presented in Table 2.2. Familism denotes the prominence of industrial families in the ownership and management of firms.77 It extends in Korea to marriage partners as well, with intermarriages common among leading industrialists and government officials, strengthening the inner circle of leadership extending across business and government.78 Family plays a major role in leading jaebol or business groups which earlier included a trading company and multiple manufacturing companies, and today extend to service sectors, particularly to banking and finance. Crossshareholding across multiple firms is often a family strategy to maintain majority ownership and control. Efforts to include multiple sectors of the value-added production line within one family of firms or jaebol are not limited to the larger, more famous jaebol. Among the upstream mills, synthetics firms today belong to major business groups such as Sunkyong, Saehan Media, or Hyosung. Korea’s nine major spinning firms do not match the scale of their synthetics competitors, but even the vertically integrated mogul spinners strive to retain both manufacture and major marketing functions within the same family of firms. Table 2.2 Patterns of Korean industrial organization

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Industry formation, 1945–60

Concentration of political clout in the executive branch of government and of economic resources in the jaebol provides a second familiar pattern in the literature on South Korea. Again a drive towards concentration is apparent beyond the major jaebol in “industrial groups” among medium-sized and smaller firms as they stretch themselves from manufacturing to marketing under family ownership and management. Henderson’s emphasis on the role of a central government authority finds resonance in family control at some firms, and has gained added significance with the globalization of Korean firms stretching management across borders for both production and marketing. The nine mogul spinners command a major share of plant and assets in cotton spinning and weaving today in South Korea, and control the leading sectoral trade association, SWAK. A similar set of nine “moguls” rule the Korean Chemical Fibers Association and dominate synthetics with the technology and scale necessary to turn a profit in polyester production within and beyond the peninsula. High tariffs on imports of cotton yarn and cloth, as well as on synthetic filament and fiber left the domestic market largely to the moguls, extending concentration from plant and assets to concentration of market share. State coordination in the development of the industry contributed to concentration for a variety of political and economic reasons, not least of which was economies of scale. The state first orchestrated disbursement of colonial industrial properties vested in the Korean government and then served as gatekeeper of resources for reconstruction of plants among the spinning industry moguls of the 1950s. Beyond plant and equipment, state control extended to foreign supplies of raw cotton, and finally to the necessary credit to finance and operate a spinning mill. The state assumed a major role in the 1960s with the export drive spearheaded by cotton mills, and in the next decade with the Heavy and Chemical Industries (HCI) campaign which fostered expansion of petrochemicals including refining of raw materials for synthetics production. Stabilization and then industrial adjustment in textiles again brought the state to the foreground in textiles from the 1980s. Despite talk of the state moving out of the economy, two powerful state institutions remain the primary agencies of restructuring on the peninsula today—the Korea Asset Management Corporation, and the Financial Supervisory Commission. And if the IMF crisis late in 1997 brought the state back into the market, fading textile earnings brought the state back into the industry recently with the Milano Project to push textiles into higher value-added production.79 Industrialization in the First Republic merits new scholarly attention. Certainly a rampant clientelism of unbounded patron-client ties between an autocratic state and mogul mills in the First Republic anchored one end of the spectrum of interest contention. Kim Joungwon cited the “Free Enterprise Law” of 1954 as a shift from Rhee’s reliance on political funding diverted from military aid, to political funds drawn from big business that in turn received governmentauthorized aid, or state-approved licenses to obtain foreign exchange at artificially low exchange rates. The variety of foreign aid available to spinning mills left them particularly vulnerable to the demands of Rhee’s Liberal Party for funding

Industry formation, 1945–60

43

political campaigns. Clearly there were differences among mills as evident in the contrast between Taechang and Kyungbang. But the dual state roles of bureaucratic management and coordination of business-state relations combined with the pressure of compressed development left all mills little choice but to cooperate or drop out of the competition. Kim Kyong-dong noted of entrepreneurs in this period: “those not in political favor or refusing collusion found themselves cut off from the sources of economic opportunities.”80 Prosecutors in 1961 singled out both government officials and mill executives. They documented corruption in distribution of vested properties, access to foreign exchange at favorable rates and local credit, and monopolistic access to loans through foreign aid. What distinguished clientelistic ties in the First Republic was the variety of favors or favored access made available, in part due to the turmoil of colonial liberation, war, and reconstruction, and in part to the absence of cohesive institutions in private finance or government to monitor such ties. More importantly, it was a lack of boundaries and boundary maintenance that permitted such clientelism in the absence of the counter-balance of open market dynamics or corporatist mechanisms of surveillance. Yet mechanisms were set in place in these years that would ensure better surveillance in the future. The fact that the powerful SWAK was established already in 1947 prior to the founding of Rhee’s Republic in 1948 helps account for its unique status among industry associations in the First Republic, and its remarkably contentious ties with the state. Mills, and the American Military Government in Korea alike needed an organization to take responsibility for import, warehousing, and distribution of raw cotton to manufacturers. SWAK was in turn recognized by the Korean state from 1948 as the representative of the mills, both public and private, despite the election of Rhee’s opponent, Kim Seong-su as SWAK president. What we find across the decade or so through 1960 is then a powerful corporatist association not only lobbying the state and providing information on mill production, but also arranging contracts for raw cotton imports, warehousing and distributing raw cotton to member mills. But this corporatism was largely limited to textiles and a few other sectors with powerful associations, and constrained by the fact of strong direct ties among mills, bureaucracy, and Rhee’s Liberal Party. There appeared little insulation of the bureaucracy from remuneration for favors received by mills, and little insulation of the mills from the demands of the Liberal Party for campaign funds. Moreover, there is no evidence of corporatist inclusion of labor in the First Republic, nor of political party alignments supporting tripartite, or indeed bipartite corporatist modes of interest negotiation. Most scholarship on the First Republic highlights Rhee’s priority of politics and political legitimation over economic priorities. US Ambassador Dowling reported in 1956 that “politics is the determining factor in many economic decisions and graft and corruption are widespread.”81 But it was not simply graft but a lack of institutional incentives which discouraged more productive enterprise, as highlighted in a State Department report to Congress in 1957:

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Industry formation, 1945–60

The absence of a climate favorable to private business, domination of the Korean economy by government enterprise, and incentives to speculative trading presented serious obstacles to private investment. Private business was hampered by the lack of legitimate credit facilities and the absence of a free-market price system.82 Exigencies of Korea’s geopolitical position on a divided peninsula close to the major Communist powers of that day, Rhee’s refusal to permit trade with Japan, and the urgency of reconstruction all constrained the free play of price and impersonal contract in a market economy. Rhee’s insistence on maintaining an inflated exchange rate drew the ire of US aid officials but the praise and gratitude of entrepreneurs fortunate enough to gain government authorization for foreign exchange. Price controls on yarn and fabric constituted a further constraint. Trade policy likewise excluded textile imports in products produced by local mills, providing them with a captive market and insulating them from foreign competition. Nonetheless there were ongoing efforts even in the First Republic to encourage market dynamics not only to appease US officials, but also to distinguish the South as the democratic, capitalist alternative on the peninsula. A search for origins would draw us back to at least the closing years of the Chosun Dynasty after 1876 and colonial years from 1910, but also to domestic and international factors in the First Republic. Clientelism is more prevalent in agrarian societies and certainly the extensive patterns of landlord-tenant relationships prior to 1945 offer abundant precedents for such exchange. Beyond historical precedent, the political and economic turmoil on the peninsula following colonial liberation in 1945, and then war and reconstruction eroded the legitimacy of market institutions from the colonial years, and forced radical changes in government institutions. The remarkable flux of available resources for spinning mills across the twelve years of the First Republic forced entrepreneur and bureaucrat alike to forge new ties quickly both between and within government and business: clientelism permitted reciprocity and trust in a chaotic decade. There were precedents of state corporatism in the colonial years, and of close business-state ties within strong industry associations. As the post-colonial US Military Government, and then as a military ally and provider of economic aid, the USA played a leading role on the peninsula through 1960, but always in alliance with Rhee’s government. Gatekeeper of huge resources of relief goods, technology, capital, Rhee’s state commanded the necessary resources to take-up coordination of industrial reconstruction. Textiles proved to be one sector where a pre-existing corporatist structure gained both function and government recognition in the First Republic, despite the absence of a broader corporatist framework embedded in either political party or industrial relations. But apart from incentives for alternate hierarchies beyond pricing mechanisms in the market, what might explain the emergence of multiple modes of interest exchange? Familism in management and ownership, but also in the jaebol dynamic of integrating manufacture and marketing within groups of firms

Industry formation, 1945–60

45

permitted greater leeway for personal ties in negotiation of interests within firms and between firm and state. The prominence of personal, direct ties between entrepreneurs and the state provided extensive opportunity for irregularities. Common interests could be cultivated and corporatist efforts mobilized more easily among an oligopoly of ten major spinners, than among a broader array of medium and large-scale firms. Moreover, the concentration of capital and technology in a few large firms, dependent on government-authorized access to cotton, credit, and foreign-made machinery limited the field of legitimate competitors for government favor. We can trace market institutions back to a network of commodity and stock markets, banks, and firms persisting from the colonial years, despite the weak local participation in these colonial institutions. Trade within Japan’s colonial network offered a precedent as well. Extremely close ties to the USA with its free market ideology, the necessity of at least government commerce between the two nations, and the oversight and planning interventions of US officials also played a role in promoting price and impersonal contract in the First Republic. Constraints on the market dynamic within South Korea turned competitive firms to other channels, whether clientelist, dyadic ties with the state, or corporatist, oligopolistic links. Among these constraints, government controls on prices of mill products, on exchange rates, and on imports and exports severely limited the dynamic of supply and demand. State efforts at coordinating both manufacture and market likewise gave incentives to firms to find clientelist or corporatist channels of improving their access to plant, finance, and market niches. The state controlled access to raw materials, distribution of vested properties, and credit. Coordination of prices and exchange rates reinforced the gatekeeper role. Constraints on international markets left local capital to scramble for aid dollars without competition for foreign investment or foreign markets. Producing for an insulated, protected local market, and constrained from competing in foreign markets with exports, clientelist and corporatist ties with the Liberal Party and local bureaucracy offered salient channels for expanding enterprise. This wider story of industrial policy chronicles continuity and change in patterns of family ownership and management of firms, concentration in a family or “group” of firms, and centralization of authority at target firms. Adjustment in declining industries offers a window on change from an earlier path of strong state direction, close cooperation between politicians and business elites, and tight controls on labor. Yet the specter of idle plants and shuttered mills can galvanize even reluctant officials into action to moderate dislocations. A clear consensus on the formal and informal patterns of such a framework continues to elude bureaucracy and business due in part to the radical compression of Korea’s development trajectory, but more generally, to the lack of institutional mechanisms to provide continuity once a consensus is reached. One key to effective coordination of adjustment efforts is a credible framework of institutions and shared ideas or “conceptions of control” defining exchange.

3

Industry growth, 1961–79

The years of the First Republic (1948–60) tell us something of initial dynamics of oligopoly familism, and state relations, as well as of compression and coordination. But they offer at best a partial picture of what was to come.1 This chapter extends the literature on Korean development in the 1960s and 1970s with two arguments. I first argue that the interplay between time and intervention evident in “compressed” and “coordinated” development deeply affected the formation and growth of market institutions. Second, in addition to bureaucratic management, coordination of business relations was critical in growth of the textile industry. Questions of cause refocus our attention on persisting patterns of personalism between state and capital and among textile moguls, of bureaucratized cooperation at trade associations, and of mutually destructive efforts to establish and extend market niches. Why did clientelism and corporatism not spawn distributional coalitions monopolizing industrial growth and impeding market expansion? Why did fierce market contention not break the dominance of the spinning oligopoly, or preclude emergence of a synthetics oligopoly, or indeed unravel state efforts to force both to cooperate in a long line of serial production for export? Complexities of relational contracting in Japan turned Dore’s attention to networks, just as the transactions costs in the “intricacies of idiosyncratic, complex, and dynamic exchange” of industrial adjustment sparked Powell’s interest in network forms of resource allocation.2 Dore wrote of networks of preferential, enduring trading relationships as an alternative to vertical relationships. Powell identified network forms of allocation in imperfect markets where exchange occurs among circles of individuals engaged in “reciprocal, preferential, mutually supportive actions.” Both scholars looked beyond firms simply as hierarchies, or markets based on price as the dominant forms of resource allocation, to more socially embedded forms of exchange.3,4 I look within institutions to contracts, interpersonal and inter-group connections, and associations to distinguish pluralistic, clientelistic, and corporatist patterns of interest organization and exchange. A market model of impersonal contracts, or what Mari Sako terms “arm’s-length contracts” based on universalistic criteria aligns with Weber’s political model of legal-rational authority and meritocratic rule.5 Connection based on personalistic and often hierarchical criteria finds parallels either in a patron-client or patrimonial model of political authority.

Industry growth, 1961–79

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Organization of industry into designated associations with representational mandates such as state-recognized labor or trade associations suggests yet a third alternative of corporatism bridging polity and market. For instance, Bianchi characterized big business in Egypt as a “hybrid sector” where both pluralist and corporatist structures continued to compete for hegemony.6 I would argue that problems of associability in Egypt highlighted by Bianchi and earlier by Moore, extend in Korea beyond contract or corporatist association to patronclient ties as well. Rather than a single theme of impersonal contract, corporatism, or clientelism, the textile transition suggests rather at times a chorus and at times a cacophony of conflicting modes with shifting borders that I term “syncretic capitalism.” Mills were hard-pressed to procure information, obtain finance, and insure credibility as they navigated the turbulent waters of rapid industrial growth. Market and contracts alone, or political ties alone, or networks and associations alone could not adequately bridge trust and transactions in years of rapid growth. A search for alternative strategies often determined survival in the absence of an independent banking system, of an extensive stock market for raising capital, or of an open, competitive market for yarn and fabric at home. Coordination and compression left state and capital facing imperfect markets where knowledge of supply and demand, and more importantly, credibility in finance and marketing could not be sustained either simply by price mechanisms or by jaebol manipulation of markets. There was simply no time for the incremental development of market institutions and societal understandings of what is necessary to insure both necessary trust and efficient transaction. Hierarchies of jaebol organization and industry association, often rapacious market dynamics, and interlinked circles of business and state elites each found a role in the turbulent years of industry expansion from the 1960s. I single out chronological compression and state-led coordination as critical features across the short history of the textile industry from 1948, identifying each feature with specific dynamics and distinctive areas of development in Table 3.1. Table 3.1 Two features of Korean textile development

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Industry growth, 1961–79

Rapid, often uneven growth from colonial spinning mills into a leading producer and sixth largest textile trader today suggests a chronological compression that distinguishes the growth of Korea’s industry from neighboring Japan or its European or American counterparts. A volatile, shifting set of resources due to a variety of factors such as colonial liberation and reversion of Japanese mills to local ownership, US foreign aid, close ties to the US cotton shippers, open export markets coupled with protectionism at home, and access to policy loans and other state supports for industry deeply affected the institutional development of the industry. In a recent study of clientelism and corporatism in Brazil, Nunes highlights fluctuation in the availability of resources which prompts a heated competition to gain access.7 As opposed to a relatively fixed array of accessible resources more familiar in established industries, the expanding industries of newly industrial countries may face an internal competition to gain entrée to state-controlled, or at least state-coordinated sets of resources critical for survival and success among a small set of major industrial players. For instance, we often find clientelistic relations supplementing more formal contractual ties within institutions as a way to ensure trust and maintain authority, and to gain access to newly available resources. Another feature of Korean textiles is the prominent role of both state and oligopoly, leaving a playing field of a small number of major players to contest against each other in times of growth and decline. State coordination contributed to the remarkable speed of textile development, but at the cost of artificial controls on market, sectors, capital and labor. Such controls impeded the cohesive, autonomous institutional formation which would have permitted clearer and more consistent borders between state, capital, and labor. One clear government priority from the 1960s was extension of a line of serial production in textiles from upstream sub-sectors of synthetics and natural fibers, through the mid-stream processes of weaving, cutting and dyeing, and then down to the actual sewing of garments downstream. Spinning, weaving, and sewing were already in place by the late 1950s, concentrated in Taegu and Pusan. Government support for exports in the 1960s spurred development of not only these earlier sub-sectors, but also of a whole new sub-sector of synthetics which received a further boost with the HCI campaign of the 1970s and a government-mandated shift into polyester and blended fabric. The state worked more closely with the industry’s peak association, the Korean Federation of Textile Industries (KOFOTI) from the 1980s, but continued to play a major role in industry policy formation and funding, particularly with the industrial estates, and then with a “depressed industries” program. What is significant here is not only the state role in extending Korean industry into multiple sub-sectors in development of an export production line, but in oversight and intervention along the line to insure adequate supplies and reasonable prices among the various segments. The state which played the role of both midwife and manager in integrating a production line through the 1970s, has now ceded much of that responsibility to KOFOTI, the larger textile jaebol, and to multiple levels of brokers.

Industry growth, 1961–79

49

Preoccupied in the 1950s with facilities and finance, mills leapt into a new decade of market opportunities at home and especially abroad. Textile exports grew in the 1960s, then jumped from $571 million in 1971 to an astounding $4.5 billion by 1979. Mills put nearly three-quarters of a million Koreans to work by 1979 or 24 percent of all labor in manufacturing.8 Employment in spinning alone jumped from 28,000 to 53,000 in the boom years of 1973 to 1979, and from 12,000 to 21,000 workers at synthetics firms. The number of spindles doubled in one decade reaching 950,000 by 1970, and then tripled in the next decade to a total of 3 million spindles by 1979. Intent on integrating spinning and weaving, mills more than doubled weaving facilities from 11,000 looms in 1970 to a total of 24,000 looms by 1979, operating about half of all looms on the peninsula.9 Expansion at cotton mills paled in comparison to the creation of an entirely new industry of synthetic fibers dating from Kolon’s production of nylon filament in 1958. Yet the event that would dramatically change Korean textiles was not nylon but polyester which Sunkyong pioneered a decade later (1969). Blended polyester/ cotton fabric and yarn, and especially polyester fabric soon became the hallmark of Korean exports. Coupled with expansion of weaving, dyeing and apparel facilities downstream, the advent of a sophisticated sector of acrylic, nylon, and polyester production upstream deepened and extended a line of serial production for the indigenous textile industry. The Rhee government (1948–60) channeled foreign aid to resurrect colonial era spinning plants, and controlled yarn prices for the insulated domestic market. But it was the Park government (1961–79) that extended a vast textile production line, offering upstream spinners new markets but also eroding their dominance in the industry. State coordination of serial production differed according to subsector, with synthetics garnering the lion’s share of state supervision and resources, and spinning gaining state scrutiny in issues affecting downstream sectors such as the price and supply of cotton yarn. Although one might expect state coordination of distributional issues in a sunrise industry such as synthetics and only regulation in the established spinning industry, one still finds the state in the 1970s intervening in spinning to control supplies and prices. Spinners did more than complain about constraints. They needed more production capacity to serve growing opportunities in foreign markets, and to meet the needs of the domestic garment industry armed with quotas for exports. So spinners pressed the government for higher prices on commodity yarns to fund new plant capacity, and for better financing for raw cotton imports. Sales opportunities, favorable local financing for new technology, and expanded US aid and credit programs for procurement of raw cotton represented a new stream of resources, and again in the flux, the spinners mobilized all channels to gain resources. Growth demanded yet again intensive brokering of interests between state and the organized and individual interests of capital among the spinning oligopoly. Changes in production, finance, and market shuffled the roster of oligopoly in spinning and created a new roster in the emerging synthetics sector. The timing of the export drive was most opportune for restless spinners. Confined to domestic markets in the First Republic (1948–60) largely due to restrictions on

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Industry growth, 1961–79

the use of US aid-supported imports of raw cotton, they had exhausted a stage of import-substitution industrialization in commodity yarns and fabrics by 1958. Exports were critical as well for the fledgling synthetics mills. The latter reaped profits during the export drive with a captive market at home and a secure market abroad through the quota system insuring stable market shares annually in US and other markets for Korean garment exporters, the leading consumers of synthetic and blended yarns. Growth led to intense contention for governmentcontrolled credit and approvals for plant expansion, but also for market share in supplying downstream apparel makers and traders, and for serving the growing offshore demand for yarn, fiber and fabric. State coordination of an increasingly complex line of serial production for an export market extended to capacity and price controls, as well as administrative guidance on distribution of critical inputs from the upstream mills. Enterprise: Dainong and Kolon Dainong and Kolon emerged as leaders respectively in spinning and synthetics during the decades of growth. Both expanded rapidly, cultivated close ties with the government, integrated production to secure their own line of serial production, and invested beyond textiles, all of which contributed to more intense and complex contention in the textile industry.10 Although both failed to gain licenses as general trading companies, they combined aggressive marketing departments with manufacturing, extending their control of the value-added line both with horizontal integration of manufacture and marketing and vertical integration of production.11 Second, both represented the open-ended character of large-scale entrepreneurship in the industry, with Kolon leaping from production of nylon to a joint-investment in polyester production with Japan’s Toray Industries, and Dainong from commodity trade in agriculture to labor-intensive spinning. Kolon International, the trading arm of the Kolon Group grew in tandem with Kolon Industries and played a major role in the textile boom, and more recently in manufacture as well as marketing of apparel. Dainong Corporation moved to the retail sector with acquisition of the Midopa Department Store in 1973 and later expanded into a Midopa chain with two additional stores beyond the landmark downtown property, as well as into Metro Products Company for merchandising. Third, the two firms represent opposite outcomes in the financial crisis. Relatively financially secure with a debt to asset ratio of 171 percent, Kolon has continued to turn a profit through the crisis, while Dainong has collapsed under a huge debt burden and is now in the hands of creditor banks. A profile of the two firms in 1992 and 2000 chronicles both leadership and change in the two firms, in Table 3.2.12 Dainong increased sales over the years but not enough to offset heavy costs of financing debts. Despite two years of bank direction and restructuring, Dainong has not recovered profitability. Declining profits can be traced to rising production costs as well as rising financing costs of liabilities, and perhaps more significant is the falling share of sales for export markets, and the growing share of sales in the fiercely contested domestic

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market. Dainong developed quickly as a mass producer of commodity yarns and grey-fabric, and then expanded down the line with uniforms and recently a network of specialty stores with high fashion products. Offshore ventures included a firm in Uzbekistan, later sold to its Daewoo partner, and two plants in China. The firm had to now retool and retrain for specialized production in a more sophisticated local market, and compete internationally in a mid-range niche of medium count yarns and fabrics. Kolon Industries meanwhile has been able to secure a market abroad for polyester and nylon, but needs to develop new polyester filaments and fibers to compete in higher value-added niches. Differences in capital and assets have widened between synthetics and spinning, with some growth in synthetics but little in spinning in the past few years. One reason is technology. Kolon has been able to diversify into products based on polymer technology. Dainong has only spinning technology with little room for profitable diversification in textiles. Despite sales growth at both firms, the rising costs of financing heavy debt burdens have contributed to growing liabilities during the years of the Asian Financial Crisis. Dainong never recovered from a hostile takeover attempt at their Midopa subsidiary in the spring of 1997, incurring additional heavy debts to finance purchase of additional shares to thwart the takeover.13 Cost-cutting has brought some relief, with huge losses of 293 billion won in 1996 and 176 billion won in 1997, down to 45 billion won in 2000. A further distinction between the spinners and synthetics firms is evident in ownership, with the latter dependent on Japanese firms for investment and technology, while spinners remain closely held family firms. Families have played a major role in the history of both firms. A leading agricultural trading firm, Dainong Corporation diversified into textiles and quickly emerged as the largest integrated textile firm in Korea, including spinning and weaving, and even its own garment brand under license with Lyle and Scott. A North Korean refugee, Dainong’s Park Yonghak established a trading enterprise for agricultural products in the First Republic and won state authorization of Table 3.2 Dainong and Kolon, 1992 and 2000

Source: Asia-Pacific Infoserve, Inc. Korea Company Handbook, Spring 2000. Seoul: Asia-Pacific Infoserve, Inc., 2000. Amounts represent billions of won. Data provided for January 1 through Dec. 31 of relevant year. Under bank supervision, Dainong is no longer listed for public trading. I culled data from Dainong Saeop Bogoseo 1999 [Dainong Report on Activities, 1999] (Seoul: Seoul Stock Exchange, 1999) on file at the Seoul Stock Exchange. NA=not available. Maeil Economic Daily, KOSDAK Listed Companies, Spring 2001. Seoul: Maeil Economic Daily, 2001.

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Dainong Agriculture (Dainong Nongeop) as a top-class trading firm in 1957. He turned to manufacture only late in the next decade with the purchase of the Keumsung spinning operation from Kim Seong-gon. Prominent in politics and enterprise, Kim had founded Ssangyong Cement as well as Keumsung Spinning, and then turned from textiles to heavy industries. Meanwhile, Park Yonghak hoped to capitalize on long experience in trade by combining large-scale manufacture with the marketing of yarn and fabric. He assembled spindles through acquisition of smaller mills to expand on the base of the plants of Keumsung and also T’aep’yung Spinning, and finally registered the new Dainong firm in July of 1973.14 Further extending advantages of scale, the firm integrated the spindles into one huge complex with completion of the Cheongju plant in June of 1975. Park Yonghak emerged as a prominent business leader in both textiles and trade. He served as an early chairman of the Federation of Korean Textiles, president of the Anyang Chamber of Commerce and Industry and vice-president of the Korean Chamber of Commerce and Industry. Active in the Japanese market, he served as the long-tenured Korean co-chair of the Korean-Japanese Business Association from 1984.15 His career culminated at the helm of the powerful Korean Traders Association where he served from 1969 to 1991 first as vice-chairman and later as the first civilian chairman of the semi-official organization.16 His son Youngil served as a vice-chairman of the Federation of Korean Industries, as a member of the Finance Committee of the government party in 1997, and as chairman of SWAK.17 Under the leadership of father and son, Dainong continued to diversify from their acquisition of Midopa Department Store in 1973 into multiple areas of manufacture and merchandising.18 Dainong Corporation was a major investor and operator of two subsidiary spinning operations in China, Dainong Yurim in Dalien, and Cheongdo Dainong in Chientao. Park Yonghak and son jointly held 17 percent of the total shares in Midopa, which together with the family-controlled Yangbaek Foundation monopolized 33 percent of the total shares in Dainong Corporation until surrendering it to the banks in 1997. Assets of $2.004 billion placed Dainong 34th among the Korean jaebol at its height, but huge liabilities coupled with a weak textile market drove Dainong into bankruptcy in April of 1997. Its main creditor Seoul Bank, itself reeling from bad loans, ordered a massive divestiture four months later. Textile operations including Dainong Corp. and Dainong Speciality Textile Co. reverted to new management under a consortium of banks.19 Kolon, by contrast, weathered the Asian Financial Crisis far better. The founder of what is today called “Kolon Industries,” Yi Weon-man started the Samgyeong Mulsan firm in Japan in 1948 for export of nylon yarn back to Korea. His son, Yi Dong-ch’an operated the Seoul office for importing the yarn, and then established his own separate firm, Kaemyeong Sales. Father and son later combined resources to establish a nylon plant, registered in April of 1957 as Korea Nylon. The firm initiated production of stretch nylon on January 1, 1959, and won a credit package from the government in February of 1961 for expansion.20 A joint investment agreement in July of 1962 with Chemtex, a

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major US chemical firm, brought a new infusion of capital and technology. Kolon Nylon initiated construction of a new plant with capacity for 2.5 tons of nylon filament daily, already in August of 1963. Two critical loans permitted further expansion later in the decade: an Agency for International development AID grant from he US government in June of 1966, and an Export-Import Bank loan from the United States in July of 1968. The funding enabled Kolon to establish Korea Polyester in March of 1969 in a joint venture with Japan’s leading polyester producer, Toray Industries, bringing a plant on line just two years later producing 20 tons of polyester filament daily. Korea Nylon completed a nylon tire cord plant in July of 1973 with capacity of 4 tons per day. Kolon gained authorization for polyester production in a market monopolized at the time by a joint venture of Sunkyong and Japan’s Teijin, the sole local producer. Burdened by heavy liabilities, Sunkyong-Teijin could not muster the resources to expand capacity to meet rising demand in the local market, leaving the field open for a new entrant. Aware of the huge investment necessary for manufacture of synthetics, the Korean state approved the Kolon-Toray venture to fill the gap. Further incentives were provided to permit recouping of extensive start-up costs with a production quota system excluding competitors. Targeting polyester and blended yarns and fabrics as a national priority in the early 1970s, the state later authorized polyester filament production at a Tongyang Nylon— Asahi Chemical venture, and production of polyester fiber at Samyang and Daehan.21 Korea Nylon went public in 1975, renamed itself “Kolon” on its twentieth anniversary in 1977, and absorbed Kolon Polyester in 1981.22 Synthetics firms won approval for listing on the Korean Stock Exchange as a channel for attracting investment, but public joint-stock firms found few investors in capitalpoor Korea. Japanese synthetics giants like Teijin, Toray, and Asahi Chemical remained the most important channel for capital and technology. Meanwhile, founder Yi Weon-man combined business with politics, continuing as both chair of the growing synthetics operation and a six-term representative in the National Assembly from 1960 in President Park Chunghee’s government party. His career included various posts relevant to enterprise such as Budget, Industry, and Commerce Committees. Family ties extended into various areas of the group’s business, as well across Korean industry and politics.23 Precedents of intermarriage between business and political circles continued in the next generation with descendants of Yi Dong-ch’an. His first son Ungyeol is the major shareholder and honorary chair of the Kolon Group. Yi Dongch’an’s daughter Yi Kyeong-suk married the third son of the eminent political official, Yi Hyo-seong president of the Korean Assembly in the 1960s. The eldest daughter of Yi Hyo-seong, Yi Mun-ok, was the wife of Pak Suk-hui, vicepresident of the Bank of Korea. Yi dong-ch’an’s second daughter, Yi Sanghi married Ko Seok-jin, president of Pilot Electric and founder of the Pilot Company. Dong-ch’an’s third daughter Yi Hye-suk married Yi Tong-hyeok, president of Korea Marine Transport. Patterns of kinship, integration of multiple firms within a group, oligopoly and close government ties stretch beyond individual enterprise to the wider industry.

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Kolon Industries is the second largest maker of nylon and polyester filaments in South Korea. Factories in Kumi, Taegu, and Kyeongsan and Kimcheon in North Kyeongseong Province churn out polyester filament yarn and fabrics, nylon filament yarn and fabrics, and tire cord. Kolon Industries also operates a cable TV channel for arts, and recently acquired the license for Lawson’s 24hour convenience chain in Korea. Major affiliates include Kolon Petrochemical (Yuhwa), Kolon Construction, Kolon Distribution, Kolon Electric, Kolon Pharmaceutical, Han’guk Yomkong, and Own Development Among its subsidiaries, the mother firm Kolon Industries holds major shares in the following: Kolon Indonesia (75 percent), Kolon-Met Life Insurance (26 percent), Kolon International (22.9 percent), Kolon Information & Communications (58 percent), Kolon Seiren (50 percent), and Kolon Merak Fiber (70 percent) in Indonesia. The firm lists a third generation of Lee family ownership and management under honorary chairman Lee Ung-yeol and others of the Lee family with 18.6 percent of the total shares in 1998, and Toray of Japan with 17.1 percent. Dainong and Kolon offer quite a contrast in earlier features of family ownership and control. The Park family managed and largely owned the entire Dainong Group in 1992, holding 26 percent of the shares in Dainong alone. Court receivership from May of 1998 brought an outsider, Kim Jin-eui to the helm and left the banks with the major shares of the firm after a debt for equity swap. Yet we find little change at Kolon during the same period. Lee Ung-yeol and family held the reins in 1992 and 1998 with 18.6 percent of the shares and Japan’s Toray holding 15 percent. Precedents of family ownership and control established a pattern of continuity and clear authority helpful in a government-managed market and fast-growing industry. The remarkable leap of Dainong’s Park Yonghak from commodity trade to a labor-intensive industry, and then into merchandising with the Midopa Department Store entailed considerable risks for both industry and entrepreneur. In the absence of an extensive stock market for inducing outside investment, the spinning mills remained largely closely held family enterprises. National Assembly Member Yi Weon-man enjoyed entrée to government offices where he obtained necessary authorizations and access to foreign loans and technology. State, labor, and foreign firms had greater confidence in an enterprise backed-up by the capital and management commitment of a wealthy family. Unlike the spinning industry with its changing roster of moguls, oligopoly in synthetics can be traced more directly to state formation of a new industry with economies of scale. The fact that only the larger jaebol could afford synthetics plants was a further factor supporting concentration. Meanwhile, economies of scale established among the larger spinners discouraged start-ups with smaller plants, but did not thwart investment from wealthier entrepreneurs joining the fray with larger plants. Quite distinct forms of state coordination appear in spinning as opposed to synthetic fibers. Spinning mills organized into the well-regarded Spinners and Weavers Association prospered in domestic and foreign markets without much state help, and benefited greatly from state promotion and coordination of textile exports. For instance, the advent of a quota system for exports of Korean garments assured the upstream millers of

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extensive demand along a local line of serial production, supplementing their own direct exports of cotton yarn and fabric. The Korean state left the spinners to make their own way in domestic and foreign markets, intervening only to insure adequate supplies of yarn and fabric for downstream sectors. What did occupy the state was a firm foundation for the capital-intensive and technology-intensive synthetics fiber industry. It played roles of gatekeeper to control entry of new firms, or as sponsor authorizing credit at government-controlled banks or permission for joint ventures with foreign firms.24 The small numbers of firms, all associated with major jaebol, permitted the state to work directly with the firms and their Korean Chemical Fibers Association. Synthetics firms flourished in the 1970s with the Heavy and Chemical Industrialization drive, at the same time spinners began to feel the pinch of rising wages and energy costs, tight credit, and a new competition for technicians from synthetics moguls. Spinning moguls Annual production of spun yarn grew from 140 million kilograms in 1973 to 380 million kilograms in 1979, an increase of 270 percent in just six years.25 But booming demand and investment in larger spinning facilities did not mask the fact of a growing gap between synthetic and natural fibers. In the seven years from 1973, volumes of pure cotton yarn for domestic use increased 140 percent, and production for export, 290 percent. But the value resulting from massive volumes of natural yarns could be matched by much smaller volumes of highvalue synthetic filament. Spun cotton yarn had always represented the major share of yarn and filament volume produced in Korea, but now its share even in volume had begun to decline. The volume of blended cotton and synthetic yarns produced for domestic consumption jumped 1,100 percent, and 360 percent in volumes for export in those seven years. Of greatest concern to the spinners, the production volume of synthetic filament for the domestic market jumped 900 percent in just seven years, and production of filaments for the export market grew 700 percent. King cotton was giving way to the new reign of polyester on the peninsula. Growth, prosperity, and government favor at the synthetic fiber plants with their polymer technology stood in sharp contrast to the cloudy future of the natural fiber producers. A new roster of mogul spinners (Table 3.3) emerged in the two decades of export growth, continuing the oligopoly and familism familiar in the First Republic. Oligopoly persisted, but now on a far larger scale with dramatic expansion of capacity at the mogul firms. The largest of the Korean mills poured money into facilities expansion to achieve greater economies of scale in spinning and scope in spinning and weaving, although spinning capacity now far outpaced capacity in weaving, forcing mills to go outside their family of enterprises and subcontract for production of fabric during periods of heavy demand. Expansion in this labor-intensive industry also concentrated a growing number of industrial workers in a few mills providing fertile ground for labor organization. Women workers at Dongil Spinning and other mills pioneered large-scale labor actions in the

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Table 3.3 Spinning moguls, 1979

Source: Han’guk Sangjang Hoesa Hyeobeuihoe (Korea Listed Companies Association), Sangjang hoesa chongram 1979 (annual report of listed companies, 1979) (Seoul: Korea Listed Companies Association, 1980) with data for December 31, 1979. Dainong, Pangrim, and Kabool were not listed on the Korean Stock Exchange in 1979. Authorized capital cited in billions (sipok) of won. Data on number of spindles through December, 1980 drawn from KOFOTI, Seomyu gongeop hyeonhwang 1980 (current status of the textile industry, 1980) (Seoul: KOFOTI, 198 l), Table 2–2–2, p. 14.

Fourth Republic despite factors often discouraging mobilization in other nations such as the economic vulnerability of a very young and inexperienced female workforce, education limited to factory technical schools, and relatively short periods of employment. Prior to the Heavy and Chemical Industrialization (HCI) drive, mills in the late 1960s and early 1970s stood at the forefront of large-scale industrial enterprise as employers, suppliers of the domestic market, and earners of foreign exchange through exports. Textile unions and the reluctant Federation of Korean Textile Workers Federation likewise played a major role in the interest identification and mobilization of industrial labor. High ratios of liabilities to assets, and consequently high costs of financing dampened profits despite strong sales. Spinners who had enjoyed favorable financing from government-controlled banks for plant in the 1950s, and for expansion from the mid-1960s, suddenly found themselves without easy credit in the next decade. The Heavy and Chemical Industrialization (HCI) drive of Park Chunghee’s Yusin Republic (1972–79) channeled the lion’s share of available credit to the larger jaebol, leaving the spinning mills to fend for themselves, often on the informal or “curb” market with much higher interest rates. Expanding steel, auto, and shipbuilding plants attracted labor with higher wages and often more attractive working conditions, forcing mills to raise wages. Adding to their miseries in financing and recruitment was the rise of new Asian competitors in commodity cottons. Signs of maturity and decline were already appearing among the spinners by the late 1970s with increasing competition for markets in Southeast Asia from Asian producers such as Pakistan with lower labor and financing costs, and newer technology. Equally important for the mills was the declining importance to the state of serial production for export in textiles, as the state withdrew resources from labor-intensive light industries in favor of major jaebol investing in heavy and chemical industries. Concentration in management, ownership, and market share continued, but not without significant changes in ownership and organization of individual

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mills reflecting intense contention for technology, technicians, and markets. Government incentives for export production from the mid-1960s attracted further capital to the spinning sector, prompting a wave of buyouts and mergers. Running plants around the clock with close to half a million spindles, newcomers to the roster such as Park Yong-hak’s Dainong and the Kim family’s Choongnam emerged as mega-moguls leaving the rest of the oligopoly in their wake. Dainong, Dongil and Ilsin followed a path of integrated textile production. Choongnam and others remained largely yarn spinners. The pace of change challenged newcomers in the race to build capacity, and the established mills to improve technology, organization and marketing in the industry turn from medium mills to large-scale producers. A second continuity beyond concentration was familism in management and ownership as might be expected, but also in organization of smaller affiliated firms around the mill.26 Kyungbang, Dongbang, and Taehan continued under the Kims, the Suhs, and the Sulls. The colonial era Kyungbang continued under the ownership of descendants of Kin Seong-su and his entrepreneur brother, Kim Youn-su. Kim Kak-choong of the former line remained at the helm, while Kim Sang-hong and his father, Kin Youn-su reoriented the family’s Samyang firm into sugar refining and polyester. Suh Chong-ik and his son, Suh Min-sok of Dongil ventured briefly into synthetics before surrendering the enterprise due to financial difficulties. Sull Won-sik and his son, Sull Won-bon parlayed investments in sugar refining and textiles into their prosperous Taehan Group. Lee Jong-seong, founder of Choongnam Spinning, was joined in the 1970s by his son, Lee Jun-ho. Familism persisted across decades of industry formation and growth with some obvious changes. One was the entry of a second generation into management and ownership, usually with the requisite training to qualify as professional managers. Intermarriage was also a new element for the now established families in industry and politics, reinforcing oligopoly and interpersonal ties. Birth of a synthetics industry Moguls quickly took advantage of the HCI campaign of the Fourth Republic to expand manufacture of polyester, nylon, and acrylic between 1972 and 1979. Production capacity of acrylic staple fiber at Hanil and Taekwang grew from 73.5 million tons per day to 320.5 million tons, an increase of 430 percent. Production of nylon filament at Korea Nylon (Kolon), Tongyang Nylon, and Kohap jumped from 71 million tons per day to 262.5 million tons, an increase of 370 percent.27 Both acrylic and nylon were then blended with cottons or other synthetics for use in a variety of fabrics, with acrylic sweaters a particularly popular export item, but polyester was king. With its multiple uses in fabrics and industrial materials, polyester soon came to dominate synthetics production as firms extended their capacity some 730 percent in both polyester staple fiber and filament to a total of 495 tons per day by 1979. Polyester firms (Table 3.4) included Samyang, Sunkyong, Saehan Industries, Daehan Fiber, and an affiliate of Korea Nylon titled “Korea Polyester.” Differences in scale divided spinning

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Table 3.4 Synthetics moguls, 1979

Sources: Han’guk Sangjang Hoesa Hyeobeuihoe (Korea Listed Companies Association), Sangjang hoesa chongram 1979 (annual report of listed companies, 1979) (Seoul: Korea listed Companies Association, 1980) Data for January 1–December 31, 1979. Daehan Fiber was not listed on the Korean Stock Exchange in 1979. Authorized capital is cited in billions (sipeok) of won.

from synthetics, with only Choongnam listing an authorized capital comparable to the synthetics firms. Although the assets and sales of Choongnam still compared favorably with the synthetics firms in 1979, the other spinners had already fallen behind in the competition with the more technology-intensive fiber producers. The two upstream sectors of the textile industry differed in employment as well, with the smaller synthetics workforce operating more technology-intensive machinery. Perhaps most significant was the difference in capital between the two sectors. The synthetics sector drew heavily on Japanese capital and technology in both its original formation and continuing expansion. In contrast, spinning mills only recently listed on the anemic local stock market and without access to investment from abroad, had to scramble for funds at the state-controlled banks and the “curb” market. One further difference is the prominence of major jaebol in the synthetics industry, combining manufacture with major trading companies from 1975 that carried their booming textile exports abroad. Samsung, Hanil, Sunkyong, Samyang, and Kolon ranked among major jaebol in the 1970s, with

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their synthetics operations contributing heavily to their growth in heavy and chemical industries. An oligopoly of synthetics producers quickly gained status as publicly listed firms, and continued the familiar pattern of high ratios of liabilities to assets. Unlike the spinners, the synthetics firms enjoyed high status in the HCI campaign as chemical producers, and as earners of foreign exchange in both serial production of textiles for export, and in direct export of fiber and filament to developing textile industries in Asia. Synthetics permitted new synergies within the line of serial production on the peninsula. Costs of financing liabilities and investment in new plant facilities dampened profits, but proved a wise gamble in the long term for production of technology-intensive upstream inputs in Korea’s line of serial production. Spinners benefited in many ways from the development of a local synthetics industry, insuring regular supplies of filament and fiber for mills spinning and processing blended yarns. Synthetics benefited from consistent, growing demand for filaments and fibers from the spinners. Sunkyong and Kolon established serial production within their families of firms to capture profits on higher value-added goods, stretching to mid-stream dyeing and finishing, while other synthetics moguls left that task to affiliated trading companies and their sub-contractors. Spinning mills continued to extend weaving capacity, and some such as Dainong and Dongil invested in finishing and dyeing as well. Serial production across a long textile line extending from synthetics fiber and filaments upstream to garments and knitwear downstream emerged as a government priority in the 1960s to serve both domestic and foreign markets. Upstream moguls in synthetics and spinning, already enjoying advantages of scale within controlled industries, extended themselves in scope as well to capture ever higher value-added segments of textile production. Apart from differences in scale, technology, finance and organization, continuities of familism and oligopoly link the two sectors.28 Kim Youn-su, family patriarch of colonial Kyeongseong Spinning (Kyungbang) and Samyang Agricultural Estates, had reoriented the latter firms with sugar refining in the 1950s, then synthetics in the 1960s. Meanwhile at Sunkyong, Chey Jong-gon convinced Teijin of Japan to invest capital and technology in a joint-venture. Together with his brother J.H.Chey (Chey Jong-hyon) Jong-gon developed a set of affiliated enterprises and later bought out Teijin’s share. Samsung patriarch Lee Byung-chull founded Cheil Synthetics Industries, later renamed Saehan Industries, together with Cheil Wool Company as Samsung’s leading textile investments. Son of founder Cho Hong-jae, Cho Suck-rai was the major owner and chief executive of Tongyang Nylon, as well as of the flagship Hyosung Trade of their Hyosung Group. Beyond prominence of founding families in ownership and management, there was also intermarriage within the industry and between industry and government. Joining industrial circles with government circles diluted boundaries between state and capital and facilitated access to critical government authorization of local financing, foreign loans, and plant expansion. A further merger of manufacture and marketing distinguished major jaebol, a dynamic particularly significant for the early histories of commodity

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trade in Korea’s general trading companies. Hyosung, Kolon and Kohap developed major trading affiliates within their conglomerates, while Samsung Co. and Hyosung won recognition as general trading companies from 1975.29 The successful effort to bridge manufacture and marketing with major trading firms within the same family of firms further distinguished most of the major synthetics producers from the spinners. We can distinguish two stages of synthetics production in state efforts to coordinate a serial line of production for export. Initial manufacture of nylon and then polyester filament in the late 1960s brought funding and state surveillance to production and distribution upstream because of its effects on manufacture and exports downstream. In a second stage of expansion in the HCI Campaign of the next decade, the goal was localization of chemical inputs for polyester production such as Teraphtalic acid (TPA) and Xylene.30 Many doubted at the time that Korea could compete in this sector. Some observers at the time predicted: “It will take about eight years for the newly-invested raw material plants to achieve international competitiveness in price.”31 The state established a precedent with local production of caprolactam for nylon production, and of acrylontrile (AN) monomer for acrylics. Market demand did not drive this priority of local production, for it was evident from the outset that local producers lacked the economies of scale to compete with huge chemical firms abroad dominating international markets. State controls on imports alleviated the problem upstream for the fledging chemical producers by forcing users downstream to purchase chemical inputs locally despite inflated prices, in return for the security of a local supply. Korean synthetics moguls purchased chemicals at higher costs from local sources, and then passed on the cost all the way down the production line. Integrated production was one feature, and growth in the financial base of firms was another across two decades of ever more complex serial manufacture in synthetics and spinning through 1979. Equally significant were changes such as market growth at home and new opportunities abroad, coupled with continued insulation of the Korean market from the influx of textile imports. Again the state intervened to protect the line of serial production. Controls on productive capacity in the 1970s helped to balance supply and demand. Spinners often opposed indirect state controls and surveillance, termed “administrative guidance,” on prices and supply of cotton yarn for the domestic market. State export incentives also deeply affected enterprise at the mogul spinning mills. Shifts in the roster of leading mills above provides evidence of market contention for productive facilities, a contention brought under closer state direction from the 1970s by the Ministry of Commerce and Industry (MCI). Export incentives from the mid-1960s included favorable credit terms for investment in production facilities oriented towards exports. Despite tighter credit terms, a booming textile trade prompted further investment in the 1970s by the more stable roster of leading SWAK firms. An oligopoly of mogul spinners enjoyed insulation from foreign competitors in domestic markets, and some insulation from competing local start-ups in spinning

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due to capacity controls. But they also had to contend with government controls on the supply of cotton yarn for domestic use, and on prices of commodity yarns. A guideline of roughly 30 percent of production volume reserved for local sales to downstream users prevented spinners from marketing their entire production abroad.32 As the leading single component in volume and value of the serial production line, distribution of commodity cotton yarn was closely monitored by the MCI, and prices were closely controlled.33 The state stockpiled cotton and blended yarn at times, and released products when supply was short or prices rose.34 State supervision of export quotas monopolized by the general trading companies from the mid-1970s, increased pressure on the spinning moguls to supply downstream weavers, dyers and apparel makers. Quotas were allocated annually on the basis of performance in the previous year, leaving downstream suppliers and their traders dependent on upstream producers for a reliable supply of commodity yarn lest they lose their allotted quota. Administrative guidance from the MCI constrained spinning moguls from accruing windfall profits by controlling supply of the crucial commodity yarns. The state ordered spinners to use locally produced synthetic filament yarn to produce blended yarn for exports. A further goal of state promotion of blended yarns was control of consumer spending by discouraging expensive pure cottons in the local market. Apart from quotas, the spinning moguls were directly affected by export incentives and in financing for import of raw cotton and machinery. Summarizing priorities of the government’s textile policy in the 1960s, Kim Hyung-kook contrasted lavish support for synthetics with neglect of spinning and apparel.35 Yet market controls and incentives cited above kept spinning moguls and state bureaucracy in harness, particularly with discretionary incentives to boost exports. What is most significant about compressed and coordinated development in the years of growth was the interplay between compression and coordination. Market dynamics alone may well have led synthetics moguls in time to press upstream into manufacture of chemical inputs, but only after expanding local demand insured an adequate scale of domestic sales to offset disadvantages of newer entrants into international markets. Artificial state coordination of supply and demand in upstream chemical inputs compressed the extension of serial production into a shorter timeframe. The same could be said of the switch at spinning mills from pure cotton yarn to blended yarns. Once the state had supported synthetics production upstream, it pressured downstream users such as spinners to reorient their production despite more lucrative markets at home and abroad for pure cotton yarn. Other factors then reinforced the rapidity of growth in the industry and ironically diluted state control and complicated surveillance. What the state had nurtured soon grew beyond the state capacity to direct. The shift from bureaucratic management to coordination of business-state ties was one lesson in governance evident in the textile chronicle. Japanese investment in synthetics production brought a new foreign element into the industry, eroding state capacity for control in the industry, just as growth in trade and exports brought the beginnings of global linkages which would be strengthened by offshore investment

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in subsequent decades. Availability of new resources, whether of Japanese investment or of foreign markets, complicated state oversight of the industry, forcing the state into more complex ties with the industry through trade policy and authorizations for inducement of foreign capital and technology. A second aspect of development in these years was the differential effect of new resources on different sub-sectors of the production line, due in part to state intervention in markets. For instance, synthetics firms received tax breaks for investment, and state-authorized demand with the switch to blended yarns. But who was buying? Spinners already saddled with new mandates imposed for production of blended yarns were forced to buy polyester filament locally at artificial prices. A stable supply of polyester filament coupled with state mandates prompted spinners to move into new products such as blended yarns and fabrics, but at a higher cost to defray the cost of the state effort to expand the production line upstream, and in a compressed timeframe. Prohibitions on the production of pure cotton products for domestic consumption in 1973, and controls on price and supply were examples of state constraints on market dynamics in spinning. Compression and coordination stunted more incremental, organic institutional formation whether among state, firms, or labor. State priorities rather than market demand, state-controlled finance rather than open capital markets, and even state-directed production and distribution rather than demand-driven product choices and marketing resulted in fluid, fast-changing boundaries between state and capital, and repression of labor’s demands. Certainly there were strong market dynamics and considerable autonomy among the mogul firms. This was not a command economy. State policies conditioned but did not replace market dynamics. If state interventions in oligopolistic markets did hasten the development of a long serial line of production, the same policies did not encourage the cohesive formation of institutions that would permit more stable, transparent negotiations of interest. One result was weak institutional boundaries among state, capital, and labor. A small number of major spinning moguls contending for limited domestic market share and offshore market opportunity, and working in markets mediated by the MCI under an authoritarian state provided fertile ground for both clientelist and corporatist structures of interest exchange. Citing high capital requirements of manufacturers in a capital-poor country where the state controlled credit, Karl Moskowitz argued that Korea’s late development only increased the power of the entrepreneur/founders, as opposed to professional managers, given the priority of government ties for access to capital.36 State intervention in the serial production line for textiles increased pressure for personalistic, dyadic ties between owner/managers and government party officials, as well as with bureaucrats. Contested interests Why did the state remain active in yarn markets despite the growing maturing of the spinning industry? One reason was uneven development. Although the spinning mills had reached maturity in scale of production and market

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saturation, other sectors of the textile production line had not. Moreover, the highly leveraged financial structure of the mills left them dependent on government-controlled credit. Finally, the authoritarian state of the Third (1963– 71) and especially Fourth Republics (1972–79) reinserted the bureaucracy into the serial production line with the HCI drive, but also with efforts at price stabilization.37 Not only did the state remain a major player in textile markets, it studiously avoided a more cohesive societal corporatist framework such as partnership with the mills in SWAK, or with the Korean National Textile Workers Federation. SWAK preserved its leverage with both mills and bureaucracy through oversight of Public Law 480 loans and General Service Manager (GSM) credit programs of the US Department of Agriculture. Cotton imports supported by PL 480 programs were limited by law to production for the domestic yarn markets, while raw cotton imports subsidized by GSM credit programs could be milled into yarn for export. The Ministry of Commerce and Industry controlled capacity expansion in the 1970s. Mills reported capacity directly to local governments, and petitioned the same offices to gain authorization for capacity expansion.38 MCI and the Finance Ministry determined prices for cotton yarn, including 20, 23, and 30 count commodity yarns. SWAK records through the 1970s include few reports of joint government-association committees with responsibility for oversight and policy in cotton spinning. SWAK does report multiple petitions for more equitable price controls, or more realistic controls on distribution. The years of growth provide clearer evidence of a state-dominated corporatism at SWAK, most poignantly evident in the SWAK event of 1973.

Capital and state State priorities in serial production included both exports and provision for the domestic market, with goals of earning foreign exchange on the one hand, and controlling inflation in the domestic consumer market on the other. SWAK had long been accustomed to price coordination with other sectors of the textile industry under the watchful eye of the state bureaucracy concerned to balance supply and demand, as well as control inflation. For instance, SWAK huddled with underwear manufacturers to decide on appropriate prices in September of 1959, and later that month with Ministry of Reconstruction officials to discuss supply of cotton cloth. The Ministry of Commerce and Industry convened a conference in November of 1959 of spinners and their consumers of cotton yarn along the production line to discuss distribution and prices. The conference concluded with an agreement on prices and volumes of monthly supplies.39 The subsequent administration in the 1960s encouraged similar discussions among spinners and their consumers down the production line. Although prices in the Third Republic were generally not under direct controls, the state indirectly manipulated prices by purchasing stockpiles of yarn when prices were low and then selling when prices improved.40 Anxiety

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over inflation following the oil shock prompted officials of the Fourth Republic to impose price controls on leading consumer items, including cotton yarn. Spinners in 1978 could fetch far higher prices abroad for 30 and 40 count yarns, but were forced by the state to devote roughly 30 percent of production to the local market at lower prices. Price disputes in April of 1979 prompted the MCI to bring together leading firms and their associations in a meeting of SWAK, the Korea Chemical Fibers Association, and the Korea Apparel Export Association to reach a compromise on prices of polyester staple fiber and polyester/cotton fabrics.41 Spinners were caught by the end of the decade between higher fixed prices on polyester stable fiber and polyester filament upstream, and government insistence on below world market cotton yarn prices to sustain production downstream.42 The cotton cartel scandal of 1973 shed light on an opaque system of interest exchange along a long line of serial production for export, capacity and price controls. The chronicle of state and capital in the event reveals much of the character and limits of corporatism and clientelism in a very contentious market for stable supplies of cotton yarn for downstream producers.43 According to a summary by Yi T’ae-hyeong, the mogul spinners colluded within SWAK to maintain prices of cotton yarn by controlling production in defiance of Ministry of Commerce and Industry directives to expand production. Frustrated initially with SWAK defiance, MCI authorized the import of Pakistani cotton yarn in February of 1973 to supplement local supplies for downstream producers desperate for additional yarn to expand export production. Further opposition from the SWAK producers led to government investigation of the organization for cartel behavior and exposure of bribes given to government officials to maintain the cartel. Prosecution of 150 government officials for taking bribes and the sacking of SWAK staff soon followed, as well as closer government scrutiny of supplies and price controls. Certainly the mogul spinners had ample warning of the impending government intervention. The MCI formally notified SWAK to insure supplies of cotton yarn for domestic consumption in a directive of early February 1973, and followed up with a warning later that month designating cotton yarn as one of sixteen items slated for further price controls. SWAK formally petitioned MCI in midMarch to resolve the supply crisis by forming a standing committee to stabilize the price of cotton yarn for domestic consumption, implementing a distribution system for commodity (i.e., 20–30 count) yarns, and establishing a policy to stabilize yarn prices. What is missing from Yi’s account is the quandary of mogul producers pushed by tight government restrictions on cotton yarn prices in the early 1970s and pulled by export incentives and export profits.44 SWAK presented its case against price controls in April 1973, arguing that increases in the cost of cotton yarn had not kept pace with rising costs, and that price regulation did not promote market dynamics.45 Intent on both controlling inflation and supplies for serial production, the MCI was not persuaded. A sector long accustomed to price controls, however, confronted more serious structural challenges pressed by the government.

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One major reason for mogul neglect of the downstream domestic market was the pull of foreign markets where they enjoyed expanding niches for their cotton yarn and fabrics. Appreciation of the yen made Korean exports cheaper in the Japanese market, contributing to a surge in total Korean exports of cotton yarn and fabrics to $582 million in 1973, 44 percent above the same value a year earlier.46 Government efforts to promote synthetics and especially blended yarns and fabrics, and thus curtail sales of pure natural yarn and fabric locally, prompted spinning moguls to see their future in foreign markets where their core products of pure cotton yarn and fabric still enjoyed an expanding demand. An MCI decision in 1973 to promote cheaper synthetic filaments in place of expensive natural yarns, giving their earlier policy recommendations the force of law, brought an end to the dominance of mogul spinners in the serial production line. MCI ordered spinning moguls to stop producing pure cotton products such as uniforms or calicos for the local market, a remarkable intervention in both serial production and local consumption. Multiple SWAK petitions to modify the directive had little effect. Further SWAK petitions followed throughout the summer and fall pleading for clearer government directives on their controls of supply and distribution of cotton yarn. Nonetheless spinning mills continued to pour capital into expansion to meet growing export demand. The number of spindles at SWAK member firms jumped from 900,000 in 1970 to 2 million by 1977, with annual operating ratios of between 92 percent and 96 percent, apart from 89 percent ratios in 1974 and 1975. SWAK members exported 30 percent of the total volume of yarns produced in 1970, but 70 percent in 1976. Mills exported 50 percent of cotton cloth in 1971, but 94 percent in 1976. Apart from scale and destination, the products also changed with the volume of pure cotton yarns falling from 65 million kilograms in 1970 to 45 million in 1976, and blended yarns growing from 8 million kilograms in 1970 to 25 million kilograms in 1976.47 Blended yarns and polyester/cotton fabrics challenged the reign of pure cotton yarn and greyfabric at the mills. Battered by Tax Office investigations and MCI purges of association officials, a humbled SWAK organization could still muster a plea for realistic prices as late as September of 1973. The very next month, General Pae Teok-chin, president of the Administrative Reform Council and Executive Director of the National Security Council, replaced Kim Yong-ju of Chonbang as president of SWAK, ending civilian rule in a move reminiscent of Rhee state intervention back in 1952. One scholar argued that the events of 1973 brought an end to particularistic ties between spinning moguls and the state in favor of more bureaucratic, official links.48 Unfortunately for the spinners, other sectors of the line continued to gain favor with the government. Clearly SWAK had lost its leverage in bargaining for favors in state coordination of textile distribution. Karl Moskowitz cites a dramatic drop in prices of raw cotton the very next year that left moguls exposed with expensive futures contracts. Struggling with expensive inputs and state controls on products, SWAK was in no position to defy state directives. Moskowitz cites such conditions in SWAK’s warm support for state positions against the US textile trade policy.49 The MCI had redrawn borders between state and

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capital, extending the reach of the state into the industry association. The entrance of General Pae to lead the organization signaled renewed state control and oversight, but not a comparable infusion of state resources in the ensuing seven years of HCI industrialization. State corporatist control of the spinners amounted to closer oversight of continuing SWAK responsibilities in the allocation of GSM loans for import of raw cotton, as well as more conventional trade association tasks of information-gathering and reporting, in addition to direct MCI controls on spindle capacity. Corporatism dominated interest exchange between capital and state in the years of growth, despite persistence of more individual, clientelist ties evident in the bribes for government officials exposed in the SWAK event of 1973. Cartel controls on supply of cotton yarns suggest corporatism fading into collusion, and clientelism fading into corruption. What prompted collusion and corruption was not only mogul ambitions to retain dominance as upstream millers in the face of competition from synthetics giants, or from downstream consumers clamoring to open the cotton yarn market to foreign mills. A formidable blend of state discretionary incentives and market controls also helped spur a bridging of trust and transaction beyond contract. But how can we explain the failure of collusive corporatism and corrupt clientelism in the SWAK event? One factor was the remarkable dominance of state over capital, leading Eckert to term the latter, “a class without hegemony.”50 State controlled the borders of state-capital, and state-labor relations. The Ministry of Commerce and Industry could challenge the yarn cartel without risking loss of political power. Another factor was segmentation. Mogul spinners found themselves isolated from one critical segment of capital in textiles, i.e., the upstream synthetics producers, due to the persisting state ties in synthetics, and the relative independence of larger jaebol-owned synthetics firms. Beyond textiles, the HCI drive made clear the declining prominence of labor-intensive spinning among leading segments of South Korean capital. Third, there was no organized voice among jaebol leaders against price controls or radical state interventions in the market, since the larger jaebol were prospering from state favor. One could also cite the absence of any substantive voice for labor, whether in support of their spinning mills or in opposition to state resolution of industry problems. Further factors of state strength and state control have been widely recognized in studies of bureaucratic authoritarianism during the Yusin Regime of the Fourth Republic. Labor and state State power in the SWAK incident brought contentious capital to heel, insuring credibility in its commitment to integrating transactions along a serial line of production on the peninsula. Action for better wages and working conditions among textile labor prompted a far more dramatic response from a state intent on maintaining cost advantages in labor-intensive export industries. You Jong-il wrote of state power in industrial relations with goals of right wages, industrial peace, and motivation for improved productivity.51 The Park regime moved

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quickly to reorient labor away from the political mobilization under the Rhee regime to economic mobilization under the corporatist shell of the Federation of Korean Trade Unions (FKTU), established in 1961. Union membership nationwide boomed with growth in non-farm, permanent employment. Some 20 percent of the nation’s 1.1 million workers belonged to unions in 1963, and 23 percent of the 4.6 million workers by 1979.52 Park’s regime likewise reorganized textile labor under the Federation of Korean National Textile Workers’ Unions in August of 1961, now with nearly 22,000 members.53 Membership more than doubled to 55,000 by 1972, and then tripled to 174,000 by 1979. The federation reported 73 labor disputes between 1967 and 1971, including the industry-wide strike of 1969 across spinning and weaving. The fact that strikes were prohibited and labor action replaced by mandatory arbitration under Park’s Yusin [“revitalizing”] Constitution of 1971 does not tell the whole story of industrial relations in the critical years of Park’s Fourth Republic (1972–79). Paternalism at the company unions and exclusionary state corporatist controls at the national association and industry federation did not prevent emergence of a pioneering autonomous labor movement among mainly female workers in the textile industry.54 Indeed the names of textile labor figures from the 1970s such as Jeon Tae-il and Kim Yeong-t’ae remain etched in the collective memory of Korean organized labor, one for fame the other for infamy. A young garment worker in Seoul’s Peace Market Complex of garment sweatshops, Jeon (Cheon Tae-il) responded to police suppression of collective action by taking his own life in November of 1970. Kneeling in front of the public and mobilized riot police, Jeon poured gasoline over himself and set himself on fire shouting to his death against management’s mistreatment.55 The dramatic protest galvanized the Cheonggye Garment Workers’ Union, and inspired organization efforts with textile labor in other sectors. Ten thousand female workers joined disputes at weaving firms in July of 1971. Labor actions in August of that year at the mogul spinners mobilized 22,600 workers, 86 percent of whom were female.56 Case studies of labor relations at four major spinning firms in the 1970s provide data on staffing, employment practices, and terms and conditions of employment.57 As one scholar concluded, the highly centralized and rapidly expanding textile firms had established structures of control without corresponding structures of employment relations.58 Paternalistic control was one means of insuring labor peace among the mainly single, teenage female workers living in company dormitories and often attending company schools. Following three to five years of factory labor, the women would often return to their rural homes to marry and raise a family The Heavy and Chemical Industries Campaign of the 1970s spurred development of largescale heavy industrial production in autos and steel, bringing together large numbers of male workers for career employment at factory sites. What is remarkable about the Korean labor movement is the early patterns of confrontation among mainly short-term, young female workers in light industry, rather than in the traditionally militant auto and steel industries.

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Deyo argued that declining paternalistic controls at the plant level spurred state action to impose corporatist controls at the state level.59 Choi traced paternalistic roots in labor-management relations to Confucian political themes that foster vertical segmental loyalties at the expense of horizontal associability in line with functional interests.60 Structural factors encouraging paternalism at the expense of egalitarian ties between capital and labor include particularistic criteria for promotions and wage raises, as well as payment in selective bonuses to supplement lower wage rates. Company dormitories and schools further enhanced employee dependence on the firm. Labor organization within the company, including temporary labor leaders who would rotate back to the shop floor, and offices and telephones provided by the firm, limited union autonomy. State-controlled industrial federations in turn did little to support the autonomy of union locals. The state also played a role with an ideology of the “enterprise family,” weak enforcement of existing labor protections, and extensive controls to discourage labor action. You concluded, “labor repression in Korea must be understood as a part of conflict management by the state within the context of a political-economic governance structure, rather than as a mere free market policy.”61 Problems with labor leadership reflect the continuing struggle to define clear borders between labor and capital within company unions and labor federations. Comparing union leadership at federations of textiles, metalworkers and chemical workers through 1980, Choi wrote of the “straightforwardly eoyong [coopted] character of the textile and metalworkers union leadership.”62 Yet enterprise unions in spinning and other sectors of the textile industry remained active in pressing for better wages and working conditions in their expanding industry through the 1970s.63 Indeed, protracted labor actions by the women workers at Dongil Spinning in the early 1970s that stunned both state and capital, took place independently of the closely controlled federation of textile workers. Protests at Dongil Spinning in 1971, 1975, and finally in 1978 represented a coalition of textile workers and the Urban Industrial Mission activists from Korean Protestant churches. Choi wrote of the 1978 dispute: “this long battle involved some of the bitterest episodes in Korea’s industrial relations, including sit-in demonstrations, hunger strikes, etc.”64 In an interview of 1993, Suh Minsok, chairman of the Dongil Corporation, spoke of the difficulty he well remembered of managing the labor turmoil in the mid-1970s as he assumed the reins of the firm.65 A decade of struggle represents far more than simply intransigent management and state repression, but is of special interest here for the problem of labor leadership. Leaders in local unions in the 1970s confronted the demands of members, management, and government with few options of representation. A coopted “labor aristocracy” at the national and industry levels had its roots at the local level of company unions and provides evidence of clientelism within the paternalistic strategies of labor control. One state strategy to bring local unions into line was the threat of dissolution. But far more effective was to simply coopt local leaders with a cooperative effort between management and

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state to provide inducements for restraining the membership. The transition from dependence to autonomy at Dongil began with expulsion of coopted leadership in may of 1972, and continued only with vigilant efforts to insure the independence of their own leadership, and challenge the state ties of labor leaders at the industry federation and national association.66 Corporatism gained ground among capital and labor in the growing textile industry of the 1960s and 1970s, along the lines of the Japan Spinners Association and Zensen Federation of Textile Unions. Until very recently, textiles was one of the few Korean industries in which annual wage negotiations were first conducted through the industry-level organizations rather than immediately at the level of enterprise. Bargaining between SWAK and KFTU continued through the 1960s and 1970s. Labor demands for a 29 percent raise in 1966 resulted in a compromise at 18.9 percent. A demand for a 24 percent raise in 1970 was settled with a compromise at 12.6 percent. A huge demand for an annual wage hike of 78 percent in 1975 resulted in an agreed hike of 30 percent.67 But apart from wage negotiations, the industry-level and national-level groups remained solidly in the government camp on disputes over working conditions, terminations, and the autonomy of labor organization at the firm. Kim Yeong-t’ae stands as foil to Jeon Tae-il. Kim rose to president of the Korean Federation of Textile Workers Union before taking the helm at the Federation of Korean Trade Unions (FKTU) in a controversial election. The manipulated FKTU electoral process which brought Kim as president of the national center in 1970 confirmed widespread suspicions of government collusion that had long plagued leadership in both the textile federation and national center.68 Industrial federations played a carefully defined role under the government-imposed national center (FKTU): “moderate union demands, implement government policy, and discipline recalcitrant locals.”69 Local unions had to depend on the textile workers federation for authorization of collective actions, and under the Yusin Constitution of the 1970s, even for dispute mediation. Kim became identified with state policy at the FKTU in the 1970s, a legacy that even today affects the legitimacy of the Federation in competition with the more radical Confederation of Korean Workers. Ironically it was the Textile Workers Federation membership that first demanded Kim’s resignation from the national center in January of 1980, citing collusion with capital and state during labor actions at Dongil Spinning, Bando Commerce Co., and Wonpung.70 A remarkable proclamation by the KFTWU in January of 1980 represents something of a watershed in Korean labor history, identifying not only the means of cooptation but its effects. Among the latter the Federation underlined erosion of trust among member unions.71 Fred Deyo cited a “developmental paternalism” critical in the rapid growth of Korea and other East Asian nations through the 1980s.72 An Asian state enjoys a moral authority to define and enforce a national (i.e., versus sectoral) interest in policy and public ideology, and gains legitimation through achievement of economic growth for the commonweal. Such premises helped legitimize authoritarian rule and political exclusion of labor as necessary to achieve high levels of

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growth. What distinguished South Korea was the tension between paternalistic, patrimonial ties promoting individualistic efforts among workers for advancement, and corporatist ties encouraging labor cohesion in interest negotiation with management. Korean scholars such as Song Ho-keun and Choi Jang-jip point to the atomization of individual workers, whether simply with Valenzuela’s thesis of market repression on behalf of national growth as against more organized, corporatist repression, or with Song’s thesis of an “industrial paternalism” of company unions which preclude wider corporatist inclusion of labor in the political dialogue between state and capital.73 Nonetheless, these same scholars have carefully documented corporatist organization among labor under a bureaucratic-authoritarian state that Launius suggests has an “elective affinity” with corporatism in Korea.74 Compressed and coordinated development contributed to the uncertainty of the decades of growth, and weak development of credible institutions of market or firm to ensure trust in entrepreneurial projects. Rapid development of export incentives and markets reoriented mills from domestic to foreign markets in the mid-1960s. A race to expand spinning capacity to capture ever more extensive efficiencies of scale and scope further contributed to change. Third, a state-encouraged shift away from natural fibers to blended polyester/ cottons destroyed forever the short-lived dominance of mogul mills in serial production, prompting a scramble to expand facilities for spinning and weaving of blended yarns and fabrics. Despite the rapid shifts within the roster of mogul spinning firms, and within an expanding line of serial production line upstream and downstream, cotton mills might have enjoyed relative stability and growth in the 1970s if the state had not radically reshaped the pattern of state-supported export incentives, and state-controlled financing for the major mills. The Heavy and Chemical Industrialization drive from 1973 led to further flux in crucial factors of production such as the supply and costs of capital and labor. Mills manufacturing for an open market may well have been forced by circumstances to contribute to the formation of cohesive institutions of both capital and state to bridge market fluctuations and ensure the trust necessary for enterprise in periods of turmoil. State coordination of the textile line of serial production, provision of attractive export incentives, and macro-economic controls for price stabilization mediated markets for the spinning moguls. Quotas amounted to controls on access to foreign markets, while stiff tariffs effectively discouraged imports. Bureaucratic coordination of markets insulated the spinning oligopoly from dramatic market fluctuations such as competition in the domestic market, and permitted continuity of supply to downstream traders with assigned quotas. But if such efforts resulted in cohesive bureaucracies of economic planning and policy enforcement in government, they left spinning moguls dependent on government access through both clientelist and corporatist channels to survive in the heated contention for local market share and exports of cotton and blended yarns and fabric.

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Conclusion Emile Durkheim wrote of the transparency of deeper social structures in times of crisis when the taken-for-granted veil of convention falls away and a society stands revealed. Neil Fligstein wrote recently of changes in market control during times of crisis. He defined a stable market as one “in which the identities and status hierarchy of firms (the incumbents and the challengers) are well known and a conception of control that guides actors who lead firms is shared.” Here the state reproduces the position of the leading firms, but markets in crisis are susceptible to transformation in both structure and concepts of control.75 Despite the optimistic picture drawn of growing textile exports, Korean mills and marketers stand at the edge of a critical shift in light industries hastened by market liberalization, a painful state-initiated reorientation towards heavy and chemical industries, and dramatic changes in fixed costs of energy, real estate, technology and labor. The macroeconomic literature on the Korean “miracle” badly needs the balance of sectoral studies to move beyond the apparent contradictions of Korea’s recent development history.76 A sectoral focus permits the depth and intensity necessary to link local industry with society, and Korea with its world competitors. One clear government priority from the 1960s was extension of a line of serial production in textiles from upstream sub-sectors of synthetics and natural fibers, through the mid-stream processes of weaving, cutting and dyeing, and then down to the actual sewing of garments downstream. Spinning, weaving, and sewing were already in place by the late 1950s, concentrated in Taegu and Pusan. Government support for exports in the 1960s spurred development of not only these earlier subsectors, but also of a whole new subsector of synthetics which received a further boost with the HCI campaign of the 1970s and a government-mandated shift into polyester and blended fabric for both production and the local market. The state worked more closely with the industry’s peak association, the Korean Federation of Textile Industries (KOFOTI) from the 1980s, but continued to play a major role in industry policy formation and funding, particularly with the industrial estates, and then with a “depressed industries” program. What is significant here is not only the state role in extending Korean industry into multiple sub-sectors in development of an export production line, but in oversight and intervention along the line to insure adequate supplies and reasonable prices among the various segments. The state which played the role of both midwife and manager in integrating a production line through the 1970s, has now ceded much of that responsibility to KOFOTI, the larger textile jaebol, and to multiple levels of brokers. Serial production begins with the concept of value-added production in manufacturing to match the needs and demands of market and manufacture at home, and exploit a nation’s comparative advantage abroad. One feature of Korean textiles is the concerted effort to integrate a long production line inhouse within large firms, in jaebol across groups of firms including manufacture and marketing, and in the nation across sub-sectors of the textile industry. The Korean state played a major role in the latter national campaign to integrate

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segments with responsibilities in three different areas. One major priority was retaining value-added along the line and reducing costs by localizing production. More than simply an import-substitution strategy, the state pressed investors upstream into synthetics and even petrochemicals with an eye on local consumer markets, local markets for export production, and direct export markets. Balancing local supply and demand for both consumers and for sub-sectors along the line was also a priority as the state closely monitored operating ratios of textile machinery, restricted access to newcomers in the upstream sectors, and as necessary, provided loans and tax breaks for investment in equipment expansion. Yet a further priority in this complicated task of market monitoring and adjustment was an effort to moderate costs of production and consumption. Basic costs of textile production such as electricity, oil, and various taxes and duties, were fixed with state-controlled rates. Intent on controlling inflation and promoting investor confidence within the upstream oligopolies of synthetics and spinning, the state had to balance fixed costs of upstream filament, fiber, and yarn against the need for profit margins among weavers, dyers, finishers, and especially the garment industry downstream. The fact that textile exports from the 1960s quickly emerged as the nation’s leading earning of foreign exchange further complicated the task of cost controls for the state. Freewheeling, often unchecked personal ties between spinning moguls of the 1950s and President Rhee’s Liberal Party resurfaced in far more subtle and for that reason, perhaps more significant links between moguls and political and bureaucratic elites under President Park. Intermarriage was one example, and the recycling of former government officials onto the staff of SWAK. Another example was the imposition of General Pae as SWAK president in 1973, an effective reminder to spinning moguls and any other restive segments of capital of the ability of the Park state to recapture controls when their economic directions were ignored. The unequal partnership in the symbiosis of state and capital persisted.77 A new blend of carefully bounded clientelist ties, as well as extensive state corporatist ties marked interest exchange in the two decades of growth, just as expanding market opportunities at home and abroad dominated industry attention. Personal ties remained critical for finance and market access, and as evident in the SWAK event, for distribution as well, but personal ties could not prevent exposure and dissolution of the production cartel that was impeding serial production in the domestic economy. Similarly, individual pleas for more realistic prices in a tightly controlled market of commodity yarns made little headway. Clientelism which persisted but with clearer boundaries between state and spinning capital in the Fourth Republic, was less constrained at the top jaebol due to the targeted incentives to encourage investment in the state’s HCI campaign. An autocratic corporatism of state coordination of spinning in the First Republic, strongly constrained by the weak role of labor and political parties, gave way in the Third Republic (1963–71) to a more balanced sectoral corporatism with ongoing discussions between SWAK and state on prices and plant. Apart from monitoring the growth of spinning and prices in the domestic

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market, the state devoted its resources and administrative energy to formation of synthetics and localization of necessary chemical inputs. Finally freed to turn their productive energies beyond local markets, spinners flourished at home and abroad until labor unrest in 1970, and the oil shock of 1972 when rising labor and energy costs left the spinners particularly vulnerable to state controls on the price of cotton yarn. The ensuing SWAK event of 1973 brought more conventional state corporatist controls on prices, supplies, and distribution at the mills, severely constraining clientelistic, personal ties with the bureaucracy, as well as collusion possible prior to imposition of closer state oversight. State corporatism in the years of expansion gained ground against both the rampant clientelism and autocratic corporatism of the First Republic, but without the democratic partnership in policy formation and enforcement familiar in northern European corporatist regimes. Coupled with this blend of connection and organized forms of cooperation was an intense contention for market share at home and abroad, and for dominance within the line of serial production. As one US official observed: “Individual firms survive only by successfully competing one-on-one with each other, while still adhering to the national policy line and adapting to frequent changes in both the competitive and policy environments as they emerge.” The same author concluded, “life offers few rewards to Koreans who are not goaloriented and highly competitive in their approach to every task.”78 Turmoil in the organization of the industry evident in the rise of mega-moguls such as Dainong and Choongnam paralleled rapid extension of production capacity in both spinning and weaving, and in sales. Clientelism and corporatism helped provide solidarity and continuity in a rapidly changing profile of manufacture and markets. Turmoil undermined predictability, a critical element for joint planning and implementation of industrialization efforts which move beyond short-term considerations of comparative advantage to long-term development planning. Turmoil and the absence of predictability based simply on adjustment to short-term comparative advantage, coupled with ambitions for rapid development of a long line of serial production line demanded competent coordination yet flexibility, a blend supported by multiple channels of contention and compromise for the exchange of interests. The textile chronicle through 1979 highlights the interaction of institutions and interests. Shifting, malleable borders of the organization and authority of state, capital, and labor in the process of rapid industrial development complicated the process of interest identification. The Heavy and Chemical Industries campaign of the 1970s brought the Ministry of Commerce and Industry back into the line of serial production, advising, cajoling, threatening, and sanctioning sectors which did not cooperate in providing adequate supplies at the right prices. HCI also brought an end to the continuity of interests and even organization among upstream spinners and synthetics producers. Extension of production facilities at the spinning mills brought together far larger numbers of workers, fertile ground for mobilization and new forms of interest identification. Institutions and therefore the interests of state, capital, and labor were changing.

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Multiple modes of interest exchange helped bridge this rapid institutional transition, providing a secure base of trust and continuity in a turbulent industry with firms racing to capture both markets and government favor. State and capital could blend and bend borders of contract, association, and patronage in ways that labor could not. But state, not capital, proved the ultimate arbiter of borders among the modes of exchange, painfully evident for the spinners in the cotton cartel scandal of 1973, and for labor in Yusin constraints on labor action. Beyond surveillance or even maintenance of borders among clientelist, corporatist, and market or contractual ties, the Yusin state under Park Chunghee also defined the borders. Far more than simply regulator or neutral referee, the state pressed its overriding interest of localizing the long line of serial production in textiles, expanding exports, and holding down inflation.

4

Industry maturity, 1980–2000

Is syncretic capitalism nothing more than an evolutionary path of development, with informal ties prominent in the origins of an industry, corporatism in an era of directed growth, and contract triumphant in an established industrial nation with strong ties to global markets and trade regimes? I argue in this chapter that the years of maturity reflect refinement and adjustment in the modes of interest exchange, but clearly their persistence in different combinations. I argue further that the organized interests of capital and labor have gained a far stronger role recently in industry governance. Syncretic capitalism helps bridge the shift from state to society in industry governance, as well as the transformation from fabric to fashion in a technologically more sophisticated serial line of production. Certainly, globalization of markets and production forces some convergence towards anonymous, contractual ties, but not necessarily to the detriment of personal links and the solidarity of associations. A prominent state role in crisis management is one factor muting a more conventional market exchange among capital, state, and labor. Big business in South Korea has only recently won parity with the state after decades of dependence, and labor continues to struggle to gain recognition as an equal partner with capital and the state.1 Even the kinship networks joining leaders of state and capital have not led to independent leverage for capital as a group, although individual capitalists have prospered with state ties.2 Nor have contentious labor actions or cooperation in familial ties with capital won them a secure place at the bargaining table. Apart from individual or patron-client ties, I noted above state constraints on the corporatist alternative. Further signs of embedded clientelism are evident in the maturity of the textile industry, but more importantly, of the structures necessary for a shift from authoritarian to societal corporatism in the industry.3 How can an industry survive within this complex, deeply rooted interpenetration of market and society?4 Five decades of textiles suggest the solution was in bordering, bending, and even blending distinct modes of exchange limiting excesses of cutthroat competition, collusion, or corruption, and fostering the credibility necessary for high risk entrepreneurship despite the uncertainties of imperfect markets, state direction, and resources of capital and technology in a developing economy. Corporatism would be one channel for linking the embeddedness of capital with the autonomy of the state, and the Yusin regime (1971–79) offers some evidence

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of “state corporatism.” The subsequent liberalization and growing leverage of capital might suggest a transition to sectoral corporatism, but scholars familiar with European corporatism note the absence of labor in Japanese and South Korean variants of corporatist bargaining, and of a Social Democratic Party promoting a tripartite framework. Others have highlighted the tension between clientelism and corporatism. For instance, Park Moon-gyu argued that multiple competing channels for influencing state policy diluted the effect of corporatist associations in South Korean industry. Personal ties of executives with officials and politicians, and a social network of kinship, region, and schools, precluded trade association dominance in exchange between state and capital.5 The textile chronicle with its long chronology paralleling Korea’s development trajectory, and its extensive reach upstream and downstream between technology-intensive and labor-intensive industries offers a window on the interaction of the two circles, and how interest contention is engaged and bordered. A campaign for Heavy and Chemical Industries (HCI) in the 1970s brought growth with steep inflation and a spiral of wage hikes and interest rates. It also opened a new era of industrial labor in huge industrial complexes. Sunrise sectors of steel, autos, shipbuilding, petrochemicals, and high technology would soon dethrone textiles as industrial leader, but the promise of further export growth and new opportunities in domestic markets brought renewed state attention and resources to textiles from 1980. Textiles would never regain their earlier pre-eminence as leading exporter or industrial employer within the far more diversified and stronger local economy of the 1980s, but could still muster a substantial contribution to trade balances and employment. Textile exports of $571 million in 1971 accounted for a remarkable 42.2 percent of total exports, but with growth in higher value-added sectors of heavy and chemical industries, the ratio of textiles to total exports inevitably fell. The value of textile exports topped $7 billion in 1985 but accounted for only 23 percent of the total annual value of Korea’s exports. Textile exports doubled again in the next five years reaching $14.7 billion in 1990.6 Led by blended fabrics, textile exports of $17 billion in 1999 accounted for 12.4 percent of total Korean exports.7 Across the industry as a whole, declining capacity in spinning and weaving was one indicator of a hollowing out of the industrial base. Spinners continued to expand from 1980 through 1991. Domestic cotton spinning spindle capacity grew from 3.1 million spindles in 1980 to 3.6 million by 1990, and then fell below 2.6 million in 1996, and to 2.2 million spindles and 2,400 looms by December of 1999.8 The operating ratio of the spindles at home had fallen to only 84 percent in 1998 and 1999, but the same companies were operating close to 1.1 million spindles and 3,600 looms offshore by 1999 at full capacity.9 GSM (General Services Manager) program loans from the USA and the Korean Foreign Exchange Fund continue to support imports of raw cotton, but fading levels of consumption led to somewhat smaller import volumes.10 Korea remains a leading consumer on the international cotton market, the world’s fifth largest importer in 1999 with 360,000 metric tons.11 What spinners dread most, however, is the growth in demand for imported

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cotton and blended yarns. Yarn exports in 1999 fell 7 percent to $168 million, as imports grew 94 percent to $508 million.12 As spinners surrendered a cherished market of mass-produced commodity yarns at home and abroad, synthetics firms captured new markets and expanded production of fiber and filament. One measure of technology investment at the latter was a decline in employment from 25,000 workers in 1990, 22,000 by 1994 and only 16,200 in 1999, despite dramatic expansion of output. Korea’s production capacity in polyester is estimated at 2.5 million metric tons in 2001, third largest in the world behind only Taiwan and the PRC. The utilization rate of Korean’s capacity for staple fiber in 1999 was higher than either of its two competitors, and only slightly behind the PRC in filament yarn.13 Themes of compressed and coordinated development take an unexpected turn as industrial maturity brings new challenges of coordinated adjustment. Exports faded for the spinners in the early 1980s but then boomed again as the three “lows” of oil prices, interest rates, and favorable exchange rates with the US dollar sharpened price competitiveness from the fall of 1985. Mills returned to full production with nearly 3 million spindles in operation until as recently as 1990. An increasingly prosperous local consumer population at home in a protected market, and lucrative markets in Japan and the USA, as well as regionally in Hong Kong and South-East Asian markets spurred the growth. A rollercoaster of cyclical and structural changes in textile markets continued with the three “highs” in late 1989 of wages, raw material costs, and the won’s strength against the dollar.14 It was clear that rising labor and plant costs of electricity and real estate, coupled with intense competition from lower cost Asian producers, had seriously eroded the competitive edge of the serial production line by the early 1990s in yet another shock to the moguls. Suddenly mills that expanded enthusiastically with state support in the mid-1970s scrambled just to finance scrap and build programs. Quickly scuttling expansion plans, mills turned now to automation, upgrading, and transfer of older equipment offshore. Broader trends in the nation’s political economy buffeted the industry in its formation, across two decades of growth, and now again in maturity. Following liberation from colonial rule, war and reconstruction, mills condensed importsubstituting industrialization into only six years of peace and relative stability in the First Republic from 1954 to 1960. Mills drove into a variety of new export markets from 1965 and readied themselves for much more with huge plant expansion through 1979. Maturity also came quickly. Mills chased volatile market demand through the 1980s with only incremental growth in spindles, and felt the full brunt of competition from lower cost Asian producers in the 1990s. Beyond markets, reforms in polity and society also forced change at the mills. Mills today must adjust to democratization in industrial relations, liberalization of controls on textile import, and industrial adjustment of its declining sectors due to new competition in export markets. A recession from 1996 and wellpublicized bankruptcies the next year of Hanbo Steel and Samni, Kia Motors and finally of the spinning mogul Dainong have prompted rapid restructuring at the banks as well, sending tremors through the highly leveraged mogul mills.

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Three developments at the firms would modify state coordination of a far more sophisticated textile industry from 1980. One was the scale, diversity, and specialization of the upstream producers with their expertise in manufacture and markets stretching far beyond the capacities of government offices. Even industry associations could no longer maintain the detailed profiles of plant and finance among the synthetics and spinning moguls necessary for carefully planned development of the industry. Globalization of the firms also affected the state’s role in the industry. Expansion overseas drew mills into binational and multinational networks of production and marketing well beyond the state’s control or immediate interest. Yet a third was trade liberalization at home and abroad, forcing greater transparency in state-business ties on the peninsula, and depriving the state of tools for easy intervention along the line of supply and demand, or of overt controls on costs. A less prominent role remained for the state in tandem with industry associations as they worked to localize inputs and upgrade critical value-added sectors such as dyeing and finishing. Markets may have dominated the attention of mills in the years of growth, but now finance has emerged as the central issue for most leading textile firms, in part due to changes in the banking industry, and in part to new state constraints on heavily leveraged firms. What draws our attention is the intense contention of interests spurred by compressed and coordinated development, and the relative weakness of credible institutions for mediating markets. Enterprise: Kabool and SK Chemicals Kabool Case studies of leading firms offer a closer look at the shifting roster of industry oligopolies in spinning and synthetics. Despite their familiar industry profile of familism, organization within groups or jaebol, and intense political activity, Kabool and Sunkyong’s SK Chemicals pioneered globalization of production in their sectors. A fluid roster of industry leaders reflects further turmoil in a fastchanging industry as firms rush to diversify and specialize production, as well as move offshore. Kabool Textiles is the mother company of the Kabool Group, a medium-size manufacturer of cotton yarn, blended yarn, and fabric, with 87 percent of its sales abroad.15 The Kabool Group fell from second to fourth among Korean fabric exporters in 1998, far behind leader Tongkook Trade, but close on the heels of Hyosung Trade and Kolon with 43 billion won of exports.16 All of the ten member firms in the Kabool Group reported losses in 1999, including 4.9 billion won at Kabool Spinning and 2 billion won at Kabool Electric.17 A heavy debt burden may have forced Kabool Spinning into the government’s workout program in July of 1998, but did not cool the ardor of Chairman and Chief Operating Officer Changho Park at least until recently. The company’s webpage highlighted his ambitions to make Kabool a “worldclass textile group,” and indeed, “the world’s top-ranking textile company.” He wrote, “we conquer the world with a ply of yarns and a piece of fabric.”18 Three straight years of red ink finally forced the hand of creditor banks, replacing Park

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with Saehan’s Han Yeong-su as chair and president at the company’s Taegu shareholders’ meeting in March of 2000. A sister firm called “Kabool Corporation” exports Kabool Textile products and operates as a mid-sized synthetic-fiber producer and converter, with 85 percent of its total sales recorded in foreign markets. Kabool Textiles competes with Kyungbang, Pangrim and Ilshin as an integrated, medium-size spinner/ weaver producing for the export market, but opted to enter the workout program in July of 1998 to avoid bankruptcy. Unlike the huge and now diversified Dainong, a relative latecomer to textiles, Kabool Textiles grew out of a 1950s’ family-owned weaving operation in Taegu and retains its local roots. Of comparable size in assets and sales, Kabool Textiles and the trading company Kabool Corp. specialize in textiles to bridge manufacture and marketing in the Kabool Group. The group also includes Kabool Limited for dyeing and weaving of synthetics, and five other weaving operations: Kabool Keumdan, Shinhan Silk Weaving, Shinhan Synthetics, the Shinhan Partnership, and Kabool Lace. Ill-fated family ownership and management of the closely held Kabool Textiles and Kabool Corporation coincided with familiar patterns among the spinning moguls, but the directions of their enterprise did not. Registered as a joint-stock firm by founder Park Che-gap and brother Park Jae-eul only in April of 1976, Kabool quickly gained a place among the spinning moguls. Indeed, only Dainong and Choongnam outpaced the growth of this maverick weaver that had assembled 50,000 spindles and 500 weaving looms by 1978, and just two years later registered over 100,000 spindles and 2,000 looms. Kabool signaled its long-term commitment to the industry with establishment of the Yihyeon Girls Technical High School in 1984.19 Park Chang-ho was related by marriage to the family of Paek Un-gyu, president of Taehan Fire Insurance, and Cheong Sae-yeong, a president of the Hyundae Group. Sons of Pak Jae-eul, brother of founder Pak Che-gap, played impressive roles in the firm.20 Among Pak Che-gap’s four sons, three were officers in the textile firm in 1991, with his eldest, the US-educated Park Chang-ho serving as president of both Kabool Textiles and Kabool Corporation. Brothers Pak Myeong-ho and Pak Shi-ho were still listed as major shareholders in Kabool Corporation and Kabool Textiles as recently as 1999. Kabool Textiles gained a listing on the Korean Stock Exchange in July of 1988, and turned quickly to offshore production well ahead of the more established moguls. Table 4.1 details a remarkable record of offshore investment in production of cotton yarn and fabric. Offshore plants added to the flood of red ink on Kabool Spinning balance sheets in 1999. Kabool Lanka reported a loss of $12.4 million, Kabool Tadjik of $6.6 million, and Kabool Uzbek of $2.1 million, with smaller losses at other offshore sites.21 Although Taegu remains the home of Kabool, the group office in the former Seoulin Hotel in downtown Seoul symbolizes its newly won status among the leading Korean textile jaebol, and a reorientation to global textile production. Executives in 1996 cited a volume of 400,000 spindles abroad and only 100,000 in Korea, with plans

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Table 4.1 Kabool Textiles, offshore subsidiaries, 1999

* Capital cited as paid-in capital, except at the Tashkent Plant No. 2 and Paerukana Plant in Uzbekistan. Capital at the latter two firms refers to total investment. Percentage in parentheses indicates firm’s share of the total investment. Sources: Korean Federation of Textile Industries, Textile Yearbook 2000 (Seoul: KOFOTI, 2000), pp. 22–23 Jaejeong Gyeongjebu [Ministry of Economy and Finance], Gyeongle Hyeomnyeogguk [Division of Economic Coorporation], Haewoe tuja hyeonji beobin hyeonhwang 12.1999 [Current status od corporations with investments abroad as of December 1999] (Seoul: Ministry of Economy and Finance, 1999); Kabool, Saneop bogoseo 1998 [Report of Activities, 1998] (Seoul: Korean Stock Exchange, 1998), pp 44–45; www.kabool.co.kr. January 2000; KOFOTI, Seomyu eobgye haewoe hyeonji beobin hyeonhwang [Current status of textile industry with corporations on foreign soil], May 1999 (Seoul: KOFOTI, 1999); Kabool Textiles Planning Department, “Haewoe tuja hyeonhwang [Current status of foreign investments] (Seoul: Kabool Textiles, 1996); Kabool Research Center, “Myeonbang eopgye hoewoe tuja hyeonhwang [Current status of foreign investments in the cotton spinning industry],” (Taegu: Kabool Research Center, 1996).

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ultimately for one million spindles by the end of the decade.22 The same executives at Kabool Corporation predicted that textiles in 2005 will still represent about 70 percent of the total sales of the Group, about the same share as in 1996, despite some Group diversification into electronics and information industries. Spinning moguls made a huge leap from domestic to foreign markets from the mid-1960s, quickly establishing new marketing lines and strategies, and then gearing up production to meet rising foreign demand. Competition with lower-cost Asian producers forced further adjustment in the 1980s with specialization beyond commodity yarns towards more sophisticated products to capture new niches abroad. But among the spinning moguls only Kabool risked the further step of extensive global production and marketing. Kabool advertises today that “our global network linking all of our manufacturing bases allows us to respond immediately from procurement, production to delivery, to cover all qualitative and quantitative aspects in order to satisfy you.”23 Executives at Kabool Corporation boasted of a global computerized system of production and sales at its Seoul headquarters in 1996. I found staff organizing raw cotton deliveries for the Sri Lanka plant at the same time they were arranging sales of its products in the Middle East and Europe. The director at the Kabool Research Center in Taegu rushed from our interview to answer fax communications from China and other offshore mills. Centralization of technical expertise has advantages for labor-intensive production of yarn abroad, with technicians at offshore sites conveying production problems directly to specialists in Taegu. Specialization and technological advances were not sacrificed in the rush to build plants offshore. While exporting spindles and management, the firm keeps its cherished dyeing expertise and calibrated technology at home under careful security. The research director himself was hired away from Kolon, an example of the continuing contention for skilled personnel among textile moguls despite efforts at industry associations to discourage raiding of scarce talent. A newcomer to the spinning oligopoly, Kabool staked its future on integration of manufacture and marketing within two closely held firms, and on a huge investment in global production. Kabool Textiles also attracted a few very capable Japanese dyeing technicians with long experience, and still others from the Italian dyeing industry, and procured Italian and Japanese dyeing machinery. The founder’s eldest son Park Chang-ho led the group from the late 1970s as chief executive officer at both Kabool Textiles and Kabool Corporation. Until recently, he held 14 percent of the shares in Kabool Corporation, with second son Park Shi-ho and other family members holding a further 6 percent. Debtequity swaps in the workout program have given creditor banks such as Hanvit 14 percent of the shares, Chosun Life Insurance 11 percent, and Korea First Bank 10.6 percent at the reorganized Kabool Ltd. Park Chang-ho retained 7.9 percent of the shares at Kabool Textiles, but now Hanvit Bank and Korea First Bank each hold 14.9 percent of the shares. With 1,350 employees compared to only 615 at Kabool Textiles, Kabool Corporation was listed with total assets of 417 billion won, and liabilities of 734 billion won in December of 1999.24 An integrated group of firms, interlocking shareholding, family ownership and

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management were familiar among the spinning moguls. Efforts to bridge natural and synthetic fibers within the same group, as well as marketing and manufacture, and now the transition to bank supervision and ownership are less familiar. SK Chemicals Polyester giant SK Chemicals has distinguished itself among synthetics moguls with early investment abroad. President Cho Ho-min proclaims a goal of becoming “a first-class worldwide company in high-tech textiles and specialty chemicals.”25 But specialty chemicals paled in the face of polyester filament, staple fiber and acetate TOW that accounted for 71 percent of total sales in 1999. The massive firm today bears little resemblance to the original plant in Suwon outside of Seoul, established in 1953 to weave fabrics out of synthetic yarn imported from the Teijin Corporation in Tokyo. Founder Chey Jong-geon parlayed the Teijin connection into local synthetics production the next decade, establishing Sunkyong Synthetic Fibers in June of 1966 and opening a plant for production of acetate within eighteen months. SK Chemicals is still the only producer of acetate filament yarn in South Korea, and proudly boasts of new acetate products such as Skylon. But the firm set their sights from the outset on the bigger polyester market and initiated polyester filament production at Suwon in February 1969 at their new joint venture, Sunkyong-Teijin Chemical Fiber. The mother company SK Chemicals absorbed the 50/50 joint venture with Teijin of Japan in April of 1976, the same year the firm went public on the Korean Stock Exchange. For more than two decades, polyester producers in Korea could effectively “assign” production to customers rather than exerting themselves in “marketing,” given state priorities on local purchases of upstream supplies to foster the local industry, and the small scale of local production compared to huge local demand. By March of 2000, SK Chemicals was operating 5 percent of Korea’s total capacity in polyester filament, and 18 percent of the nation’s capacity for polyester fiber.26 Differences in scale, technology, and the organization of firms within industrial groups or jaebol were highlighted above as I compared spinning and synthetics in the decades of growth. The challenge of globalization today offers yet a further contrast. Spinners move abroad as manufacturers, sometimes supported by trading arms within the group such as Kabool Corporation and Kabool Textiles. Synthetics firms within huge, diversified jaebol command a wide range of internal Group support, but must invest far more to establish a synthetics plant abroad than a spinning mill. The Sunkyong Group today includes the flagship general trading company SK Corporation, SK Chemicals, SK Securities, SK Global, SK Gas, and SK Telecom. Chey Jong-hyon was the second son of the patriarch and a prominent business leader in his own right. Indeed, he had to delegate company operations to devote his energies to leadership of the prestigious Federation of Korean Industries. His son Tae-won moved quickly to consolidate control following the death of his father, Chey Jong-hyon in 1998. Born in 1960 and educated at the University of Chicago, Tae-won chairs the board at the flagship SK Corporation, SK

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Telecom, and SK Chemicals. Piecing together information on the three publicly held firms and twenty-six subsidiaries of the Sunkyong Group in 1991, the Korea Economic Weekly reported a controlling family stake of 50.6 percent.27 Looking solely to the publicly held firms of the group in 1999, Chey Tai-won retains 6.9 percent of the shares in SK Chemicals, with other family members holding an additional 1.8 percent. Another group firm, SKC holds 6.2 percent of the shares at SK Chemicals, but Tai-won himself owns 24.9 percent of the shares in SKC.28 Offspring of founder Chey Jong-geon married into families of bankers, industrialists, and parliamentarians, a precedent carried to new heights in the next generation.29 Few families in Korean industry today better represent the alliance of industry and politics than the generation of the now deceased founder, the eldest of four sons and two daughters. The third son, Chey Jong-gwan, served as vice-chairman of Sunkyong Marketing in 1992. Chong Jae-dong, the deceased husband of the second sister, served as vice-chairman of Haewoe Textiles. The fourth and youngest son, Chey Jong-uk, served as president of Sunkyong Marketing, and was related by marriage to Suh Pong-gyun, former Finance Minister, and Kim Chi-yeol, former Minister of the Interior. But it was the family of the second son Chey Jong-hyon that forged the most important marriage alliance when his eldest son T’ae-weon married Roh Su-yeong in September of 1990, daughter of then President Roh Tae-woo.30 The Roh family was related in turn to Kim Han-su, founder of Hanil Synthetics, and through Kim to Yang T’aek-sik, former mayor of Seoul, and Hong Jin-gi, former Minister of the Interior. Chey Jong-hyon parlayed kinship and business ties into a prominent role in the politics of not only textiles, but of the wider skein of leading firms where he chaired the powerful Federation of Korean Industries from 1992 until 1997. Sunkyong was also among the sixty Korean firms serving on the government party’s powerful Finance Committee in 1997.31 Of special interest is the general trading company (GTC, jonghap sangsa), SK Corporation, organized in 1976 to process exports for Group firms. SK Corporation handled most of the products for SK Chemicals until the late 1990s when the ratio fell to about 50 percent of SKI sales. GTCs prosper with scale not scope, specializing in commodity exports rather than in small lots of specialized goods. This left SK Chemicals to develop its own marketing arm of technicians with business expertise who can attract customers to specialized, sophisticated products. But the GTC contribution of capital and market expertise proved critical in SK Chemicals’ first offshore project, Sunkyong Keris in Indonesia. Sunkyong has already sunk some $140 million into construction of a vast polyester filament and fiber complex in Tangerang, near Jakarta. SK Chemicals plans further investment at Keris and affiliates for integrated production of synthetic fabrics, amounting to one billion dollars by 2001.32 Already the plant operates with a capacity of 180 tons of polyester filament yarn daily, and 220 tons of bottle grade PET resin. The Director of Marketing at Keris in Jakarta explained that new equipment for upstream production would be imported from Teijin Seiki in Japan, the machinery affiliate of Sunkyong’s original partner in polyester production.

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Partners in Sunkyong Keris include SK Chemicals with 57 percent of the shares, the trading company SK Corporation with 15 percent, SK Engineering & Construction with 15 percent, and the local P.T.Rempoa Fila with 15 percent.33 SK Chemicals had invested $56 million dollars in the company itself with an 85 percent share of the equity in the venture as of December 1999. A further $6 million dollars has been invested in a polyester filament venture in which SK Chemicals holds also an 85 percent share.34 These amounts reflect capital of the ventures, not the far larger investment in property, construction, and technology. A manager at SK Chemicals in Seoul noted that initially all financing was generated within the Group, another advantage of scale for synthetics producers in large jaebol. Beyond simply finance, the various partners in the Group also bring expertise and organization to the Keris project. SK Engineering and Construction is responsible for construction, and Sunkyong Ltd. for marketing, leaving SK Chemicals to focus on familiar tasks of training local technicians, planning petrochemical imports from SK Gas and others, calibrating and operating machinery, and bringing the new plant into production. Korean nationals from headquarters in Seoul serve as directors of the Tangerang plant, of the Marketing Division, the Administrative Division, and of the Sales Department, with 40 Korean nationals working together with 1,060 local personnel.35 How important is the GTC role in this offshore investment? The Marketing Director at Sunkyong Keris spoke of his need for GTC help in market information, in-country expertise, and in networks of supply and distribution. On the advice of SK Corporation, SK Chemicals prepared its own marketing network in advance by supplying local Indonesian weavers with polyester for at least four years prior to opening production at Keris. Synergies in planning, finance, and operational expertise help synthetics firms within diversified jaebol to spread the risk of an expensive manufacturing venture abroad. The result is that SK has outpaced its Korean competitors abroad, and boasts in 2000 of a “packaging, production, and marketing base in Indonesia and East Asia, focusing mainly on textiles.” SK Chemicals has plans to “establish a total polyester production base in Indonesia for flexibly coping with East Asia demand.”36 Comparison A statistical profile (Table 4.2) conveys remarkable differences in finance and sales between two firms pioneering globalization of Korean textile production. Saddled with dollar-denominated foreign loans and heavily dependent on textile sales abroad, Kabool suffered a triple blow with the (1) devaluation of the Korean won; (2) inability of Korean banks to rollover short-term loans for operations; and (3) weak sales in commodity textiles. The corporate workout program has only now forced a restructuring and inserted new management and ownership.37 Kabool’s new network of global production and marketing has apparently already outpaced its competition among mogul mills in exporting output of its Korean plants despite generally soft international markets. With

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the heavy investment in initial start-up costs for the offshore plants nearly complete, the firm is positioned to reap the benefits of low cost production and proximity to large and growing consumer markets in the near future, if it can resolve its debt problems. Kabool Lanka in Sri Lanka is touted as the centerpiece of production abroad including 100,000 spindles and a paid-in capital of $11.3 million, but a far larger investment in plant, equipment and construction. Plants in China operate a further 110,000 spindles, and have absorbed a lot of capital. Kabool’s bold strategy of global production and commodity specialization may in time survive the crisis with a resurgence in the Asian textile market, but such a strategy demands a major commitment of capital and expertise that could be mobilized in a family firm more easily than in a firm with bank ownership and solely professional managers. The delinking of familism, friendly bank financing of debt-driven expansion, and close state relations in Korea’s textile moguls may force far more conservative strategies of survival in the future. Cho Ho-min faces a more manageable task at SK Chemicals with adjustment towards specialty chemicals to escape ceilings on growth in sales of synthetic yarns and fabrics. He began with successful stock offerings to raise the firm’s capital from 60.1 billion won to 99.2 billion won. SK Chemicals recorded moderate growth in sales across the period but little growth in profits, given Table 4.2 Kabool and SK Chemicals, 1992 and 2000

Source: Korea listed Company Association, Sangjang hoesa chongram 1992 (Annual report of listed companies 1992) (Seoul: Korea listed Company Association, 1993). Also, KOSDAK Listed Firms 2000. Amounts represent billions of won. Kabool Textiles has been absorbed into Kabool Corporation under bank supervision, and no longer reports separately.

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rising costs of labor, petrochemical inputs, machinery, and now the depreciation of the local currency. The election of Hong Ji-ho in September 2000 as the new CEO of SK Chemicals signaled completion of the reorganization concentrating on resins, specialty chemicals such as hybrid PTA, and a new rayon product using acetate fiber. Consolidation appears inevitable in the aftermath of restructuring and the Asian Financial Crisis, but its results will not be clear for some time.38 Polyester fiber production was spun off into a separate new firm titled Huvis.39 The latter firm will include the polyester fiber units of both Samyang and SK Chemicals, a combined capacity of 631 million tons annually. Samyang will then continue as a food, chemicals and life sciences firms, and SK Chemicals with chemicals and life sciences.40 A continuing family commitment within the Group may well prove critical in diversification towards environmental products and biotechnology. Over-supply in polyester production due to cut-throat competition between smaller commodity producers and the mogul specialty producers is forcing Korean moguls to transfer production offshore. Within the textile industry, SK Chemical has been a pioneer in investment in synthetics production abroad, but with investment in new technology rather than transfer of technology from existing Korean plants. Although SK Keris in Indonesia has suffered from the recent political and economic turmoil in Jakarta, it provides not only an offshore base for expansion, but critical experience in mobilizing forces within the Group to design, build, and operate an offshore plant, as well as market production. Again, the commitment of the Chey family in ownership and management during the difficult transition to a global producer of synthetics may prove critical in this further step of entrepreneurship. Features of industrial organization noted in earlier decades have likewise changed. Family ownership and management no longer dominate complex, joint-stock firms as in the past, yet persist now into the third generation of family leadership at SK Chemicals. But unlike earlier generations, this generation has been educated in Economics or Business Administration from the University of Chicago, a mark of professional management. Control rather than outright ownership is the challenge today with family investment designed to retain the reins through a complex pattern of interlocking shareholding across member group firms. One key is gaining the participation of smaller investors, and another is the support of banks willing to finance expansion without taking a piece of ownership. Offshore investment for Kabool Textiles has brought about new partnerships in which local investors contribute some capital at times, as well as real estate. But at Sunkyong Keris and the multiple Kabool mills abroad, effective control remains with the mother firm in Seoul. Market share remains concentrated among moguls dominant in spinning and synthetics on the peninsula, but with some changes among the former. Offshore investment and diversification beyond textiles has jostled the spinning oligopoly of SWAK firms. Equally significant has been a change among the upstream sectors at home where the penetration of synthetics firms into spinning of filament and blended yarns has diluted market share for mogul cotton spinners. Concentration of capital and technology

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persists among the SWAK roster of moguls, but with serious challenges from larger synthetics firms, and with the redirection of capital out of the local textile production line. Beyond transitions at firm and industry, change has come to the alliance of state and firm, evident already among the spinners following the SWAK event of 1973, but now also between state and synthetics giants. Globalization at the firms and across the serial line of production within Korea has diluted state oversight and control, yet close ties persist between state and industry as evident in family alliances and industry politics. Trade liberalization has constrained state initiatives in import policies, and forced firms to develop their own networks of production offshore for import to the peninsula. In sum, the state has moved from patron to partner in a new tripartite alliance of state bureaucracy, industry association, and mogul firms. Spinning moguls Transitions in plant, market, and especially finance have marked nearly two decades of maturity from 1979. The Asian Financial Crisis has left devastation in its wake in the Korean spinning industry. Dainong continues to operate but Table 4.3 Spinning moguls, 2000

Source: KOSDAK listed Firms 2000. Amounts represent billions of won. Number of spindles cited from Dongil Spinning, Saeop bogoseo 1999.1.1–1999.12.31 [Report of activities, January 1–December 31, 1999] (Seoul: Korea Stock Exchange, 1999), p. 10. Statistics provided by SWAK and repeated in annual reports of other spinners. Note that Dainong and Tongkook Spinning remain under bank supervision. Kabool Textile has been absorbed into Kabool Corporation under bank supervision, and no longer reports separately.

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now in the hands of creditor banks rather than the Park family. Tonggook, Choongnam and Kabool have so far avoided bankruptcy only by agreeing to corporate workout programs with their creditors. Taihan Textiles reported losses for the fifth consecutive year, and Pangrim finally posted a net profit for 1999 despite losses in ordinary income and declining sales. Yet some mills have prospered. Dongil, Ilshin and Kyungbang have posted profits as mid-size producers of higher quality yarns and fabrics, and Chonbang appears to have returned to profitability. Taekwang appears the jewel in the crown, prospering in both spinning and synthetics. Spindle capacity (Table 4.3) remains one dimension of competition and turmoil in the ranks of mogul spinners, and also chronicles remarkable expansion in plant since 1970. Taekwang has joined Choongnam and Dainong at the head of the pack, though unlike other spinning moguls, Taekwang is a synthetics leader mogul in acrylic stable fiber and nylon filament which also spins blended yarns. A leader in polyester fabrics, Tongkook Spinning joined the ranks of the mogul spinners in the mid- 1990s and now finds itself in a corporate workout program. Distinguished by a dedicated textile trading firm and a large-scale spinning operation, Tongkook and Kabool developed in Taegu as major cotton spinners and traders to supply their extensive weaving operations. Unlike Kabool, the Tongkook Group of Paik Young-gi established a polyester plant, Tongkook Synthetic Fibers as well with a capacity today of 434 tons daily of polyester filament to feed its extensive weaving facilities for cotton/polyester fabrics.41 One major difference for the dedicated spinning moguls evident between 1979 and 2000 is the extension of huge synthetics firms such as Taekwang Industries, the Tongkook Group, Saehan, and Hanil Synthetics into in-house serial production and spinning of natural and synthetic filament, fiber, and blended yarn. Only Taekwang Industries among the four firms appears to have succeeded, and that largely because of its popular spandex product. This bridging of synthetics and spinning parallels an earlier strategy by synthetics moguls to hold shares in spinning moguls, which can serve as customers. For instance, descendants of Kim Youn-su at Samyang remain major shareholders in spinners such as Kyungbang and Dongil in line with the family’s colonial experience in spinning. Industry leader Choongnam has reduced the number of spindles from 568,000 in 1979 to 243,000 two decades later, and Dainong from 483,000 to 245,000. Kabool has emerged as the largest Korean spinner today due to its extensive capacity offshore, and Pangrim has fallen out of the mogul roster with transfer of much of its equipment to a Vietnam venture. Sales at Choongnam of 113 billion won in 1979 climbed to only 214 billion won two decades later, eroding profits and the profit ratio. Although Choongnam suffered overall losses from 1993 through 1998, most other spinners maintained profits until 1996 when losses became the norm rather than the exception. In contrast, sales at the synthetics giant Taekwang Industries jumped from 59 billion won in 1979 to 1.3 trillion won in 2000. Weak performance despite huge investment led to serious financial difficulties at the highly leveraged spinners, a problem shared with a few of the synthetics giants and many of Korea’s leading jaebol. Financial hard

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ship has brought hard-pressed commercial banks close to foreclosure on the highly leveraged moguls, threatening family ownership and management. Yet through the summer of 2000 only Dainong and Hanil Synthetic have surrendered ownership to the banks, and even in those cases few mills have been shuttered. Family ownership and management persist, and indeed, about half the spinning moguls have returned to profitability. The state has come to the rescue for leading textile moguls in the past, either with special loans to weather a financial crisis, or with a distribution of plant following foreclosure to ensure continuity of production and employment. Falling levels of employment are one sign of maturity. The total number of workers in textiles rose to 422,000 in 1987, including 56,000 workers in spinning alone, before falling off at the end of the decade. Employment in textiles had fallen to 300,000 by 1994, and then to 208,000 by 1998.42 Employment at spinning mills fell precipitously due to both declining production levels and problems attracting skilled labor. A decline of 25 percent from the previous year left SWAK member mills with only 21,200 workers at the end of 1996, falling to 15,000 three years later. Member mills reported only 14,000 total workers on the rolls in March of 2000.43 Executives complained of the difficulty of attracting workers to spinning plants, given the industry’s reputation as “dirty, dangerous, and difficult.” Megamogul Choongnam operated its domestic mills in 2000 with only 15 percent of its 1979 workforce of nearly 11,000, and Dainong with only 27 percent of its 1979 workforce of 10,500. Average monthly earnings in the textile industry jumped from 389,310 won in 1989 to 658,541 won in 1992, a rise of 170 percent in just four years.44 Wage hikes indicate a rising local standard of living driving labor-intensive industries into early maturity if not decline, and force firms to invest in automation to replace older, more labor-intensive machinery. Incentives necessary to retain experienced workers add to the financial burden of wages hikes and technology investments. Frustrated in attempts to attract a local supply of labor, mills now must rely on part-time employees and foreign workers. Managers complained about the latter breaking contracts to find less demanding work in service sectors such as restaurants and stores.45 Pressing the government limit on foreign “trainees” to 15 percent of total labor at any one Korean firm, smaller textile companies have been leaders in recruitment of foreign laborers with a total of 13,000 workers reported in March of 1995. The Korean Federation of Textile Industries (KOFOTI) allotted 6,000 workers to 1,136 companies in one week alone.46 Executives at mogul mills spoke of greater reliance also on workers from abroad, as even their pool of young female workers trained in company technical schools tends to leave the firm after finishing school. Perhaps the most striking difference between decades of growth and now restructuring is growth at some firms, survival at others. Authorized capital offers one indicator of scale. Choongnam raised its authorized level from 15 to 23 billion won across 21 years from 1979, but the smaller Kyungbang firm from 2.4 billion won in 1979 to 7.9 billion in 2000. Yet rapid growth in other sectors

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of industry has further eroded the comparative position of spinning moguls, with only Choongnam ranking among the top one hundred local firms in terms of assets. Nonetheless, strong growth in assets among the moguls reflects continued investment in technology across the decades, as well as in other areas of enterprise, and in offshore production sites. Growth in scale has forced more professional management, but families continue to hold their ground in ownership and overall direction of the spinning moguls. Lee Chun-ho holds 9.6 percent of the shares at Choongnam and serves as chair of the board.47 The Seoul Bank and other creditors have assumed ownership and control at Dainong, replacing Park Youngil with a courtappointed receiver Kim Jin-eui. Brothers Lee Sik-jin and Lee Ho-jin maintain 30.2 percent of the shares at the prosperous Taekwang Industries, and Ho-jin serves as president. Lee Ho-jin also is at the helm at Daehan Synthetic Fiber where the brothers hold 28 percent of the shares. Daehan recorded sales of 463 billion won in 2000, and the mother company Taekwang 1.3 trillion won. SWAK president Kim Young-ho maintains control and a 36 percent share of the stock at the thriving Ilshin. Sull Bum has replaced Sull Won-sik as president at Taihan, and retains 13 percent of the shares. FKI Chair Kim Kak-choong retains control at Kyungbang, and about 19 percent of the shares through two family-controlled foundations. Suh Min-seok remains as chair of the board at Dongil and leading subsidiaries Dongil Fabric, Dongil Renown, and Dongil Aluminum. He controls 16 percent of the shares through personal holdings of his own, eight members of his family, and a foundation.48 Kim Jong-bin and family hold 15 percent of the shares at Chonbang, and retain control of the board and presidency. The banks have recently assumed majority ownership from the family of Park Chang-ho at Kabool, and replaced him with their own executives. Also consigned to a corporate workout program, Tongkook will be fortunate to avoid a similar transition from the present ownership and management of Paek Moon-gyu and family. The Paeks hold 26 percent of the shares in the corporation. The financial collapse of the massive Kukje conglomerate has gained most of the scholarly attention in studies of state-industry ties in the mid-1980s, but leading textile moguls such as Dainong and Choongnam confronted their own financial crises at the time, unable to repay loans coming due after their hasty expansion in the 1970s. Smaller than Kukje, and perhaps with better prospects for recovery, and certainly with better government ties, both Dainong and Choongnam were put under special bank supervision in return for extraordinary loans to support financial restructuring. Such support from the state and banks under its direct or indirect control in South Korea constrained the market dynamic and permitted the survival of Dainong and Choongnam. Kukje was not so fortunate and collapsed in the mid-1980s when banks under the control of the Chun government refused to rescue it from financial insolvency. The Kukje collapse has been widely cited as evidence of the importance of government relations for leading firms. Kukje executives later testified in the Korean National Assembly of Chun government revenge for failure to provide sufficient political

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funding.49 Equally significant for market adjustment in the crowded field of textile production was the distribution of assets. Insolvency usually results in plant closings and a natural attrition of firms within an industry, recapturing the balance of supply and demand by brutally forcing weaker firms out of business. The pattern in South Korean industry of a transfer of ownership rather than plant closings and dispersal of assets, keeps plants and employees in place despite bank foreclosures. With state encouragement and indirect state subsidy through favorable bank loans, Hanil Synthetics absorbed the textile operation of Kukje, as well as its brand new headquarters in downtown Seoul. Hanil Synthetics itself has now floundered under heavy liabilities and remains a supervised issue under bank control.

Synthetics firms moguls Some have called for cooperation between the moguls and the new mavericks to maintain prices by controlling supplies and consolidating the present twelve producers into six.50 Chang Uk-hyun, Director of the Fiber and Home Industries Bureau at MOCIE, applauded the proposed consolidation of polyester production at Samyang and SK Chemicals in the summer of 2000, and predicted other moguls would follow suit.51 Hyosung has already absorbed smaller producers such as Dongyang Nylon and Dongyang Polyester, and there were reports of Kolon discussing a merger with Kumkang Trading. The 1999 roster of synthetics moguls in Table 4.4 includes only one new firm, Hankook Synthetics, founded in 1987. Persistence of the same mogul firms across two decades since 1979 might suggest the strength of oligopoly to restrain new entrants. In fact, a set of smaller, new local producers of commodity polyester filament yarn has forced the moguls upstream into specialty products. At the same time leading international firms such as Dupont and Toray have expanded their presence on the peninsula in joint ventures with Saehan Industries targeting the higher valueadded sectors of the industry. Local moguls now face stiff competition at both the lower and higher value-added levels of production.52 Cut-throat competition among local producers ravaged the industry at the same time the IMF crisis forced firms with huge loans for expensive equipment to expand sales or go bankrupt. Consolidation bringing an end to the earlier oligopoly appears the only solution. Three synthetics moguls rocked the Korean textile world in April 2000 with announcement of a proposed merger. SK Chemicals, Samyang, and Saehan Industries disclosed discussions slated to conclude in July of 2000 on a single unit to include the polyester facilities of SK Chemicals at Ulsan and Suweon, Samyang at Cheonju, and Saehan at Kumi. The result would be a polyester giant with an annual capacity of 580,400 tons of polyester filament, and 308,000 tons of polyester staple fiber.53 In any case, the operating records today for independent synthetics giants are sobering. Hanil Synthetics followed Dainong into court receivership, and Kohap is in similar difficulty. Recording consecutive annual losses of 755

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Table 4.4 Synthetics moguls, 2000

Source: KOSDAK Listed Firms 2000. Amounts represent billions of won. Data on production capacity cited in tons per day, and provided in Hwaseom (March 2000):80–81. Fiber is represented with an “F,” and staple fiber with “SF.” Hyosung has completed a voluntary reorganization. Saehan is in a Workout Program. Kohap and Hanil Synthetic are under bank supervision.

billion won in 1998, 644 billion won in 1999, and 1.2 trillion won in 2000, Kohap has been assigned by the banks to the corporate restructuring program. Saehan won permission to enter the government’s workout program in May of 2000 to gain temporary relief from creditors. Vice-Chairman Lee Jae-gwan of the legendary Samsung Family has promised to donate his home and other property to save Saehan Industries from the banks, despite sale of Saehan’s brand new, high technology spunbond plant to Toray.54 The result is a formidable new joint venture on the peninsula, Toray Saehan Inc., incorporated in November of 1999 with an annual capacity of 50,000 tons of a high quality brand of polyester filament, Eslon, 90,000 tons of polyester film, as well as non-woven fabric. Moving Toray’s state-of-the-art equipment to the peninsula, Toray and Saehan plan to begin production of 10,000 tons of nonwoven fabrics of polypropylene filaments in early 2001.55 Hyosung reorganized four firms into Hyosung Corporation and recovered profitability in 1999 after losses of 3.9 billion won in 1997 and 96.8 billion won in 1998. Newcomers such as Taekwang’s Daehan, and Seong An Synthetics have fared better. The exception here is Keumgang Trading which remains under bank supervision despite returning to profitability in 2000.56 Restructuring, expansion of foreign firms, and consolidation have left synthetics in chaos. The roster reflects change in the organization of synthetics within Group firms, but the familiar synthetics oligopoly persists. The profitable

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synthetics arm of the Samsung Group was spun off into the Saehan Media Group. But the burden of financing Saehan Media, together with a weak polyester market has left Saehan Industries vulnerable to its creditors. Saehan Industries holds a 23 percent share in the Group’s flagship, Saehan Media which posted a massive 294 billion won loss in 2000.57 Hyosung has fared better. The latter diversified just prior to the financial crisis into unprofitable areas, and then quickly reconsolidated in a voluntary reorganization which brought profits already in 2000.58 The industry had only recently recovered from a synthetics recession in 1997 before the financial crisis. All but Kohap and Hanil Synthetics returned to profitability in 1998 with sales at the synthetics giants continuing to grow, although firms focused on the domestic market enjoyed smaller amounts than competitors with strong foreign markets. The importance of the export market become painfully clear in the case of acrylic where Hanil Synthetics selling mainly to local weavers suffered an 8 billion won loss in its last year of public reporting. In contrast, Taekwang Industries with 70 percent of its sales abroad enjoyed a profit of nearly 14 billion won in 1997, and nearly 140 billion won the next two years. Sales at synthetics moguls still follow an earlier norm of a 70/30 ratio between exports and local sales, although Samyang with fiber representing only 33 percent of its sales sells fiber abroad but food and feedstuffs at home. The fact that synthetics firms can still maintain profits despite soft foreign markets reflects their stronger position in the serial production line. Synthetics production continues as a central enterprise of leading jaebol such as the SK Group or Hyosung, often in combination with a group trading company heavily involved in the textile trade. Assets of 22.7 trillion won left Sunkyong the fifth largest Korea jaebol in 1996. Hyosung, Kolon, and Kohap ranked among the top twenty, and Saehan and Samyang among the top forty. Strong growth in both capacity and assets sets the synthetics giants apart from most of the spinning moguls, further extending differences in technology and assets. Polyester giant Samyang Corporation expanded plant capacity from a daily of 49 tons in 1979 to 429 tons of polyester filament in 1999, and 650 tons of staple fiber. Other moguls followed suit, resulting in a total daily capacity of synthetic filament and fiber totaling 6,976 tons per day across the country by March of 2000, moving Korea into fourth place behind the USA, China, and Taiwan.59 Samyang raised its 1979 level of authorized capital of 20 billion won to 60.4 billion won by 1999, as assets skyrocketed from 96 billion won in 1979 to 1.5 trillion. The problem now is over-capacity and cut-throat competition, forcing consolidation such at Huvis, the new joint venture of SK Chemicals and Samyang. Financial costs of amortizing loans and paying high interest rates consumed earnings, and the insecure financial status of many of the major synthetics producers threatens continuity in the roster of family ownership and management, despite persistence of extensive Japanese investment such as Toray in Saehan and Teijin in Sunkyong. Financial exposure at spinning and synthetics moguls has left finance dominating enterprise in the years of maturity, rather than technology, products or markets. Concentration continues though now

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with the challenge of smaller commodity producers of polyester filament yarn allied with local weavers to respond quickly to openings in the vast Chinese market and elsewhere for polyester and polyester blended fabrics. Familism likewise continues at the prospering firms, but appears at an end at firms with heavy financial burdens. Kim Sang-ha and brothers and son retain both a dominant share of company stock and administrative leadership at Samyang. Choi Tae-won holds the reins at SK Chemicals and the family remains a major shareholder in both the synthetics firm and the larger SK Group. Park Dongsik remains in charge at Hankook Synthetics, and is listed among the major shareholders with personal holdings and cross-holdings in two E-Hwa textile firms, both listed as major shareholders in Hankook Synthetics. Mitsui holds 5 percent of the shares in Saehan Industries, and Toray 20 percent, while patriarch Lee Byung-chull’s son Lee Jae-gwan and family hold 20 percent. Lee Jae-gwan is struggling to remain vice-chairman of the board and convince the banks to provide more short-term loans for operating funds, without being designated for the corporate restructuring program. Restructuring has reduced Cho Suck-rae’s shareholdings from 25 percent at Hyosung T & C to only 7.4 percent at the newly organized Hyosung Corporation, although he remains chief operating officer. CEO Lee Ung-yol and patriarch Lee Dong-chan retain 15.5 percent of the shares in Kolon, with Toray Industries holding 12.8 percent. But the Hanvit Bank and investment companies have replaced Chang Chihyeok as major shareholders at Kohap with the sale of stock to increase capital. A professional manager has also joined Chang at the helm for the time being. Meanwhile CEO Lee Ho-jin and Lee Sik-jin continue to hold 31 percent of the shares at the booming Taekwang Industries. It is not surprising that the synthetics moguls have taken the lead in pressing the government for an emergency law to support the industry with the end of the earlier rationalization programs for depressed industries at the end of 1997.60 Moguls contended that horizontal specialization thus far in the midstream sectors of weaving, dyeing and finishing has contributed little to the vertical integration necessary for competitive fabrics in international markets. They argued that upstream producers must be better integrated with weavers and processors in the planning and production of yarns, fibers, and fabrics, to achieve the quality necessary for mid-range and high class apparel. The state must provide a road for the textile industry “circle” [sangeopgye] to become an “advanced nation” type of industry. Neither spinning nor synthetics moguls plan to expand. The key now is to reduce what KOFOTI chairman Park Sung-chul terms “a chronic high cost, low productivity” structure of textile production. SWAK member spinners plan to increase facility investments for automation in 2000, an increase of 170 percent over the previous year. Chemical fiber producers foresee a modest 15 percent growth in facility investment, mostly to increase production of the popular spandex. Domestic leader Taekwang is investing to increase monthly production of spandex from 1,900 tons to 3,000 tons by 2001. Competitors like Hyosung plans a 300 percent expansion from 700 tons per month to 2,100 tons of spandex, and the newcomer

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Dupont-Saehan has plans to increase capacity 450 percent in the year from the present 70 tons per month to 320 tons.61 Consolidating interests Continuing efforts at coordination and intense industry change within a short time frame recall similar features in earlier decades. The task of fostering and then integrating a serial line of production devolved from state to association and finally to globalized firms in the international marketplace. Features of familism, concentration, and prominent relations with the state persist at some firms, and remain a marker of change or continuity at all firms. Oligopoly persists in both spinning and synthetics, but mogul spinners now operate about one-third of their total spindles abroad as global coordinators in a serial line of production, and find themselves challenged domestically by synthetics firms such as Taekwang with extensive spinning capacity for its own polyester filament yarns. A synthetics oligopoly finds itself challenged by smaller commodity producers as well as new foreign entrants within the domestic market. Very recent changes in family ownership and control at mogul spinners will affect forms of interest exchange, as will consolidation in synthetics such as the proposed joint venture in polyester of Samyang and SK Chemicals. The state has returned to the industry with new leverage, now mediated through the Korea Asset Management Corporation and the Financial Supervisory Commission. But of greater interest here are organizational changes at trade association and labor union. Capital and the state If the years of maturity brought new market demands, they also changed patterns of interest contention among capital, state and labor. Adjustment extended to firms and their interest associations such as the Spinners and Weavers Association (SWAK) and the Korean Federation of Textile Industries (KOFOTI). State corporatist strategies faded with popular pressure for democratization and market liberalization. But rather than simply anonymous, unstructured market interactions, a new style of state-business coordination emerged in some sectors which has been termed elsewhere “mesocorporatism.” Cawson distinguished corporatism from pluralism along three dimensions: monopoly role of corporatist groups, integration of interest representation and policy enforcement, and a state role in licensing representation and codetermining policy.62 I find at best inconsistent efforts at a broader corporatist strategy of state-society cooperation in Korea on major redistributive questions, including tripartite negotiation of wages and wider industrial policy at a national level. I also find, however, a sectoral pattern in textiles of state-business cooperation that matches Cawson’s criteria of monopoly representation, fusion of representation and policy implementation, and a prominent state role. Cawson

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distinguished this pattern of “mesocorporatism” with specific sectors where there is no necessary class base for interest organization, nor necessity for transclass collaboration.63 Streeck and Schmitter highlighted the mediatory role of sectoral interest associations with the term private interest government, assessed by the extent and direction of association activity.64 Such groups would “internalize a significant part of the externalities of a group’s collective action and interests.” This would permit member firms to reduce transaction costs with other interest associations along the line of production, with parallel industry associations in nations of their trading partners, and ultimately with the Korean state as well. Equally important, the associations would permit efficiency and better direction through “hierarchical coordination between different levels of interest aggregation and group activity.”65 The same authors were quick to point out that a revised state role from direct to procedural control does not suggest weakness, but rather a more sophisticated type of market allocation. With five members including giants Hanil and Dainong no longer active, the nineteen remaining spinners continued in 2000 to gather under the umbrella of SWAK.66 Although membership is not legally mandated, its earlier gatekeeper roles in procuring raw cotton, lobbying the government, and negotiating with other textile associations within and beyond Korea made membership a necessity for the mills. Kim Young-ho of Ilshin Spinning serves as current president and Lee Jun-ho of Choongnam as vice-president in positions that rotate among the major mills. Retired government officials such as Executive Vice-Chairman Kim Seung-ho, former Director of MOCIE’s Industries Division, and Managing Director Chun Chul-soon, formerly of the Department of Investment Planning at MOCIE manage a staff of some fifty researchers and other personnel.67 SWAK draws its budget mainly from dues, with about 66 percent of the dues representing a fixed amount across all members, and 33 percent based on capacity. In addition to annual dues, the association retains other assets such as their own buildings in prime locations in downtown Seoul and Pusan. Interviews with SWAK staff, mill executives, and with officials of the Textile and Clothing Industry Division at MOCIE suggest the role of SWAK has been reduced largely to lobbying the government for common interests, although individual firms actively lobby the government as well. Critical functions of the association include collating information on raw cotton purchases, negotiating and registering firms for special credit from the US Agriculture Department for purchase of US raw cotton. The Association gathers information on spindles in place and spindles in production, on wages, employment, and sales. Prior to the Asian financial crisis of 1998, a committee of SWAK members would meet regularly with a committee from the Korean Federation of Textile Unions to discuss wages and working conditions, in a corporatist arrangement similar to that of the Japan Spinning Association and their labor counterpart, the Zensen. A joint committee provided annual guidelines for wage negotiations at individual firms. Marketing functions include local arrangements to advertise cotton yarn and fabric in cooperation with Cotton Council International of the USA, as well as

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sharing information on local sales and exports among its members. SWAK represents the mills in international meetings of the International Cotton Advisory Committee, and the International Textile Manufacturing Federation. In an effort to ensure “orderly growth” of trade ties among Korea, Japan, and Taiwan, SWAK meets regularly with the Japan Spinners Association, and sometimes with their Taiwanese counterpart. SWAK’s main task remains providing information on the sector to the Ministry of Commerce, Industry, and Energy (MOCIE) and Ministry of Finance, and lobbying these same offices on behalf of the mills. SWAK internalizes part of the externalities of collective action for member spinners, but is careful not to interfere with the lobbying activities of individual mogul firms with government offices. If SWAK continues with reduced but still important responsibilities, the more significant change in interest representation has been the growing role of KOFOTI. In the absence of large integrated textile firms spanning the entire production and marketing process, or of general trading companies responsible for domestic sales as well as exports, the Korean government fostered the integration of the long production line for export through associations, and particularly through KOFOTI. The advent of a quota system for textile exports under the MultiFiber Arrangement in the 1960s spurred organization of textile export associations under tight government control for the allocation and supervision of export quotas.68 The growing complexity of textile production then prompted officials to organize an industry-wide umbrella association to supplement the efforts of sector-specific associations such as SWAK or the Korea Chemical Fibers Association. One result was a new peak organization in 1967 called the Korean Federation of Textile Industries (KOFOTI), which included twenty-seven organizations among its membership.69 Better funded than many other trade associations, KOFOTI began with an endowment of $14 million, contributed equally by state and member associations. The Federation quickly assembled space for present and future needs with prime real estate in the Samsong Section of Southern Seoul. KOFOTI soon assumed far greater responsibilities with the Industry Rationalization Fund from 1979, and continues today to supervise its distribution and that of subsequent programs. Like other major trade associations, former government officials closely linked to the earlier Ministry of Trade, Industry, and Energy manage the association. Yu Deuk-hwan, formerly of the Foreign Ministry, served as Executive ViceChairman of KOFOTI before promotion to the post of executive director of the Korean Traders Association in 1995. Mr Yu soon advanced to a similar position at the Korean Federation of Industries, in 1996, replaced at KOFOTI by Mr Chang Seok-hwan, former Deputy Minister for trade at MOCIE. Yu spoke of KOFOTI functions such as providing information, promoting trade and fashion, and distributing government finance for medium and small industries in dyeing and finishing according to the Textile Adjustment Plan. More important for coordination of the wider industry are the long-range textile plans designed by state and industry under sponsorship of KOFOTI, identifying goals all along the long textile production line and targets for exports. However, I was surprised

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to find few executives who shared the enthusiasm of MOCIE or KOFOTI officials for the decade-long Textile Vision (1995–2005). Indeed, some were not aware of the document, and others referred to it as a government plan without concrete support. If SWAK has lost ground among its member mogul firms due to sectoral decline and diversification out of the industry, KOFOTI which relies on a cohesive network of participating associations has also lost its earlier prominence in large part due to globalization of the industry. Although KOFOTI devotes its energies to improvement of the midstream sector of dyeing and finishing, and recently of fashion, state and association keep a close eye on the development of upstream sectors for provision of basic chemical inputs. Petrochemical production for textiles offers a story within a story of integrated production and cooperation, with state subsidies and administrative guidance at the outset to insure local purchase, but more recently increased private investment to insure a local supply and penetrate foreign markets. Development of a petrochemical industry has been a stellar success in efforts to extend the line upstream to raw materials for textile production. Investment upstream has been left largely to state bureaus devoted to heavy and chemical industries, and to leading jaebol with the capital and expertise necessary to begin or expand chemical production. Hankook Caprolactum produces this basic material for production of nylon, in a joint venture of Tongyang Nylon, Kolon and Kohap. The firm produced 115,000 tons of caprolactum in 1999 but their customers still imported 243,000 tons from abroad.70 Just the opposite was apparent in basic material for polyester where local firms doubled production of TPA in three years from 1996 to 4.1 million tons by 1999. In contrast to the joint venture in caprolactam production by nylon producers, leading producers of TPA are owned and operated by jaebol with other textile investments, such as Samsung Chemicals of the Samsung Group, Samnam Chemicals of the Samyang Company, and SK Chemicals of the Sunkyung Group. Korean firms had reached self-sufficiency in production of TPA by 1996, and were able to meet 90 percent of local demand in acrylonitrile monomer, and 60 percent of local needs in ethylene glycol by 1999. Local firms could provide only 32 percent of the local needs for Caprolactam.71 Major jaebol with textile investments have aggressively expanded upstream chemical production, initially supported by the state in the Heavy and Chemical Industries promotion of the 1970s. Unlike textile investments, however, upstream chemical production can also represent an area of diversification away from textiles into chemical production over time, as the technology and plant devoted to TPA for instance can be redirected into more specialized products. Investment offshore and diversification have taken their toll on industry identity among upstream moguls. Meanwhile market liberalization and democratization have reduced the state role in the industry. One anomaly of older business associations in Korea has been the prominent state role in their formation and even at times, their funding. I find industry executives still identifying SWAK and KOFOTI as largely government operations, and certainly the administration of both is left to former government officials. With the decline of state funding

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for the associations, and declining state role in supervision of textile markets and manufacture, the associations have devolved to the status of voluntary associations dependent on mogul firms for their funds and direction. But with less state pressure to cooperate in associations within sectors or across the industry, firms now appear less willing to fund joint-projects or share information within their own associations. Crises such as adjustment which demand some coordination across the industry have prompted a flurry of meetings and plans, but as one leading SWAK member quipped, “SWAK is merely a social club (chinmukhoe).” Mesocorporatism within trade associations appears today at a crossroads of democratization, market liberalization, and industry adjustment. Labor and the state I devote a subsequent chapter to changes in the organization and interest representation of organized labor during the past few years of crisis in finance and industry. The story of textile labor in the years of growing sectoral maturity from 1980 parallels changes in the wider Korean labor movement. Labor unrest in 1987 remains a watershed of the democratic union movement, resulting in a dramatic wage hikes and far stronger labor organization. It also marked a transition in initiatives among labor leadership from textiles and light industries to the more formidable organizations of heavy industry in plants with far larger numbers of workers. Higher labor costs and labor militancy at home helped spur the transition from lower value-added commodity production to higher value-added production, evident in the loss of textile markets to lower cost Asian producers. A compressed timeframe, aggravated by recurring crises in the society and industry, have deeply shaped the role of labor in interest exchange. Abrupt changes in union organization at the national level, as well as in the state labor legislation and enforcement have distinguished the path of Korea’s organized labor. It is neither craft federation nor national center, but rather “enterprise unions” that command the dues and loyalties of Korean workers. Taishiro Shirai cited four features of an “enterprise union” in Japan: (1) membership limited to regular employees; (2) inclusion of both blue-collar and white-collar workers in the same union; (3) union officers elected from among regular employees of the firm, rather than a professional corps; and (4) sovereignty retained at the local enterpriseunion level, despite membership in industry federations.72 The author concluded that the enterprise union had to balance two quite different goals: representing the interests of labor and cooperating with management in promoting mutual interests of management and workers. Unlike the Japanese unions, a clear line between labor and management limits Korean enterprise unions to regular blue-collar employees. The absence of a professional corps of labor leaders at the local level parallels the Japanese model, as does sovereignty of the local union and generally weak ties to craft or industry federations. Labor competition and labor mobility in Korea erode identification with the company. Also in contrast to enterprise-wide unions in Japan, one often finds plant unions in Korea without any integration of unions across a firm’s multiple production sites.

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Both pluralist contention and clientelist paternalism appear to channel interest exchange at the plant level. Contention is evident in the competition among workers for better bonuses apart from their regular pay levels, and in inter-firm competition to attract the best workforce.73 Evidence of paternalism can be found in the relatively weak organization of labor at the firms, with only 1.4 million workers (11.5 percent) of the total workforce organized across society in South Korea in 1998, but also weak intermediate organization at the level of craft, and disarray at the national centers.74 Independent and often isolated enterprise unions, supplemented or substituted for by Labor-Management Councils, remain focused on plant-level bread-and-butter issues of job security and wages, rather than on the wider macro-economic or political interests of organized labor. One parallel with Japanese labor organization is the venerable Korean Federation of Textile Workers Unions (KFTWU) which has been decimated recently by the rapid downsizing of the industry. Deyo summarized the role of industrial federations under the government-imposed national center, Korean Federation of Trade Unions: “moderate union demands, implement government policy, and discipline recalcitrant locals.”75 Among its most important roles, the Textile Federation would lead annual coalitional bargaining among the cotton spinning firms, the silk spinners, the major wool spinning firms, and even a few of the synthetics firms. Dues provided by member unions, and revenues from investments constituted its annual budget. But the Textile Workers Unions Federation today has been reduced largely to information-gathering, reporting data to other organizations, and fostering ties with international labor federations as membership has fallen precipitously from 107,000 in 1992 to less than 35,277 in 1998 with 185 member unions.76 The Federation represents 33 percent of workers in spinning mainly at the mogul mills, but lists only Sunkyong Industries among synthetics moguls as member unions and represents a mere 5 percent of all workers in synthetics.77 Meanwhile, its competitor the Korean Federation of Chemical-Textile Workers Unions includes 14 unions and 9,965 members, and dominates the synthetics side of textile production.78 Textile labor organizations dependent on membership dues suffered a double blow with the 1998 recession. Wage levels either declined or at best remained at earlier levels, at the same time membership at spinning mills dropped precipitously with the closure of multiple plants, and temporary layoffs at others. Coalition bargaining among the spinners has given way during the financial crisis to firmlevel agreements on pay cuts and discussions of layoffs and terminations. Adding to the disarray are problems of organization. A double pyramid of labor organizations continues to bedevil industrial relations in the textile industry. An older pyramid consists of company unions in spinning firms, the Textile Federation at the craft level and the Federation of Korean Trade Unions at the peak. A recently developed, more militant pyramid of company unions in synthetics, the Chemical-Textile Federation, and the Korean Congress of Trade Unions at the peak now competes for members among textile firms and a place in national bargaining on wages and welfare. Contention between the two pyra mids, sectoral decline and the IMF adjustment have seriously eroded corporatist links to capital

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and state. The Textile Workers Federation survived with a reduced membership and reduced budget by curtailing staff and activities, and selling their Hapchongdong headquarters building. Ironically, the Federation flounders despite long experience at corporatist style wage negotiations and other activities now supported by the D.J.Kim government. Although it continues to monitor employment and wage levels in the industry, and advise member unions on annual negotiations, it has no leverage in more immediate decisions on reducing output or closing mills. Stymied by the dual blows of sectoral decline and national recession, corporatist organization in industrial relations at the mills remains one of the only industry-wide channels for labor policy formation and enforcement. Credible boundaries can prevent corporatism from fading into collusion, clientelism into corruption, or contract into excessive contention. Although the state has intervened at times in the textile industry to re-establish boundaries to discourage such excesses, the multi-leveled interchange has provided credibility and trust within firms and between firms and state in a fast-moving industry confronting remarkable flux at home and in markets abroad. But boundary maintenance begins with cohesive organizational identities distinguishing state, capital and labor. Labor lacks the cohesive and comprehensive organizations necessary to play a major role in maintaining boundaries, leaving it vulnerable to paternalistic clientelism in weak markets and excessive contention in strong markets. The problem of co-opted (eoyong) leadership provides one clear example of divisiveness reflecting the ambiguous position of labor vis-à-vis both capital and state. Conclusion Two decades of industry maturity have made the task of coordination in textiles far more complex. Three problems persist for the industry: (1) the high cost of upstream chemical inputs such as TPA; (2) the low quality of Korean dyeing techniques; and (3) the loss of a competitive edge in the garment industry. State and industry have joined forces under the aegis of KOFOTI to expand chemical production to offset costly imports, and to upgrade dyeing for higher valueadded production of sophisticated fabrics and yarns. Meanwhile, the garment industry has been left largely to market forces, often moving offshore or simply shutting down operations. Globalization of the production line has eroded the coordinating authority of KOFOTI, and redefined lines of production among the moguls. Mogul textile firms such as Kabool or SK Chemicals now operate their own international network of production and sales, with plants on the peninsula only a part of a larger framework. But even apart from global operations, efforts to capture ever higher value-added opportunities has prompted vertical reintegration of production at home within the textile moguls into an internal line of serial production. Saehan Industries or Kolon Industries will produce upscale synthetics and blended yarns and fabrics in house, and then market the finished products, often in its own network of apparel outlets. Moguls

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can combine the roles of upstream producer, mid-stream converter, and downstream marketer within the same family of firms with only the sewing of garments left to outside subcontractors. A third change affecting coordination is the crossover of investments between synthetics and spinning moguls, or the extensions of synthetics firms into spinning of blended yarns. If state and association played a major role in coordination of discrete sectors along a line of serial production for export through the 1970s, vertical and horizontal integration at home, and the growth of global networks has diluted the distinct sectoral functions and firm identities that made outside coordination necessary. An export boom from 1965 and facilities expansion in the 1970s slowed in the early 1980s. An industry accustomed to rapid growth was prodded into maturity by competitors among lower-cost producers abroad, and the rising costs of production in a prosperous domestic economy. Adjustment in the mid1980s left many of the highly leveraged mogul spinners in serious financial difficulties from which they still have not recovered. Much of the turmoil in a textile industry dependent on exports can be attributed to changes in international markets, as evident in the recovery of 1986.79 But there were also domestic factors, such as labor protests from 1987 leading to spiraling wage hikes at the labor-intensive cotton mills. Market liberalization brought a rising tide of textile imports in the 1990s, and international scrutiny of state support for the industry and controls on labor. If compressed, rapid development in the years of growth was due in large part to opportunity in international textile markets, the compressed character of sudden maturity and decline in cotton spinning can be attributed to opportunity and constraint in the same markets abroad. Former presidents Chun Doo-hwan (1980–85) and Roh Tae-woo (1986– 91) were convicted and imprisoned for soliciting illegal political contributions. President Y.S.Kim’s (1992–97) own son was convicted and imprisoned for similar reasons. The state has remained the primary patron for all of Korean industry through these years when clientelism often faded into corruption and bribery. State patronage in the textile industry was no exception. A persisting role for MOCIE in tandem with KOFOTI in the adjustment of the depressed sectors of textiles left the state with a prominent if changing role in the years of maturity. But maturity has also brought greater independence to mogul firms, less vulnerable to state controls on licenses, authorizations for equipment expansion, or oversight of trade. Problems of supply along the line of serial production which brought such dramatic state intervention in the SWAK event of 1973 have been less frequent due to a diversification of suppliers beyond the peninsula. Moreover, the strong institutional network of trade associations in the industry ensures a level of transparency in state-business ties that promotes more competitive access to government support. No doubt the single most critical area of state sponsorship remains financing, whether directly through KOFOTI authorized credit for restructuring, or for major new investments of mogul firms, dependent on Korean banks with state affiliation. Yet if the state as patron was once prominent in oversight of production facilities, monitoring of distribution along the serial production line, and in trade as well as finance,

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its leverage over the moguls remains today largely in finance. A more independent banking system has narrowed and bounded the patron-client tie, but contributions to political parties persist as a means to insure good relations with the bureaucracy. The development of mesocorporatism supported by strong industry associations would be more significant if it were not for movement out of the industry. Mogul synthetics firms have set their sights on chemical production rather than textiles, and mogul spinners on diversification into land development, retailing and distribution, or other forms of manufacture. A centrifugal dynamic away from the industry has diluted identification of mogul firms with their industry associations. Nonetheless, the survival of the spinners even with production largely offshore depends in part on investment insurance provided by the state’s Export-Import Bank, state negotiation of access to foreign markets, programs of gradual reductions of import controls, and favorable credit rates for import of raw materials. Mesocorporatist patterns of adjustment policy formation and enforcement are apparent in the prominent role of trade associations such as KOFOTI and SWAK, with the small Textile Bureau of MOCIE playing more of a supportive, coordinating role. Precedents and embedded institutional patterns of mesocorporatism may prove more significant in establishing the boundaries of state-business ties in adjustment strategies for other oligopolistic industries in Korea, than simply the ongoing, rapid adjustment process of individual mogul textile firms. If clientelism distinguished the formative years of the industry, and state corporatism the years of growth, more pluralistic forms of interest exchange within markets appear to best distinguish the recent decades of maturity. Market liberalization brought down controls on textile imports, and product upgrading moved Korean producers to higher value-added markets without quota controls. A third change was the growth in consumer spending fostering new, higher value-added textile markets on the peninsula. Korean firms now find themselves facing international and domestic competition in a fast-growing local market for a broader range of consumer and even industrial textiles. Democratization also fostered competition, particularly in industrial relations where more paternalistic forms of control have faded in favor of more structured negotiations between labor and management. Democratization has also forced a state retreat from market interventions which often limited competitive entry into markets. But in part due to the rapidity of the changes, the prospects of market contention without destructive practices of excessive competition such as dumping, are far from clear. Another problem is restructuring itself with the state intervening to preserve capacity and employment by distributing rather than dispersing assets of failed companies. For instance, Hanil Synthetics absorbed the textile operation of Kukje in the late 1980s, rather than simply closing the factories. Dainong’s mills continue to run today despite bankruptcy. Piore and Sable identified the disorganizing of Keynesian welfare capitalism in the West from the early 1980s. In the ensuing two decades, Britain and the USA have found ways of reorganizing capitalism with only occasional state

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intervention, but with a sophisticated net of state regulation to ensure a competitive playing field. South Korea has faced a similar process in a shorter time frame, and without the benefit of clear precedents or institutions for state regulation to foster competition.

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The shift from state to society continues in the Korean textile industry, suggesting new patterns of interest exchange. A transition from state corporatism to societal corporatism would be one path, permitting some continuity with the more directive reign of Park Chunghee. The textile industry would appear fertile ground for corporatist-style governance, given its deeply rooted and vigorous trade associations and labor federations. Why has corporatism not become the dominant form of interest exchange among the upstream, monopolistic sectors of synthetics and spinning? I argue in this chapter that the interaction of clientelism, market contention, and corporatist forms of exchange has limited and constrained the emergence of any one path of exchange in the contemporary textile industry. Industry turmoil offers clear evidence of shifts in governance, but also of the persistence of multiple modes to provide credibility and flexibility in the transition of restructuring. A small circle of large firms compete for market and government favor in Korean textile circles. Ideal models of free market transactions often assume the anonymity of actors within an impersonal market, but personal ties still play a major role in transactions among Korean moguls. Harrison White argued that the stability of production markets depended not on anonymity but rather on mutual regard, particularly evident in Korea where leading players make decisions with an eye to the market share and government ties of their small number of competitors. Neil Fligstein wrote of “conceptions of control” or mutual understandings about how a market is structured.1 His emphasis on the interplay of politics and markets, and the role of state and enterprise in establishing effective conceptions of control in new markets, appears particularly relevant to the Korean situation. If the Park regime controlled prices and supplies along a line of textile production to sustain a market structure, subsequent administrations from 1980 played a reduced but still significant role in the adjustment of local market structures, particularly in financing and access to markets. Still more significant is the continuing turmoil in Korean markets at home and abroad, forcing new contention among and between state and firm to establish effective modes of interest exchange. Rather than highlighting insulation of bureaucrats from rapacious capitalists, Haggard has argued we might better look to business-government ties as an

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ongoing negotiation. The state needs political support, continuing investment, and information on the growing complexity of markets, technology, and labor. Business needs a predictable and stable business environment, and occasionally incentives for expansion or restructuring.2 Particularly in Korean development, Fligstein’s market controls, or Haggard’s emphasis on stability and predictability, were often countered with a drive for greater market share by established firms, or new market opportunities by recent entrants.3 State and capital often join forces to reverse decline in developing economies, in contrast to marketdriven adjustment in established capitalist economies. Scholars of adjustment in South Korea have drawn attention to the prominent state role, but also to the growing leverage of large-scale capital in shaping and enforcing adjustment policy.4 Moon Chung-in distinguished three sets of reforms including industrial restructuring, financial reforms and liberalization of the domestic market, and concluded that each forced an adjustment of the government’s political relationship with key social groups.5 In a comparative study of adjustment across sectors within Korean industry, Kim Byung-kook located textiles between state-led programs in steel and private sector initiatives in semiconductors.6 An interplay of state and corporate strategies in textiles offers a precedent for large-scale industry with strong state oversight in extensive private sector investments, such as automobiles or petrochemicals, which may soon face a similar challenge of adjustment. Apart from state ties, restructuring demands immediately “an infusion of new resources—capital, management, and technology.” A World Bank report of 1987 contrasted Korean and Japanese adjustments in the textile industry. Japan’s industry confronted declining competitiveness already from the late 1960s during a period of growth in other domestic industries.7 Second, Japanese firms could rely on revenues from a large domestic market, and on financing from domestic capital markets as well as banks. In contrast, Korean firms relied more on international markets for their revenues, government-controlled banks or curb markets for credit, and now face adjustment in an economy with weak prospects for growth. The report cautioned against extensive government financing for the textile adjustment, but recognized the need for state participation given the weakness of the stock exchange and demands for financing. Despite strong associations and a history of corporatist cooperation with the state, sectoral corporatist efforts such as the joint state/industry funding of the Textile Modernization Fund failed miserably, and even recent efforts to create a dialogue on change along the production line have brought few concrete results. Corporatism would suggest the “structured representation of functional interests in the process of policy-making.”8 Anderson feared such structured ties might take on a life of their own, supersede intervening democratic institutions, and prove resistant to change. I found little evidence of entrenched institutions in Korean textiles thwarting democratic market processes, or distributional coalitions frustrating change. The problem in Korea is rather the absence of cohesive channels and institutions of interest exchange lending credibility and

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stability for long-term cooperative efforts at adjustment.9 Prominent industry associations such as the Spinners and Weavers Association, or the Federation of Korean Textile Industries offered evidence of the waxing and waning of state corporatist strategies. A review of adjustment at leading mills finds market contention, as well as persisting clientelist links, constraining corporatist efforts at change. Adjustment alternatives include specialization, diversification, and offshore investment. Mills elsewhere have specialized in niche markets, but Korean mills developed with advantages of scale in mass production of commodity goods, rather than in small lot production of more sophisticated products. Specialization demands a shift in both minds and machines on the mill floor for commodity producers. There is also the problem of developing markets and distribution lines for a specialized good, as opposed to commodity goods. Korean mills endeavored from the outset to monopolize the production process within house as far as possible, whether with spinning and weaving at the early mills, or with polyester giants moving their filament and fiber into fabric, but manufacture of specialized goods demands new forms of cooperation with other firms along a line of production and marketing. Diversification within or beyond textiles likewise posed problems for the Korean mills in an economy where huge conglomerates or jaebol dominate the leading areas of industry and services with large-scale investments. Cotton spinners often diversify in real estate speculation or developing mill properties into department stores or residential units, given limited opportunities to branch out into other industries. A more attractive diversification strategy would build on existing expertise in marketing and manufacturing by extending into the higher value-added sectors of garments and fashion. The third alternative of offshore investment remains a viable if risky option for mills in a nation with little experience or institutional support for manufacture offshore. Most mills appear pushed offshore by high production costs, rather than pulled offshore by attractive investment opportunities or their own programs of integrated production and marketing across borders. Familiar features of Korean industrial organization such as concentration of management, market, and ownership within family firms, and close ties with the state have thus far survived the adjustment process in textiles, though with significant changes in state oversight and direction. Strategies of specialization, diversification, and offshore investment have brought change at firms in response to structural shifts in domestic and foreign markets for Korean textiles. Equally significant is the change in Korean jaegye or “business circles” forced by the wrenching dislocations of political democratization, market liberalization, dramatic financial reforms demanded by the IMF, and industrial restructuring across the entire line of textile production. The sangeopgye or “industrial circle” of textiles offers a window on change in business-state ties and international market ties. What can be said of interest exchange in the chaos of financial reform at home and shifting market opportunities abroad for a declining industry that still manages significant export growth each year?

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Four firms: Dongil, Choongnam, Samyang and Saehan Four firms represent the variety of scale among the upstream producers, yet similar challenges of adjustment confronting Korea’s textile moguls. The record of targeted firms (Table 5.1) chronicles multiple contrasts between spinning and synthetics, but at least one continuity in reduction of employment. Choongnam today retains only 20 percent of its 1992 labor force, Dongil 46 percent, Samyang 31 percent, and Saehan 62 percent of its labor eight years ago. Saehan has nearly doubled its capital and Samyang reports 1.5 times the capital of 1992. Both report growth in assets and liabilities as might be expected with expansion of polyester plants at both firms. A specialized, medium-size spinner like Dongil with its Dongil Fabric subsidiary and Dongil-Renown joint venture downstream can integrate production of yarn and fabric to capture higher value-added segments of the fabric market. It has been able to remain profitable and records incremental growth in capital to about 1.3 times its scale of 1992. More significant, however, is the doubling of assets without a comparable growth in liabilities. But a large-scale commodity yarn producer like Choongnam reports declining capital

Table 5.1 Selected textile moguls, 1992 and 2000

Source: Han’guk Sangjang Hoesa Hyopeuihoe [Korean listed Companies Association], Sangjang hoesa ch’ong’ram 1993 [Annual report of listed companies] (Seoul: Korean Listed Companies Association, 1993); Maeil Gyeongje Sinmun, Hoesa yeon’gam 1993 [Annual corporation reports 1993] (Seoul: Maeil Economic Daily, 1993). KOSDAK Listed Firms 2001. Data provided for Dec. 31, 1992 and 2000. Amounts represent billions of won.

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despite its size, and has suffered nearly a doubling of liabilities with assets sold off to avoid bankruptcy. Cotton and blended yarns represented 55 percent of Dongil sales in 1999 and fabrics another 20 percent of sales. Choongnam reported yarns as 44 percent of their sales in 1999, and processed fabrics as 21 percent. Synthetic textile fabric accounted for a remarkable 42 percent of sales at Saehan Industries in 1999, with polyester filament and staple fiber accounting for another 40 percent. Polyester filament accounted for 33 percent of sales at Samyang, competing with sugar and feedstuffs. The recent transfer of polyester production to Huvis, a joint venture with SK Chemicals will leave Samyang mainly a sugar and foodstuffs operation. Dongil registered strong growth in sales despite a relative decline in its export ratio, suggesting stronger growth in the domestic market. Choongnam Spinning remained largely an exporter of cotton yarn, and suffered a decline in sales between 1992 and 1999. Adding polyester production capacity over the seven years, Samyang suffered a decline in sales between 1992 and 2000 but remained profitable. Saehan Industries registered a huge increase in sales of lower value-added products in offshore markets following sale of its higher value-added film and spunbond plant to the joint venture Toray Saehan. Losses were due to financing of liabilities and payments to cover losses at the Group flagship Saehan Media. Dongil invested extensively in upgrading capacity at home and in production at an offshore mill in Indonesia from 1992, contributing to a strong financial balance sheet today. Choongnam Spinning has made much larger investments abroad, and has suffered more from competition with lower cost Asian mills. Varieties of familism within family groups or jaebol, concentration, and usually close state ties characterized all four firms in earlier years. Samyang began as an agricultural company of the Kobu Kim family in the colonial years, transformed itself into a leading sugar refinery in the First Republic, and added polyester production in the Third Republic. Unlike the independent Samyang, Cheil Synthetics Industries developed within Korea’s largest jaebol, the Samsung Group. Group founder Lee Byung-chull won the cooperation of Japan’s Toray Industries in the jointly invested Cheil Synthetics from 1972. Spun off recently into the Saehan Media Group under descendants of Lee Byung-chull’s second son, Lee Ch’ang-hi, the firm has been renamed Saehan Industries. A third target firm is a dedicated spinner, Choongnam Spinning, now the largest cotton miller in South Korea. When a fire swept through the firm’s main facility at Taejeon in 1991, the family invested the insurance settlement in 70,000 new ring spindle spinning machines from Howa and Toyoda, leading Japanese machinery companies. Choongnam today operates the most sophisticated, large-scale spinning mill on the peninsula. A foil for Choongnam in both scale and scope, Dongil Spinning is a medium-size, integrated textile firm including spinning, weaving, dyeing, and apparel affiliates. With roots reaching back to the First Republic, Dongil has long maintained close ties with the venerable Samyang and Kyungbang firms, both with colonial histories under the Kobu Kim family. Apart from majority ownership by the Suh family, Dongil lists the Samyang

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Company as a major shareholder. Dongil and Kyungbang have jointly invested as the majority shareholders in the largest Korean dyeing firm, Joongang Textile Finishing Co. Samyang remains firmly in the hands of founder Kim Youn-su’s twelve children, including brothers Kim Sang-ha, Sang-hong and Sang-eung. The shareholdings of eldest son Kim Sang-hong and family members amount to 29 percent of the firm’s total shares, with an additional 11 percent held by two family-led foundations.10 Kim Sang-hong serves as Group chairman and largest shareholder, but it is Kim Sang-ha and Sang-eung who have won renown in the business community. Sang-ha has served as chair of the Korean Chamber of Commerce and Industry for over a decade, and also as chair of the Korean Agricultural Association. Sang-eung has served as vice-chair of the Korea Management Association, and chair of the Korea-Mexico Economic Cooperation Committee, and president of Samyang Co.11 Marriages in the family of Kim Sang-ha include ties to Pak Kyu-weon, former legislator, and Song Sam-seok, president of Monami. Family ties for Kim Sang-hong extend to Kim In-deuk, honorary chair of the Byuksan Group, Cheong Jin-gi, former president of the Economic Daily Newspaper Company, and Lee Min-ha, former president of Tongyang Expressway Bus Company. The array of connections to business and government circles forged by the marriages of twelve children is remarkable.12 Unlike the closely held Samyang, Saehan Industries listed two Japanese firms, Toray Industries and Mitsui Corporation with 20 percent and 5 percent respectively of the company shares, as compared to only 19.4 percent of the shares held by chief executive Lee Jae-kwan and family members in 1999.13 The Japanese synthetics giant Toray served as the founding partner with both capital and technology, and remains today the majority shareholder. Saehan Industries and an Employee Stock Ownership Foundation have replaced Lee and other family members as the majority shareholders in Saehan Media, Korea’s largest manufacturer of videotape, which no longer appears as a leading shareholder in Saehan Industries.14 Family ownership has also faded at Choongnam Spinning. A former government official and National Assembly Representative, Choongnam founder Lee Jong-sung left politics in the 1960s for industry as executive director of Kugan Spinning. Lee was able to purchase the spinning firm in 1971, and with loans from Japan initiated a massive expansion in tandem with revenues from exports. The patriarch’s eldest son, Chun-ho later served as president, and his younger sons Lee Chae-ho and Kwang-ho served respectively as vice-president and executive director of the firm. Lee Chun-ho and other members of the family are listed as leading stockholders with about 18 percent of the shares in 1995, but only 14.1 percent of the total shares in 1999.15 The family was no longer listed among top shareholders in 2000. Among the five children of founder Lee Jong-sung, Chun-ho and his brother Jae-ho have developed the most extensive ties with business and government officials through marriage.16 Suh Chong-ik organized Dongyang Spinning already in August of 1955 into

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one of the leading mills on the peninsula. Acquisition of Chungang Dyeing in January of 1960 established a precedent of integrated production that continues today. The founder was less successful with Taehan Synthetics, a joint investment with Kyungbang from December of 1963. Unable to obtain newer technology and pressed financially, Suh sold off the venture to Taekwang Industries, at the time only an acrylics producer. But Dongyang Spinning continued to prosper with a listing on the stock exchange in 1964, and a new name as Dongil Spinning two years later.17 Eldest son of founder Suh Chong-ik, Suh Min-sok continues today as chair and majority stockholder of the Dongil Group, and president of Dongil Spinning. Min-sok and family members own close to 10 percent of the shares, and control a further 10 percent through the Jung-hun Scholarship Foundation, with the Samyang Co. retaining 5.5 percent of the shares.18 Prominent in Korea’s business circles, Suh Min-sok has served on the boards of the Federation of Korean Industries, of the Korean Federation of Textile Industries, and most recently as president of the Spinners and Weavers Association. The business circle of textiles includes both business elites and politicians, but begins in the firms and families where leading executives remain ownermanagers well into the second or third generation of family control. Karl Moskowitz argued that the weakness of capital markets and the concentration of capital stretching back to landownership in the last century have enhanced the role of entrepreneur/founders as both providers of capital and brokers of government relations.19 The coordinated and compressed character of late industrialization on the peninsula left little room for the institutional developments within and beyond the firm that would permit the transition to professional management at the very top familiar in Chandler’s work on the shift from family capitalism. The addition of well-trained professional managers and technicians in leadership posts is evident in company boards of directors, themselves rosters of leading executives within the firm. Later generations of family leadership are likewise well prepared with the necessary graduate degrees and administrative experience, eroding the clear distinction between family and professional management. A sure hand at the helm can be critical in times of adjustment, as was reported when Kia Motors, a major automobile manufacturer, had to broker a bailout with both stockholders and government in the summer of 1997. Ford Motor of the USA and other foreign ventures held 16 percent of the shares but exercised no management rights, and there were no other outstanding majority shareholders who could claim management rights. This left salaried managers alone to deal with creditors and shareholders, other possible jaebol partners, and the state itself without the same leverage enjoyed by competitors combining management and ownership.20 Some would press for a clearer division between ownership and management, while others protest committed owners bring the credibility of their own resources to bear in negotiations with state and investment partners. In the meantime, concentration, government connections, and kinship continue at Samyang and Dongil, but may soon end at both Saehan Industries and Choongnam unless they return to profitability.

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Adjustment Programs of specialization and upgrading, diversification, and offshore production at the target firms offer concrete evidence of the progress of adjustment. Product specialization or acquisition of upstream chemical firms or downstream processing affiliates deepens a firm’s commitment to the industrial circle of textiles. Diversification into unrelated areas erodes a firm’s focus in textiles, but sets the stage for either balancing cyclical downturns in textiles with more consistent profits elsewhere, or for bailing out of a declining industry altogether. A third strategy of textile investment offshore balances cyclical variations in textile markets with multiple bases for manufacture and markets.21 Korean spinners in 1999 operated a total of 3.7 million spindles worldwide, 1.07 million spindles or 30 percent abroad, and 2.2 million spindles or 70 percent at home. Operating ratios of the 2.2 million spindles at home rose to 89 percent in 1999, after falling to 83 percent and 84 percent respectively in the previous two years. Koreans played major roles in local textile industries in Asia with 187,000 spindles in Vietnam, 245,000 spindles in China, and Kabool alone operated nearly 330,000 spindles in Uzbekistan.22 Dongil and Choongnam have less room for specialization and product improvement, given the relatively narrow range of existing technology and their limited research facilities. Given their situation, however, the structure of Dongil Spinning with its long-standing commitment to integrated production offers more possibilities for specialization than does the organization of a dedicated, large-scale spinner such as Choongnam. Sales of Choongnam’s cotton and wool yarn and grayfabric finally reached 55 percent of total sales in 1995, with dyed fabrics accounting for a further 43 percent, a balance of yarn and fabric resulting from a long effort at adjustment dating from 1979.23 Kim Hyung-duk, president of Choongnam explained Choongnam’s shift from yarn-centered production to apparel-oriented production, and efforts to produce finer count yarns back in an interview of 1985.24 He argued that survival in spinning depended on advancing from yarn to fabrics, dyeing or garments, and from commodity to integrated production. Part of the problem in upgrading production was the cost of synthetics for blended fabrics, such as polyester staple. Kim and others noted that not only did locally produced polyester staple cost more than imports from Taiwan or Japan, but that spinners and weavers were unable to pass on the higher cost of polyester staple in products for the domestic market, despite directing at least 30 percent of their production to the local market under state guidelines. Upgrading production within government-imposed restraints on the Korean textile line constrained adjustment alternatives of leading spinners. Specialization How does a spinner capture higher value-added segments of the production process downstream? Both Choongnam and Dongil expanded through affiliates as evident in Choongnam’s acquisition of Taeseong Wool Spinning in 1987 to move into production of wool yarn and fabric. With marketing largely limited

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to contracting with export brokers, Choongnam operates two trade companies largely as garment makers and exporters with Choongbang in Seoul specializing in knitwear, and Chunghwa Trade in Pusan in woven dress shirts. Affiliates permit the mother company, Choongnam Spinning to specialize in its brand name “Ostrich” yarns. With a far more extensive net of textile affiliates, Dongil Spinning has integrated production through firms such as Dongil Textiles, Dongil Fabric, Dongil Marathon, and Dongil Knit, firms in which Dongil remains either the sole or the majority shareholder with management control. In contrast to the fiercely independent Choongnam, Dongil has established prosperous joint ventures with larger investors in areas demanding heavy investments in technology or marketing. Dongil Renown is a joint venture with a leading Japanese outerwear house, Renown Inc., and a synthetics firm, Kuraray. Established in February of 1981, the joint venture has spawned a more specialized operation as well, Korea D’urban, joining Dongil, Renown and D’urban of Japan. The cooperation follows an earlier precedent established with Joongang Textile Finishing already in 1960 as a joint venture in dyeing with the local Kyungbang and Ilshin Spinning companies. Apart from differences in organization, both Choongnam and Dongil have moved down the production line towards finishing and garments in an effort to capture higher-value added segments of the textile export line, but the mother firms remain largely millers of cotton and blended yarns. Dependent on imports of raw cotton and local supplies of polyester fiber at international market prices or above, both spinners have suffered from cost hikes in raw materials, labor, and plant costs. Korean synthetics producers share a common origin in commodity production for an export market much like the spinners, yet both Samyang and Saehan Industries have moved aggressively into higher value-added synthetics, including industrial use products. 25 The Samyang Group includes both Samnan Petrochemical and Samyang Kasei, which produce basic chemicals for polyester fiber and engineering plastics. Samyang’s product line now includes engineering plastics and PET bottles, in addition to polyester fiber and filament. Unlike the Samyang Co., which must make its own investments in chemical firms to insure supplies of inputs, Saehan Industries can rely on supplies from the network of Samsung Group firms. Although now in separate Groups, Saehan Industries procures TPA from Samsung Petrochemical, and EG from Samsung General Chemical. This informal linking permitted Saehan to focus investment on production of higher value-added polymerization, polyester base films, and its Jesbon spunbond non-woven material, prior to sale of the plant to Toray in 1999.26 Both Samyang and Saehan Industries operate extensive research facilities to expand and improve their product line, based on polymer technology. Acquisitions and joint investments have also expanded product lines. Samyang is working feverishly to expand its food, feedstuffs, and polyester fiber mix to include chemicals and pharmaceuticals.27 Earlier investments include the wholly owned Shinhan Flour, established in 1956 to refine wheat flour, Samyang Genex Corp. in 1964, and the acquisition of Sun Hill Glucose Co. in 1985, the nation’s leading maker of starch. The Group established Samyang Heavy Machinery in

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1973 as a government-appointed supplier of metal machinery and pressure tools, and retains 28 percent of the shares as the largest shareholder, but chemicals and pharmaceuticals have dominated investment priorities more recently. Affiliates such as Samnam Petrochemical, Samyang Kasei, and Samyang Chemical extend its textile production upstream to chemical inputs. Samyang established Samnan Petrochemical in 1988 with Mitsubishi Kasei of Japan, and the Honam Oil Refinery of Korea’s LG Group, for production of terephthalic acid (TPA) used in manufacture of polyester fiber. A year later, Samyang joined with the same Japanese chemical giant to form Samyang Kasei Co. for production of polycarbonate resin, a type of engineering plastic. Samyang retains 40 percent of the shares of Samnan, and 50 percent of the shares in Samyang Kasei. In April of 1992, Samyang established a medical equipment subsidiary, Samyang Medicare Co., and retains 70 percent of the shares. Other investments include Samyang Finance, Jeonbuk Bank in Chonju, and recently Samyang Data Systems. Profits from sales of sugar, agricultural products, and synthetics, together with loans, have funded dramatic expansion of polyester capacity from 741 tons per day in 1992 to 1,079 tons per day seven years later.28 Saehan Industries has also expanded production capacity in polyester from 492 tons per day in 1992 to 789 tons eight years later. As a member firm rather than mother company in the Samsung Group, and now in the Saehan Media Group, Saehan Industries has less need for its own network of affiliates and diversified investment, than does the independent Samyang. Samyang reported a 30 percent share of the local market in 1999 for staple fiber, and 8 percent share of market for polyester filament. It likewise commanded 32 percent of the market for sugar and 3 percent of the market for feedstuffs.29 Among its competitors, Samyang noted Saehan enjoys a 21 percent share of the market for staple fiber and 8 percent share of the market for polyester filament. Meanwhile, Saehan reported it own bad news in the heated competition with Sunkyong’s SKC for sales of polyester film. Saehan’s share of the domestic film market fell from 41 percent in 1997 to 24 percent in 1999, while SKC expanded its hold in the market in the same period from 38 percent to 46 percent.30 Both Samyang and Saehan remain largely dependent on commodity sales of polyester fiber and filament, with Samyang enjoying closer ties with local customers and Saehan Industries more dependent on export markets. Diversification A variety of diversification strategies reflect differences in the organization, technological base and production needs of these commodity producers. Choongnam Spinning has invested in largely unrelated areas of auto parts and leisure industries. Hankook Reeyon and a joint venture with Japan’s Riken, Korea Riken Electric, both produce auto parts. Leisure industry investments include an Onyang hotel developed by a subsidiary, Choongbang, and a travel service and tour buses operated by Sooduck Tourist. But these remain relatively small investments, compared to the textile operations. Listing solely Dongil

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Aluminum apart from textile investments, Dongil Spinning has invested even less outside the industry. Yet spinning mills occupy huge pieces of real estate, often in initially peripheral areas, which in time become part of the metropolis and both Choongnam and Dongil can fall back on property for collateral on loans, and for future investment if mills are moved abroad. Dongil was also fortunate enough to succeed with its bid some years ago for a headquarters property in the now high-rent Samseong Section south of the Han River. Samyang has diversified in line with its earlier strengths in foods and polyester fiber, while Saehan Industries has diversified solely in-house, reflecting membership in a larger circle of jaebol affiliates. Close ties to the Samsung Corporation, the jaebol’s general trading company, Samsung Fine Chemicals, and Cheil Wool helped extend Saehan Industries up and down the textile production line. But Saehan reflects two major problems in textile industry diversification. One is extensive investment in totally unrelated areas, such as Saehan Media. A further problem is a mill’s financial support of a failing Group company. Saehan Industries reports a fairly strong balance sheet, but must divert funds to cover its guarantee of loans at Saehan Media. Kabool and Tongkook both find themselves pouring funds into electronics subsidiaries at a time when the textile industry is not strong enough to provide extra cash. A strategy of investing profits from textiles in new areas succeeded in the years of the textile boom, but fails miserably when the textile plants need to reinvest profits to finance transfer of equipment abroad or upgrading of technology.

Offshore investment Moving offshore may specialize production with higher value-added manufacture retained at home, and labor-intensive manufacture sent abroad. Moving abroad also forces new investment strategies at home if for no other reason than development of former mill properties. Apart from adjustment at the firms, offshore investment also deeply affects the industry as it becomes more deeply enmeshed in international markets, and necessarily less cohesively focused on local state and market relations. As opposed to investments in assembly abroad whether in electronics, autos, or garments, mills moving abroad with plants must make long-term investments of capital, technology, and personnel. Since the high costs of local labor, real estate, energy, and financing will soon force other Korean industries off the peninsula, the relatively brief decade of mill investment abroad offers a potentially significant precedent of how the transfer of manufacturing abroad affects firm and industry. Offshore investment (Table 5.2) is the best single indicator of both globalization and maturity in Korea’s textile industry, particularly the long-term investment necessary for transferring upstream spinning and synthetics production. Despite a late start in offshore investment compared to its Japanese competitors, Korean spinners have moved aggressively to initiate production abroad with

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Table 5.2 Spinners’ offshore investment 1999: single projects

* Percentage in parentheses indicates firm’s share of the total investment. Source: Korean Federation of Textile Industries, Textile Yearbook 2000 (Seoul: KOFOTI, 2000), pp. 22–23. Jaejeong Gyeongjebu [Ministry of Economy and Finance], Gyeongje Hyeomnyeogguk [Division of Economic Cooperation], Haewoe tuja hyeonji beobin hyeonhwang 12.1999 [Current status of corporations with investments abroad as with investment abroad as of December 1999] (Seoul: Ministry of Economy and Finance, 1999).

large-scale plants. Apart from Dongil Spinning in Indonesia and Pangrim in Vietnam, most of the single project efforts (Table 5.2) have just begun production, and promise to dramatically change the largely local production profile of Korean spinning in the next few years as mills operate with more capacity offshore than at home. Chonbang, Kyungbang, and Taehan have moved cautiously with small investments, although Kyungbang plans to buy new spindles rather than relocating existing equipment from Korea. Chonbang enjoys a lucrative niche on the peninsula in spinning and weaving of denims, and operates a profitable joint venture with Gunze of Japan for production of high quality yarn. Secure in textiles and operating an automated plant in Chonan with 50,000 spindles, Chonbang has turned its financial resources to diversification rather than extensive expansion abroad, focusing on real estate development and the paging service business. Although Kyungbang has invested in expensive machinery to maintain its niche in high quality yarns and fabrics, profits from higher value-added products have not kept pace with costs of production and financing debts. Offshore mills offer one avenue for lower cost inputs of yarn and fabric, but problems of reliable supplies and quality control make offshore production less attractive for a firm focused on higher value-added products.

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Table 5.3 Spinners’ offshore investment 1999: multiple projects

* Percentage in parentheses indicates firm’s share of the total investment Source: Korean Federation of Textile Industries, Textile Yearbook 2000 (Seoul: KOFOTI, 2000), pp. 22–23. Jaejeong Gyeongjebu [Ministry of Economy and Finance], Gyeongje Hyeomnyeogguk [Division of Economic Cooperation], Haewoe tuja hyeonji beobin hyeonhwang 12.1999 [Current status of corporations with investments abroad as with investment abroad as of December 1999] (Seoul: Ministry of Economy and Finance, 1999).

Taehan Spinning has plans for a further investment in Vietnam and may well move most of their facilities offshore, once their financial picture improves. Among firms with more ambitious projects, Pangrim and Dongbang no longer rank among the leading spinners because most of their equipment has already been moved offshore. Commodity producers like Choongnam and Dainong (Table 5.3) can replicate their production and marketing abroad more easily than specialized producers. Choongnam moved early and has already begun to dominate production of yarn for the local market in Vietnam, and will soon expand production of fabric as well. KOFOTI recently reported a shift already in

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textile offshore investment from basic production of yarn or garments for import back to Korea, to integrated production abroad for sale in local markets.31 Korean firms reported that 71 percent of the total value of textile production abroad is plowed back into local markets, with less than 16 percent imported back to Korea. Given the strengths and marketing opportunities for the garment industry in Vietnam, the investment in fabrics will further enhance Choongnam’s growing global network. The effort in India has only begun but if equally successful in tapping a local market for commodity yarn and fabric, and similarly efficient in labor-intensive production with older but still reliable spinning machines relocated from Korean plants, Choongnam will retain only higher value-added production in Korea. Dainong has distinguished itself as a vertically integrated producer of commodity yarns, fabrics, and garments, and has added a higher value-added line of garments with its own small network of boutiques more recently. Integrated commodity production can be shifted offshore, but demands considerable organizational and management skills to insure continuity of supplies and reliable fulfillment of orders. The shift offshore parallels its earlier emphasis on commodity production, and indeed, even its commitment to integrated production. Dainong has also distinguished itself offshore with a joint investment with the huge general trading company Daewoo in the Uzbekistan project, which joins a spinner with a trading company in an alliance more familiar in the Japanese industry. With the collapse of Dainong, Daewoo assumed full ownership of the project and now operates 330,000 spindles in three plants as sole owner of a firm with an authorized capital of $21.5 million.32 Offshore investment: selected firms Dongil Spinning initiated production of polyester sewing thread at P.T.Dong Il Indonesia in 1992 with a capital of $2.5 million.33 Weak links to the local market and a ceiling of 35 percent of sales leave the affiliate largely dependent on sales back to the mother firm in Seoul. Dongil Il Indonesia has been buffeted by simultaneous weakness in both Indonesian and Korean markets. Operating a factory in West Java and marketing offices in Jakarta, the firm has quickly moved upscale from undyed thread to spinning and dyeing about 500 colors of thread in a plant of 450 employees. Dongil retains 75 percent of the shares in 1999 and a Dongil affiliate, Dongil Marathon, a further 20 percent. As a mediumsize Korean manufacturer with no previous experience of investment abroad, local managers sought out the advice and experience of a Japanese miller with an Indonesian plant, Shikibo, to learn about labor relations and benefits, but gained little advice about technology since machinery at Dongil differed greatly from machinery at Shikibo. Dongil originally transferred 17,000 spindles, and has subsequently added a further 17,000 to achieve economies of scale.34 After four years of planning an offshore venture, Choongnam Spinning finally broke off negotiations with a local Indonesian partner in 1991 due to rising wages, inadequate supplies of electricity and clean water, and saturation in the

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Indonesian textile industry. China looked more attractive with its local supply of cotton, but the inefficiencies of the PRC government and problems in cotton supply and distribution turned their attention elsewhere. Little more than a decade after their momentous decision to invest in processing as well as spinning at home, Choongnam gained Korean government authorization for a joint venture in Vietnam in July of 1991. A government-owned textile spinner and processor, Vicotex serves as local partner responsible for government relations with a 30 percent share of the joint-enterprise Choongnam Viet Thang. Choongnam badly needed a local partner at the time, since there were no diplomatic relations between South Korea and Vietnam. Korean plant managers at the site just outside of Ho Chi Minh City guided me among 34,500 older Choongnam spindles arranged in 82 lines, and 434 weaving looms. With an authorized capital of $2 million and overall investment of $12 million, the venture spins yarns and then weaves polyester/cotton fabric for local sales and exports to the Middle East and Europe.35 Choongnam Viet Thang provided only about 5 percent of Choongnam sales in its second year of production in 1995, but it has prospered with 40 percent of its sales in the local market and projects growth in both production and exports. Dongil entered Indonesia mostly on its own with a smaller, focused investment in polyester spinning thread in a nation already saturated with spinners and even synthetics plants. Choongnam entered Vietnam with a spinning/dyeing operation and a local partner well-connected in the textile markets of a nation where Choongnam could easily outclass local production of natural and blended yarn and fabric.36 Neither established marketing networks nor long-standing ties with local partners drew Dongil and Choongnam offshore, but rather the advantages of low production costs and local market opportunities, and possibilities of gaining export quotas from these less-developed nations. In contrast, Samyang and Saehan Industries had the advantage of export ties to Pakistan and Indonesia respectively where their low cost polyester fiber had won a share of local markets. This prior experience of distribution and marketing, supplemented in the case of Saehan by ties to a general trading company like Samsung Corp., distinguished the offshore investments of the synthetics producers from the two spinners above. Samyang had been exporting polyester fiber to Pakistan since 1977, and then won contracts in 1990 for supply of polyester production technology. Samyang had opened a $110 million polyester factory in Hattar, Pakistan, with an annual capacity of 40,000 tons of polyester fiber by August of 1992. Named Dewan Salman Fibre Ltd., the firm is a joint venture with majority partners Dewan Mushtag Group of Pakistan and Mitsubishi Co. of Japan, a general trading company, with the minority partner Samyang holding 12.5 percent of the shares.37 Samyang also invested in a weaving plant in Bienhoa in Dongnai Province, Vietnam, near the new Choongnam Vica plant. S.Y.Textile was established in September of 1993 with a capital of $2.5 million and assets of $5.3 million, and reported sales in 1995 of $2.6 million.38 The latter effort is a joint venture with a Korean partner, Young Hwa Weaving and Dyeing Co. Ltd.

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Spinners generally transfer older, labor-intensive machinery offshore to extend the life of the spindles and further profit from their original technology investment by supplying technicians and spare parts from Korea. Operating more complex polyester production equipment that is difficult to dismantle and transfer, synthetics producers such as Samyang and Saehan Industries have taken a different strategy. Both firms boast of offshore plant sales in which they provide the expertise for designing a plant and putting it into operation. Samyang played this role in Pakistan, but Saehan Industries was the Korean pioneer with a 1987 contract for a polyester filament plant at Baroda Rayon of India worth $35 million. Samsung Corporation is responsible for exports from the plant, while Saehan Industries provides the engineering and operational know-how.39 Saehan Industries completed a polyester filament plant for Orissa Synthetics Ltd of India in 1991. Saehan Industries set up two spinning plants for the P.T.Yasonta Group of Indonesia. A plant for Yasonta’s P.T.Yashindotama began production of high quality filaments at the end of 1990. The trading company Samsung Corporation oversaw the project, Samsung Heavy Industry constructed the plant and purchased equipment, and Saehan Industries provided production expertise. A mill for the Yasonta Group’s P.T.Yatama Ariputra firm was completed in 1992. Saehan Industries parlayed ties with the P.T.Yasonta Group of Indonesia into a jointly invested weaving operation in 1988 P.T.Yasam, now called P.T.Saehan. The venture operates two plants outside of Jakarta with about 700 workers in each spinning and weaving cotton and polyester/cotton blends, exporting most of their production due to constraints in the local market. The firm has survived with grayfabric exports of polyester/rayon blended materials to the Middle East and Hong Kong. The Yasonta Group and Samsung Corp. each hold 10 percent of the shares respectively, with the latter providing export opportunities through its worldwide network of offices. As majority partner with 83.2 percent of the shares, Saehan is responsible for operations and marketing, and for much of the $30.2 million in paid-in capital.40 P.T.Saehan reported total assets of 97.5 billion won in 1999, liabilities of 81.5 billion won, and a loss for 1999 of 2.16 billion won.41 Offshore investment offers further evidence of the relatively rapid transitions for the Korean mills. Synthetics producers such as Samyang and Saehan could rely on either their own long marketing ties, or on ties of their wider jaebol, but spinners were forced to move quickly without the benefit of precedent or longstanding partnerships. Although spinners expanded rapidly with exports from the 1960s, their role was limited to providing local brokers and local trading houses such as Daewoo and Samsung with yarn and fabric, leaving spinners little experience in international networks of sales and marketing, although Choongnam and others established trading offices in Tokyo and Hong Kong. Samyang and Saehan were better prepared for moving offshore, but without the benefit of a general trading company or affiliated construction and engineering firm, Samyang had to forge a different path abroad than Saehan or SKI or

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Kolon. The brief experience of offshore investment has left Korean mills with few reliable precedents to date, given the long gestation period of manufacturing investments abroad, yet they now face far more urgent demands for transferring plants offshore. The compressed time frame of change will only continue among the hard-pressed mills in the hectic days of restructuring. But if the compressed character of change persists in the Korean textile trajectory, the feature of coordination, largely by state or state-mediated industry associations, has abruptly faded in the rush to send plants offshore, and likewise in strategies for diversification. A state or association role in adjustment has been largely limited to technological improvements in processing, and little attention has been paid to the future of Korea’s long production line for export. Changing interests Korean mills developed within a socio-political framework of interest exchange distinguished by organization within large firms vertically integrated for production of fiber, filament, and fabric. Marketing was largely limited to consignment sales to supply the downstream sectors of processing and assembly, or sales to brokers in Seoul, Tokyo, or Hong Kong of commodity fiber or yarn. A long production line for export within Korea provided a reliable market and played a major role in determining prices, government policy on tariffs, taxes and aid for new equipment, and even the amount of production available for export. Mills also benefited indirectly from the quota system for exports, with long-term contracts for filaments and yarns with trading companies holding huge quotas such as Daewoo and Samsung Corp. This earlier framework permitted reliable channels for interest exchange between firms and the state, and among firms for a time despite (1) the rapid extension of the production line upstream and downstream, turbulent rise and then decline of the industry as employer and earner of foreign exchange within the Korean economy; (2) changes in comparative advantage of the industry vis-à-vis its Asian competitors; and (3) wrenching changes in trade policy at home and in the USA and Europe. Although vestiges of the earlier framework persist, particularly the internal organization of the textile moguls and long line for export production, the industry is changing today without benefit of strong, reliable institutions outside the industry such as a stock exchange to raise large amounts of capital, a transparent and impartial banking system, or effective trade associations to resume the role of mediating and orchestrating the disparate and competing sectors of a complex domestic production network. Adjusting textile moguls face new challenges of interest exchange as they move abroad without the benefit of even the existing framework of finance and trade institutions on the peninsula, or familiar array of competitors and contractors in the sangeopgye or industrial circle of Korean textile firms. Offshore investment remains the primary alternative for commodity production among the major mills and effective use of their existing technology, but also provides opportunities for the transition to a flexible regional production network better positioned to

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penetrate markets abroad and weather cyclical changes in the textile trade at home. The experience of mills abroad tells not only of Korean interest exchange in new contexts of socio-political organization, but of the future of a Korean industry with headquarters on the peninsula responsible for production and marketing sites across Asia. Corporatism, clientelism, and contract continue to play a role even as mogul mills move abroad. Corporatism Corporatism turns attention to state and associations and sharing of responsibility for policy formation and implementation in offshore investment. After three decades of pressing development of a domestic production base for textiles, neither state nor trade association were easily persuaded of structural changes or inevitable industrial decline. Smaller investments offshore by assembly ventures such as garment companies began in the mid-1980s, but large-scale investment by mills in manufacturing abroad began to take shape only in the next decade.42 Legal changes from the late 1980s permitting extensive offshore investment, development of the Export-Import Bank, and encouragement from the Ministry of Commerce and Industry for textile investment offshore finally unleashed mogul mills, but with few incentives, reliable precedents, or support structures. Korean textile investors in Indonesia, Thailand, and Vietnam complained of Korean government restraints, although each admitted the importance of ExportImport Bank loans at rates far lower than domestic credit rates on the peninsula.43 Government trade promotion agencies such as the Korea Trade-Investment Promotion Association (KOTRA) provided some literature on local investment procedures abroad, but Korean investors found the local KOTRA offices offshore focused more on trade than investment. One problem facing the state bureaucracy was the rapid shift over the past eight years from domestic investment to investment abroad. A second problem was access to reliable information in China and South-east Asia for either Korean state or investors with little experience abroad, and both state and investors confronted a further problem of assets. Highly leveraged mills could export their older machines, and the managers and technicians necessary to operate plants, but did not have much capital. Textile trade associations on the peninsula face an uncomfortable dilemma in promoting investment offshore. Mandates from a sectoral association like the Spinners and Weavers Association, or from the peak association, Korean Federation of the Textile Industry, do not include dismantling the local industry. Interviews in 1994 with leaders of both organizations reflected their anxieties about the future of an industry with mills moving employment and technology abroad. Yet I found industry leaders in 1996 and indeed, the Director of the Textile Industries Bureau at MOTIE quite positive about the transfer of laborintensive production abroad, assuming higher value-added production continued on the peninsula.44 By 1996 it was painfully clear that labor-intensive production had lost competitiveness in Korea, and also clear that mogul mills could succeed with production abroad. The turnabout in attitudes by 2000 was remarkable.

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KOFOTI President Park now states, “Future textile development will be increasingly dependent on globalization and international cooperation.” KOFOTI’s “Business Blueprint 2000” includes expansion of the industrial foundation and a foundation fund, cooperative relations among different sectors within the serial line of production, and export promotion and international exchange.45 Nonetheless, neither SWAK nor KOFOTI have been aggressively promoting transfer of facilities abroad, focusing rather on exports through upgrading the industry at home and here indeed is the problem. Major mills may initially integrate production abroad and at home, but in time may find the cost of upgrading and automating technology at home less attractive than diverting profits from production abroad into other investments. The lure of high land prices in the mid-1990s drew textile firms to close some of their plants in favor of commercial land real estate development, although so far the major firms still retain production facilities on the peninsula.46 Such concerns, and the rapidity of the shift towards production abroad, have left the industry associations promoting integration and preservation of the local production line, rather than playing a major role in collating information or lobbying government offices for help in offshore investment. Mogul mills appear to appreciate the corporatist framework of textile industry associations and government offices at home more when they go abroad and find themselves with no sources of information other than their own offices. Korean mills and trading houses in Indonesia and Vietnam complained of a lack of credible local government statistics, or reliable access to government officials. I heard other complaints about gaining access to local markets, or contracting with local processors, including joint-investment partners.47 Korean moguls would bring their technology and managers to a foreign country on the basis of existing rules and agreements on exports and imports, on provision of electricity and water, and on labor relations, only to find the ground rules and agreements either revised or ignored. The lack of cohesive and reliable bureaucratic rule in government, or of mediating associations such as a local textile trade association welcoming foreign mills, left the Korean investors scrambling to ensure a supply of electricity just to keep the plants going, much less making long-term plans for production. Aggravating this information vacuum was the organization of Korean investments, usually without a constructive role for a local partner, or indeed for fellow Korean firms. Japanese spinners with a longer experience of offshore investment and representing stiff competition for Korean mills in Southeast Asia, usually join with a Japanese general trading company that enjoys long commercial ties to the foreign nation. Joint-investment permits specialization of tasks and reduction of risk, as evident at Saehan Industries that followed this pattern within the Samsung Group of firms. Samyang was forced to cooperate with a local partner in Pakistan and Japan’s Mitsubishi Co., if for no other reason than the scale of the investment. Choongnam and Dongil went abroad alone despite the experience of LG Corporation in Indonesia, or Kolon Corporation in

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Vietnam, although Choongnam permitted a minority investment in Choongnam Viet Thang by a local mill in the absence of Korean diplomatic ties. Choongnam operates its larger investment, Choongnam Vica, without local participation. Pangrim and Tongkook in Vietnam have also pressed ahead without strong local partners nor trading company support. Corporatist patterns of interest exchange depend in large part on a cohesive industry identity, supported by strong associational ties. Two decades or so of prosperity and often cut-throat competition among Korea’s larger mills may not have permitted sufficient time to coalesce and bridge the often divisive dynamics of diversification and offshore investment now eroding industry identity. Precedents of concentration within firms, and vertical and horizontal integration to capture value-added aspects of production and marketing continue in Korean firms abroad. Contract While one would not expect corporatist strategies to stretch beyond Korea’s borders, one might expect opportunities for contract and more open competition as a precondition for transfer abroad. But the rule of law is often a problem in domestic markets of developing nations where families and clans dominate distribution and marketing with embedded networks of kinship and long-term business ties. Ethnic Chinese dominance in the textile trade, whether assembly, distribution, or marketing persists in many nations of South-East Asia. Certainly Korean investors in manufacture in these nations, like other long-term foreign investors, need law and contract to gain their own foothold in these markets. Also in tandem with other foreign investors, Korean millers press host governments for favorable terms regarding transfer of older spindles, access to electricity, acquisition of land for plants, and controls on labor. Since host countries must compete for foreign investment by providing incentives, investors make every effort to hedge the risk of their investment by securing favorable terms from local officials. Contract and law remains a basic framework, but leave considerable room for negotiation between foreign capital and the host government. Korean executives, long accustomed to bargaining with an authoritarian state, appeared to rise to the task of negotiating with often hardpressed local bureaucracies over issues of electricity and water. Another feature of government relations was corruption, particularly at the local level. A garment executive in Jakarta told of pay-offs as a normal business expense, often at the Customs Office, or offices commanding local electricity supplies. Executives complained not of the amount of the bribes, but of the difficulty of keeping up with the system. A breakdown in procedures at customs, or the power company, or the local government office in charge of roadbuilding would leave a plant with idle equipment and workers. In their own effort to curtail bribes, the Indonesian government would frequently rotate customs officials, leaving the local Korean managers scrambling to contact the incoming officers and establish the necessary links and amounts. But I also heard from Korean brokers and managers with longer experience in China,

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Indonesia or Vietnam explaining how to work effectively with local officials to insure adequate supplies of electricity, or completion of roads to new plants, sometimes in tandem with their local partners or even their local subcontractors. Korean executives appeared well suited to the task of dealing with a new patron, the state, but now with more leverage as a foreign investor with independent sources of capital. Clientelism Clientelist ties persist abroad, but also in more limited ways back in Korea. On a national level, the prosecutions of President Chun Doo-hwan (1979–85) and Roh Tae-woo (1986–91) for illegal accumulation of political funds from Korean business ended with sentences and imprisonment for both, only to be pardoned in December 1997. In the same year the second son of President Kim Youngsam (1992–96), Kim Hyon-chol went to jail for illegal accumulation of a political campaign chest and personal funds from leading business groups.48 Apart from corporate donations to politicians under pressure from the Blue House, business leaders also had to contend with local payments for what is termed, “quasi-taxes.” The latter include semi-voluntary donations to the projects of local governments and local chambers and trade associations. One executive enumerated his donations to police, local-government officials, and even firestation officials. He explained that if you fail to respond, “you have to prepare for a variety of administrative disadvantages.”49 But finance remains the single most important area for patron-client ties. Leveraged mogul mills remain dependent on loans from government-controlled banks to cover operating expenses, and on government authorization for offshore investment.50 Failure of highly leveraged firms such as the Hanbo Group, but also textile groups such as Dainong and Ssangbang Wool drew attention to how banks were persuaded to lend to firms already burdened with debt.51 Kinship ties with other business leaders within business circles, and with leading politicians continue to insure the credibility necessary for gaining necessary financial support. Broader political and economic changes on the peninsula have complicated the task of industrial adjustment in textiles as an earlier framework of bounded clientelism, sectoral corporatism, and competitive contract has come undone. Social networks binding the business elite in the industry persist, and provide additional links to leading politicians and bureaucrats. Appointment of former high-level officials to executive positions in the firm responsible for government relations further strengthens the circle of common interests between state and enterprise. Associational ties have traditionally limited individual access to state favor and support, and in the past decade or so, the growing transparency of Korean enterprise in domestic and foreign markets has likewise supported the rule of law and more even-handed procedures in regulations of export quotas or cut-throat competition in domestic markets. The contradiction between a robust institutional framework of trade associations and state bureaucracy at MOTIE,

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yet relatively ineffective sectoral corporatist strategies of adjustment offers evidence of the fading of an earlier syncretic framework of interest exchange. Conclusion Adjustment by the firms suggests market contention at home and abroad, and persisting social networks strengthening bounded clientelist ties constrain sectoral corporatist efforts at a coordinated restructuring of the industry. An authoritarian state role in creating corporatist associations may explain the reluctance of mills in an age of democratization to cooperate in organizations identified with state controls. A further problem may be the lack of organizational integration within the business community, due to radical discrepancies in scale between the huge jaebol, and even the mogul mills. The Federation of Korean Industries, an increasingly independent peak association dominated by the leading jaebol, remains the central voice for capital in the nation focusing on the organization and specialization of the major jaebol, rather than on issues of restructuring. Even within textile associations, the Federation of Korean Textile Industries serves as an umbrella group for sub-sectoral associations among firms with huge differences of scale. SWAK and the Korean Chemical Fiber Association, for instance, represent mogul firms, as opposed to medium-size and smaller firms in mid-stream and downstream sectors of the industry. Timing may be a further problem, with adjustment forced on an industry that had only recently reached maturity, and in a period of radical change in state economic policy and organization. Inability to muster a consensus around corporatist strategies of change can be traced to wider changes in the industry and Korean political economy. Pressure from foreign trade partners and domestic aspirations for democratization have combined to force the state’s retreat from coordination of the textile production line, controls on prices and supplies, and on restraints on imports. At the same time the growing scale and complexity of synthetics production upstream, and specialization of commodity and high fashion demand downstream leave mogul mills with new opportunities for specialized production and sales growth. Meanwhile opportunities for lower cost production at offshore sites, with attractive local markets, have drawn some mills into new networks as international producers and marketers, poised to recapture commodity niches in the Korean market with internal transfers among their offshore sites. What mills confront is nothing less than the challenge to redefine their mutual understandings of how the local market is structured. Complicating this redefinition is their own effort at globalization and diversification, one pushing the mogul mills into transnational textile conglomerates, the other pulling mills away from their focus on textile production. The tension between deepening commitments to textile production through integrated production or specialization, and diversifying out of textiles into real estate development, leisure industries, or chemicals has brought new cleavages to the industrial circle of textiles, at the same time investments in offshore production have left mogul mills with divided loyalties and priorities

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over local and foreign markets. For instance, tariffs on imported medium count, combed cottons have previously struck a common cord among mogul spinners intent on domestic production of these higher value-added goods. But the consensus may soon fade if Kabool or Pangrim or Choongnam upgrade production abroad to capture niches in those developing markets, and then bring those fabrics to the Korean market. If the earlier pattern of bounded clientelism, sectoral corporatism, and pricebased contract is in transition at home, mogul mills moving abroad confront new modes of interest exchange in Vietnam, Indonesia, Pakistan, China and elsewhere. One persisting feature of the textile chronicle in Korea remains the effort to encompass multiple channels of interest exchange that precludes the dominance and therefore entrenchment of any one channel. We can now summarize the social systems of production in Korean textiles underlying this complex bordering process in Table 5.4. Korea’s cultural landscape embeds market and contract in a skein of social ties. A landscape of industrial organization with a prominent family role in the concentration of market, management, and investment at mogul mills sets further boundaries on impersonal contract. Long historical experience of state coordination persisting from the colonial years, and mediated by well-established trade associations likewise affects the contractual exchange within markets. Coordination of state and association, concentration in family firms, and longstanding cultural precedents of social networks have left Korean entrepreneurs with multiple channels of exchange, whether directly with state or market, or between state and market. A dynamic of both brokering and bordering clientelist, corporatist, or contractual ties remains central to the Korean experience of enterprise in the textile industry. The textile chronicle does reveal a shift in the relative salience of competing modes of interest contention, with more opaque, informal modes less significant today and more formal modes, particularly liberated market dynamics relatively more important. This raises questions of causality addressed recently in a study of legalization in Asian societies.52 Although the author focused on law within regional organizations, the same causes appear relevant when explaining the growing significance recently of law and contract as efforts to ensure transparency in market dynamics. A demand-driven, functionalist model looks to a “stable, rule-governed environment for international economic transactions,” and to accountability, precision, and effective institutional implementation of law and contract. South Korea’s strong ties to the USA and later to international export markets, and now also to dominant trade regimes such as the OECD, would suggest the strength of market demand for more transparent modes bounded by precise definition of responsibility and consistent implementation. The persistence of alternate modes, both informal and formal, turns attention to other explanations. A cultural argument would highlight local precedent and institution, and could be contrasted with domestic political explanations for greater or lesser reliance on law and its equitable, impersonal implementation in

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structuring interest exchange. Studies of the First Republic under President Rhee often highlight the role of domestic politics, and perhaps can help explain the initial effort to legislate labor relations. The role of law and contract in interest exchange may also be a result of the state’s political and social priorities, widely cited in the literature on Korea’s “strong state.” Comparative study of the recent history of interest contention in other industrial sectors would complement the textile chronicle and provide a basis for sorting out causality in specific periods.

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Table 5.4 Social systems of production in Korean textiles

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State

Polanyi argued that greater autonomy from society and polity distinguished the modern market economy, while social relations of kinship, religion, military power and political precedent held sway in earlier economies. Yet recent studies of the persisting social bonds behind market relations appear particularly relevant to Asian forms of capitalist organization.1 Financial and corporate restructuring has brought the Korean state back into the economy despite efforts in the 1990s to draw back from market intervention. Perhaps more significant is the persistence of the state in sectoral policy, evident in the remarkable intervention to support the Taegu area weavers. This chapter offers a detailed picture of the transition towards societal governance in the restructuring of textiles. How does the state devolve governance to the organized interests of capital? What social systems of production must develop to permit a wider societal role? I argue first that the Korean state remains a pivotal mediator in the restructuring of midstream textiles, rather simply custodian or regulator. State authority remains critical for maintaining trust or credibility in the upgrading of serial production among various sub-sectors of the industry. I argue further that the complexity of reorienting serial production for higher value-added markets, and problems with financing the change have impeded devolution of state responsibility to semiofficial association. State and industry identified a crisis of restructuring in the Taegu area, and joined in the $680 million Milano Project to save the jobs and investments of an entire regional industry.2 Again we find a compressed period of dramatic change, coordination between state and the private interests of capital, and a crisis. Again anxieties arise about how to better integrate a midstream sector of weaving, dyeing and finishing into a domestic line of serial production. Haggard and Moon argued that the gap between societal and statist explanations of adjustment could only be addressed through attention to the interests and institutions of both political and societal actors.3 In the absence of substantive sectoral studies of state and economy, discussions of a changing state role remain on a very general level. Peter Evans cited the Korean textile industry as one example of how the state embeds itself in markets through nurturing of targeted industries, whether with “midwifery” in a “greenhouse” of tariffs, import restrictions, and investment

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incentives and controls, or with “husbanding” the evolution of a sector in an industry. Images of midwifery and the husbanding or managing of resources capture earlier state roles in an industry critical for employment, basic consumer goods, exports and foreign exchange. But Evans’ term custodian does not adequately capture the proactive role of the contemporary Korean state in an era of adjustment, and indeed deflects attention from complex state/capital dynamics with suggestions of a disinterested, passive state content with regulatory powers. An industry chronicle of formation, growth and maturity has tracked shifts from midwife to manager, but more recently to mediator rather than simply custodian. The structure of an industry in decline has forced the state to take initiatives beyond simply a “custodial” role in textiles, moving beyond regulation to “mediation” with multiple resources in finance and policy instruments. Following Moon’s seminal depiction of the demise of the developmental state in South Korea, Kim Eun Mee cited a “limited developmental state” oriented to goals of foreign policy, social welfare, as well as of economic development.4 This picture of a targeted state policy better taps differences of policy and practice in depressed industries such as textiles, and disparities in state approaches even between technology-intensive and labor-intensive sectors within the same industry. Images of midwife and manager depict earlier phases of a state stitching and stretching serial production across sectors, particularly in synthetics with its greenhouse of protection, or spinning with state prodding to prioritize yarn supplies for downstream weavers and garment makers. Bridging the dichotomy between developmental and regulatory state, a role of mediation represents a remarkable shift for both state and capital basic to emerging conceptions of market control. The state played a major role in the development of Korea’s textile industry, helping to create, extend, and integrate an extensive line of serial production for export. Globalization in the past few years has vastly complicated the task of line integration as both state and industry now find themselves moving products between national borders for different aspects of production, finishing and assembly. Restructuring of an industry demands a reformation of its ties to the state as well, as new ties across industries and across borders redefine the interests and institutions of both state and capital. Successful adjustment today depends not only on retaining technologically sophisticated, higher valueadded segments of the production line within Korea, but also on maintaining an effective network of production and marketing abroad to ensure a reliable supply and demand to keep the expensive local enterprise operating at full capacity. State and industry must address two dilemmas of collective action in order to sustain and extend a line of serial production: the interest of society versus interests of industry, and interest of an industry versus interests of individual firms. A societal interest includes a consumer priority of adequate supplies and reasonable prices, but also a macroeconomic priority of sectoral growth for earning foreign exchange and expanding export volumes. An industry interest

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includes ever cheaper and more reliable sources of supply and demand, as well as better access to markets abroad and at home. Meanwhile textile and garment firms must look to profits and growth to spur investment and reinvestment in the industry. State and industry have cooperated at least nominally in promoting localization of the industry, often with sacrifices such as artificially higher prices of local supplies of polyester until synthetics plants, and then petrochemical plants could achieve economies of scale necessary for lowering the costs of production. Coupled with collective action dilemmas of formation and then extension of a serial line of production for export has been the challenge of matching supply and demand up and down the line. General trading companies, supported by multiple levels of brokers have come to play that role in Japanese textiles and garments, often with long-term relationships between suppliers and consumers. The Japanese state has likewise played a role, particularly in crises of adjustment and trade. With a shorter and far more turbulent history, state bureaucracy and its semi-official organizations, whether sector-specific garment export associations, or peak associations such as KOFOTI, have played a far more prominent part in extending and integrating the serial line of production in South Korea. Globalization, diversification, and adjustment over the past decade have forced the firms themselves to take the initiative in an international network of supply and marketing, but still in tandem with state and trade associations intent on sustaining and improving a “Korean” serial line of production for foreign exchange and positive trade balances.5 Interest groups Multiple levels of mediation have come to define the contemporary state role in Korean textiles, as opposed to the earlier dominance of the Textile Bureau at the Ministry of Commerce and Industry (MCI) in the heady days of the textile boom. MCI gave way to the Ministry of Trade and Industry by the 1980s with a “Textile and Consumers Goods Industry Bureau.” Roh Chungkyu, Director-General of the Textiles and Consumers Goods Industry Bureau under the MTI spoke publicly already in the 1980s of the growing complexity of government planning for the industry. Detailing elements of a five-year government plan for textiles emphasizing new materials and high value-added fashions, Roh Chungkyu promised the government’s financial and technological support in a new alliance of state, business, and academia. He lauded private sector initiatives in fashion design such as research institutes at major moguls, and joint private-public efforts such as the Korea High Fashion Association linking textile and fashion companies.6 Roles of midwife and husbanding in the upstream sectors had now given way to buffering midstream and downstream sectors during their transition to higher value-added production. But society had also begun to change with the growing restiveness of students, labor, and other civic groups against the strong state. The future of coordination lay with associations rather than government offices.

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Bureaucratic reform at MTI in the 1990s brought the massive Ministry of Trade, Industry, and Energy (MOTIE) in 1994, and then the Ministry of Commerce, Industry and Energy in 1998 (MOCIE) that today includes only a small division on textiles within the Bureau of Electronics, Textile and Chemical Industries.7 Some of those textile experts have moved into MOCIE-supported projects in the private sector, extending the reach of the central government to the market itself, and assuring good communication and high levels of trust between MOCIE officials in Seoul and their colleagues in the field. Former MOCIE officials play major roles in Taegu at the Korea Textile Development Institute, the Korea Dyeing Technology Center, and the Milano Project itself. The Milano Project includes a total of twenty-one staff in Taegu, of which only three come from the private sector. Just as the planning offices of major Korean jaebol play a dominant role in the direction of the firms, so also at the research institutes and joint state-business projects, planning offices dominate major decision-making. Visiting Taegu in June of 2001, I found MOCIE and former MOCIE personnel well-positioned in the planning offices of all major institutes and project offices. Nonetheless, changes in administrative personnel offer further evidence of the comparative decline of textiles within a far stronger Korean economy and growing complexity of a global industry. A far smaller textile operation at MOCIE is fully occupied today with (1) keeping track of programs and policies at KOFOTI and other semi-official textile associations; (2) of the textile trade through semi-government organizations such as KOTRA (Korea Traders Association) and KITA (Korea International Trade Association); and (3) of changes in financing for the mills at the Finance Ministry. MOCIE retains a major role in legislation supporting depressed industries, which includes the mid-stream sectors of textiles, and in new trade and industry initiatives such as projections of growth for textile exports. Lee Byung-ho, Director of the Textile and Clothing Industry Division in July of 1996 supervised a staff of five specialists responsible for keeping MOTIE officials informed of trends in the industry. Lee explained that many of the functions of the earlier bureau have been specialized and spun off into other offices such as trade, or energy, or offices concerned with depressed industries. Mill executives left with the daunting task of keeping contact with multiple government offices at MOTIE and the Ministry of Finance, agreed with Director Lee’s assessment of a specialization of industry oversight at government offices. Specialization and diversification at the mills have complicated the state mandate of oversight and coordination. Internationalization is a further complication, with the state hard-pressed to match the sophistication of firms in gathering and digesting information in global markets. The Textile Division at MOCIE today must coordinate a government position on textile policy and help shape legislation, leaving it preoccupied with coordination of internal policy rather than with external direction and enforcement of industry policy. Three types of organizations have extended and refined the government role in the industry, linking state with industry in a multi-layered alliance of semi-official groups chartered and partially funded by the state to

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maintain a national interest across multiple sectors. KOFOTI (Korean Federation of Textile Industries) stands at the pinnacle of an extensive network of sectoral trade associations, preeminent in government policy and dominant in representation of the industry worldwide. Although closely linked to the government in its history, administration, and funding, the association highlights its industry-wide mandate: “a non-profit organization representing general Korean textile industries domestically and internationally.”8 Unlike the broad-based and multi-functioned KOFOTI, the Korean Export Association for Textiles or KEAT limits its activities solely to exports of fiber, fabric, and yarn. Both organizations have assumed government functions such as credit allocation at the former and issue of commercial visas at the latter, both are governed by private sector, largescale firms but managed by former government officials. The most recent example of how the state has specialized and extended its role in the industry through subsidiary organizations is the Korea Dyeing Technology Center in Taegu or “Dyetec” that draws on the resources of national, provincial, and city governments. KEAT Export associations emerged in the early 1960s to organize trade in the absence of general trading companies. The advent of a quota system for textile exports under the Multi-Fiber Arrangement in the 1960s spurred organization of textile export associations under tight government control for the allocation and supervision of export quotas.9 The Ministry of Commerce and Industry gave final approval for the Korean Export Association for Textiles or KEAT in February of 1981.10 Organized through a merger of the Fabric and Yarn Export Association and the Cotton Textiles Export Association, KEAT reflected the shift in textiles from cotton to blended yarns and fabrics, and specifically the rise of synthetics. Establishing offices in Seoul and Taegu, the organization likewise gave recognition to the capital for both trade authorizations and production, but also to Taegu, the center for weaving and finishing of polyester and blended fabrics.11 KEAT activities include issue of commercial visa and export licenses, distribution of export quotas to individual firms, and reports to government agencies. A Division Chief at KEAT distinguished between basic and open quotas for exports to designated foreign markets. A vendor’s assigned quota can be maintained if filled in the previous year, but will be reduced if not filled. An open quota is distributed directly by KEAT each year to firms based on exports to non-quota markets, especially Japan, Singapore and Hong Kong, on percentage of higher value-added goods, and on investments in plant. The latter criteria reflect association priorities for adjustment. With roughly 80 percent of quotas allotted on precedent and performance, and 20 percent on criteria of adjustment, the association has added adjustment to its original functions of distribution of quotas. New agreements in the World Trade Organization on textile exports will eventually eliminate the quota system that guaranteed the less developed exporting nations a set amount of commodity exports annually to major markets. Exports of higher value-added goods outside of the quota system, and to nations

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outside the quota system have outpaced quota exports since the early 1990s. A visit to KEAT offices left me with the impression of a very busy bank with multiple service windows for filing applications, as well as inner offices collating information and preparing reports. Apart from quotas, KEAT retains the critical function of issuing commercial visas, including review of financing and company structure. A primary objective of KEAT from its founding has been “order” in the industry, whether “orderly” exports to nations protesting Korean dumping abroad at prices below cost, or with excessive competition at home and a balance between supply and demand of textiles. Examples of the latter include voluntary restraints on exports negotiated between association and individual firms to prevent firms eager to increase market share from dumping products in sensitive foreign markets.12 Few organizations have played a more central role in integrating a serial line of production mid-stream and downstream, and in moderating competition along the line to avoid sanctions from major importing nations on Korean textile exports. KEAT reports directly to MOCIE, but disputes between sectors would also be aired at KOFOTI. KOFITI would take the lead in proposing legislative changes in textile export policy, although only with the direction and support of officials at MOCIE ultimately responsible for drafting legislation. What is perhaps most intriguing about KEAT with its official functions in issuing of visas and distribution of quotas, is its blend of governance by the private sector and dayto-day management by former government officials. KOFOTI The Korean Federation of Textile Industries is responsible for policy rather than export procedures, but shares with KEAT the blend of private sector governance and management by former officials from MOCIE or the Foreign Ministry. Eight chairmen from the leading moguls comprise the KOFOTI Board of Directors, four from spinners and four from synthetics firms, as well as eight executive directors from the major sectoral associations, mainly retired government officials. But unlike many policy organizations that remain semi-official think tanks, KOFOTI has been entrusted with the financial resources and legislative clout to play a major role in melding the diverse sectoral interests into a coordinated response of adjustment and technological advance.13 Kim Eui-young identified the comparative strengths of KOFOTI over comparable peak associations in other industries with its independent finance and the diversity of downstream sectors which lack a unified voice in relations with the state.14 While oligopolistic upstream sectors of synthetics and spinning have access to government offices as individual firms, through sectoral associations, and through other peak associations such as the powerful Federation of Korean Industries, the mid-stream and downstream mix of medium-size and smaller firms must rely on KOFOTI. Upstream firms might benefit from coordination downstream insuring reliable information and enforcement of jointly negotiated agreements, but I found executives at upstream firms often without interest in or knowledge of KOFOTI policies, regarding it

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rather as an adjustment facility for smaller firms downstream. Yet a third reason for the comparative strength of KOFOTI is the state priority on reversing decline in an industry with strong potential for employment and exports. Adjustment has brought the association both funding and a mandate. Equipment controls and support date from the “Interim Measures for Textile Industry Equipment” of 1968, replaced in 1980 by the “Textile Industry Modernization Promotion Law,” and a new policy of joint state-private sector funding. A Textile Modernization Fund was established in 1981 under this legislation to provide low-interest loans of 6 to 8 percent per annum with medium term maturity, but neither government nor industry had met the goal of 60 billion won through 1985.15 Designation as a “depressed industry” under the Industrial Promotion Law in 1986, however, made textile and apparel firms eligible at the outset for 180 million won in loans at 5 percent for equipment modernization, and continues to distribute credit through multiple extensions of the program.16 KOFOTI publicizes the programs, determines eligibility, screens and recommends applications to the Industrial Policy Division at MOCIE, which in turn approves funding to be obtained through banks. KOFOTI thus retains control of a large revolving fund of credits since the five year credits are paid back at 5 percent interest, as well as additions included in the government’s annual budget. Aid has been distributed through a Structural Adjustment Fund to improve technology in spinning, weaving, and dyeing with an eye to new materials, and a Rationalization Fund to spur investment in new technology at small and medium-size firms in knitting and sewing.17 Results to date in the dyeing sector are impressive. The industry registered growth in annual output of dyed fabric of 42 percent in the decade through 1999, expanding from 3.3 billion in 1989 yards to 5.6 billion yards in 1999. The same industry reported a decline in employment over the same period of 29 percent, falling from 42,430 workers in 1989 to 30,484 in 1999.18 A further benefit to the industry has been capacity controls, particularly at mid-stream dyeing and weaving plants, to discourage expansion and newcomers. Promotion efforts reflect the state’s specialization within the industry through a semi-official organization, but also the state’s commitment to change and adjustment. The bulk of the assistance has flowed to midstream firms in processing and dyeing of blended fabrics, particularly in the Taegu area, reflecting government priorities in serial production. Apart from the Industry Promotion fund, KOFOTI also administers a joint public-private fund to promote fashion design and has recently opened a new five-story fashion center at its headquarters in Seoul.19 The association continues to collate industry information for both member firms and the government, and is responsible for a range of monthly and annual publications on the industry. Dyetec KEAT and its predecessor export associations developed in the 1960s with the initial export drive. Leadership in adjustment programs brought KOFOTI into

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prominence later, through dating already from 1967. The Korea Dyeing Technology Center or “Dyetec” in Taegu represents a new style of cooperation bridging not only the public and private sectors, but also multiple forms of state governance in an era of democratization and decentralization.20 Established only in 1994 and operational from 1996, Dyetec is the centerpiece of the Taegu Dyeing Industrial Center located in Pisan, a suburb of Taegu.21 State efforts in the 1970s to reduce traffic and pollution by concentrating assembly and especially polluting industries within industrial districts spawned industrial centers such as Panweol near Seoul, and others near Pusan and Incheon. Local and national governments purchase the land and provide low-cost loans to build infrastructure of electricity, steam, water supply and treatment, and transportation.22 Huge plants run by Tongkook or Kabool dominate a landscape filled with smaller dyeing operations of specialized dyers. Dyetec had refined its operations by 1999 to focus on training of technicians, forging cooperative seminars and research projects among industry, academia, and their own Research Institute, and problem-solving and testing with their extensive equipment. They continued their commitment to both environmental protection with cleaning of waste water, and better dyeing and finishing technologies.23 Improvements in dyeing and fashion design take priority in the Textile Vision composed by KOFOTI and approved by MOCIE, critical to the future of higher value-added textile production on the peninsula. The Plan includes goals of textile and apparel exports amounting to $25 billion in 2003 and $30 billion in 2007.24 Fashion can be left to research centers and schools or partially obtained through licensing, but dyeing is a critical industrial process demanding huge amounts of energy, clean water, and water treatment facilities. Moreover, leading makers of dyeing technology in Japan and Italy are loath to part with their best machinery or top technicians. Perhaps the single most important gauge of Korea’s future in the industry is an industry-wide commitment to improve dyeing facilities despite the cost of technology, technicians, and particularly of water treatment facilities to clean effluents. Most spinners and weavers prefer to sub-contract out most of their production, despite the pattern of synthetics or spinning moguls extending themselves into allied sectors along the production line. Even integrated firms such as Dongil will sub-contract out some of their yarn, given the high cost of maintaining their own dyeing machinery. Weavers can serve as assemblers and exporters of fabric or even garments through sub-contracting, but dyers simply dye fabric or yarn. Dyers are thus the most independent of sub-sectors in an industry desperately in need of integration and cooperation, and problems of equipment and capacity in their sub-sector remain the most serious bottleneck today in upgrading a line of serial production.25 Annual production of dyed fabric increased from across the decade from 1990, although the number of fabric and yarn dyeing machines fell from 6,360 in 1990 to 4,852 in 1999.26 The huge rise in production coupled with small expansion of machinery suggests replacement of older machinery with higher capacity new technology.

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The Textile Division of the Ministry of Commerce and Industry recommended establishment of Dyetec in May of 1993, and won presidential approval and partial funding for its new building in December of 1994. Construction and basic equipment in the new six-story research center cost a total of 110 billion won, with 40 percent of the total provided by the national government, 35 percent by Taegu City Government, and 25 percent by member firms.27 Central government pays for machinery, Taegu City government pays for buildings, and private industry pays for operating expenses of the institute. Planning is now divided into four-year segments. In the first segment, 1995–99, the central government invested 10 billion won, Taegu City 8.7 billion won, and the private sector 10 billion won for a total 28.7 billion won budget ($28.7 million).28 The Center plans to double its personnel in the next few years as it adds a pilot factory for knit products budgeted at 15 billion won ($15 million), and a design promotion center budgeted at 27 billion won ($27 million). Two five-story buildings housing the new projects were roughly 75 percent complete at the time of my visit in June of 2000. Five divisions reflect the scope of Center research, including polyester, cotton blends, nylon, and two pollution control departments. The Center opened with a skeleton crew of twenty-six in 1996 rising to seventy by 1999. District members paid for operating costs of the Center, although the local government funded foreign cooperation projects and two-thirds of the 4 billion won annually allocated for training of technicians.29 Staff and directors at the Center spoke proudly of “cutting-edge” dyeing technology in the basement of the building as the key to training and research. I asked about the balance of cooperation and competition among member firms, and heard of problems with dyers traditionally very possessive about their know-how. The Center seems most effective in addressing common problems with new machinery, particularly installment and basic adjustment. Member firms would also contract the Center to experiment with the equipment according to their specifications, and report the results back solely to that firm. After four years of operation, the Director of the Planning Department and former MOCIE Textile Section official Ryu Jong-woo noted that 19 percent of firms contracting Dyetec came from the Seoul area, evidence of the Center’s growing national role. Dyetec and the Pisan Dyeing Industrial Center represent the future for midstream processing in Korean textiles, and also a viable alternative for cooperation between larger and smaller firms in distinct, well-defined sub-sectors such as dyeing. I was also impressed with the balance between national priorities in capturing higher value-added aspects of textile production for the domestic industry, and the regional priority in maintaining a textile industry for employment and production. Dyetec served an extensive network of Taegu weavers churning out huge volumes of polyester and blended fabrics, but could also extend its reach to Pusan and Seoul and other production areas given the short distances and excellent highway and rail connections within a geographically small nation. Equally important was the integration of public and private interests evident at the headquarters of the Taegu Kyungbuk Textile Industries Association. Executive

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Director Yoon, a former Textile Division official at MOTIE, spoke in 1996 of the variety of textile sub-sectors in the Taegu area, including weavers, dyers, knitters and garment makers. An effort to coalesce and mediate their divergent interests was complemented by research activities of the Korea Textile Development Institute in the same building. Officials at both the Association and the Institute cooperated closely with the Dyetec staff at the Pisan Dyeing Center, as well as with staff of member associations such as the Kyungbuk Weaving and Knitting Industry Cooperative with headquarters in downtown Taegu.30 In a return visit four years later, I found Mr Yoon now heading up a private textile inspection firm headquartered at Dyetec, and his replacement at the Taegu Kyungbuk Textile Industries Association busy with new funding responsibilities in the Milano Project, but still complaining of reluctance among small and medium-size firms to cooperate.31 Korean weavers continued to dump their polyester fabrics on foreign markets at below cost just to keep the banks at bay. A MOTIE initiative to expand government-sponsored warehouses was one strategy to keep tabs on inventories and their destinations, but the Milano Project represented the new direction of an industry oriented to fashion and higher value-added apparel. The huge textile manufacturing base in the Taegu Kyungbuk region faces two major problems.32 One is decline in international markets for its main export item of lower-cost polyester fabrics. The second is a lack of integration into a local serial line of production to capture higher value-added aspects of textiles and garments. Labor-intensive OEM production for Hong Kong brokers no longer provides sufficient sales to sustain the industry. The solution is upgrading weaving, dyeing and finishing to take advantage of upstream and downstream strengths in Korea, and then penetration of higher value markets abroad. Reaching a consensus on this rationale between state and industry is one achievement of the Milano Project. Impressive planning of seventeen separate and well-focused tasks is a second achievement often lacking in combined national and regional efforts at industrial restructuring elsewhere. A tour of building projects, computerized testing and design centers, and of information centers in June of 2000 provided clear evidence of implementation. The first four-year plan, 1999– 2003 includes mainly infrastructure projects of buildings, hardware and software. A more ambitious effort to move the regional industry from fiber and fabric to apparel and fashion in the next four-year plan will demand more fundamental changes in technology and attitudes at the firms themselves, but clearly the project has gained momentum thus far. Resplendent in its Samseong glass-enclosed towers in Seoul, KOFOTI stands at the peak of a pyramid of well-integrated textile associations bridging the interests of capital and state. But beyond procedural issues of mediation, there is the further substantive question of the industry’s future. The Korea Textile Development Institute in Taegu, funded by MOCIE, will double its staff to about 120 in the next few years as it combines the task of gathering technical information with the effort to distribute relevant materials to local firms. Extending soon from simply the technical side to aspects of management and marketing, and from weaving,

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dyeing and finishing to information on design and fashion, KTDI faces the formidable task of inducing labor-intensive factories to automate and specialize, without ignoring the needs of more sophisticated firms interested in the latest energy-efficient and multi-use machinery. Dyetec represents a bold effort to advance the mid-stream sector of the Korean industry with improved facilities for dyeing. I wondered in 1996 whether it could gain the cooperation of larger and smaller firms, as well as of national and local governments in committing the funds to adapt and improve on Japanese and German dyeing technology. Despite fluctuations in markets for locally woven and dyed fabrics, I found that Dyetec by 2000 had found a secure place among leading firms of all sizes. Calibration and specialization of technology for the specific needs of the Korean industry through a variety of new hardware and software systems appear promising, given new investments of capital and technicians supported by the Milano Project. Interest versus interests Each of the associations provides a forum for interest exchange between capital and state, and also along the production line between larger and smaller firms. Former officials from MOTIE, the Ministry of Finance, or the Foreign Ministry mediate the interests of capital to the state as executive directors of the associations, and bring state priorities to the associations. In the absence of clear boundaries between association and state bureaucracy, association officials appear to play on the strength of their former positions in government to gain a hearing for the association, and keep the association current on changes within the government, just as their association keeps the government informed of the status and progress of the industry. A continuity of former government officials within leadership positions at the associations on the national and local level permits greater coordination and remarkable cohesion within the pyramid of semi-official trade associations. A shared ideology about state-capital cooperation pervades the “Textile Vision” statements of both KOFOTI and the Korea Textile Development Institute (KTDI) in Taegu.33 This in turn provides direction for the Taegu Kyungbuk Textile Industries Association and Dyetec at the Pisan Dyeing Industrial Estate. Beyond simply ideas, the documents drive priorities with arguments for budget battles over joint funding of cooperative projects. Extending and refining its role in the industry through this network of associations, the Korean state today plays a far more complex role in extending and refining the line of serial production for textiles. I found the staff at the Textile Division of MOTIE remarkably well informed about industry issues, though less familiar with individual firms. They appeared to harbor no grudges about success or failure at mogul firms, and no loyalties to either firm or sector. Their candid appraisal of the vulnerability of labor-intensive sectors, and their promotion of efforts to move older technology offshore stood in sharp contrast to the reluctance of their counterparts at the associations. One state official even spoke of an industry future without much spinning at all, maintaining only higher value-added segments on the peninsula. One unintended function of the

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devolu tion of state tasks to associations has been a widening gap between state and firm, yet the state continues to fund the adjustment programs through KOFOTI, support research on industry technology through the Korean Institute for Industrial Economics and Trade (KIET), and share the cost of new technology and training in fashion design.34 Capital continues to lobby for state funding and favor, as well as state support in trade policy.35 Corporatist interest exchange would include associations designated and partially funded by the state to work with capital in joint formation and enforcement of industry policies of adjustment. Associations such as KOFOTI, the Korean Export Association for Textiles, or Dyetec fit the criteria of state recognition of designated organizations to represent the interests of capital, and of partial state funding. Insertion of former state officials directly into the administration of the associations reinforces state ties, but the growing role of capital in the designated trade associations founded by a strong state must also be recognized, particularly in the recent funding of the associations. What has weakened the Korean corporatist alliance of state and capital thus far is the absence of a political party such as the Christian Democrats in northern Europe with their commitment to tripartite strategies of interest negotiation, and the absence of labor within the established negotiating framework between state and capital in textiles. Whether President D.J.Kim’s recent efforts to include labor in policy discussions of restructuring during the financial crisis will result in enduring tripartite structures remains to be seen. Yet corporatist strategies evident in strong industry associations persist and provide the most extensive and reliable channel of business-state cooperation in the industry. Direct ties among mogul mills, politicians and bureaucrats still provide an alternate path to state authorizations and state policy. Although capital has gained leverage in this asymmetrical interdependence, reliance of highly leveraged firms on state authorization for finance provides fertile ground for clientelist ties. The persistence of bounded clientelism evident in familism, personal links of kinship in and education in hiring, and personal ties joining state and major firms, and firmly grounded in mogul reliance on state favor in finance provides a balance to corporatist ties. Ties between moguls and their smaller counterparts down the line of serial production in textiles represents a second major area of interest exchange promoted through trade associations. An upstream oligopoly in synthetics and spinning finds no counterpart downstream, and indeed, no competitor or cooperator in trade with the relative decline of textiles among the exports of Korea’s general trading companies. Patronage of larger firms has long been evident in ties between huge upstream mills controlling supply of yarn and fiber, and their downstream clients. Although price controls moderated the leverage of upstream mills, the SWAK event of 1973 stands out in retrospect as one of the few times the state ever challenged mogul power in pricing and provision of critical inputs for the weavers, processors, and garment makers. A newfound appreciation for the role of mediumsize and smaller firms from the late 1980s coincided with growing disenchantment with jaebol dominance in capital and markets, forcing legislation to protect the smaller firms. Dependent on larger firms for contracts, smaller firms usually have

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to endure long delays in payment as the larger firms garnered interest on their cash before finally releasing it to sub-contractors. Only a complex, reliable, and flexible network of sub-contracting in textiles can meet the demands of fast changing consumer tastes. A visit to a group of smaller independent weaving firms in the Taegu area in 1996 was a powerful reminder of patronage in a fast-changing industry. Tongkook or Kabool or Kolon would provide orders and even loans for machinery to local weavers when markets were strong, but would turn to their family of sub-contractors when orders were scarce. Independent weavers survived downturns on industrial estates within a cocoon of efficient energy supplies, transportation, and warehouses, but had to scramble to keep abreast of mogul mills’ market and production priorities. Dominance of large-scale firms continues to distinguish the Korean pyramid of trade associations, and remains at the core of patron-client ties between larger and smaller firms. Mogul mills dominate the board of KOFOTI, and although much of the adjustment funding has been directed mid-stream and downstream, sustaining and upgrading the local line of serial production offer moguls a huge local market for their upgraded products. KOFOTI also lobbies the government on trade policy critical for the success of moguls abroad, and for their integration of a global or at least regional system of production and marketing. But the focus on operations rather than policy at a second association, the Korean Export Association for Textiles (KEAT) offers more tangible evidence of patronage. Assigned quotas to export markets can be renewed annually if a firm fills the quota in the previous year with the agreed upon level of exports. Leading general trading companies that gained quotas in the initial years of the export boom could sub-contract those quotas to smaller firms, and then count the exports of the latter as part of their fulfillment of the quota. Mogul mills and the big trading houses dominated the quota trade through the early 1990s, subcontracting the precious quotas to eager client traders when their own trading operations lost interest or leverage in the targeted export good or market. Scale also made a difference at Dyecen and Dyetec in Taegu, with assessments based on size and use of facilities. Larger dyeing plants of Tongkook or Kabool on the industrial estate enjoyed a constant stream of orders, generous funding for equipment procurement and upgrading, and better access to information on changing trends in local and international demand. Smaller dyeing plants survived with orders from both firms as well as from other smaller weavers in the Taegu area. Dyetec competes for research contracts among the moguls, since Tongkook and Kabool also operate their own research centers where they could develop new dyeing techniques or calibrate their own machinery. Asymmetrical interdependence of cooperatives on the larger firms leaves the smaller plants vulnerable to the demands and priorities of the moguls. Cooperation for competitiveness, 1993–96 The urgency of adjustment has spawned new calls for cooperation in hopes of improving the competitiveness of Korean textiles in international markets.

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Meetings in 1993 and again in 1996 drew together diverse players along the line of serial production to voice their suggestions for improving coordination. A Private Sector Committee for Improving National Competitiveness was organized in 1993 as a joint public-private forum for discussion of adjustment policy. Peak trade associations had founded the committee, led by Chey Jong-hyon of Sunkyong and chair of the Federation of Korean Industries, Kim Sang-ha of Samyang and president of the Korean Chamber of Commerce and Industry, and Park Yonghak of Dainong and chair of the Korean Traders Association. In a sign of the changing status of textiles in Korean industry, only two of the fourteen trade associations among the founding members were textile groups, and only a few of the seventeen leading jaebol among the founders had strong textile operations. Yet the group addressed problems of synthetic fiber, fabric, and knitted goods in only its second assembly in December 1993.36 Some 320 participants were drawn from government, academia, industry, and the media. Koo Chang-nam, chair of Tongyang Nylon chaired the panel on fiber that included officials from the Korean Institute of Industrial Economics and Trade (KIET), and the Korean Productivity Center, executives from Hanil Synthetics and Kolon, as well as an academic. Panelists contrasted the irrationalities of the Korean industry with the tight integration up and down stream in the textile production lines of Japan and Taiwan. One panelist called for an industry-wide agreement on specifications to permit better planning across sub-sectors of the line. Others lauded the strategic focus of the Japanese textile industry and called for close coordination of national objectives between state and industry in Korea, and greater cohesion within the industry between larger and smaller firms. Specific recommendations to the state included lowering interest rates, strengthening of rules such as specifications within the industry, expanding the research infrastructure, and better labor productivity. Kim Kwang-yeon of Sama, a weaving firm of 500 employees in Taegu, chaired the second panel on synthetic fabrics. Panelists included three academics, as well as the president of the Korean Textile Development Institute in Taegu, and the executive director of the Korean Weaving Industries Cooperatives. Again, speakers criticized the weak coordination between upstream and downstream segments of the production line and excessive competition, and added a plea for the general trading companies to play a more prominent role in gathering and disseminating market information along the line. Recommendations for the state included support for training and technology, easing of tax assessments and lower interest rates, and new controls on excessive competition through establishment of a stability fund through a tax assessed on the value of an individual firm’s fabric exports. The meeting of 1993 offers one profile of state-capital cooperation, as well as of inter-industry concerns which include prominent role for the state to harness and focus the growing diversity of textile production on the peninsula. Three years later the industry confronted not only continued relative decline but also dramatic change in the international markets for textiles with the advent of the World Trade Organization, imminent reduction of textile quotas and Korea’s own tariffs, and new constraints on state economic intervention with

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Korea’s entry into the Organization of Economic Cooperation and Development (OECD). Now the initiative came directly from MOTIE in organizing, sponsoring and chairing a series of meetings at the Korean Chamber of Commerce and Industry on cooperation between state and the private sector in the development of new industries. I attended the second meeting of the series in July of 1996 that addressed problems of the weaving industry.37 Industry representatives came from Daewoo, the general trading company and Nasan Textiles, a leading fashion firm, and from textile firms such as the huge Cheil Industries and the mediumsize Seyang Industries, as well from universities and from the Korean Institute of Industrial Economics and Technology. MOTIE officials included directors of the Consumer Industries Division, the Trade Policy Division, the Industrial Economy Division, and the Export Policy Division. Ahn Kwang-jeol, ViceMinister of Trade, Industry, and Energy opened the conference with a call for cooperation between state and private sector. Panels included presentations on weaving of polyester fabrics in Japan, and on wool in Italy, but much of the morning was devoted to the Korean situation. For instance, Professor Ch’oi Yong-hwal of Kyungbuk University cited problems of excessive competition, underfunding of rationalization projects over the past decade, and called on the central government to take the lead in implementing a textile vision, and on local governments to improve industrial infrastructure, organize information sources, and support trade associations. The ensuing discussion echoed the call for greater coordination between state and private sector, and between larger and smaller firms. Pak Sun-t’aek of Seyang Industries cited problems of small and medium-size firms lacking the technology and capital to transfer out of a declining industry. He pointed to the mismatch between production upstream and needs of mid-stream weavers along the production line and concluded, “yarn produced upstream has little marketability.” Kang T’ae-seung, president of the Synthetic Fabrics Export Association stressed the need for an integrated government policy on rationalizing the industry, particularly with clearer guidelines and stronger enforcement of scrap and build programs. Yu Hyeon-sik of Cheil Industries, the huge wool spinning and weaving firm of the Samsung Group, observed a transition from commodity to small-scale production in the industry and called for government planning and support to reorient the line upstream and downstream to accommodate specialized, higher value-added products. Cooperation for distinction, 2000 Three years later President D.J.Kim proclaimed Taegu as the New Milan and outlined a five-year plan to develop high quality fabric for high fashion materials. The national government will pay about 55 percent of the 680 billion won ($680 million) project of improving technology and expertise in dyeing, knitting, design and fashion creation, with industry contributing about 38 percent and the Taegu City government another 7 percent.38 MOTIE Minister Park Tae-young followed up the announcement with the Ministry’s commitment to government warehousing

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of fabric stocks in weak markets to prevent local dumping of materials produced for export. Responding to Fair Trade Commission demands for the end of the cartel among woven goods exporters, Park pledged the Ministry would intervene to maintain these prices by intervening with fabric stocks in the market.39 Minister Park traveled to the Korean Textile Development Institute in Taegu on May 19, 2000 to chair a two-hour evening meeting for a progress report.40 Park Seong-cheol of KOFOTI opened the gathering with an update on the industry vision statement. Ambitions persist with projections for expansion in textile exports from $17 billion in 1999 to $25 billion in 2010, moving Korea from fifth largest to third largest textile exporter in the world. How does Korea plan to move ahead of major exporters like Germany and the USA? The answer is growth in production capacity and product value. He projected growth in production of chemical fibers and filament from 2.4 million tons annually to 3.5 million tons as the fifth largest national producer in the world. Cotton yarn production would expand as well from 2.3 million tons to 3 million tons, and wool yarn to 600,000 tons annually, ranking sixth in the world. Quality would improve with a shift from Original Equipment Manufacture (OEM) export strategies to a planned export strategy highlighting local brands. MOCIE Director of the Textile Consumer Industries Office, Chang Uk-hyeon followed with his plan for automating and specializing technology, improving training of personnel, and development of new materials, methods of design, and promotion of fashion. Relevant comparisons were limited to Italy, Japan, and the US textile industries, with the focus on selecting market niches and technologies to match facilities already in place. Highlighting the state’s interest in the growth of the industry, Chang cited the positive balance in the textile trade of $17.1 billion in exports as against only $3.8 billion of imports. The resulting $13.3 billion represented 55 percent of the country’s trade surplus in 1999. The meeting moved quickly to more concrete issues of adjustment with a presentation on the Milano Project by neither a MOCIE official nor a local industry executive, but rather by the Economy and Industry Bureau Chief from the Taegu City Government, Pae Kwang-sik. Reminding each of the participants of their responsibilities in the seventeen tasks, he proceeded to identify budgets on the initial five-year plan (1999–2003) and accomplishments. Of the total budget of 680 billion won, 143 billion won was spent in 1999, and 159 billion won in 2000, with shares for central government, private sector, and local government specified. Each of the groups was represented at the table, together with leaders of the relevant associations responsible for each task. For those groups not meeting established goals, it must have been quite painful to sit there at the end of the day as the results were posted in front of the Minister of MOTIE. Pae concluded his presentation with the critical issue of export performance, noting happily a growth spurt of 11.8 percent in exports for the region between October 1999 and April 2000, reversing annual declines since 1995. To further reward progress and implicitly warn those falling behind, most of the rest of the two hours was devoted to highlighting what had been accomplished thus far.

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The meeting made clear that the state remained the dominant player in the Milano Project. That conclusion was confirmed in a series of negative articles about the Project in the fall and winter of 2000. Some claimed the project was President D.J.Kim’s effort to gain political support in the region. Others argued that it was nothing more than authoritarian state direction in an industry with long experience of self-direction. Finally, some noted local weavers needed loans to fend off creditors rather than the new Institute buildings and exhibition centers.41 Lending credence to the attacks, I found officials at the Taegu Gyungbuk Textile Industries Association in May of 2001 also complaining of state interference. Taegu officials were still reeling from the reports, scrambling to explain that the private sector retained a major role, and that the local textile industry could not expect results overnight. One official noted grimily that their model of Northern Italy in the Milano Project prided itself on strong associations in civil society with long experience of autonomy, but that South Korean lacked a similar tradition. The Milano Project highlights three tensions evident in the devolution from state to societal governance in Korean market and society. One is the tension between national government and local governments in the regionalization and localization of political power. Taegu City Hall has finally gained operational command of the Milano Project, but the Finance Ministry and MOCIE still administer the finances. The second is the continuing tension between the government and private sector, particularly the autonomy and initiative of the industry level associations of capital and labor. As one textile association official quipped in Taegu, “state commands, private sector obeys.” Disparities in structure and interests between the massive jaebol and SMEs constitutes a third, embedded tension in the transition to societal governance. Mainly small and medium-size firms focused on an export market, the Taegu region textile industry is a child of earlier era of export-oriented industrialization based on low-cost light industries. What remains, however, is not simply a small export platform along the coast that can be shuttered as more technologically sophisticated industries drive Korean exports, and stronger local demand develops for polyester fiber and fabric. Korean weavers, dyers and finishers in the Seoul area and other regions have established themselves in the developing local market leaving little room for the Taegu firms to reorient their products to local demand. Lower cost competitors in China and Indonesia have captured low-cost fabric markets previously dominated by the Taegu producers. Reintegrating the industry into a Korean line of serial production with a focus on consumer demand for apparel and fashion is a survival path for a major sector of a regional economy. Park Kyutaeg contrasted the strong state direction in the upstream textile industry through the 1970s, with the subsequent blend of local, national, and private initiative in the mid-stream textile firms of the Taegu area.42 Placing a local government under state direction, and shifting the focus from a state-business alliance with large-scale capital to small and medium-scale firms, opens a promising but problematic chapter in the Korean state role in the economy.

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A $680 million investment demands tremendous coordination and cooperation between capital and the state. If industrial policy was not abundantly evident in government efforts to press restructuring at textile moguls through workout programs, this government reinvestment in a new area of high-value, hightechnology textile production signals commitment to a new type of serial production mid-stream to downstream. Although the new line remains a valuable outlet for upstream higher quality production at the mogul firms, it is the medium and small-scale firms downstream which have now won the attention of the industry. More nimble in the fickle fashion market, and more responsive to changing export markets, smaller firms have an organizational flexibility in what Piore and Sable have termed “flexible production.”43 Gary Hamilton has paralleled what Dore termed “flexible rigidities” at Japanese keiretsu with the producerdriven rigidities of the Korean jaebol.44 Consumer-oriented downstream firms in Korea may be one path to greater flexibility in textiles. However, the fact that capital, technology, and marketing expertise remains largely with the larger jaebol poses a challenge for a new integration of the serial line of production between larger and smaller firms. Charles Sable applauded innovation in the Korean political economy among state, jaebol headquarters, and jaebol affiliates in which “the relation of the production units to the affiliated companies all depend on the consultative combination of monitoring and reelaboration of common goals.”45 Whether state and capital can reorient themselves in a more complex and sophisticated line of production in a period of incremental rather than explosive growth remains to be seen. Serving the interests of both upstream moguls and downstream segments of smaller firms may prove more difficult than the earlier alliance of state and jaebol. Personal ties of kinship and education will continue to support direct links between the industrial circle of textile owner-managers and families of leading officials and politicians. Demands of large-scale financing for production inputs, new technology and offshore investment will continue to draw the state into the circle of major firms. IMF-mandated reforms of the finance and banking sector may relax government oversight, but given the unpopular alternative of jaebol ownership of the banking system, the state will most likely retain some ownership and voice at the banks. Demand for coordinated production on the peninsula and the urgency of export revenues to balance trade deficits will keep associations at the center of the industry, mediating state priorities and mobilizing industry interests. Refined and embedded in the state transitions from midwife to manager, corporatist and clientelist channels of interest exchange will be needed to sustain the new state role of mediator. Conclusion Anxious to strike a better balance between light and heavy industry, and in desperate need of export revenues, the Korean state has worked hard to salvage the line of serial production in textiles. State leverage in finance, law, and international trade relations leaves little doubt of a continued role in the industry, but clearly the state

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has moved out of management and firm-specific interventions in favor of industrywide programs administered by trade associations. Changes in firms, markets, and the international capitalist system have prompted the shift towards a more embedded role of mediation through a range of semi-official industry associations. The late Chey Jong-hyon of the Sunkyong Group and chair of the Federation of Korean Industries led the charge of leading jaebol against state efforts to constrain oligopolies across the domestic economy. Owner-managers of mogul mills prominent in the FKI have joined in the contentious public debate with the state since the 1980s over direction of the Korean economy, although privately business leaders continue to lobby the state for industry and company priorities. Organized interests of capital today in South Korea would not be amenable to the earlier pattern of discretionary incentives and managerial directives, but mills have yet to establish either the financial security or offshore bases to permit autonomy from the local state, particularly in the crisis of adjustment. Mogul mills for the most part have advanced abroad with regional rather than legitimately transnational investment networks. A production base located in Indonesia that simply returns commodity yarn and fabric to the mother company on the peninsula for further processing and sale does not constitute a transnational operation joining investment, management, and markets of two nations. Synthetics firms such as Samyang in Pakistan appear to have penetrated local markets and gained the participation of local capital in a truly transnational operation, but still are limited largely to two nations. What does this say about transitions in the Korean state? Evans’ suggested a transition among roles of midwife, manager, and custodian. I find the state in textiles playing more of a mediating and coordinating role, rather than custodial role. Kim’s suggestion of sector-specific strategies of “plan-rational” versus “market-rational” strategies begins to explain the state’s oversight role in the Milano Project, though far more market-sensitive than the earlier managerial role in developing an upstream synthetics sector. Perhaps the most significant insight to be drawn from the state effort recently in Taegu’s textiles is the more complex interplay of state and industry today, the new voice for small and medium-size industries, and the continued absence of labor in bargaining the restructuring process. Textiles remain important in the Korean market as a supplier of basic and higher value-added consumer products and of industrial use products, as employer and investor in regional markets on the peninsula, and as source of foreign exchange. Yet a downward trajectory of relative decline in contrast to sunrise, technology-intensive industries on the peninsula has forced the state to reduce support even for infrastructural projects such as improving information technologies, engineering, and education in the industry. Globalization and specialization have also vastly complicated the task of surveillance, much less state management of a production line. Highly publicized state initiatives in fashion and dyeing divert attention from the fact that the Korean state has largely surrendered labor-intensive sectors of spinning, processing, and garment assembly to lower-cost competitors in China, Pakistan and South-East Asia.

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Labor-intensive industries have not only lost favor with the Korean state but now find themselves encouraged to move abroad. Coupled with a role transition from line management to mediation, the recent policy evident in the MOCIE/ KOFOTI Textile Vision represents a dramatic shift in state priorities for the industry. A second transition evident in the Korean state is the devolution of funding and plan implementation across central government, provincial, and city governments. This is significant for more than financing. Devolution of power and oversight at the center to regional and local governments permits far more effective surveillance and implementation, particularly in textiles with its dispersion from midstream to downstream in medium-size and smaller firms. What I found remarkable was the persisting authority of the central government or MOCIE at the local level, whether through visits from the MOCIE Minister, posting of MOCIE personnel, or assignment of retired MOCIE officials to top posts in both the public and private sector. The complexity of international markets, coupled with the urging of major trade partners organized into policy regimes such as the OECD, WTO and International Labor Organization (ILO), have nudged the Korea state from sector-specific to macro-economic policies, from industrial development to trade policy, and from discretionary incentives to non-discretionary programmatic support, or support through a macro-economic government policy. Yet industrial decline in competition with Asian competitors and growing trade deficits due to the high cost of importing expensive technologies have brought the state back into its depressed industries. The return has been marked by extensive bureaucratic reforms evident in new styles of more transparent cooperation between state and private sector. If the short time span of growth and maturity in Korean textiles has not encouraged the cohesive institutional development necessary for long-term growth and adjustment, the pressure of catching up with advanced capitalist economies and the legal demands of international trade regimes have forced devolution of former state functions to leading industry associations such as KOFOTI. Changes at state level deeply affect interest exchange in the industry. As Koo and Kim concluded of South Korea through 1990, “political exigencies played a more important role in determining a development strategy than market factors.”46 Growing leverage and the autonomy of industry associations provide evidence of the demise of state corporatism familiar during the Yushin Regime (1972–79) under Park Chunghee, but as yet only sporadic efforts towards establishing the framework for sectoral corporatism. Harnessing individual energies for a common national goal remains the state’s priority and clearly is not the priority of contentious jaebols, major mills, or even of the fiercely independent weavers and dyers in Taegu. As distinct from the autonomous Federation of Korean Industries, most textile industry trade associations developed by a strong state and still led by retired government officials have not shed the label of government organizations among the restive segments of large-scale capital.

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Why, then, is the state still deeply involved in the restructuring of a now wellestablished industry? Interviews in Taegu with leaders in the public and private sector brought me back to the issue of trust and credibility. Investing or reinvesting in the high-technology midstream sector of dyeing is a big risk for smaller and medium-size firms. Even textile moguls need assurances that such investments in dyeing technology in-house, or in upstream adjustment for production of higher-value filaments and yarns will be worth the risk. Market dynamics alone appear unlikely to convince investors to move in step with such a grand vision. But the state brings more than simply credibility in financing and infrastructure projects. The state in South Korea still commands considerable authority in the political economy. Such a combination of credibility and authority gives a textile vision tangible form and direction, encouraging wary investors to follow the plan and maintain the line of production upstream and downstream. Regional integration of offshore production plants will only strengthen and refine the production capabilities of the line. Transparent corporatist structures and procedures permit the state two major roles in the industry through the associations. Corporatism helps limit clientelistic favor and cut-throat competition in a state vulnerable to patron-client ties with major mills, and constrained from intervening among firms to impose limits on production or prices to stabilize markets. Excesses in either mode of exchange erode the state’s promotion of a common project for adjustment and upgrading the industry. Trust remains the key to reducing transaction costs of rapid adjustment along a complex line of serial production embedded at home and abroad. One key to successful adjustment will be the state role as buffer against destabilizing shifts in markets, whether due to speculation and rapid price changes, to collusion of oligopoly, or excessive competition among small and medium industries. If associations can continue to encourage corporatist cooperation without precluding effective trust based on particularistic ties of kinship, region, or school, or the more contentious market dynamic based on impersonal contract and unconstrained prices, syncretic capitalism will persist in the textile adjustment. A changing state role in the textile transition reflects deeper changes in the channels of interest contention. Demands for greater transparency emanating from civil society as well as from powerful trade partners have driven more particularistic, clientelist ties underground. Clientelism persists as a credible channel of exchange, particularly in crisis situations such as financing on the curb market, but far more embedded and better limited due to the strength of regulatory agencies and the trade associations. I find corporatism persisting as well, but clearly in transition itself as a channel of interest negotiation and policy enforcement for an adjusting industry. Corporatism survives in trade associations during perhaps an interim of negative reaction to the excesses of state direction in the past. The future may bring a return to cooperation but with a far stronger role for capital, and even an institutionalized role for labor as well. Liberal market reforms may, on the other hand, bring an end to corporatist organization and policy implementation on the peninsula in favor of more ad hoc, issueoriented organizations. A more open market competition based solely on supply

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and demand will prosper only with credible institutions of finance, market and trade ensuring fulfillment of contract and access to markets despite the radical discrepancies in scale between the larger jaebol and the medium-size and small enterprise.

7

Labor

Nowhere has bordering the multiple channels of interest exchange been more difficult or continuity more problematic than among labor. This chapter brings a sobering conclusion to the brokering and bordering of interests we call syncretic capitalism. I argue that syncretic capitalism has long permitted accommodation of the organized interests of capital and state without a comparable recognition of priorities among the largely disorganized interests of labor. Garnering far less attention than state or capital, labor has nonetheless been a critical factor in the growth of Korea’s textile industry, and remains important today in adjustment. Labor relations in Korea run the gamut of interest exchange options—pitched battles with management, orderly annual negotiations, or imposed, paternalistic wage settlements. Time compression, state-business coordination, and multiple crises have frustrated development of cohesive organization or reliable, professional leadership. Nor have familism, oligopoly, and the state-business alliance engendered a secure place for labor in negotiations with the organized interests of capital or the state. Yet syncretic capitalism in textiles has made possible the remarkable development of serial production, and left some room for worker representation on the edges and interstices of the growth trajectory. Textile labor today remains better organized in Korea than in most of Asia, and is more vocal than its well-funded and far larger partner in Japan, the Zensen. Korea’s competing peak labor organizations jostle today for legitimacy in the Tripartite Commission, one indication of labor’s growing leverage despite the ravages of adjustment. Labor presents a far different picture of interests than we find among capital or state. Workers must gain autonomy from state and capital, a critical and painful step in the transition to societal governance. The interplay of interest and institution among workers tells us a far different story of how society is actually embedded in the society of industry, in management, and in working families. We learn first of the remarkable saga of how workers have won a place at the bargaining table, despite weak institutions for defining and representing their interests. Patrimonial controls over labor were seldom challenged by corporatist structures or moderated by market dynamics till 1979, and even today remain a primary area of interest contention for workers despite democratization and market liberalization in other areas of society. Corporatist

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association, inter-marriage and family ties among capital and state, and market competition provided bureaucracy and firms with multiple, often mutually supporting channels for interest exchange since the 1950s. Equally important, the channels provided multiple bases for surveillance to maintain borders, or at least to monitor how borders were blended and negotiated. Less powerful and less organized segments of society such as labor or small and medium-size firms did not command the multiple channels of interest contention that proved invaluable for the competition and compromise distinguishing the alliance of state and big business in South Korea’s development path. Second, this chapter brings us more deeply into the concrete processes of adjustment following the IMF crisis, and their effect on the structuring of workers’ interests and institutions. Wrenching changes in polity, economy, and the industry have brought terminations and extended lay-offs to large numbers of Korean textile workers. Union officials spoke in the spring of 1998 of mogul mills listing 1,000 to 2,000 workers, but operating with less than 500. A vigorous state effort at the National Assembly in the spring of 1997 relaxed legal constraints on layoffs and terminations, in return for greater autonomy among organized labor. Landmark legislation on lay-offs in early February 1998 opened the door for rapid retrenchment which in the absence of a national welfare net of unemployment insurance or retraining benefits makes the human side of Korea’s adjustment in the IMF era painfully evident. A seasonally adjusted unemployment rate reached 7 percent by June of 1998.1 Labor agreed to a 2.7 percent wage cut in 1998 in response to the demand of the Employers Association for a 20 percent reduction. Agreement on a 2.5 percent raise in 1999 still did not bring labor back to the pre-crisis wage levels.2 Wages for textile workers in 1998 fell an average of 3.5 percent for all workers, and 12.1 percent at firms with 500 or more employees.3 Changes in labor legislation at the National Assembly have reshaped employer-employee relationships, permitting management far more leeway in severing workers, but also allowing more extensive and autonomous labor organization, and even political action.4 Equally significant are changes in the economy where reforms in labor and banking have served as a gauge of local commitment to changes mandated by the International Monetary Fund from the fall of 1997. Song Ho-keun distinguished four institutional forces affecting labor markets: minimum wage laws, public welfare policies, labor unions and the firm’s internal labor market.5 The fact that minimum wage laws, extension of health insurance to all workers, and mandated negotiations on working conditions all date from 1988 reflects the extent of recent changes. Continuing legislative reforms affecting union organization and employment security add to the uncertainty of mills scrambling to attract and keep workers in an industry already defined as “dirty, dangerous and difficult.” Flux in industrial relations on a national level leaves mills without stable precedents for planning long-term adjustment strategies, while sectoral changes in a sunset industry bring yet a third transition to labor relations at the mills striving to recapture competitiveness in international markets. Sunset industries often simply close their doors but the differentiated textile industry

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offers multiple possibilities for reorientation to niche markets, or even commodity production of higher value-added products such as industrial textiles. Labor plays a role in training local technicians at offshore investment sites, and more importantly, in acquiring new skills to better adapt existing technology for new raw materials and new products. But lacking both the necessary education programs and forward-looking union leadership to prepare them for such tasks, labor unions have been slow to meet challenges such as transfer of production abroad or specialization at home, just as management has been reluctant to identify new roles for labor in a globalized line of textile production. Thomas Kochan distinguished a pluralist model of interest contention in US industrial relations, a corporatist model of alliances between state and major labor federations in Germany, and a hybrid Japanese model including both pluralist and corporatist features.6 I find the Japanese pattern represents a quite distinctive mode of interest contention rather than simply a selection of pluralist and corporatist features. Organization in enterprise unions rather than crafts, and cooperation between management and labor on behalf of the firm raise questions about the autonomy of the Japanese union. Gallenson questioned the independence of Japanese unions, while T.J.Pempel and Tsunekawa even suggested a curious variant of corporatism which did not even include labor. Shirai countered that in fact Japanese unions have been successful in maintaining their independence in representing the interests of employees, and I have noted the recent development of a passive or reactive voice for labor in tripartite negotiations over adjustment polices.7 A Japanese model of enterprise unions tests the familiar Western boundary between the interests of management and labor, leaving workers vulnerable to the organized interests of capital. The company union model in South Korea has long left workers vulnerable to an alliance of state and big business. Kochan concluded, “Current industrial relations in Korea feature a mixture of practices borrowed from these three systems but embedded in a unique Korean cultural and historical setting.”8 Among the latter he distinguished Confucian paternalism of centralized decision-making and strong hierarchical control, which raise further questions of autonomy already apparent in the enterprise union model more familiar in Japan. An unsteady mix of pluralism, corporatism, and clientelistic paternalism in South Korean industrial relations offers little parallel to ties between Japanese capital and state.9 Caught between paternalistic management and an authoritarian state bent on economic growth, labor has only recently gained a voice even in labor policy at the plant level without a corresponding place in shaping industrial policies of adjustment either at the local level of firms or national level of industries. Despite the imposition of state corporatist structures from the 1960s under the Korea Federation of Trade Unions, long-standing precedents of paternalism within company unions persisted until challenged initially by female textile workers in the early 1970s. Large-scale industrial conflicts in sunrise heavy industries led by male workers arose in the next decade in tandem with

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concentration of massive workforces at Hyundai’s Ulsan shipyard or the auto plants of Daewoo and others. Korean workers emerged from the watershed of labor turmoil in 1987 better organized, more active and much more militant than in earlier decades. Adding to economic priorities of better wages and job security, labor has agitated recently against government constraints on more autonomous organization both at the company and industry level.10 Roger Janelli, Lee Ok-jie, and others documented paternalistic ideologies which reinforce the asymmetry of industrial relations in company unions dependent on the firm for salaries, office space and expenses.11 Limits on membership to solely blue-collar labor results in a clear distinction between management and labor. An embedded structural dependence of company unions on management, and an ideology of paternalism consistent with deeper Confucian precedents of authoritarianism in social relations12 may remain opaque to Western observers of episodic Korean labor militancy, but the asymmetry and particularism of clientelistic labor relations come starkly to the surface in the problem of eoyong or “co-opted” union leadership often promoted to lower-level managerial posts. Fred Deyo cited a “developmental paternalism” critical in the rapid growth of Korea and other East Asian nations through the 1980s.13 An Asian state enjoys a moral authority to define and enforce a national (i.e., versus sectoral) interest in policy and public ideology, and gains legitimation through achievement of economic growth for the commonweal. Deyo argued that such premises helped legitimate authoritarian rule and political exclusion of labor as necessary to achieve high levels of growth. He cited a tension in South Korea between paternalistic, patrimonial ties promoting individualistic efforts among workers for advancement, and corporatist ties encouraging labor cohesion in interest negotiation with management. Song Ho-keun and Choi Jang-jip pointed to the atomization of individual workers. Choi cited parallels with Valenzuela’s thesis of market repression on behalf of national growth as against more organized, corporatist repression. Song wrote rather of an “industrial paternalism” of company unions which preclude wider corporatist inclusion of labor in the political dialogue between state and capital.14 Nonetheless these same scholars have carefully documented corporatist organization among labor under a bureaucratic-authoritarian state which Launius suggests has an “elective affinity” with corporatism in Korea.15 Contending models of interest exchange at the mills bring these earlier profiles into the contemporary crucible of IMF-mandated reforms in a declining industry hustling to regain competitiveness with resources of technology and labor. I begin with organization, continue with exchange of interests in the adjustment process, and conclude contrasting labor with the organized interests of capital and state. A clientelistic paternalism encourages labor’s cooperation in depressed markets as workers face the threat of company bankruptcies or simply terminations and thus weak markets erode identification with the goals of organized labor and turn attention back to individuals and firms. Market recovery brings out a far more contentious pluralism among organized labor confronting company paternalism and state authoritarianism. At the same time a corporatist

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overlay of organization and procedure persists in the textile industry, and provides an arena for both cooperation and contention without ensuring a cohesive role for labor in tripartite negotiations. Lacking a Labor Party and still barred from political activity, organized labor remains dependent on their own national centers and the Ministry of Labor to insure a voice in national industrial policy, and in macroeconomic policies affecting wages and job security. Labor organization Features of industrial organization such as family ownership and control, concentration of capital and market share within a family of firms or jaebol, and close state ties have long defined the boundaries of acceptable representation of labor interest. Family ownership and control lend legitimacy to familial ideologies of labor commitment and control. Concentration of capital and market share within an oligopoly of jaebol-affiliated firms establishes a hierarchy of employment, with industry leaders offering better wages and working conditions to attract the best recruits. Jaebols prosper with strong internal labor markets, but the limited number of major firms also leaves workers with limited options for interfirm mobility. Coordination of a line of serial production for export has also limited demands of organized labor for better wages and benefits in a state long dedicated to economic growth and military security, then to economic stabilization without inflation in the 1980s, and finally to both market liberalization and adjustment in the 1990s. A curious evolution into two competing pyramids has distinguished much of Korean labor, and textiles is no exception. Table 7.1 offers an outline of the various levels and organizations. Some cooperation is evident among the peak labor organizations at the Tripartite Commission. At the level of industry federations, officials of the Federation of Korean Textile Workers’ Unions told me in 1999 of possibilities for joint-efforts with their competitor, the Democratic Textile Alliance. But the two pyramids continue through 2000 in competition and indeed contention for legitimacy among organized labor. Table 7.1 Dual pyramid of organized labor in textiles.

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Local unions Japanese society has been termed “a society of industry” with firms organized into sectors serving as the focal point of lifetime employment, residence, recreation, and even retirement with welfare benefits.16 South Korea might be better described as a society of jaebol bridging a number of industries, but with jaebol standing similarly at the center of society with employment, residence, recreation, and retirement, encouraging firms to identify with affiliated firms rather than industries. Long-term company identification with specific functions in a single industry then proves difficult at private associations of industry or trade in South Korea as firms tend to capture value-added aspects of both manufacturing and marketing in-house or through sub-contractors, rather than specializing as either makers or marketers in a single industry. Sharing of information, expertise, or expenses among member firms poses still further problems for associations in South Korea where company identification with jaebol rather than industry impedes cooperation. Compounding the difficulties of institutionalizing company interests within trade or industry associations is the fact that most industrial sectors in South Korea have developed only recently, often with state encouragement and subsidy rather than domestic market demand, and have quickly progressed into mature industries in need of adjustment. Structural features of Korean industry such as familism, groupism with jaebol, oligopoly within sectors, and close state ties which in the past frustrated cohesive labor organizations, contribute to paternalism. Lee Ok-jie faulted an irregular pay system which relies on non-universalistic criteria for reward, and the multiple options of bonuses and gifts which supplement workers income at the plant.17 A weak job market during recessions leaves workers particularly vulnerable to strategies of paternalistic management. Korean labor organizations face problems of worker identification with a company rather than a craft, as “enterprise unions” command the dues and loyalties of Korean workers. Enterprise unions on the peninsula are limited to regular bluecollar employees with a clear demarcation between labor and management. For instance if a union member at Samyang is promoted to the personnel department or any other promotion above hands-on work on the shop floor such as even upper-level technician, they will immediately sever membership with the union. Only 1,165 workers of a total of 2,456 employees were eligible for union membership in 1999.18 I found a union of only 150 manual workers at the Kurodong plant of Sungdo Apparel, a medium-size garment and fashion firm, yet a further 200 workers at the site without representation because they were defined as technicians, office workers, management, etc., and thus not eligible for union membership.19 Leadership at Samyang’s Jeongju Plant Union of 1,800 members back in 1992 included a director, vice-director, office manager, women’s affairs director, and a secretary, all with a three-year term of office after which they return to the same positions in the factory they occupied before election. A similar procedure was evident at the Sungdo Apparel Union of 150 female machine operators, ages 14 to 20 mostly residing in the adjoining dormitory, and represented

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by union president Yi Pong-gi, the only employee devoted full-time to union affairs. The absence of a professional corps of labor leaders follows the Japanese model, as does sovereignty of the local union and generally weak ties to craft or industry federations. Unlike Japan, labor competition and labor mobility can erode identification with the company leading to internal competition among workers. As opposed to enterprise-wide unions in Japan, one often finds plant unions in Korea without any integration of unions across a firm’s multiple production sites. I was surprised to find no connection whatsoever between the textile union at the Jeongju plant of Samyang and trade unions at other Samyang plants in sugar, petrochemicals, etc. Interest exchange at the plant level appears channeled by both a pluralist contention and a clientelist paternalism. Contention is evident in the competition among workers for better bonuses apart from their regular pay levels, and in interfirm competition to attract the best workforce.20 Evidence of paternalism can be found in the relatively weak organization of labor at the firms, with only 11.5 percent of workers organized across society in South Korea in 1998, but also weak intermediate organization at the level of craft, and disarray at the national centers.21 Independent and often isolated enterprise unions, supplemented by LaborManagement Councils, remain focused on plant-level bread and butter issues of job security and wages, rather than on the wider macroeconomic or political interests of organized labor. Determination of wage hikes is a good example. Labor-Management Councils took up the issue at about 20 percent of the firms annually between 1995 and 1999, with formal collective bargaining at about 22 percent of the firms, and administrative direction by the firm at the remaining firms.22 Noh Jin-kwi, Senior Director of Research at the Federation of Korean Trade Unions explained that even by 1999 the Councils still had not found a substantive role in labor negotiations. Although now legally mandated with four sessions annually, the meetings remain largely adversarial because there is no other forum for discussion. Councils would ideally support collective bargaining, but must play a role in wage negotiations in the absence of such bargaining. The result is that long-term substantive issues such as preparation for adjustment strategies are never discussed. Instead, a tense crisis atmosphere persists in which labor and management have no outlet for regular exchange on day-to-day issues, or indeed on longer-range issues that require education on both sides. Industry federation Interest exchange at the level of craft or federation would ideally provide a balance to the weak organization and compromised independence of local unions. But division at the national level of peak associations has led to further divisions at the craft or industry level. Local unions belong to one of two competing industry federations, the older Federation of Korean Textile Workers Unions (FKTWU) affiliated with the Federation of Korean Trade Unions, and the recent Democratic Textile Alliance affiliated with the Korean Trade Union Congress. The older FKTWU represents 35,000 workers in 1999 at the larger spinning firms and has

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suffered with the decline in employment at the mills, but the Alliance represents 9,400 workers in the synthetics industry with a relatively stable membership.23 The venerable FKTWU dating from the First Republic has been reduced largely to gathering of information, reporting, and ties with international labor federations as membership has fallen precipitously from 107,000 in 1992 to less than 36,000 in only six years. The Federation represents 33 percent of workers in spinning mainly at the mogul mills, but only Sunkyong Industries among synthetics moguls, a mere 5 percent of all workers in synthetics.24 Meanwhile coalition bargaining among the spinners has given way at least temporarily to firm-level agreements on pay cuts and discussions of survival. A pyramid of labor organizations remains in place in the textile industry with the Textile Federation at the craft level and the Federation of Korean Trade Unions at the peak, but both sectoral decline and the IMF adjustment have seriously eroded corporatist links to capital and state. The recession from 1998 has left the Textile Workers Federation floundering with a reduced membership, but it continues to monitor employment and wage levels in the industry, and advise member unions on annual negotiations. Stymied by the dual blows of sectoral decline and national recession, corporatist organization in industrial relations at the mills remains one of the only industry-wide channels for labor policy formation and enforcement. Peak association The disarray of labor organization at the federation level is paralleled at the national level with a heated competition between older and newer national centers. Liberalization in the 1980s loosened government controls at the national center, and widespread labor disturbances in 1987 resulted in a competition between the older, official Federation and the newer, unofficial and indeed outlawed Council. Maverick labor activists organized the outlawed Korea Trade Union Congress and the Korea Congress of Independent Industrial Trade Union Federations by 1990, and then regrouped in 1994 under the banner of The Korea Council of Trade Unions (KCTU) to better compete with the finances and leadership of the official Federation of Korean Trade Unions (FKTU).25 The latter official Federation meanwhile has emerged as a more formidable force for national representation of labor with its turn recently to more independent representation of worker interests at the national level, its infrastructure of information and research, and its membership of leading trade federations. The Director of International Affairs at the FKTU enumerated three functions: political lobby at the National Assembly and Ministry of Labor; formulation of national labor union policy in tandem with leaders of twenty member federations; information exchange and education. Among the group’s priorities he cited strengthening of industry-wide federations, organizing whitecollar workers, and promotion of tripartite negotiations.26 The Federation receives funding for education program and legal services from the Ministry of Labor, in addition to core revenues from its member federations.

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Although the Federation of Korean Textile Union Workers continues its affiliation with the FKTU, local unions today still remember the FKTU’s close government ties, just as textile executives recall the recent history of the Spinners and Weavers Association (SWAK) or KOFOTI as government organizations. Government control through former government officials in the nominally independent SWAK, or with personnel and budgets at KOFOTI, and government control of labor through imposition of a national center have left a legacy of distrust that continues to plague the leadership of labor federations and trade associations. Both the older labor Federation and the newer Council serve as de facto national centers lobbying for labor’s interests in the turmoil of IMF era labor reforms, but the membership of industry associations, dues structure, and information and research networks of the older Federation remain critical with the organized interests of capital and state. One example is the Tripartite Joint Committee of capital, state, and labor, which includes the Vice-Prime Minister for Finance and the Economy and the Minister of Labor, the chairs of the Federation of Korean Industries and the Korea Employers’ Association, and the presidents of the Korean Federation of Trade Unions and the newer Korean Council of Trade Unions. Both labor representatives boycotted the committee in January of 1998 in efforts to force better legislative measures on job security and job creation, and both returned after further assurances, enabling the committee to play a major role in the new legislation on labor lay-offs in February of 1998, a critical component of Korea’s compliance with the IMF agreement on reforms.27 Credible boundaries discourage the fading of corporatism into collusion, clientelism into corruption, or contract into excessive contention. Although the state has intervened at times in the textile industry to reestablish boundaries to discourage such excesses, the multi-leveled interchange has provided credibility and trust within firms and between firms and state in a fast-moving industry facing remarkable flux at home and in markets abroad. Hagen Koo wrote of state support of business in finance and labor relations as further evidence of capital’s dependence on the state. One result of state labor controls was the absence of institutionalized channels of interest exchange for capital and labor, aggravating the crisis atmosphere of labor relations which persists today.28 Labor lacks the cohesive and comprehensive organizations necessary to play a major role in maintaining boundaries, leaving it vulnerable to paternalistic clientelism in weak markets and excessive contention in strong markets. Problems of coopted (eoyong) leadership indicate the depth of divisions and the ambiguous position of labor vis-à-vis both capital and state. Cooptation of union leadership can be traced to plant-level union organization, legislation, and state intervention. A lack of a corps of professional union leaders continues to bedevil efforts to foster union identification at the plant level. Union leaders at Samyang complained of a double bind: workers fault them for not being more aggressive with management in pushing salary demands, and management faults them for not being cooperative in promoting long-term growth. Since few leaders can muster enough worker support to

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gain re-election to a second three-year term even if they chose to run again for office, they must bear in mind their eventual return to the shop floor as employees. Federation officials as well as local leaders cited a further problem of promotion to the personnel office as former union officials cross the line into management positions legally excluded from union membership, unlike the more inclusive enterprise union of white- and blue-collar workers in Japan. And if both capital and state legislation on union eligibility play a role in drawing off promising labor leadership, so also do state administrations with what Yu described as a combination of repression and appeasement to control wages and enforce labor peace. Appeasement included levying of compulsory union dues and appointing top union officials to cabinet positions, as well as limited protective measures for rank-and-file workers such as national legislation on industrial accident insurance.29 Other scholars cited cooptive measures by the Park regime in the 1970s of appointing higher-level union leaders to government posts or even the Government Party at the National Assembly, comprising a co-opted “labor aristocracy.”30 Institution and interests The vice-director of the labor union at Samyang’s Jeonju plant in 1992 reflected on five years of labor activity following the general strike of 1987 and concluded: “There is a close connection between the immaturity of political development in Korea, and the immaturity of development in social organizations such as labor.” Efforts at political liberalization from the late 1980s have encouraged more autonomous interest groups of civil society, but the process has only begun. Organized labor does play a major role in defining and promoting the basic interests of textile workers in wages and working conditions, evident in the annual wage negotiations which offer a window on the roles and relative significance of various levels of labor organization in the textile industry. Wages A “spring wage offensive” among labor in South Korea parallels the Japanese practice of annually establishing national and industry guidelines for negotiations of wage hikes and benefits at individual firms. The Federation of Korean Trade Unions has played a more prominent role over the past decade in establishing prior guidelines in tandem with the Ministry of Labor. There is less consistency in a second level of coalitional negotiations at regional, craft or industry, and even jaebol federations of labor unions, particularly in the spring of 1998 with lay-offs and pay cuts. In past years a Labor Committee of SWAK would represent capital, and the textile labor federation would represent labor in annual efforts to establish an industry guideline. Actual contract negotiations remain the responsibility of individual enterprise unions, but usually in tandem with Federation guidelines, and in concert with other textile unions. The Federation of Korean Textile Workers Unions also plays some role in local decisions on

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labor actions to press for better terms, and a major role in mobilizing member unions to protest unfair terms on a national level. Although the negotiation process has been suspended in 1998 and neither the Sungdo nor Samyang unions are listed as members of the KTWU, negotiations until recently included the following procedures. Leaders at the Samyang union spoke of the appointment of a team of five to seven members to head up negotiations with management in the March wage offensive. They would begin preparation with materials sent from the Textile Workers Federation on results of the previous negotiations, the situation of the industry, and possibilities for demands. The same Federation also would offer guidelines for Samyang union demands in line with other synthetics firms of comparable size. Although only Samyang, Tongkook Synthetic Fibers, and Kolon joined in coalitional bargaining in the early 1990s, guidelines established in these negotiations provide a baseline for negotiations at all the major synthetics producers. A decade later the landscape has changed remarkably for both labor and capital. The Samyang Union has left the Korean Textile Workers Federation to join the Democratic Textile Alliance, Tongkook Spinning is in a workout program forcing the Tongkook Group to consolidate its operations. Management proved flexible in wage negotiations of the early 1990s due to the difficulty of retaining their more experienced workers and competition with peer firms for the same labor pool. Retaining experienced, skilled labor remains a priority at both spinners and synthetics firms, particularly with the advancement in automation at the spinners. But this picture of annual negotiations does not convey the complexities of labor relations at the local level where agreements on annual wage hikes provide only guidelines, not the substance of actual wages which are determined by a combination of subjective merit ratings and seniority. Park Young-bum wrote of two factors impeding more effective pattern-setting mechanisms in wage negotiations: reluctance of powerful enterprise unions to share their bargaining power with federations, and the absence of strong union leadership at the federation level to unite factions within industries.31 Moreover, firms vary widely in the relative importance of bonuses and other special cash payments provided, spurring competition between workers in the same firm, and eroding the significance of annual union negotiations.32 Adjustment Given the conventional role of organized labor at levels of plant and craft, what can be said of their role in negotiating the transition to specialized, higher valueadded production at home and transfer of commodity production abroad? Transfer of production abroad includes not only machinery but also organization and technology. The Vietnamese partner of Choongnam Spinning in Vietnam commented that rather than simply machinery or capital, it was technique that distinguished the most significant contribution of foreign investors to Vietnamese textiles. Technique, he explained, included production planning and organization,

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calibration of machinery, and training of workers and technicians. Choongnam executives told of posting promising Vietnamese technicians and team leaders back to Korea to learn from coworkers in Korean plants about schedules, machines, raw materials, and “attitudes about work.” Dongil Spinning in Indonesia has a smaller program of posting Indonesian personnel back to Korea, but with similar goals. When I asked executives at P.T.Saehan and Sunkyong Keris in Jakarta, and at Kolon and Choongnam in Ho Chi Minh City about language problems for indigenous workers trying to learn in Korea, they offered two explanations. The first and more straightforward solution was translation of all manuals into the local languages, though even translated manuals would be of little help to technologically unsophisticated workers, and would demand intensive mentoring by Korean technicians and machine operators. The second and far more interesting response was that indigenous workers were posted back to Korea to learn the company spirit which they absorbed both on the plant floor and in the dormitories. Korean labor thus plays a significant role in the transfer of production abroad, well beyond actual posting of selected Korean technicians and machineoperators abroad. Wages and working conditions dominate the attention of textile unions and the industry-level federation, with little attention given to policy for adjustment at the mills. But adjustment is still relatively new, as are the negotiation structures between capital and labor. In addition, the turnover in leadership at enterprise unions impedes continuity in planning and negotiating long-term change. Apart from wage negotiation committees, enterprise unions are also responsible for the work of Labor-Management Councils in the firms, which are organized independently by workers at non-unionized firms. Councils are mandated with discussion of planning at the company, providing the appropriate forum for joint review of adjustment strategies, and are surveyed regularly by the Korean Labor Institute, a research unit under the Ministry of Labor. Kim Hoon looked to the tension between the “collective bargaining” function of the union itself, and the “joint consultation” function of the councils, and found some tension but growing complementarity in larger firms.33 The law on the LaborManagement Councils stipulates two separate agenda: a consultation agenda for negotiation, and an information agenda for communicating management plans and priorities. Adjustment plans might be included under information as part of a general management plan and performance report, or issues on the economic and financial situation of the firms and industry, but there is no clear legal stipulation mandating such discussions. A survey of labor members of the councils in all industries in 1996 revealed discrepancies across firms in company reports on the situation of the firm and industry. Although over 80 percent of manufacturing workers surveyed reported some materials on production and management were provided, over half reported the materials were very limited.34 Chang Yeong-cheol looked more closely to the information on firm strategies, noting only about 2 percent of respondents reported information on company plans or policies, and only less than 1 percent

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on offshore investment plans.35 But the more important finding of the survey was the labor priority on immediate issues of negotiation such as grievance procedures, plant safety, and rational management of personnel and labor affairs. Labor has yet to gain a place at the bargaining table on issues of enterprise planning and adjustment, despite participation on the plant floor with training of foreign workers, or temporary postings abroad for installment and calibration of transferred machinery.36 Efforts to monitor and model Korean labor relations in Asian offshore investments have begun to affect activities at the federation level. Korean business and state are well aware of the widely publicized complaints against Korean managers and foremen at Korean-invested subcontractors in Indonesia and Vietnam. The Ministry of Labor has turned to organized labor to encourage international agreements and sharing of information to better regulate labor practices of Korean firms in Asian countries. One strategy is education for Korean labor in international issues relevant for global firms moving technicians among production sites at home and abroad. The Spinners and Weavers Association (SWAK) joined the Federation in a study tour abroad in the fall of 1999 under the theme of Labor-Management Cooperation.37 Another is labor diplomatic activity in bilateral agreements with industry federations abroad, and in international labor federations of those industries. The Korean Federation of Textile Worker Unions has long been active internationally, in part through support and encouragement of their counterpart organization in Tokyo, the Zensen. Zensen in turn has been supportive of TWARO, based in Singapore, the Asian Regional Organization of Textile Workers. Jung Duk-jin, Director of the Organization and Education Bureau, FKTWU (Federation of Korean Textile Workers Unions) explained in the fall of 1999 that the federation was moving quickly to complete agreements with textile labor federations in the former Russian states and in China. An agreement with Turkey had been signed in September of 1999. The federation largely focuses on countries with Korean textile investment, but faces problems of language, organization and resources. Curiously, the federation now finds itself better equipped in all three areas than counterpart organizations in Asia which are not accustomed to international ties with other federations. National policy One area of labor relations that has changed is their role in national level economic policy with the advent of the Tripartite Commission.38 President D.J. Kim’s administration inaugurated a “Social Compact” in February of 1998. He singled out three areas of negotiation—management transparency and corporate restructuring; stabilize consumer prices; employment stabilization and unemployment policy. Organized labor has long rallied for a national voice in these issues. Whether this new institution will meet their expectations remains to be seen. Apart from the state initiative and the commitment to tripartite negotiation, what is likewise significant is the breadth of topics to be

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addressed. Establishment of the Tripartite Commission followed in quick succession, “established at the recommendation of the World Bank to promote industrial peace after Korea was bailed out by the IMF and international creditors in late 1997.”39 It was “a tripartite cooperative system in the economic crisis and a restructuring of social cohesion via institutionalizing participation of workers’ and employers’ organizations.”40 The basic goal of the Commission was equal participation and equitable pain-sharing among workers, government and political circles, and employers. More generally, the Commission was dedicated to “transforming old industrial relations of confrontation and conflict to new industrial relations encouraging participation and cooperation is essential to ride out the current economic difficulties and take a leap forward to an advanced nation in the coming 21st century.”41 The Commission differs from earlier tripartite efforts in two aspects: direct representation of the state, including the Labor Ministry and the Finance Ministry, and a more extensive, economic and social agenda beyond labor issues. Highlights of Commission operations to date include permanent legal status from May of 1998, responding to labor demands for a firmer institutional base. The Commission’s brief history has proved turbulent with withdrawal of the more radical Korean Confederation of Trade Unions in February of 1999, followed by withdrawal of both the Korean Federation of Trade Unions and then the Korean Employers Federation. The latter balked at labor’s demands in the Committee on the Reform of the Industrial Relations System.42 Although the Third Tripartite Commission was established on September 1, 1999 with labor returning under KFTU and industry under KEF, the more radical KCTU has thus far refused to return.43 The Commission was able to conclude an important agreement in February 2001 which defers implementation of two labor union regulations. The first would ban payment of company wages to fulltime union officials. The second would permit establishment of multiple trade unions at one workplace.44 Clearly the Commission is a work in progress with an uncertain future, despite permanent legal status. Nonetheless, an institutional structure for on-going corporatist negotiations is now in place at the national level. But the more embedded structures of industrial relations at the level of firms remain the most critical area for change, and for assessing prospects of corporatist exchange at the local level. Scholars have mixed feelings about the significance of labor’s participation in the Tripartite Commission and their role in the IMF adjustment. Barry and Dongsook Gillis highlighted the contradictory tendencies of globalization such as competition and fragmentation with cries for labor “flexibility” in the face of lay-offs, as against a local socio-political response highlighting social stability and cohesion. In contrast with West European economies where a neo-liberal market ideology has recently gained leverage against the earlier welfare state approach, the South Korean situation of labor’s exclusion and only a meager social welfare net prior to globalization has led to greater inclusion of labor, as evident in the Tripartite Commission, and more support for investment in welfare

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today.45 Hagen Koo is far less optimistic, arguing that globalization has been the primary factor behind the weakened position in South Korea today. He highlighted labor’s quandary in shifting from a company welfare net of permanent employment to an open labor market with no public safety net. Second, he emphasized the legacy of unproductive labor relations from the years of a tight business-state alliance. Finally, he questioned whether labor’s compromise on terminations in return for a place on the largely ineffective Tripartite Council was worth it. He wrote: “The real irony of Korean labor’s empowerment at this juncture was that it had to use its enhanced status and power to implement an institutional change that would permanently impair and destabilize workers’ position on the labor market.”46 Conclusion Nowhere is the gap between institution and industrial development more evident than in Korea’s industrial relations where the lack of cohesive institutions of labor or labor-management relations, and the inconsistent role of the state in fostering cohesive, independent institutions discourage a constructive role for labor in the planning and enforcement of adjustment policy. Excesses of one or another mode of exchange among capital have at times stymied effective growth and adjustment in the long line of serial production on the peninsula, but more often the balance of multiple modes has helped border and mutually support in turn corporatist, clientelist, and contractual ties. Despite weak institutions of market such as an effective, independent judiciary protecting contract and competition, an independent financial system, and independent mechanisms of pricing, supply and demand, contract still could play a role when buttressed by corporatist transparency, and clientelist ties of reciprocity. Syncretic capitalism permitted the trust and mutual credibility necessary for a quick response to opportunities whether directly in markets, or to state incentives to develop markets. Prompted by the growing sophistication of firms and state, and the increasing complexity of international markets, more cohesive institutions of contract and corporatism have begun to play a more prominent role in interest exchange in the industry, with embedded clientelist ties still in place to support credibility and information exchange. Labor-management relations present a far different picture, despite a similar profile of contract, corporatism at industry federations and national center, and paternalistic clientelism at the enterprise unions. Contract, indeed excessive competition, has come to the fore in times of labor strife which highlight the tenuous institutional bases of contract, corporatism and clientelism in industrial relations. Choi Jang-jip concluded that even through 1980 state labor policy in South Korea reflected broader state priorities than simply corporatist exclusion or inclusion of labor. Economic growth, labor peace, and geopolitical security took precedence over efforts at fostering cohesive institutions whether of corporatism or contract, and gave priority rather to integrating labor into the priorities of the enterprise. Stabilization and liberalization efforts by the state in the 1980s brought

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little fundamental change to industrial relations until the general strike of 1987 forced greater autonomy for labor organizations. Subsequent state administrations have vacillated between labor reform and the status quo, further impeding cohesive growth in the necessary labor organizations and mediation bodies that would insure a substantive role for labor in the adjustment process. Nonetheless, the adjustment process in the textile industry provides evidence of change in industrial relations, prompted by shifts at firm, market, and state. Paternalism in local labor relations has long been supported by familism in management and ownership of local plants, often reinforced through socializing agencies such as factory schools and dormitories of the mogul spinning mills. A corporatist overlay of industry labor federation and national center was supported by cohesive trade associations among the mills, and powerful state agencies intent on dampening inflationary wage demands. As mills today diversify out of textiles, specialize textile production, and move offshore, the earlier local base of largely young, uneducated machine operators is giving way to a much smaller labor force of highly skilled workers. A better educated, smaller workforce with opportunities to move their skills into other industries may prove less amenable to paternalistic controls. Corporatist functions appear to persist today in part because of the complexity of labor relations at firms trying to adjust within their sector at a time of wider market liberalization. Educational programs, collation of information, and ties with other labor organizations within and beyond Korea now take center stage at the Federation of Korean Textile Workers Unions. As the liberalizing Korean state moves slowly out of a period of labor controls, the federations and national center remain among the few institutions with the expertise and personnel to support enterprise unions and permit a tripartite consensus on critical issues of adjustment such as terminations. Nonetheless, the enterprise or company unions themselves remain the most significant forum for the bargaining of interests in Korean industrial relations, and across a society of larger and smaller jaebol in the upstream sectors of textiles. Independent, organized labor is essential for effective bordering of multiple modes of interest exchange at the plants to discourage excesses of clientelism, corporatism, or contention. Lower-cost competitors in international markets have forced mills to move out of labor-intensive production domestically, shedding workers as they transfer machinery offshore or automate production processes at home. The growth of capital and technology-intensive industries, as well as of service industries in South Korea, fostered a competitive labor market in South Korea prior to the IMF era recession, forcing firms to compete not only for technicians, but for younger Korean laborers and even for foreign laborers. Market can play a bordering role on paternalism or corporatist collusion in labor relations, but can also result in excessive competition pitting workers against one another and discouraging common action. Comparatively lower wages and greater availability of labor due to the recession may spur an industry recovery, but will probably not change the industry’s direction of specialization and upgraded production at home, and labor-intensive production abroad. Shifts in markets at home and

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abroad have also affected bargaining of interests, with participation in the International Labor Organization (ILO), and the Organization of Economic Cooperation and Development (OECD) have brought international scrutiny of Korean constraints on labor organization such as the ban on organization of the public sector, or on labor’s political activity. Globalization initially promoted a new role for the industry’s labor federation as they reorganized to learn of Korean textile investments abroad, particularly their labor practices, to better support enterprise unions in annual negotiations on wages and job security. But the dramatic, rapid shift of spindles offshore over the past three years has led to a sudden downsizing of the industry in South Korea, depriving the federation of both members and dues. Whether South Korea will follow the Japanese model of a balance of domestic and foreign production sites with their own international line of serial production, or retain headquarters in Korea with production and marketing mainly abroad will largely determine the future of the industry’s labor organizations. A remarkably complex state role in industrial relations has developed due to the potent combination of change in the textile industry and the macroeconomic reforms of the IMF Era. Legislation and practice on the entry and training of foreign workers, on education for development of technicians in more complex technologies of the textile line, and most immediately on labor organization has kept the state deeply involved in labor relations in the textile industry. In addition to the institutional gap in labor organization and mediating fora between capital and labor, one can cite a further gap between state legislated policy in labor relations and state enforcement that has long constrained the role of organized labor, although historically it has also discouraged firms from shedding workers. With priorities of labor peace to permit economic growth, the state has long permitted and even encouraged a corporatist organization of labor in textiles from firm to federation to national center. The growing complexity of global industries such as textiles, as well as processes of democratization and Korean participation in international labor and trade regimes has renewed state interest in cohesive organization of labor. What remains is the entry of organized labor into domestic politics which would permit an alliance with political parties to insure continuity in labor’s voice on issues of adjustment, trade, as well as domestic labor conditions. Second, the globalization of the industry through investment offshore is prompting the Textile Workers Federation to establish stronger links with labor in the target nations of investment through such organizations as the Asia Pacific Regional Organization of the International Confederation of Free Trade Unions (ICFTU). Here the federation finds a new, very significant role in regional industrial relations which will prove significant if labor at the enterprise level gains a voice in adjustment planning. In any case, adjustment may erode earlier bases of both paternalism and corporatism.

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Conclusion

Extensive state intervention in the market may well foster “opportunities to acquire wealth through unproductive activities such as influence-peddling, and divert entrepreneurial efforts away from productive activities.”1 Chang cites “rentseeking” as the foil to productive industrial policy in Korea, and cites India and Turkey as examples where rent-seeking activities have been a major obstacle to development. Answers to why ties between state and local capital in South Korea did not always result in predatory rent-seeking can be found in society as well as state. An image of the Korean “Weberian state” suggested in contrasts with the more fragmented states in South-East Asia does not do justice to either the varieties of internal cohesion across time nor the complexity of domestic networks supporting state policy and enforcement.2 Even recognizing the capacity and relative insulation of the Korean state in the Third and Fourth Republics (1961–79), the complex and sometimes collusive interaction of state and capital remains the central forum for striking a balance between the interests of industry and society in the process of developing target industries for penetrating international markets. Five decades of growth in textiles suggest syncretic capitalism as one answer to the anomaly of strong, and usually effective state coordination moderating the effects of monopoly cronyism or collusion, despite concentrated sectors of synthetics and spinning, and a skein of clientelist and corporatist ties joining major politicians, bureaucrats, and industrialists. Syncretic capitalism links but also limits, connects but also constrains interest struggles which in the long run permits reliable channels of reciprocity, precedents of trust and mutual interdependence, and yet some constraint on excesses of collusion, corruption, or cut-throat competition. Syncretic capitalism helped moderate the political demands of a strong state on dependent capital in earlier decades, but also helped limit the capacity of capital to exploit the state, a mechanism discouraging the dangerous shift from simply connections to capital’s capture of the state.3 As opposed to either pluralism, corporatism or clientelism alone, multiple competing channels of interest contention address not only market imperfections in the Republic such as the imbalance between supply and demand or of capital flows, but more specifically the inadequacy of institutions for channeling

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and regulating ties between bureaucracy and business, state and society, politics and markets.4 Indeed, reliance on syncretic capitalism may actually retard cohesive institutional development of interest channels, and encourage a kind of crisis mentality that marks the ascent of textiles from war and reconstruction through the Milano Project today. Why does the Taegu textile industry suddenly need an infusion of close to $680 million dollars with much of it coming from the public sector? Why does an industry with five decades of production and marketing experience need the state to ride in as their savior? Firms and business associations have a mandate to plan and promote ongoing adjustment in light of market changes. Among the extensive studies on the Milano Project, none address the basic question of what went wrong in firm and market that led to such a crisis. The chronicle of the textile industry, however, offers a clear answer with multiple instances of coordination, a compressed timeframe, and crises. Structure and process across five decades foster a crisis mentality that forces restructuring when a consensus is established on directions of change or development. Multiple paths of interest contention permit a variety of channels of reciprocity and mutual surveillance necessary to ensure trust in turbulent periods of growth and decline, particularly in newly industrialized societies where institutional development has not kept pace with economic growth. Political demands as well as the demands of creating and sustaining an industrial base for advancing into foreign markets add further complexity to the neat picture of a Weberian, insulated bureaucracy implementing rational economic policy. Import substitution and then export-oriented industrialization helped legitimate the rule of capitalism in the Republic of Korea, but sustaining high growth rates in export volumes and foreign exchange earnings demanded high trust in a chaotic scramble for growth with few credible bases of exchange among state and entrepreneurs only recently introduced to a post-colonial capitalism of international markets. The economic performance of leading industrialists lent credibility to the Korean state of the Third and Fourth Republics under Park Chunghee, fostering an interdependence between state and capital of mutual support and guarantees necessary to embark on high risk investments.5 Growth with stabilization and liberalization in the past two decades has again helped legitimate authoritarian and then more democratic rule, and helped sustain the legitimacy of the south in contrast to the drastic economic deterioration of the north. Apart from legitimacy in a tensely divided nation, multiple modes better tap the interplay of market and society in the south where tradition and modernity mingle in such patterns as family ownership and control in the jaebol, the organic role of the state in the economy, or in paternalism in labor relations at the firms. Coordination: Korea and Turkey Cooperation along a line of textile production remains the key to the cohesive development of an industry, as opposed to simply an isolated sub-sector of dyeing or weaving, or indeed a set of firms in a particular specialty. Only now do policy

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makers admit that linking the Taegu area weavers directly to foreign buyers as basically sub-contractors in a global stream succeeded only in the short term with cheap exports of polyester fabric. A consensus has now emerged on better integrating the mid-stream both upstream to local producers and downstream to local facilities for apparel and fashion. The creation of industrial sectors through integrated production upstream and downstream makes possible economies of scale and scope critical for import-substitution phases of early industrialization. Coordination of supply and demand along a line of production and export within an industry facilitates the task of creating, sustaining, and extending comparative advantage in international markets in the initial stages of export-oriented industrialization. Adjustment in a mature industry serving diversified markets at home and abroad again can be facilitated by the multiple opportunities presented by production facilities in the higher value-added sectors of a particular industry. Drawing on the resources and competencies of both capital and state, the development of a coherent yet diversified industry provides a window on distinctive national strategies for resolving problems of collective action. Biddle and Milor contrast the organization of industries of garments and autos in Turkey to distinguish growth-oriented networks from rent-oriented networks. Policy networks refer to formal, institutional ties between state and capital, as well as informal ties, although the authors focus on business associations and firms.6 Transparent flows of information between association members and between association and state bureaucracy, reciprocity and credible sanctions to protect against breaches of mutual confidence distinguish what they term “growthoriented networks.” In contrast, limited transparency does not preclude particularistic ties and free-riding behavior in what they term “rent-seeking networks” that are vulnerable to illegal forms of cooperation for mutual benefit defined here as “corruption.” The authors provide case studies of growth-oriented networks in the ready-made garment industry such as the Turkish Clothing Manufacturers Association, and of rent-oriented networks in autos such as the Association of Automobile Manufacturers. Despite some parallels in the growth of the ready-made garment industry in Turkey and the textile industry in South Korea, it is more the contrasts in state and industrial organization that offer insight into coordination of business-state ties in the two nations. What drives the study is the question of institutional conditions orienting state industrial policy towards public goals such as economic growth and export competitiveness, or private goals of prosperity for individual firms. Curiously, the authors conclude that it is the business community and particularly their association that mediate company and industry interests, rather than the state. Indeed, the authors pose the “Weberian” South Korean state as foil to the penetrated, inefficient state role of the Turkish government in recent economic development, and cite a “politicized incentive regime” to exemplify the lack of insulation, and the prevalence of particularistic and clientelist ties between state the business. Ziya Onis put it more bluntly in an earlier article on Turkish state and foreign trade companies, arguing that the “regulatory” character of the Turkish state outweighed its “developmental” character, characterized by an

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export policy formulated and enforced by a highly fragmented bureaucracy that still intervened frequently at the microlevel. Compounding problems with state autonomy was the absence of encompassing peak associations in the business community able to aggregate interests and contribute to policy formation and enforcement. Politics has eroded the credibility of the semi-official Union of Chamber and Commodity Exchanges, organized with government direction in 1950, and frictions between exporters and local industrialists in the more independent Turkish Industrialists and Businessmen’s Association have crippled joint action. Onis concluded that loose policy networks resulted from the combination of fragmented bureaucracy and fragmented business interests, spawning an unstable relationship of mutual distrust between state and capital.7 Biddle and Milor cite the willingness of Korean business leaders to relegate decision-making to their professional associations and a history of repeated interactions between associations and an insulated bureaucracy. I would counter that textile moguls in Korea have proved reluctant to cede any responsibility to associations or indeed, to share information with competitors unless forced by the structure of government incentives such as access to raw cotton imports through the Spinners and Weavers Association of Korea, or availability of lowinterest loans for adjustment through the Korea Federation of Textile Industries. But what the contrast with Turkey does suggest is that the corporatist overlay of semi-official business associations continues to play a significant role in South Korean textiles, given the structuring of state incentives and constraints embedded in these semi-mandatory organizations, despite the rugged independence of larger and smaller jaebol eager to retain advantages of both marketing and manufacture within their own organizations. To link transparency with association, I would argue that gathering information on international market and production opportunities, provision of statistics on capacity and operation, and sharing of plans for increasing or decreasing productive capacity remain critical functions of associations, together with oversight of discretionary state favors for any one firm at the expense of the other moguls. Third, the contrast with Turkey highlights the depth of the Korean policy networks in a relatively cohesive pyramid stretching from local, urban, and regional branches of sectoral associations, to national offices of sectoral associations, to peak associations such as the Federation of Korean Industries. The fact that the powerful Federation of Korean Industries convened the earlier discussions on the competitiveness and adjustment of the textile industry, or that the Taegu Kyungbuk Textile Industry Association retains responsibilities for equipment improvement loans, provides evidence of the kind of cohesion in the business community that is critical for effective policy formation and enforcement. An insulated state bureaucracy would serve little purpose without the business associations, and more importantly, the enterprise of firms intent on consolidating and expanding market share. Finally, the penetrated Turkish state with its politicized incentives, coupled with frail peak associations in the business community may pose little challenge to particularistic and clientelist ties, but one still wonders about the positive role of direct, personal ties between

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state and major firms. To the authors’ question, “Do clientelistic networks always place binding institutional constraints in the way of successful economic performance?,” the Korean textile chronicle suggests the cautious response, “not always.”8 The task remains to specify conditions under which such networks fostered trust to limit risk in the absence of credible institutions for entrepreneurship, and in turn the conditions under which unbounded clientelism undermined trust in the fledgling institutions of firm and finance. Autonomy: Korea and Thailand Recent studies of Japan’s regional network of production in Asia have raised questions of mobility along a ladder of technology across North-East and SouthEast Asia, or of dependency on Japanese capital and technology. Scholars have questioned Akamatsu’s “flying geese” variation of Product Cycle theory. Is Japan the leader drawing along other Asian nations up the technological ladder of comparative advantage? Or is Japan the dominant technological power in Asia retaining control in a hierarchy of added-value within their regional network of production? Bernard and Ravenhill originally countered the benign argument of technological leadership with a hierarchical regionalization of production within Asia by Japan’s multinationals. A “‘supply architecture’ built around ongoing Japanese innovation of components, machinery, and materials,” maintained a distinctive hierarchy of technology. In addition to supply of capital and technology, Hatch and Yamamura identified Japanese political networks in Thailand complementing the penetration of multinationals in home electronics and auto manufacture. They warned that Asian economies “embraced” by Japanese capital and technology in this production alliance may well fall captive to Japan’s advanced technologies.9 A relatively autonomous serial line of production in South Korean textiles provides an intriguing exception. I highlight a broader societal architecture paralleling the “Nikkei” (i.e., “Japanese network”) supply architecture in Korea, China, and Thailand in my own work on Japanese investment networks.10 The key to Japan’s distinctive political economy abroad is balancing a “supply architecture” of technological innovation and capital investment with a “social architecture” between market and society necessary to embed lines of production and distribution within industries. Flows of production and distribution provide a rough guide to market networks. Societal networks which develop to support market networks include local partners, business associations, and state patrons. More generally, such networks extend from international trade regimes and bilateral trade agreements, to local “state” relations and the bureaucracies responsible for foreign investment and trade, legal structures, industrial and distribution infrastructures, and on to business associations and the role of local partners in foreign invested enterprises. What can textiles tell us of local production that might clarify the regional dependence argument? Briefly stated, complementarities between supply and societal architectures are the key to coordinating a serial line of production in Japan, or between Japan and Thailand. But Japan’s multinationals, and indeed,

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small and medium-size industries hoping to sub-contract in South Korean textiles, have never been able to achieve such complementarities in South Korean textiles. Korean textiles offer a remarkable case study of early reliance on Japanese technology, later diversification of technology upstream in synthetics, and now a relatively small amount of Japanese direct investment. Moreover, the long line of serial production in South Korea has retained local control of production, with few inputs from Japan. The contrast between Korean and Thai textile industries sheds light on regionalization of Japanese networks. Local textile processing sub-contractors in Thailand are often Nikkei joint ventures, dependent on Japanese machinery, know-how, and capital. Japan’s general trading companies have a long tradition of domestic integration of production and distribution in textiles, moving fibers down to fashion in a tightly integrated system of sub-contractors usually enjoying long-term business ties with a particular trading house. The trading giant Itochu remains a leader today in Thailand’s textile industry. Among textile companies, Teijin is a producer of high quality polyester fibers and filament, selling off its upstream products, or else sub-contracting processing to affiliated firms. Toray identifies itself as a vertically integrated textile company with a vast supply network within Asia. Japanese firms operate most of Thailand’s more sophisticated production facilities upstream, and are leaders in spinning, weaving, and processing as well. Directing production to local or foreign markets according to demand, textile giants in Thailand such as Toray or Teijin can control the flow of production and distribution through the midstream stages of weaving, dyeing and finishing. The societal penetration of Nikkei networks is equally remarkable. Longstanding partners from prominent Chinese-Thai families played a major role initially to insure good government relations and marketing opportunities, but have now sold off their shares or remain largely silent partners. Japanese or Nikkei textile producers meet regularly as a committee at the Bangkok Japanese Chamber of Commerce, the largest such chamber outside of Osaka or Tokyo. The Japanese government has played a major role in shaping and funding the Industrial Restructuring Plan at Thailand’s Ministry of Industry, particularly in sectors important for Japanese investment. Testing and research institutes have been established in targeted sectors to implement the restructuring plans, with Japanese technicians and advisors dispatched to the institutes by the Japan Productivity Organization with funding from JICA (Japan International Cooperation Agency). Japanese technicians in dyeing testing machinery are presently setting up the Dye Test laboratories at the Thai Textile Institute.11 Syncretic capitalism has been critical in establishing and integrating a local supply architecture with societal networks in South Korean textiles. Patterns of industrial organization cited above, as well as distinctive features of compression and coordination have helped sustain the remarkable flexibility of multiple modes of interest exchange, and autonomy of serial production. Moreover. autonomy has been gained not in isolation, but rather in interaction with the neighboring Japanese firms. Korean textile giants have long engaged the Japanese industry,

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whether in acquisition of technology, capital investment, or in market relationships. As seen above, Korea’s Kolon fostered initial technical and capital ties with Teijin, only to switch to Toray a decade later, and today retains Toray as a major partner with 12 percent of the shares. Formerly a technology partner, Toray has moved aggressively into the vulnerable Saehan Industries and is now the majority partner with 20 percent of the shares. Emerging recently as a major player in specialty textiles on the peninsula, Toray has invested in a new 50/50 joint venture with Saehan Industries. Technology licensing remains the norm, however, rather than direct investment. Teijin provides SK Chemicals with licensed technology in Korea and in Indonesia. Dupont of the USA has technology licensing agreements on the peninsula, particularly for production of spandex, and also a new joint venture with Saehan, DSI.12 Over-capacity in polyester and weak global markets have forced Korean synthetics to induce new foreign investment, but the blend of US and Japanese investment, together with an extensive base of local capital does not suggest technological dependence on any one nation. Problems of interest exchange in the vertical integration of Thai textile production along a line of serial production offer a useful foil to the Korean experience. Clientelism, corporatism, and contract or market have each played a role, though in patterns quite unlike the Korean case. Doner and Ramsay cite three factors bounding clientelism to preclude monopoly cronyism despite a long history of particularistic, affective, and hierarchical ties between Thai officials and Chinese entrepreneurs. One factor was intra-elite rivalries for state-supplied goods and services which encouraged a “competitive clientelism,” and discouraged monopoly over time of government favor by any single entrepreneur. Coupled to the competition was the boundary of hard budget constraints, and specifically the absence of selective or “discretionary” credits so prominent in Korea’s development. The authors also cite an institutional richness in the Sino-Thai business community in both ethnic networks and business groups, although not in the conventional pyramid of strong business associations necessary for more substantive, corporatist intermediation. One example of institutional strength was the commercial Bangkok Bank which promoted the transfer of capital from rice to textiles, and then the integration of the textile line for exports. In contrast, the more cohesive state in Korea, the absence of an intra-elite rivalry, and continuity rather than change in administrations, might permit a long-term monopoly of government favor in export quotas, tax subsidies for equipment, etc. Sectoral interventions such as the depressed industries program in Korea exemplify persistence of discretionary incentives through the present, although coupled now with more complex macroeconomic incentives for growth as well. The richness of Sino-Thai ethnic networks and of independent banks provides a further border to a predatory state not found in Korea, although strong, large-scale business groups under family ownership and direction dominate spinning and synthetics in both nations. Clientelism in South Korean textiles did revert at times into corruption, and briefly in the late 1950s and again in

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1972, in monopoly cronyism to control the price and supply of yarn. Nicole Biggart brought Weberian theory to the Korean state of the Third and Fourth Republics under Park Chunghee with the thesis of patrimonialism rather than clientelism, but argued similarly “that the social relations of competitive patrimonialism push economic decision making away from the impersonal and rational western model,” with state structure and state policy helping to maintain competition for state favor.13 Despite occasional lapses, the relatively benign clientelism that has permitted long-term reciprocity between state and textile moguls has been a result of the interaction of what Amsden rightly terms “a smart state” and the organized interests of capital with alternate channels of contention and surveillance. Equally intriguing in the Thai case is the ebb and flow of a corporatist dynamic, particularly strong in the 1980s. The Thai Textile Manufacturers Association in the early 1990s helped coordinate the interests of six trade associations including synthetics, spinning, and weaving, and played an important role in representing the industry to the state in issues of adjustment. But the lack of successful precedent for such coordination between state and business in critical issues of capacity controls or trade incentives and controls helped limit expectations and joint-efforts to discussions of policies and mutual lobbying. The Japanese Trade Organization (JETRO) conducted a survey of the Thai textile industry to determine the suitability of the industry for further investment and found “insufficient linkage between spinning, weaving, dyeing, and other textile industries.”14 The survey was particularly critical of association failures in promoting vertical integration and expansion of the industry. But in contrast to both Japan and South Korea, the frequent changes of government in Thailand, coupled with fragmented responsibilities for industry policy, did not provide textile moguls with the continuity in state leadership and policy-formation capabilities necessary for more substantive cooperation. Market liberalization and foreign investment in the industry further diluted common action, given the sometimes conflicting priorities of Japanese versus local investors, making corporatist styles of concertation still more difficult In contrast, South Korean business associations and bureaucracy have weathered the influx of imports and greater foreign scrutiny of joint efforts at home, and continued efforts at joint policy formation and enforcement. Indeed, the contrast with Thailand suggests some benefits in the transition from more state-directed corporatism particularly evident in the semi-official Korean textile business associations. Democratization has reduced the funding and oversight role of the state in these associations at the same time production abroad and diversification have eroded the commitments of major textile conglomerates to the industry. Yet both state and capital need the associations to plan for change and further investment in vertical integration of the industry at home, if only now in textiles and not garments, given the growing complexity of both the domestic and international markets. It would be difficult now to create such associations and initiate cooperation, but with the structure of associations and government office in place, and a legacy of capital’s dependence on state support,

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and then interdependence with the state, Korea draws the praise of scholars such as Doner and Ramsay for institutions permitting systematic exchange of information and reciprocity between state and entrepreneurs. The fact that persistent exposés of corruption and collusion continue to blemish an otherwise remarkable history of development in Korean textiles, evidence of a gap between economic performance and institutional development, can divert attention from formidable institutional developments at firm, association, and state bureaucracy. A long record of interaction between state and mogul through institutions of family, firm, association, and their continued vitality provide the societal context for syncretic capitalism in the negotiation of interests between state and the private sector in textiles. Processes of globalization, including internally and externally induced democratization and market liberalization, have enhanced the market dynamic in both Korea and Thailand to such an extent that Doner and Ramsay conclude that by the late 1970s, “the Thai political economy was a hybrid of clientelism, pluralism, and concertation.”15 Contrasts of industry, institution and practice in the textile sectors of both nations, and particularly of clientelism and corporatism suggest dramatic differences between the Thai hybrid and Korea’s syncretic capitalism. Factors of industrial organization, market, state and international system critical in the formation and development of interest contention on the peninsula would help account for differences between the Thai and Korean forms of interest exchange today. The future: Korea and Japan Korean textile moguls have gained autonomy within global production alliances with Japanese and Western giants. Yet the parallels and occasional contrasts with the Japanese industry reveal much of coordination and compression in the Korean industry. 16 I found “patterned pluralism” and corporatism distinguishing the Japanese industry, with evidence recently of a societal or even a “sectoral” corporatism. Leaders of Japan’s textile trade associations agree to undertake the implementation of policy through delivering the cooperation of their members in exchange for favorable policies. In addition to various ringikai joining state, capital, and labor in formation of adjustment policy under the aegis of MITI, we can also cite the powerful textile associations such as the Japan Textile Federation, or sectoral giants such as the Japan Chemical Fibers Association, or the Japan Spinners Association. The interdependence of state and private interest organization, together with structured, long-term negotiating relationships between them distinguish corporatism from pluralism. Nonetheless, I concluded that the corporatist link remained at best porous and at times vacuous in the competition between established mogul mills and the newer, often privately held maverick firms. Sectoral corporatism has not found such congenial ground in the exchange of interests among state, capital, and labor in Korean textiles. I find instead hierarchical, reciprocal, informal clientelist ties added to the mix of corporatism

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and pluralism. Yet the survival and occasional success of joint efforts at reform may be evidence of a transition from state corporatism to sectoral corporatism, despite the apparent chaos of the industry today. Pluralistic market competition in South Korea’s textile industry bears little resemblance to the “patterned pluralism” more familiar in Japan with its distrust of “excessive competition,” or to the “free markets” espoused in the USA buttressed by formidable anti-trust mechanisms to insure a more level playing field. Contention in Korea stands in contrast to the embedded patterns of sub-contracting and long-term marketing ties familiar in Japan, or to the prominent role of price and contract supported by vigorous legal institutions in the USA. Recent efforts towards greater transparency and more secure financial institutions have added further fire to the crucible of contention in the textile adjustment, as the rush to capture ever larger market share through integration of manufacture and marketing remains the overriding goal of the textile moguls. Despite government warnings against “dumping” products on the local market at below cost, and despite complaints from mid-size and smaller sub-contractors over irregularities in payment and orders from the mogul firms, mogul mills contend fiercely for market share at home and abroad in an effort to survive lower-cost competitors. Syncretic capitalism in Korean can sustain a remarkable ability for survival. Two features distinguish the adjustments in Japan and South Korea: the timing or pace of growth and adjustment (compression versus extension), and the forms and extent of coordination within the industry. Compression of Korea’s industrial trajectory in textiles from origins to growth, and on to maturity and decline contrasts with the far longer, extended trajectory of textiles in Japan. Coordination of a textile production line across multiple upstream and downstream sectors offers a further contrast, with the GTCs playing a major role in Japan, versus the state and semi-official trade associations, and more recently the jaebol themselves taking that role in South Korea’s textile industry. Varieties of compression or extension, and coordination have contributed to corporatist cooperation in Japan’s textile adjustment, and to a fierce, often cut-throat contention and dumping of products below cost in Korea. Interest exchange evolves along lines far more complex than simply compression and coordination in the history of an industry, but the history tells us much of the past and possible directions for further evolution. Compression Mogul spinners in Japan such as Toyobo or Kanebo developed at the turn of the century and expanded into China and Korea during the colonial years prior to the Pacific War. The Japan Spinners Association still refers to firms of the 1950s such as Tsuzukibo and Kondobo as “new spinners,” but Korea’s largest spinners, Choongbang and Dainong date only from the late 1960s. Competition from lower cost producers spurred adjustment legislation in Japan’s textile industry already from 1956 with the “Old Textile Law.” A “Special Textile Law” (1967–74) provided low interest loans to spur scrapping of older

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equipment, and together with company efforts to move offshore strengthened the industry at home, but it was the “Depressed Industries Stabilization Law” (1978–83) that mobilized an industry-wide consensus on adjustment and achieved significant reductions in capacity. Now deprived of such government supports, the industry has reshaped itself with transfer of capacity offshore, product specialization, and diversification of investment permitting survival but not yet prosperity at the mills. What forced the decline in Korean textiles was initially the state-directed investment in chemical and heavy industries at the expense of light industry. Dramatic hikes in the factors of production such as wages, electricity and real estate forced labor-intensive industries prematurely into the sunset on the peninsula in the late 1970s, only to be resurrected in part by a humbled state newly appreciative of light industry in the early 1980s. A “Depressed Industries Law” of 1985 brought some relief to the hard-pressed textile industry with lowcost loans for improving technology, particularly to the mid-stream sectors of weaving and dyeing critical for maintaining a production line for export on the peninsula. But without national support or experience in offshore production, Korean mills adamantly opposed transfer abroad until forced by high wages at home from the early 1990s. Long accustomed to high debt ratios and friendly banks, Korean mills having only recently begun the task of reinvesting in equipment and investing in production abroad, now face a far more dire prospect of bankruptcy in the IMF era. With a more extended time frame, Japanese mills have learned the rewards of cooperation at home and worked through the learning experience of jointinvestment abroad. Although the state played a major role in orchestrating change in earlier decades, mills today have more than a decade of cooperation among themselves with relatively little direct state support or intervention. More independent but also more savvy in lobbying efforts to gain a place in state trade policy and regional development programs, moguls cooperate in their associations at the same time most mills are diversifying into non-textile areas of investment. Although the consensus on industry reforms remain hotly contested, particularly on import policies which separate those with foreign production bases from firms with mostly local production, most cooperate in critical issues such as voluntary production cutbacks. A porous sectoral corporatism permits joint efforts without precluding maverick behavior among mills willing to risk heavy reinvestment in a declining industry. Part of the reason for cooperation at home is the expanding international role of the Japan Spinners Association and Japan Chemical Fibers Association which fosters cooperation among adjusting firms with heavy investment abroad in manufacture and marketing. Mills now need a more sophisticated lobby on imports, since they themselves might bring in goods from offshore sites for processing and sale. Mills need a cohesive voice on state unemployment benefits and reeducation programs for workers shed in the closing of mills moved abroad. In sum, trade associations have developed a new role in tandem with adjustment to serve a more globalized and diversified textile industry, taking

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advantage of their structured ties with MITI, the Ministry of Finance, the Diet and other organizations. The extended timeframe of the textile transition in Japan permitted a gradual repositioning at the trade associations, and gradual formation of a new consensus among adjusting mills on the value of corporatist cooperation. Korean mills have only begun the task of transferring production abroad, with only Kabool dedicated to a global system of production comparable to Tsuzukibo of Japan. Moreover, in contrast to Japanese mills teaming up with general trading companies to share investment risk, administration, and expertise, Korean mills tend to go abroad without trade partners. In addition, Korean mills have sought out production sites in diverse settings across Asia, the midEast, and Eastern Europe. This diversified pattern permits little continuity of geography, of firms, or of marketing strategies among the Korean mills, discouraging so far common efforts to lobby the government on trade policy, raw material procurement, or insurance and loans for investment abroad. Korean mills in time will face similar challenges on trade and investment policy such as tariffs or taxes on imports of products from offshore sites, or promotion of a local textile parts industry to service older machinery transferred abroad. But the rapidity of the shift offshore, the crisis of refinancing their debts, and the demand for new products and new distribution systems in the fast developing local Korean textile market have left the firms scrambling for survival on their own. Similarly, the rapid shift from state direction to state mediation in the industry leaves the mills suddenly saddled with powerful semi-official trade associations which claim little allegiance. Nor have mills yet defined a clear mandate for the associations to serve them in a time of rapid change, nor accumulated the experience of autonomous cooperation to insure adherence to an industry-wide consensus. In the meantime, the crucible of contention grows more intense with mills hustling to position spindles and polyester plants abroad and cutting workforces at home. Coordination Coordination of a long textile production line extending from upstream synthetics and spinning, midstream to dyeing and weaving, and downstream to garments represents a second critical difference between Japan and South Korea. General trading companies (GTCs) such as Tomen and Itochu prospered with imports of raw cotton and exports of cotton products in the late nineteenth and early twentieth centuries. This earlier pattern of manufacture at the mills and marketing at the GTCs developed into a productive teamwork for managing markets at home and manufacture abroad. Japan’s GTCs continue to coordinate production and marketing of textiles within Japan’s domestic market, moving products along a multi-tiered system of brokers to bridge upstream mills and downstream garment and fashion houses. A network of inter-firm cooperation including major manufacturers and marketers provides coordination and a basis for cooperation in the Japanese industry, particularly in years of adjustment.

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In the absence of GTCs dedicated to both imports and exports, Korean mills have long been accustomed to manufacture and marketing within their own groups of firms or jaebols.17 With the development of textiles as an export industry from the 1960s, the Korean state found itself controlling prices and even supplies to make sure downstream assemblers would have a reliable supply of locally produced and locally priced inputs to meet export quotas on an annual basis. Although the Ministry of Commerce and Industry and the Ministry of Finance attempted to spin off some of these functions to trade and export associations, and mandated the Federation of Korean Textile Industries with the task and the fund for adjustment, the state remained a force in integration of the textile production line well into the 1980s, and is still responsible for the Textile Vision statements, and is a major player in the Milano Project. Yet the simultaneous reforms of democratization and market liberalization in less than a decade have suddenly deprived the Korean industry of not only state support, but more importantly, state coordination. Huge jaebol now manage the markets, dominating a network of sub-contractors and downstream consumers, often with a line of their own affiliates constituting an in-house textile production line. Eager to capture higher value-added segments of production, textile jaebol, or textile mills within jaebol, are reluctant to cooperate along the line with other major players, whether within their sector, or between sectors. Market liberalization in Japan and South Korea might suggest either a “disorganizing of capitalism” along the lines of Sabel and Piore, or on the other hand, a “reorganizing of capitalism” which meets the demands of new market structures by reintegrating indigenous, often deeply embedded modes of exchange. Bringing this question to the hard-pressed textile industry I have found persisting patterns of cooperation in Japan despite the centrifugal forces of diversification and offshore investment. The same question proves more complex in the chaotic Korean industry, already in turmoil due to industry-specific factors well before the financial crises from the fall of 1997. What is surprising is the persistence of clientelism in an embedded network of marriage alliances, company recruitment of former government officials, and personal ties between politicians and entrepreneurs, coupled with the continuity of corporatist links in the trade associations. Trust remains the critical component for adjustment, ensuring credibility in finance, industry and politics. Multiple modes of exchange in the past have helped state and capital weather crises and harness resources for rapid adjustment, but can a similar interaction of contending modes play a role in a more mature political economy under closer international scrutiny? Korean textile moguls scrambling for survival, and a Korean state intent on both industry reform and revival may not have the luxury of severing either corporatist or clientelist ties in a time of crisis. Syncretic capitalism What is the future of syncretic capitalism on the peninsula? Is it simply a temporary expedient in the absence of adequate institutions of market and state

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to ensure a level playing field for all competitors, or perhaps a clever strategy to harness private and public resources for a common project in developing nations where trust must be sustained in very chaotic, fast-changing markets? In either case the strengthening of institutions mandated under the IMF call for “transparency” would appear to obviate the need for multiple modes in favor of a consistent and credible system of commercial law, protection of property rights, and open markets for investment domestic or foreign. But replacing firmly embedded channels of trust nourished by all three modes with an Anglo-Saxon model of adversarial law may prove difficult in the short term. Features of industrial organization cited above will continue to bring state and capital together, if for no other reason than reform and restructuring of enterprise and oligopoly in compliance with IMF conditions. Second, kinship networks remain in place and intermarriage continues among the top echelon of politicians and industrialists, and firms still recruit high government officials into industry executive positions. Sectoral trade associations have assumed a more significant role in information gathering and policy preparation given the complexity of international trade and adjustment, and still often draw their executives from a pool of retired government officials. Clientelist and corporatist ties may be attenuated with stronger market institutions insuring the transparency of finance and contract, but such ties remain rooted in families and friendships and associations which will not soon fade. Third, the very steps government and enterprise have taken thus far to comply with IMF conditions and regain international credibility reflect yet another stage of coordination in a very compressed time frame. Coordination and compression again demand remarkably high levels of trust among Korean state, capital, and labor in order to recapture the international credibility of their firms and financial system. Finally perhaps the most significant benefit of syncretic capitalism in textiles has been a balance of public and private, firm and industry interests, particularly evident in integration and extension of a serial line of production for export. Even if Mr Greenspan is correct and the Anglo-Saxon ideal of law and transparent procedure within relatively unfettered markets has finally triumphed over an Asian model with a more prominent state role, what institutions will take up the state role of striking a balance of private and public interests? Strong business associations such as the Federation of Korean Industries and the Korean Chamber of Commerce and Industry help coalesce the interests of mainly larger firms in relations with a state still deeply involved in the economy. Trade and industry associations within each sector provide further institutional support for defining the common interests of capital within an industry, and for bridging interests between sectors and with the state. Although corporatist strategies of organization and action have been identified to date only in agriculture and industrial relations, the prominent role of business associations in policy formation and enforcement is widely recognized.18 Yoo Moon Jee argued that the skein of personal connections or inmaek remains the basic of political, economic, and all other social activities in South Korea today.19 Recent investi

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gations in South Korea of former presidents Chun and Roh, of the break-up of the Kukje conglomerate in the mid-1980s, and of the ties among banker, bureaucrats, and jaebol leaders exposed in the aftermath of the financial crisis of 1997 provide abundant evidence of continuity in personal ties, often resulting in corruption. Korea’s prominence in powerful international trade regimes such as the WTO and the OECD has brought greater transparency to market relations, and a stronger commitment to the rule of law in the market even prior to IMF demands for change in the fall of 1997. Strong business associations coupled with strong state bureaucracies committed to economic intervention, persistence of personal networks, and the growing role of contract and price provide bases for corporatist, clientelist, and contract forms of interest exchange across Korean society. Little attention has been given to modes of interest contention in the small number of thorough case studies of Korean industries available to date, but we can cite differences in the relative strength of the state role. Economists Pack and Westphal looked to state intervention more broadly across sectors and found a dual policy structure between industries in which the nation had a static comparative advantage and those in which it did not. The state left the former to market forces and intervened in the latter, including existing industries such as textiles whose competitiveness depended on adjustment.20 Various scholars have identified sectoral differences which often result in different forms of interest aggregation and articulation, but the internal organization of firms in South Korea into jaebol often dilutes sectoral differences by the extension of a single jaebol into multiple industrial and service sectors.21 Synthetics giants in South Korea such as SK Chemical, Saehan and Hyosung developed within diversified conglomerates bridging multiple sectors while other leaders such as Kohap, Kolon, or even Samyang have emerged mainly as textile moguls, as have all the leading spinners apart from Dainong. Concentration of productive facilities and market share, however, gives continuity to the upstream sectors of Korean textiles, sustained in part by strong trade associations, and provides a basis for sectoral cooperation with the state and other sub-sectors of the industry. The recent entry of a few smaller producers such as Hankook, Seongan and Kumkang has not destroyed continuity in demands for better prices for their products from Korean weavers. Despite oscillation between macroeconomic versus sector-specific discretionary state policies in steel, textiles and semiconductors, Kim Hyung Kook concluded that what distinguished the steel adjustment was state initiative, market forces in semiconductors, and a blend of state and corporate strategies in textiles.22 He looked closely to formation of social coalitions in textiles and echoed Anne Krueger’s conclusion that the government’s quantitative restrictions spurred a rent-seeking competition in textiles for quotas, trade subsidies, and other benefits. Kim highlighted the role of the Spinners and Weavers Association of Korea in allocation of subsidized imports of raw cotton and aid for production facilities in the 1950s, providing a formidable institutional base for the textile coalition of mogul spinners. His study extends the comparative method to specify causes for

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differing forms of state intervention in the economic conditions of the industry, the social bases for coalitions, and the institutional bases for pressing a sectoral interest with the government. Finally, we might ask how changes in industrial organization will affect syncretic capitalism. Consolidation in the industry will lead to greater, rather than less concentration. Family ownership and management have been replaced by bank management at the ailing spinning and synthetics mogul, though not at the prosperous firms. Assuming banks will sell their majority shares once the operations return to profitability, the question is whether new families will enter the market to purchase and possibly manage the firms. The complexity of management, and scale of investment will make it more difficult for any one family to establish majority control, at least at the synthetics moguls. The professionalization of management continues to dilute family management in leading firms across the economy. But personal ties remain critical in Korean market and society, and will probably remain prominent despite the fading of earlier forms of family capitalism. Close relations between state and business may not be as cordial as in the past, but the state remains a major player, particularly with the growing complexity of international trade regimes. Globalization is perhaps the single most significant change affecting syncretic capitalism. The advent of major foreign partners in local textile operations will encourage a shift towards international “best practice” in interest bargaining as well as other aspects of enterprise. But priorities of profit and market growth will no doubt trump priorities of global versus local practice. If syncretic capitalism works in South Korean markets and society, it will probably persist. Stretching the Korean serial line of production abroad will pose still other problems for the bordering of multiple modes of interest bargaining. American and Japanese firms have adapted abroad yet retained distinctive national features. Korean textile firms in Vietnam and Indonesia cited above appear to be striking a similar balance with local business practices. What may prove more significant for the persistence of syncretic capitalism in textiles, however, is the growing autonomy of Korean business and labor due to globalization of markets and manufacture. Neither state nor local industry may command their attention in the future as it does today, and links with international federations of business and labor may dilute state controls on organization and finance. Borders in Asian capitalism Capitalism begins with borders such as “private” versus “communal” property, state versus society, the public versus the individual. Markets develop in capitalist societies with bordered institutions of state, capital, and labor. One feature of South Korea’s capitalist trajectory in the twentieth century has been the fluidity of these borders, resulting in problems of formation among critical market institutions such as a transparent, equitable and consistently implemented set of laws, but also in a remarkable ability to adapt and change. Scott Snyder highlighted the role of crises in Korean patterns of negotiation where

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brinkmanship appears primary. He noted of the IMF-mandated reforms, “it was only in an atmosphere of crisis that long-standing prescriptions for systemic reform of South Korea’s economic structure were able to be undertaken.”23 Compressed time frames help precipitate crises. A compressed development process was evident not only in textiles, but in the relatively abrupt shifts among initial import-substitution industrialization in the late years of the First Republic, easy export-oriented industrialization in the Third Republic, and then the Heavy and Chemical Industrialization campaign of the Fourth Republic. The next two decades from 1980 brought remarkable transitions of democratization and market liberalization, punctuated by watershed labor demonstrations in 1987, prosecutions of former presidents, and the Asian Financial Crisis from 1997. Crises have largely precluded the fixing of stable borders, leaving capital, state, and labor to reorganize and redefine their institutions in the process of negotiating their interests. Organized labor has evolved a curious structure with competing pyramids of representation in textiles, which has only recently won legal recognition. The larger jaebol emerged as Korea’s top firms only from the 1960s and 1970s, and the textile jaebol have seen their leadership decline in those same years. The changing role of business associations such as the Federation of Korean Industries, established with state initiative and oversight, are mirrored in the uneasy autonomy of semi-official trade associations within the textile industry despite democratization in other areas. Many of the mogul mills have reorganized themselves in the past few years as global firms with production sites offshore, and most have diversified into other investment. We find remarkable transformations even in the organizational structure of the vaunted Korean state. The Ministry of Commerce and Industry in the Third and Fourth Republics succeeded Rhee’s Ministry of Industry, but was overshadowed by the Economic Planning Board on most major decisions, particularly with the advent of the HCI Campaign. Textile policy has now devolved to multiple ministries such as the Ministry of Technology, Industry, and Energy, and the Finance Ministry, as well as to semi-official associations. Continuities in institutions provide bases for patterns of interest exchange. Familism at firms and personalism in political party leadership, the prominence of kinship in Korea’s political economy, as well as of regionalism and school ties provide fertile ground for clientelism and patrimonialism. Corporatism is fostered through an institutional framework of organized interests among labor and capital, and by a skein of semi-official trade associations linking state and industry. Indigenous philosophies of the common good, the nature of the political community, of state and indeed “interest” likewise support corporatist strategies. What Stepan termed “organic statism” appears more consistent with both practice and ideology in Korean political economy, than the liberal pluralism prominent in the Anglo-Saxon nations of the West.24 Institutional bases for contract include the system and practice of business and contract law, the Fair Trade Commission, the Korean Stock Exchange, and some efforts towards a more autonomous banking system. But despite inroads in the institutionalization of contract in the market, and democracy in the polity, Cho Soon and others continue to argue,

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“a free and competitive market system does not emerge in an institutional vacuum.”25 Institutions often provide borders for interest exchange. Cohesive, often longstanding patron-client ties embedded in kinship, region, and school can serve as a clientelist border on the excesses of cut-throat competition or corporatist collusion. A labor-oriented party such as the Christian Democrats helps legislate and implement a corporatist format for interest exchange in some European nations. Enduring, cohesive organizations of labor and capital also contribute to the maintenance of a corporatist framework to preclude clientelist corruption or mutually destructive competition. Structures such as open capital markets, stock exchanges, an independent banking system, and a relatively unfettered system of pricing, supply and demand provide a competitive dynamic to offset excesses of collusion or rent-seeking corruption. Mark Granovetter recently distinguished between relations of solidarity and power within and among institutions. Solidarity or trust is often a horizontal relation associated with outcomes such as cooperation or contention, whereas power is a vertical relationship of authority with outcomes of domination or compliance.26 Institutions of state, capital, and labor in South Korea reflect this dual function of trust and power in tasks of interest exchange such as definition and surveillance of borders, the brokering of such borders, and sometimes the infringement or breaking of borders. Much of this study has focused on the establishment or definition of borders evident in interest exchange in three periods of the textile industry. Surveillance and the breaking of borders have been most apparent in crises, whether prosecutions of “illicit accumulation” in 1961, the cotton cartel incident of 1973, the collapse of Kukje in the 1980s, or restructuring programs in the Asian financial crisis from 1997. I have given less attention to the prosaic task of brokering borders on a day-to-day basis where a nexus of clientelist, corporatist, and open market ties defines the context for interest exchange. This nexus builds on what economic sociologists point to more broadly as the societal context of exchange, or what Murakami and Rohlen termed a continuum between economic and social exchange. Case studies of other industries in South Korea’s recent capitalist history will help clarify the significance and extent of such a nexus. Given the wide attention gained by Korea’s rapid socioeconomic development and now adjustment in the Asian Crisis, the significance of the local experience of institution formation, as well as of interest aggregation and negotiation stretches well beyond the peninsula. Dilemmas of collective action spur questions of how actors pursue their interests. I have focused on the formation of interests in a developing economy, linking institutions and long-standing patterns of collective solidarity to problems of trust in a fast-changing social, political, and market environment. Seligman linked generalized trust to modernity and interaction with strangers whose responses and credibility they cannot confidently gauge. Trust becomes necessary in social interactions “that can no longer be adequately encompassed within the matrix of normatively defined role expectations.” The problem is clear but the resolution is not. Seligman describes the individual in Western society as the

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“final repository of rights and values,” the foundation of the social order, and the focus of social trust.27 I have highlighted a blend of individual and social bases for trust in South Korea with little explicit reference to individuals apart from law and contract. What I find intriguing is the similar challenge of modernity, i.e., formation and negotiation of interests within a capitalist society, and yet the diversity of resolutions in the very definition of generalized trust.

Notes

Introduction 1

Edward A.Gargan, “Bowed, Not Battered: Taiwan Rides Out the Storm.” New York Times February 24, 1998, pp. D1 and 4; for a recent comparison of state credit policies in Taiwan and South Korea, see Hyuk-rae Kim, “The State and Economic Organization in a Comparative Perspective: The Organizing Mode of the East Asian Political Economy,” Korean Social Science Journal 20 (1994):91–120.

1 Market and society 1

2

3 4 5

6

7

Gary G.Hamilton, “Asian Business Networks in Transition; or, What Alan Greenspan Does Not Know about the Asian Business Crisis,” in T.J.Pempel (ed.), The Politics of the Asian Economic Crisis (Ithaca, New York: Cornell University Press, 1999), p. 47; T.J.Pempel, “Introduction,” in T.J.Pempel (ed.), The Politics of the Asian Economic Crisis p. 2. The IMF staff pointed to “problems of data availability and lack of transparency, which hindered market participants from maintaining a realistic view of economic fundamentals.” International Monetary Fund, World Economic Outlook, May 1998: A Survey by the Staff of the International Monetary Fund (Washington, DC: IMF, 1998), p. 3. “What has happened here is a very dramatic event towards a consensus of the type of market system which we have in this country.” New York Times, February 13, 1998, pp. C1–2. See the editorials and featured discussions in the Joseon Ilbo and Donga Ilbo, in the final days of 1999. Bruce G.Carruthers and Brian Uzzi, “Economic Sociology in the New Millennium,” Contemporary Sociology 29 (May 2000):486–494; Mark Granovetter, “The Old and the New Economic Sociology: A History and an Agenda,” in Roger Friedland and A.F. Robertson (eds), Beyond the Marketplace: Rethinking Economy and Society (New York: Aldine de Gruyter, 1990), pp. 89–111; Neil J.Smelser and Richard Swedberg, “The Sociological Perspective on the Economy,” in Neil J.Smelser and Richard Swedberg (eds), The Handbook of Economic Sociology (Princeton, NJ: Princeton University Press, 1994), pp. 3–26. J.Rogers Hollingsworth and Robert Boyer, “Coordination of Economic Actors and Social Systems of Production,” in J.Rogers Hollingsworth and Robert Boyer (eds), Contemporary Capitalism—The Embeddedness of Institutions (Cambridge: Cambridge University Press, 1997), pp. 1–47. Oliver E.Williamson, Economic Organization—Firms, Markets and Policy Control (Washington Square, New York: New York University Press, 1986), p. 139.

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8 Mark Granovetter, “The Nature of Economic Relationships,” in Richard Swedberg (ed.), Explorations in Economic Sociology (New York: Russell Sage Foundation, 1993), pp. 3–14. See also his “Economic Action and Social Structure: The Problem of Embeddedness.” American Journal of Sociology, 91, 3 (Nov. 1985):481–510, and Mark Granovetter, “A Distinctive Theoretical Agenda for Economic Sociology,” paper presented at the Second Annual Economic Sociology Conference at the University of Pennsylvania, Wharton School, March 4, 2000. 9 Karl Polanyi, “Economy as Instituted Process,” in Mark Granovetter and Richard Swedberg (eds), The Sociology of Economic Life (Boulder, GO: Westview Press, 1992), pp. 29–52. 10 Hollingsworth and Boyer, Contemporary Capitalism, p. 444. 11 Neil Fligstein, “Markets as Politics: A Political-Cultural Approach to Market Institutions,” American Sociological Review 61 (August 1996):657. 12 Marco Orru, Nicole Woolsey Biggart, and Gary G.Hamilton, “Organizational Isomorphism in East Asia,” in Paul DiMaggio and Walter W.Powell (eds), The New Institutionalism in Organizational Analysis (Chicago: The University of Chicago Press, 1991), p. 361. 13 Hollingsworth and Boyer, “Coordination of Economic Actors,” p. 2. 14 Hyuk-Rae Kim, “Fragility or Continuity? Economic Governance of East Asian Capitalism,” in Richard Robison, Mark Beeson, Kanishka Jayasuriya, and HyukRae Kim (eds), Politics and Markets in the Wake of the Asian Crisis (London: Routledge, 2000), pp. 95–115. Kim distinguished among bureaucratic management, coordination with the business elite, and control capacity of the state. His use of the term coordination follows Katzenstein’s earlier work on policy networks. The term coordination in the work of Hollingsworth and others highlights the broader societal bases of economic governance beyond, but not excluding the state. See J.Rogers Hollingsworth and Robert Boyer, “Coordination of Economic Actors”, pp. 1–47. 15 Rodney Clark, The Japanese Company (New Haven, CT: Yale University Press, 1979). 16 Emile Durkheim, The Division of Labor in Society (New York: The Free Press, 1933), pp. 206–219; Talcott Parsons, The Structure of Social Action, vol. I, “Marshall, Pareto, Durkheim,” (New York: The Free Press, 1937), pp. 310–314; Stewart Mccaulay, “Non-Contractual Relations in Business: A Preliminary Study,” in Mark Granovetter and Richard Swedberg (eds), The Sociology of Economic Life (Boulder, GO: Westview Press, 1992), pp. 233–264. 17 Robert D.Putnam, Making Democracy Work: Civic Traditions in Modern Italy (Princeton, NJ: Princeton University Press, 1993), p. 179. 18 Ibid., p. 167. 19 Ibid., p. 156. 20 Francis Fukuyama, Trust: The Social Virtue and the Creation of Prosperity (New York: Free Press, 1995), pp. 30, 101; Fukuyama, “Social Capital and the Future of Asia,” paper presented at the International Symposium for the Tenth Anniversary of the Samsung Economic Institute, June 28, 1996. 21 Gregory Henderson, Korea: The Politics of the Vortex (Cambridge, MA: Harvard University Press, 1968); Norman Jacobs, The Korean Road to Modernization and Development (Urbana, IL: University of Illinois Press, 1985), p. 64; Glenn D.Paige, “Toward a Theory of Korean Political Leadership Behavior,” in Dae-sook Suh and Jae-jin Lee (eds), Political Leadership in Korea (Seattle: University of Washington Press, 1976), pp. 223–238. For a study of how this affects business organization, see Kae H.Chung, Han-chong Lee and Kullyun Jung, Korean Management: Global Strategy and Cultural Transformation (New York: Walter de Gruyer, 1997). Nicole Woolsey Biggart, and Mairo Guillén “Institutionalized Patrimonialism in Korean Business,” Comparative Social Research 12 (1990):113–133.

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22 For the distinction between trust and cooperation in horizontal networks, and power and coercion in vertical networks, see Mark Granovetter, “A Distinctive Theoretical Agenda for Economic Sociology”. 23 This text follows the transliteration rules of the Ministry of Culture System with some exceptions. I defer to the practice of individual Koreans or Korean-American scholars in both transliteration and word order with surname first or last. Also, I revert to earlier, now prevalent transliterations of place names such as Taegu or Pusan, or personal names such as Park Chunghee or Kim Youn-su. 24 Chaibong Hahm, “Confucian Political Discourse and the Politics of Reform in Korea,” Korea Journal 37, 4 (Winter 1997):65–77. 25 Indeed, some would argue that favoritism, discretionary incentives, and kinship connections to the jaebol impeded cohesive institutional development within civil society, despite the acknowledged efficiency of the state in promoting economic growth. Rhee Jong-Chan argued that the state reverted back to favoritism in order to gain the investment and long-term industrial commitment of the larger business groups during the Heavy and Chemical Industries (HCI) campaign of the 1970s. Rhee, The State and Industry in South Korea (London: Routledge, 1994). Sakong Il observed that state supports in the same campaign such as credit at favorable interest rates, as well as subsidies, caused serious imbalances in finance, firm concentration, and labor costs for the wider economy. Il Sakong, Korea in the World Economy (Washington, DC: Institute for International Economics, 1993). Kang concluded that a bifurcated Korean state under Park Chung Hee (1961–79) included both inefficient, clientelistic domestic ministries, and more meritocratic and efficient fiscal ministries. David Chan-oong Kang, “Profits of Doom: Transaction Costs, RentSeeking, and Development in South Korea and the Philippines,” PhD dissertation, University of California Berkeley, 1995, p. 6. See also Paul D.Hutchcroft, Booty Capitalism: The Politics of Banking in the Philippines (Ithaca, New York: Cornell University Press, 1998). Evans extended his thesis of state autonomy and capacity to a theme of “embedded autonomy” in recognition of the critical role of state links to capital in the implementation of industrial policy. He termed the Korean state “developmental” rather than “predatory” or rent-seeking, but cautioned: “Korea is pushing at the limit to which embeddedness can be concentrated in a close ties without degenerating into particularistic predation.” Peter Evans, “The State as Problem and Solution: Predation, Embedded Autonomy, and Structural Change,” in Stephan Haggard and Robert R. Kaufman (eds), The Politics of Economic Adjustment: International Constraints, Distributive Conflicts, and the State (Princeton, NJ: Princeton University Press, 1992), p. 159; P. Evans, Embedded Autonomy: States and Industrial Transformation (Princeton, NJ: Princeton University Press, 1995). 26 Nicole Woolsey Biggart and Mauro F.Guillén, “Developing Difference: Social Organization and the Rise of the Auto Industries of South Korea, Taiwan, Spain, and Argentina,” American Sociological Review 64 (Oct. 1999):726. 27 Alice H.Amsden, “The Textile Industry in Asian Industrialization: A Leading Sector Institutionally?” Journal of Asian Economics 5, 4 (1994):573–583. 28 Danny Unger, Building Social Capital in Thailand: Fibers, Finance, and Infrastructure (New York: Cambridge University Press, 1998), pp. 109–112. 29 Karl Fields concluded that “informal relationships of trust” facilitating market transactions have proved a significant factor in a successful East Asian variety of capitalism. Karl J.Fields, Enterprise and the State in Korea and Taiwan (Ithaca, New York: Cornell University Press, 1995), p. 244. Gregory Henderson (1968) contrasted a pluralist interest group ideal of multiple competing interest groups with the actual situation in South Korea of clients streaming toward the state patron in Seoul, just as Hahm contrasted the primacy of impersonal contract in the West with the personalism of Korea. See also Bruce Cumings, “Is Korea a Mass Society?,” in James B.Palais (ed.) Occasional Papers on Korea, no. 1 (New York: Joint Committee on Korean Studies

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31 32 33 34 35

36 37 38

39 40 41

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of the American Council of Learned Societies, 1974), pp. 65–80; Pyong-Choon Hahm, The Korean Political Tradition and Law (Seoul: Royal Asiatic Society, 1967). For a history of the interplay of interest and profit, of interests and passion, and changing definitions of interest in the West, see J.A.W.Gunn, “Interests Will not Lie. A Seventeenth Century Political Maxim,” Journal of the History of Ideas, 29, 4 (Oct.Dec. 1968):551–564, and Albert O.Hirschman, The Passions and the Interests: Political Arguments for Capitalism before Its Triumph (Princeton, NJ and New York: Princeton University Press, 1977). For a review of interest articulation in South Korea, see Hyeong-pyeon Yun, “Iik tonghap gwa jeongdang (Interest groups and political parties),” in Kim Un-tae et al. (eds), Han’guk jeongchiron (A study of Korean politics) (Seoul: Pagyeongsa, 1976), pp. 350–378. Philippe C.Schmitter, “Sectors in Modern Capitalism: Modes of Governance and Variations in Performance,” in Renato Brunettao and Carlo Dell’Aringa (eds), Labor Relations and Economic Performance (New York: New York University Press, 1990), p. 4. Y.H.Lee, “The Relationship between the State and the Chaebol, 1980–1993,” Korea Observer vol 26, no. 1 (Spring 1995):52. Rhee, The State and Industry in South Korea. John Oh, Korean Politics: The Quest for Democratization and Economic Development, (Ithaca, New York: Cornell University Press. 1999), pp. 164–193. Janet Tai Landa, Trust, Ethnicity and Identity (Ann Arbor, MI: The University of Michigan Press, 1994), pp. 14–15. Yasusuke Murakami and Thomas P.Rohlen, “Social-Exchange Aspects of the Japanese Political Economy,” in Kumon Shumpei and Henry Rosovsky (eds), The Political Economy of Japan: Cultural and Social Dynamics, vol. 3 (Stanford, CA: Stanford University Press, 1992), pp. 63–104. Ibid., 1992, p. 83. René Lemarchand and Keith Legg, “Political Clientelism and Development: A Preliminary Analysis,” Comparative Politics (January 1972):151. Carl H.Landé, “Introduction: The Dyadic Basis of Clientelism,” in Steffen W. Schmidt, Laura Gausti, Carl H.Landé, and James C.Scott (eds), Friends, Followers, and Factions: A Reader in Political Clientelism (Berkeley, CA: University of California Press, 1977), pp. xxi–xxii. Eric R.Wolf, “Kinship, Friendship, and Patron-Client Relations in Complex Societies,” in Michael Banton (ed.), The Social Anthropology of Complex Societies (New York: Frederick Praeger Publishers, 1966), p. 10. James C.Scott, “Patron—Client Politics and Political Change in Southeast Asia,” in Steffen W.Schmidt et al. (eds), Friends, Followers, and Factions (Berkeley, CA: University of California Press, 1977), p. 132 Andrew G.Walder, Communist Neo-Traditionalism: Work and Authority in Chinese Industry (Berkeley, CA: University of California Press, 1986); Jean Oi, State and Peasant in Contemporary China: The Political Economy of Village Government (Berkeley, CA: University of California Press, 1989); Vivienne Shue, “State Power and Social Organization in China,” in Joel S.Migdal, Atul Kohli, and Vivienne Shue (eds), State Power and Social Forces: Domination and Transformation in the Third World (Cambridge: Cambridge University Press, 1994), pp. 65–85. David L.Wank, Commodifying Communism: Business, Trust, and Politics in a Chinese City (Cambridge: Cambridge University Press, 1999). Roger Janelli noted that “ethnographic studies of modern South Korean organizations are rare.” See his Making Capitalism: The Social and Cultural Construction of a South Korean Conglomerate (Stanford, CA: Stanford University Press, 1993), p. 215. Stephan Haggard and Susan Collins, “The Political Economy of Adjustment in the 1980s,” in Stephan Haggard, Richard N.Cooper, Susan Collins, Choongsoo Kim, and Sung-Tae Ro (eds), Macroeconomic Policy and Adjustment in Korea, 1970–1990 (Cambridge, MA: Harvard University Press 1994), pp. 75–107.

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45 Sung M.Pae, Testing Democratic Theories in Korea (New York: University Press of America, 1986), p. 18. 46 Chang-hee Nam, “Clientelistic Expansion of Japan in Korea: the Political Economy of the Greater East Asian Co-prosperity Sphere,” PhD dissertation, University of Kansas, 1992, and “South Korea’s Big Business Clientelism in Democratic Reform,” Korea Observer 25, 2 (Summer 1994):193–206. For a study of colonial state corporatism, see Gi-wook Shin and Bo-hyun Han, “Colonial Corporatism: the Rural Revitalization Campaign, 1932–1940,” in Gi-wook Shin and Michael Robinson (eds), Colonial Modernity in Korea (Cambridge, MA: Harvard University Press, 1999), pp. 70–96. 47 Alice H.Amsden, Asia’s Next Giant: South Korea and Late Industrialization (New York: Oxford University Press, 1989), p. 146. 48 Moon Jee Yoo, “Industrialization: Dynamics of the State and Business Organization for the Case of South Korea,” PhD dissertation, University of California, Davis, 1992, pp. 12–13. 49 Ha-Joon Chang, “South Korea: The Misunderstood Crisis,” in Jomo K.S. (ed.), Tigers in Trouble: Financial Governance, Liberalisation and Crises in East Asia (London; Zed Books Ltd, 1998), p. 228. 50 Alan Cawson, “Corporatism,” in David Miller (ed.), The Blackwell Encyclopedia of Political Thought (New York: Basil Blackwell, 1987), p. 105. Dennis L.McNamara, “Comparative Corporatism,” in D.McNamara (ed.), Corporatism and Korean Capitalism (London: Routledge, 1999), pp. 9–25. 51 Colin Crouch, Industrial Relations and European State Traditions (Oxford: Clarendon Press, 1993), p. 6. 52 Philippe C.Schmitter, “Reflections on Where the Theory of Neo-Corporatism Has Gone and Where the Praxis of Neo-Corporatism May Be Going”, in Gerhard Lehmbruch and Phillippe C.Schmitter (eds), Patterns of Corporatist Policy-Making (Beverly Hills, CA: Sage, 1987), pp. 262–264. 53 Harmon Zeigler, Pluralism, Corporatism, and Confucianism. Political Association and Conflict Regulation in the United States, Europe, and Taiwan (Philadelphia, PA: Temple University Press, 1988). 54 Bruce Cumings, “The Corporate State in North Korea,” in Hagen Koo (ed.), State and Society in Contemporary Korea (Ithaca, New York: Cornell University Press, 1993), pp. 197–230. 55 Guillermo A.O’Donnell, “Tensions in the Bureaucratic-Authoritarian State and the Question of Democracy,” in David Collier (ed.), The New Authoritarianism in Latin America (Princeton, NJ: Princeton University Press, 1979), pp. 285–318; “Reflections on the Patterns of Change in the Bureaucratic-Authoritarian State,” Latin American Research Review 13, 1 (1978):3–38; “Corporatism and the Question of the State,” in James M.Malloy (ed.), Authoritarianism and Corporatism in Latin America (Pittsburgh: University of Pittsburgh Press, 1977), pp. 47–87. 56 Hyun-chin Lim and Woon-seon Paek, “State Autonomy in Modern Korea: Instrumental Possibilities and Structural Limits,” Korea Journal (Nov. 1987):19–32. 57 Hyug-baeg Im, “The Rise of Bureaucratic Authoritarianism in South Korea,” World Politics (Jan. 1987): p. 249. 58 See Hyun-chin Lim, Dependent Development in Korea, 1963–1979 (Seoul: Seoul National University Press, 1985). Lim described the Fourth Republic under Chunghee Park as a “kind of corporatist state.” 59 Bruce Cumings, “The Origins and Development of the Northeast Asian Political Economy: Industrial Sectors, Product Cycles, and Political Consequences,” International Organization 38 (Winter 1984):1–40; and “World System and Authoritarian Regimes in Korea, 1948–1988,” in Edwin A.Winckler and Susan Greenhalgh (eds), Contending Approaches to the Political Economy of Taiwan (Armonk, New York: M.E.Sharpe, 1988), pp. 249–269.

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60 See Seung-heui Pak, “Sinjohapjueui eui hyeonsilseong e taehayeo” (The reality of the new corporatism), Gyeongje wa Sahoe 15 (Fall 1992):75–89; Gyung-goo Choe, “Johap jueui bokja gugga eui mohyeong e gwanhan yeon’gu” (A model of a corporatist welfare state), Han’guk Sahoehak 25 (Summer 1991):93–111. 61 Jang-jip Choi, Labor and the Authoritarian State: Labor Unions in South Korean Manufacturing Industries, 1961–1980 (Seoul: Korea University Press, 1989); Jang-jip Choi, “A Corporatist Control of the Labor Union in South Korea,” Korean Social Science Journal 11 (1984):25–55. For a study of business associations, see Moon Kyu Park, “Interest Representation in South Korea: The Limits of Corporatist Control,” Asian Survey 27, 8 (Aug. 1987):903–917. 62 Byoung Doo Lee, “Politics of Industrialization: The Textile Industry in South Korea and the Philippine,” PhD dissertation, Northwestern University, 1992, p. 31. 63 Gerhard Lehmbruch, “Concertation and the Structure of Corporatist Networks,” in John H.Goldthorpe (ed.), Order and Conflict in Contemporary Capitalism (Oxford: Clarendon Press, 1984), p. 62. Philippe Schmitter, “Interest Intermediation and Regime Governability in Contemporary Western Europe and North America,” in Suzanne Berger (ed.), Organizing Interests in Western Europe: Pluralism, Corporatism, and the Transformation of Politics (Cambridge: Cambridge University Press, 1981), pp. 285– 327, and Schmitter, “Still the Century of Corporatism?”, in Phillippe C.Schmitter and Gerhard Lehmbruch (eds), Trends Toward Corporatist Intermediation (London: Sage Publications, 1979), pp. 7–52. 64 Frank Upham, Law and Social Change in Postwar Japan (Cambridge, MA: Harvard University Press, 1987), pp. 22, 199–200. 65 Peter J.Katzenstein, “Introduction: Asian Regionalism in Comparative Perspective,” in Peter J.Katzenstein and Takashi Shiraishi (eds), Network Power: Japan and Asia (Ithaca, New York: Cornell University Press, 1997), pp. 29, 31. 66 Miles Kahler, “Legalization as Strategy: The Asia-Pacific Case,” International Organization 54, 3 (Summer 2000):549–571. 67 Kenneth W.Abbott, Robert O.Keohane, Andrew Moravcsik, Anne-Marie Slaughter and Duncan Snidal, “The Concept of Legalization,” International Organization 54, 3 (Summer 2000):401–402. 68 Guillermo O’Donnell, “Illusions about Consolidation,” Journal of Democracy 7, 2 (1996):34–51; Philippe C.Schmitter, “Dangers and Dilemmas of Democracy. Journal of Democracy 5 (April 1994):67. 69 Larry Diamond, Developing Democracy: Toward Consolidation (Baltimore, MD: Johns Hopkins University Press, 1999), and Juan J.Linz and Alfred Stepan, “Toward Consolidated Democracies,” Journal of Democrcy 7, 2 (April 1996):15. 70 Chalmers Johnson, “Political Institutions and Economic Performance: the Government-Business Relationship in Japan, South Korea, and Taiwan,” in Fred Deyo (ed.), The Political Economy of the New Asian Industrialism (Ithaca New York: Cornell University Press, 1987), pp. 136–164, and C.Johnson, MITI and the Japanese Miracle (Stanford, CA: Stanford University Press, 1982). Youngil Lim, Government Policy and Private Enterprise: Korean Experience in Industrialization (Berkeley, CA: Institute of East Asian Studies, University of California, 1981). 71 Fligstein, “Markets as Politic,” p. 661. 72 John H.Goldthorpe, “The End of Convergence: Corporatist and Dualist Tendencies in Modern Western Societies,” in Brian Roberts, Ruth Finnegan, Duncan Gallie (eds) New Approaches to Economic Life (Manchester: Manchester University Press, 1985), pp. 130–131. 73 D.M.Leipziger and P.A.Petri, “Korean Industrial Policy;” Howard Pack and Larry E.Westpal, “Industrial Strategy and Technological Change: Theory versus Reality,” Journal of Development Economics 22 (1986):87–128. 74 Bruce Cumings neatly captured Korea’s colonial “industrialization” with a contrast between “over-development” of economic infrastructure and “under-development” of

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human resources. Cumings, Korea’s Place in the Sun: A Modern History (New York: W.W.Norton, 1997), pp. 148–153. Norman Jacobs argued that the persistence of both patrimonial goals of moral and political legitimacy, and patrimonial procedures of prebends in business/state ties, limited growth in Korea to technological modernization or “industrialization” rather than “development” of new institutions and technologies. Jacobs, The Korean Road to Modernization, pp. 76, 104, 301. Looking to the ensuing five decades following colonial liberation, Koo depicted South Korean civil society as “short in history and relatively underdeveloped in institutional features.” Hagen Koo, “Strong State and Contentious Society,” in Hagen Koo (ed.), State and Society in Contemporary Korea (Ithaca, New York: Cornell University Press, 1993), p. 232. Soon Cho, eminent economist, Mayor of Seoul, and presidential candidate in 1997, cited the pressing need of an “institutional framework for developing the market for these new resources and guiding the people to adapt themselves to it.” Soon Cho, “Government and Market in Economic Development,” Asian Development Review 12, 2 (1994):147. President D.J.Kim and others have decried the ‘growth first” ideology of development that left little room for political or wider social development. 75 I am grateful to anonymous external reviewers for raising these issues. 76 Peter Evans, Embedded Autonomy, p. 53.

2 Industry formation, 1945–60 1 Korean Federation of Textile Industries (KOFOTI), Monthly Statistics of the Textile Industry, vol. 15, no. 146 (January-March 2001), p. 12. Saneop Jaweonbu (Division of Industrial Resources), MOTIE (Ministry of Commerce, Industry, and Energy), Seomyu saneop balcheon cheollyak gandamhoe 2000.5.19 (Discussion of a strategy for the development of the textile industry, May 19, 2000) (Taegu: Korean Textile Development Institute, 2000), p. 3; Korea Chemical Fibers Association (KFCA), Chemical Fibers Handbook 1999 (Seoul: KFCA, March, 1999), Tables 4 and 7. Fiber Economic Bureau, Fiber Organon, August 1999 (New Jersey: Fiber Economic Bureau, 1999), p. 140; Han’guk Seomyu Saneop Hyeophoe (Korean Federation of Textile Industries, KOFOTI), Seomyu saneop byeollam 1999 (Textile Industry Handbook, annual) (Seoul: KOFOTI, 1999), p. 14. 2 Sinsaneop Gyeogyeongweon, Han’guk samsipdae jaebeol jaemu bunseok (Financial Analysis of Korea’s Top 30 jaebol) (Seoul: Sinsaneop Gyeogyeongweon, 1999), p. 52. 3 Dennis L.McNamara, Textiles and Industrial Transition in Japan (Ithaca, New York: Cornell University Press, 1995). 4 Myung Hun Kang, The Korean Business Conglomerate: Chaebol Then and Now (Berkeley CA: Institute of East Asian Studies, University of California Berkeley, 1996), p. 178. 5 Meredith Woo-Cumings, Race to the Swift: State and Finance in Korean Industrialization (New York: Columbia University Press, 1991), p. 149 6 Yukiko Fukugawa, “Chaebol’-led High Growth System in South Korea,” in Toru Yanagihara and Susumu Sambommatsu (eds), East Asian Development Experience: Economic System Approach and its Applicability (Tokyo: Institute of Developing Economies, 1997), p. 94. 7 Gary G.Hamilton, William Zeile and Wan-Jin Kim, “The Network Structures of East Asian Economies,” in Stewart R.Clegg and S.Gordon Redding (eds), Capitalism in Contrasting Cultures (Berlin: Walter de Gruyter, 1990), pp. 105–129. 8 Yeong-gyu Ch’oe, Han’guk hyeongmyeong jaepansa (Korean Revolution: A History of the Prosecution), vol. 1 (Seoul: Donga Publishing, 1962), p. 989; Kyong-dong Kim, “Political Factors in the Formation of the Entrepreneurial Elite in South Korea,” Asian Survey 16, 5 (May 1976):465–477. 9 Gunsa Hyeongmyeong Pyeonchan Wiweonhoe, Han’guk gunsa hyeongmyeongsa (A History of the Military Revolution), vol. 1, pt. 1 (Seoul: Dong’a Publishing, 1963), pp. 80–97; Ch’oe, Han’guk hyeongmyeong jaepansa, vol 1, p. 989; Ae-myeong Ch’oe,

Notes

10 11

12 13 14

15

16

17 18 19

20

21

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‘Jaebeol gieop mollagsa (A History of the Decline of the Jaebol),” Weolgan Joseon (April 1985): 510–528. SWAK, Seomyu yeonbo (Textile annual) (Seoul: Spinners and Weavers Association of Korea, 1963), Sec. III, p. 154. This annual publication will be cited as TPH. See also Kil Ho Pak, “Seo Kap-heo,” Sedae 3, 4 (May 1965):224–229. Ch’oe,’ Jaebeol kieop mollagsa;” Chosen Shokusan Ginko (Chosen Industrial Bank), Chosabu, “Chosen ni okeru hantojin shihaika no kaisha josei” (The Condition of Companies under Local Management in Korea), Shokugin Chosa Geppo (Jan. 1940): 25–64. McNamara, “State and Concentration in Korea’s First Republic, 1948–60,” Modern Asian Studies 26, 4 (1992):711. Civil Property Custodian, Japanese External Assets as of August 1945, report of September 30, 1948, vol. 1, p. 75, available in Nation Archives Records Group 59. TPH 1968, p. 434. See also Han’guk Saneop Eunhaeng (Korea Development Bank), Han’guk saneop gyeongje simnyeonsa (A Ten-Year History of the Korean Industrial Economy, 1945–1955), (Seoul: Korean Reconstruction Bank, 1955), p. 1077. The US Foreign Operations Assistance (FOA) program was superceded by the International Cooperation Agency (ICA) in 1954. AID, the Agency for International Development in turn succeeded the International Cooperation Agency (ICA). Taechang obtained a grant of $78,000 in 1959 for procurement of specialized spinning machines and a further equipment grant of $365,800 in October of 1959. Grants for purchase of raw cotton continued, with $729,000 in November and $650,000 in December of that same year. TPH 1959, Sec. I, p. 5; Daehan Sanggong Hoeeuiso (Korea Chamber of Commerce and Industry, KCCI), Saneop Gyeongje (The industrial economy) Nov. 1959, p. 75, and Feb. 1960, pp. 72–73. A total of $1.17 million from the ICA in that year alone was worth about 585 million hwan, better than five times the capital of the firm. Dennis L.McNamara, “Entrepreneurship in Colonial Korea: Kim Yeon-su,” Modern Asian Studies 22, 1 (1988):165–177, and D.McNamara “The Keisho and the Korean Business Elite,” Journal of Asian Studies 48, 2 (May 1989):310–323; Carter Joel Eckert, Offspring of Empire: The Koch’ang Kims and the Colonial Origins of Korean Capitalism, 1876– 1945 (Seattle: University of Washington Press, 1992). Sang-hong Kim, Samyang osimnyeon, 1924–1974 (Fifty years of the Samyang Company, 1924–1974) (Seoul: Jusig Hoesa Samyangsa, 1974); Editors of Jaejeong, “Minjok jaebeol eui saengtae: Kim Youn-su jaebeol gwa Samyangsa (Emergence of private jaebol: Kim Youn-su’s jaebol and the Samyang Company),” Jaejeong 6, 1 (1957): 110–117. Chi-young Pak, Political Opposition in Korea, 1945–1960 (Seoul: Seoul National University Press, 1980), pp. 29, 145–147. Sang-hong Kim (ed.), Sudang Kim Youn-su (Sudang Kim Youn-su) (Seoul: Sudang Kinyeom Saeophoe, 1971), pp. 213–214. Kyungbang procured 324 weaving machines in 1954 under a grant from the United Nations, thereby doubling the total number to 724, and accounted for nearly 13 percent of the cotton cloth and 7 percent of the cotton year produced on the peninsula that year. TPH 1955 Sec. I, pp. 6, 11–12. The grants were provided by the United Nations Korea Reconstruction Agency, or UNKRA. TPH 1955, Sec. III, p. 127, and 1960, Sec. III, p. 127; In-hwan Pak (ed.), Kyeongbang yvgsimnyeon (Sixty years of Kyungbang) (Seoul: Samhwa Publishing, 1980), p. 519; Han’guk Saneop Eunhaeng (Korean Reconstruction Bank), Han’guk saneop gyeongje simnyeonsa 1955, p. 1077. Kyungbang received ICA equipment support totaling $104,000 in 1957. TPH, Sec. I, 1968, p. 143. The firm procured smaller ICA grants for raw materials in October of 1958 of $50,000 (2.5 million hwan), and $28,800 in equipment support. KCCI, Saneop gyeongje (Dec. 1958), p. 75; TPH 1959 Sec. I, p. 3. It garnered ICA funding worth $98,292 (4.9 million hwan) for twenty specialized spinning machines in 1959, and a further $149,000 (7.45 million hwan) for related equipment, grants equaling

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22 23 24 25

26 27 28 29

30 31

32 33

34

35 36

Notes

about 12 percent of its capital. KCCI, Saneop gyeongje (Nov. 1959), p. 75; TPH 1960 Sec. I, p. 5. Sang-hong Kim, ed. Sudang Kim Youn-su, pp. 213–214, 248–251, 306. The loans were provided by the Foreign Operations Administration of the United States State Department. Dennis L.McNamara, Colonial Origins of Korean Entreprise, 1910–1945 (Cambridge: Cambridge University Press, 1990), pp. 127–134; D.McNamara Trade and Transformation in Korea, 1876–1945 (Boulder, GO: Westview Press, 1996), pp. 172–179. James Coleman, Foundations of Social Theory (Cambridge, MA: Harvard University Press, 1990), p. 320. Spinning mills were developed on the southern half of the peninsula in the 1920s with Chosen Spinning and later Kanegafuchi among the leading firms. We find rayon and staple fiber plants to the north from the 1930s, with actual and planned capacity of about 35,000, metric tons a year. See Joint Army-Navy Intelligence Studies (JANIS) Publishing Board, Joint Army-Navy Intelligence Study of Korea, including Tsushima and Quelpart (Washington, DC: National Archives, 1945), p. IX–38; Su-ryul Heo, “1930 nyeondae gunyo gongeophwa jeongchaek gwa Ilbon dokjeom jabon eui jinchul (The industrialization policy for military purposes in the 1930s, and the advance of Japanese monopoly capital),” in Ki-byeok Cha et al., Ilje eui singmin tongchi (Colonial administration of Korea under Japanese rule) (Seoul: Jeongeumsa, 1985), pp. 270–277. Civil Property Custodian, Japanese External Assets as of August 1945, vol. 1 (Washington, DC: National Archives, 1948), p. 42. James E.Shoemaker, Chair, National Economic Board, USAMGIK, “Summary, Review and Action Program for the Economy of South Korea as of 10 December 1946,” Records Group 165 (Washington, DC: National Archives, 1946), p. 28. For a review of state labor policy, and labor practices at the Kyungbang firm, see Eckert, Offspring of Empire. SWAK, Banghyeop isimnyeonsa (A twenty-year history of the Spinners and Weavers Association of Korea) (Seoul: Samseong, 1968), p. 129. The same association published an annual report, Saeop bogoseo (Report of Activities), and the Seomyu yeonbo (Textile Annual), providing a valuable historical record of the industry. Ministry of Commerce and Industry, Republic of Korea, “General Survey and Rehabilitation Programs of Industries in the Republic of Korea,” (Washington, DC: National Archives, 1953), pp. 41–42. A report on over-expansion of the industry can be found in United Nations Task Force in Korea, “Seventh Report of the United Nations Commission for the Unification and Rehabilitation of Korea, Covering the Period August 24, 1956– August 14, 1957.” The report was reprinted in Department of State, Historical Office, Bureau of Public Affairs, American Foreign Policy—Current Documents 1957 (Washington, DC: Government Printing Office, 1961), entry 394, p. 1194. SWAK, Banghyeop samsimnyeonsa (A thirty-year history of the Spinners and Weavers Association of Korea) (Seoul: Samseong, 1978), pp. 718, 721. Jeonguk Seomyu Nodong Johap Yeonmaeng is translated as “Korean Textile Labor Union Federation.” See Federation of Korean Textile Workers’ Unions, Brief History of FKTWU (Seoul: FKTWU, 1992), p. 8; Teok-je Pak and Ki-seong Pak, Han’guk eui nodong johap (Labor unions in Korea), volume I (Seoul: Han’guk Nodong Yeonguweon (Korean Labor Institute), 1989), p. 146. Thomas A.Kochan, “Industrial Relations and Human Resource Policy in Korea: Options for Continued Reform,” in Lee-Jay Cho and Yoon Hyung Kim (eds), Korea’s Political Economy: An Institutional Perspective (Boulder, GO: Westview Press, 1994), p. 679. Eckert, Offspring of Empire, pp. 205–220. Sa-uk Kim, Han’guk nodong undongsa (History of the Korean Labor Movement) (Seoul: Munhwasa, 1974), pp. 59–60. Byung-koo Cho “Labor Movement and Labor Policy

Notes

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38 39 40 41

42

43 44 45

46 47

48

49 50

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under the American Military Government in Korea, 1945–1948,” PhD dissertation, University of Illinois at Urbana-Champaign, Sociology, 1991. Soon-Won Park, Colonial Industrialization and Labor in Korea: The Onoda Cement Factory (Cambridge, MA: Harvard University Asia Center, 1999), pp. 169–185. See my review in Korean Studies (University of Hawaii at Manoa), vol. 24 (2000):177–178. A national federation identified with the left, the Joseon National Council of Labor Unions (Joseon Nodong Johap Jeoguk Pyeong’euihoe, or Jeonpyeong), stood against the Korea National Labor Union Association (Daehan Minguk Nodong Johap Chong’yeonmaeng, or Daehan Noch’ong) allied on the right. Sungjoo Han, The Failure of Democracy in South Korea (Berkeley: University of California Press, 1974), pp. 188–197. Young-Hee Shim-Han, “Social Control and Industrialization in Korea—On the Corporatist Control of Labor,” Korea Social Science Journal 13 (1986):103. Young-ki Park, “Korean Labor,” in Stephen J.Deery and Richard J.Mitchell (eds) Labour Law and Industrial Relations in Asia: Eight Country Studies (Melbourne: 1993), p. 145. The firms included Taechang, Keumsung, Daehan, Cheonnam, Kyungbang, Dongyang, and Samho. Daehan Minguk Naemubu (Ministry of the Interior), Daehan Minguk tonggye yeon’gam 1960 (Statistical Review of the Republic of Korea, 1960) (Seoul: Naemubu, 1960), p. 164. Henry L.Buckhardt, “Foreign Agricultural Service Report, Korea: Cotton Annual,” September 23, 1957, p. 6. RG 469, Records of the US Foreign Assistance Agencies, 1948–1961, Office of Far Eastern Operations, Korea Subject Files, Commodities Box 56, Folder: Korea, Commodities, Cotton, 1957 (Washington, DC: National Archives, 1957). See also TPH 1955, Sec. I, p. 4, 1956, Sec. I, p. 17, and 1960, Sec. I, p. 123. Charles R Frank. Jr., Kwang Suk Kim and Larry E.Westphal, Foreign Trade Regimes and Economic Development: South Korea (New York: National Bureau of Economic Research, 1975), p. 53. TPH 1957, Sec. I, pp. 15–16. E. Gallagher, “Developments in the Cotton Textile Industry, Republic of Korea,” February 11, 1959, p. 1. Foreign Service Dispatch No. 432. National Archives, Records Group 469, Records of the US Foreign Assistance Agencies 1948–1961, Office of Far Eastern Operations, Korea Subject Files 1953–1959, Commodities Box #101, Folder “T” (Washington, DC: National Archives, 1959). Robert Donaldson, “Term-End Report: Textile Survey,” July 31, 1958, p. 7. Document available in Records Group 469, Office of Far Eastern Operations, Korea 1953–1959 (Washington, DC: National Archives, 1958). An oligopoly in wool spinning purchased raw materials in common, an effort described by a UN official as “a preference to allocate supplies among their own members, thus avoiding the middleman and his profit.” W.D.Bacon and J.R.Andrus, “A Study of the Korean Woolen and Worsted Industry,” May 17, 1958. The document can be found in RG 469, Office of Far Eastern Operation, Korea, 1953–1959, Commodities (Washington, DC: National Archives, 1958). A SWAK report of March 1957 cited total bank loans of 11.1 billion hwan for member mills, as against a paid-in capital of only 1.08 billion hwan; Reconstruction Bank credits for textile manufacturing accounted annually for 30 percent of its total funds for manufacturing in 1957, and 20 percent for the next two years. The bank committed about 9.7 billion hwan to the industry in 1957, 13.2 billion hwan the next year, and 17.4 billion hwan in 1959, just as commercial banks under government control and partial ownership devoted a major share of their manufacturing credits to textiles. Bank of Korea, Josa Weolbo 14, 11 (Nov. 1960):40–41. TPH 1968, pp. 259, 474; Frank, Kim and Westphal, Foreign Trade Regimes and Economic Development.

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58 59

60 61

62

63 64 65 66

67 68

Notes

KCCI, Saneop Gyeongje, (September, 1958):26–29. Frank, Kim and Westphal, Foreign Trade Regimes and Economic Development. TPH 1959, p. 1. The procurement process is explained in Strickland et al., 1957, Section 3. TPH 1960, p. 8. Nicole Woolsey Biggart, “Institutionalized Patrimonialism in Korean Business,” Comparative Social Research vol 12 (1990):113–133; Norman Jacobs, The Korean Road to Modernization and Development (Urbana, IL: University of Illinois Press, 1985). Sung M.Pae, Testing Democratic Theories in Korea (New York: University Press of America, 1986). For a broader review of interest group politics, see Young-Rae Kim, Han’kuk yiik jipdan gwa minju jeongchi balcheon (Korean interest groups and democratic political development) (Seoul: Daewangsa, 1990). Bruce Cumings, “World System and Authoritarian Regimes in Korea, 1948–1984,” in Edwin A.Winckler and Susan Greenhalgh (eds), Contending Approaches to the Political Economy of Taiwan (Armonk, New York: M.E.Sharpe, 1988), p. 261. Chang-hee Nam, “Clientelistic Expansion of Japan in Korea: the Political Economy of the Greater East Asian Co-prosperity Sphere,” PhD dissertation, University of Kansas, Political Science, 1992, and her article, “South Korea’s Big Business Clientelism in Democratic Reform,” Korea Observer 25, 2 (Summer 1994):193–206. Walter Dowling, US Ambassador, “Evaluation of Aid Programs in Korea,” October 25, 1956, p. 7, Foreign Service Dispatch No. 128. National Archives, Records Group 469, Korea Subject Files 1953–1957, Box 1. Edwin M.Cronk, First Secretary of Embassy, “Annual Economic Report 1955, Republic of Korea,” March 19, 1956, pp. 30, 42, 45. Foreign Service Dispatch No. 294 from American Embassy, Seoul, to Department of State. RG 59 Civil Records, Box 5116, Dispatch File 1955–1959 (Washington, DC: National Archives, 1956). Edwin M.Cronk, First Secretary of Embassy, “Quarterly Economic Review, AprilJune 1956, Republic of Korea,” October 15, 1956, p. 13. Foreign Service Dispatch No. 116 from American Embassy, Seoul, to Department of State. RG 59 Civil Records, Box 5116, Folder 89, Dispatch File 1955–1959 (Washington, DC: National Archives, 1956). See also CINCREP (Representative of CINC Military Command), Office of Economic Coordinator, “Reference ICATO 1284,” January 19, 1957, p. 1. Incoming Cablegram, International Cooperation Administration, from CINCREP Seoul, Control No. 11468. National Archives, RG 469, Office of Far Eastern Operations, Korea—Subject Files 1953–1959, Box 66, 1957, Commodities Folder—K— Commodities—Cotton. Edwin M.Cronk, First Secretary of Embassy, “Week A No. 4—Section II, F— Economic,” February 23, 1956, p. 2. Foreign Service Dispatch No. 289, National Archives, Records Group 59, Civil Affairs, Files ‘55–’59, December, Box 5116. Thomas C.Niblock, “Report on Disposition of Former Japanese (Vested) Properties, August, 1945–August, 1956,?” December 4, 1956, p. 12. Gunsa Hyeongmyeong Pyeonchan Wiweonhoe, Han’guk gunsa hyeongmyeongsa (A history of the military revolution), Seoul: Dong’a Publishing, 1963, vol. 1, part I, p. 95. Sydney L.W.Mellen, “Labor Notes—South Korea.” Foreign Embassy Despatch, no. 70, September 29, 1954. RG 469 Office of Far Eastern Operations, Korea subject Files 1953–1954. (Washington, DC: National Archives, 1954), addendum, p. 1. An English translation of the charter of the FKTU is also enclosed. Sydney L.W.Mellon, “ICFTU Interest in the Korean Labor Movement,” Foreign Service Despatch no. 8, July 16, 1954. RG 469 Office of Far Eastern Operations, Korea subject Files 1953–1954 (Washington, DC: National Archives, 1954), p. 2. D.Alan Strachan, “Korean Labor Report.” American Embassy, Seoul, July 1, 1954. RG 469 Office of Far Eastern Operations, Korea subject Files 1953–1954 (Washington, DC: National Archives, 1954), p. 6.

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69 Jongbin Kim, “The Korean Cotton Manufacturing Industry,” PhD dissertation, University of California Berkeley, 1966, p. 12. 70 SWAK, Banjik weolbo (Textile monthly), April 1967; Yong-wan Kim, “Kim Yongwan,” in Weollo Gieobin (eds) Jaegye hoego (Reminiscences of the business world) (Seoul: Han’guk Ilbosa, 1981), p. 132. 71 Kyo-sik Kim (ed.), “Kim Yong-wan,” in Han’guk jaebeol (Korean conglomerates) (Seoul: Gyeseong, 1984), p. 135. 72 J.Rogers Hollingsworth, Philippe G.Schmitter, and Wolfgang Streeck, “Capitalism, Sectors, Institutions, and Performance,” in J.Rogers Hollingsworth, Philippe G. Schmitter, and Wolfgang Streeck, (eds) Governing Capitalist Economies (New York: Oxford University Press, 1994), p. 6. 73 Joungwon Kim, Divided Korea (Cambridge, MA: Harvard University Press, 1975); also Chi Young Pak, Political Opposition, 1980. 74 Paolo Ceri wrote of conditions and competition in clientelistic exchange. See his “Social Exchange and Political Exchange: Towards a Typology,” pp. 67–100 in Bernd Marin (ed.), Generalized Political Exchange: Antagonistic Cooperation and Integrated Policy Circuits (Boulder, CO: Westview Press, 1990). 75 Meredith Jung-en Woo-Cumings, “The State, Democracy, and the Reform of the Corporate Sector in Korea,” in T.J.Pempel (ed.), The Politics of the Asian Economic Crisis (Ithaca New York: Cornell University Press, 1999), p. 128. 76 Ruth Berins Collier and David Collier, “Inducements versus Constraints: Disaggregating ‘Corporatism,’” The American Political Science Review, 73 (December 1979):967–986. Young-Hee Shim-Han, “Social Control and Industrialization in Korea”: 102–103. 77 Chan-Sup Chang and Nahn Joo Chang, The Korean Management System—Cultural, Political, Economic Foundations (Westport, CT: Quorum Books, 1994). 78 Duk-jin Chang, “Privately Owned Social Structures: Institutionalization-Network Contingency in the Korean Chaebol,” PhD dissertation, University of Chicago, Sociology 1999; Changwon Lee, “Social Capital, Social Closure and Human Capital Development: The Case of Managerial Workers in Korean Chaebol,” PhD dissertation, University of Chicago, Sociology 1994, pp. 103–107. 79 Douglas R.Gress, “The Liability of the Linkage Between Corporate Governance and Corporatism in South Korea: With Special Reference to the Economic Crisis,” MA thesis, Yonsei University, Seoul, Graduate School of International Studies, 1998. 80 Kyong-dong Kim, “Political Factors,” pp. 465–477, 469. 81 Walter Dowling, US Ambassador, “Evaluation of Aid Programs in Korea,” October 25, 1956, p. 9, Foreign Service Dispatch No. 128. Records Group 469, Korea Subject Files 1953–1957, Box 1 (Washington, DC: National Archives, 1956). 82 Comptroller General of the US, “US Assistance Program for Korea, Fiscal Years 1954–1956,” in US State Department, Audit Report to the Congress of the United States, 1957 (Washington, DC: US State Department, 1957), p. 13.

3 Industry growth, 1961–79 1 See my “State and Concentration in Korea’s First Republic,” Modern Asian Studies, 26,4 (October 1992), pp. 701–718, and “Reincorporation and the American State in South Korea: the Textile Industry in the 1950s,” Sociological Perspectives, special issue on Studies in the New International Political Economy, vol. 35, no. 2, (Fall 1992): 329–342. 2 Walter W.Powell, “Neither Market Nor Hierarchy: Network Forms of Organization,” in L.L.Cummings and Barry M.Staw (eds), Research in Organizational Behavior (London: JAI Press Inc., 1990), pp. 302–303; Ronald Dore, “Goodwill and the Spirit of Market Capitalism,” The British Journal of Sociology, vol. 34, no. 4 (1983): 459–482.

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3 Networks of subcontractors beyond the jaebol played a smaller role upstream in Korea’s textile industry, due to concentration at firms and consequent use of scale to monopolize access to markets and government offices. See Ok-Jie Lee, “Labor Control and Labor Protest in the South Korean Textile Industry, 1945–1985,” PhD dissertation, Sociology, University of Wisconsin-Madison, 1990. Williamson, Ouchi, and Streeck looked to institutions and patterns of interaction beyond markets which address market imperfections in order to reduce transaction costs. Oliver E. Williamson, “Transaction Cost Economics and Organization Theory,” in Neil J. Smelser and Richard Swedberg (eds), The Handbook of Economic Sociology (Princeton, NJ: Princeton University Press, 1994), pp. 77–107, and Market and Hierarchies: Analysis and Antitrust Implications (New York: Free Press, 1975). William G.Ouchi, “Markets, Bureaucracies, and Clans,” Administrative Science Quarterly, 25, 1 (1980):129–141; Wolfgang Streeck and Phillippe Schmitter, “Community, Market, State and Associations? The Prospective Contribution of Interest Governance to Social Order,” in Wolfgang Streeck and Philippe C.Schmitter (eds), Private Interest Government: Beyond Market and State (Beverly Hills CA: Sage Publications, 1985), pp. 1–29. 4 Hollingsworth, Schmitter, and Streeck cited markets, corporate hierarchies, states, formal associations, and informal networks as possible institutional settings for exchange. J.Rogers Hollingsworth, Philippe C. Schmitter, and Wolfgang Streeck, “Capitalism, Sectors, Institutions, and Performance,” pp. 3–16 in J.Rogers Hollingsworth, Philippe G.Schmitter, and Wolfgang Streeck (eds), Governing Capitalist Economies: Performance and Control of Economic Sectors (New York: Oxford University Press, 1994). 5 Mari Sako, Prices, Quality and Trust: Inter-firm Relations in Britain and Japan,” Cambridge Studies in Management no. 18 (Cambridge: Cambridge University Press, 1992):9–188. 6 Robert Bianchi, Unruly Corporatism (New York: Oxford University Press, 1989), p. 21; Clement Moore, “Authoritarian Politics in Unincorporated Society,” Comparative Politics Jan. 1974):193–216. See also James Jesudason’s study of a mix of coercive and democratic procedures in state policy, “The Syncretic State and the Structuring of Oppositional Politics in Malaysia,” in Garry Rodan (ed.), Political Oppositions in Industrializing Asia (London: Routledge, 1996), pp. 128–160. 7 Edson de Oliveira Nunes, “Bureaucratic Insulation and Clientelism in Contemporary Brazil: Uneven State-building and the Taming of Modernity,” PhD dissertation, University of California, Berkeley, 1984. 8 Han’guk Gyeongjein Yeonhaphoe (FKI), (ed.) “Seomyu gongeop hyeonhwang 1980” (Current state of the textile industry, 1980) (Seoul: Federation of Korean Industries, 1981), Table 1–4, p. 9. 9 Han’guk Gyeongjein Yeonhaphoe (FKI), Han’guk gyeongje yeon’gam 1980 (Korean economic yearbook 1980) (Seoul: Federation of Korean Industries, 1981), pp. 30–31. 10 Brief histories of both Dainong and Kolon have been drawn from interviews at the firms, as well as from the following sources: Maeil Gyeongje Sinmunsa, Hoesa yeollam: sangjang beobin (Annual corporation reports: listed firms), vol. 1 (Seoul: Samhwa Publishing, annual); Korea Listed Company Association (Han’guk Sangjang Hoesa Hyeopeuihoe), Sangjang hoesa jongram (Annual report of listed companies) (Seoul: Han’guk Sangjang Hoesa Hyeopeuihoe, annual); Asia-Pacific Infoserv., Inc., Korea Company Yearbook (Seoul: Asia-Pacific Infoserv., annual); Han’guk Sinyong Pyeongga Jusik Hoesa (Korean Investors Service), Han’guk gieop jongram: deungnok beobin byeon (Annual report of Korean Companies: registered corporations) (Seoul: Han’guk Sinyong Pyeongga Jusik Hoesa, 1993); Korea Chamber of Commerce and Industry KCCI), Korean Business Directory (Seoul: KCCI, annual); Seoul Gyeonje Sinmun, Jaebeol gwa gabeol (Jaebol and families) (Seoul: Seoul Gyeonje Sinmun, 1991); Joseon Ilbo Gyeonjebu, Jaegye eui injae deul (Leaders of the jaebol) (Seoul: Joseon Ilbo Gyeonjebu, 1984).

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11 Japan Textile News (April 1976), pp. 89–91, (September 1977), p. 87. 12 Dainong was the only textile conglomerate among the eleven conglomerates that collapsed in 1997. Sang-mok Suh, “The Korean Currency Crisis: What Can We Learn from It?,” Korea Journal 38, 2 (Summer 1998):45. 13 Joseon Ilbo, July 10, 1997, p. 12. 14 Dainong Corporation, “Dainong Corporation,” company brochure, 1990, p. 4. 15 Park Yonghak was chair of the Korea-Japan Economic Association. Familiar with former Prime Minister Nakasone and other Japanese leaders, he received the prestigious Fujita Award from the Japanese Government in 1996 in recognition of his efforts to promote bilateral ties. 16 Donga Ilbo, Donga yeon’gam (Donga annual—biographies) (Seoul: Donga Ilbo, 1996), p. 282. 17 Joseon Ilbo, June 11, 1997, p. 5. Sunkyong was also among the sixty Korean firms serving on the Finance Committee of the government party in 1997. 18 Kinship played a role in both ownership and management at Dainong under the second generation of family leadership of Park Youngil. Sull Won-bong, president of the Taihan Sugar Group that includes Taihan Textile, is the son of the eminent textile pioneer Sull Won-sik, and husband of Yonghak’s first daughter. Park Yonghak’s second daughter married Lee Sang Lyul, a PhD in engineering from Columbia University who served as president of the Dainong Corporation. Jaebeol gwa gabeol (Jaebols and families), pp. 20–21. 19 “Dainong to Be Dissolved—Only Midopa Saved,” Korea Times Aug. 26, 1997, p. 14. 20 Seung-hyu Seong, “Naillon sidae yeon jaebeol idea: K’oorong geurup” (The age of nylon in the second decade of the jaebol: the Kolon Group), Shindonga (June 1984): 372–382. 21 JTN (September 1978), p. 38. 22 Jaebol gwa gabeol, pp. 163–167; Japan Textile News (September 1977), p. 80. Korea Polyester (Han’guk Hwaseom) and Korea Nylon (Han’guk Nairon) were joined under the single name of Kolon. 23 Jaebol gwa gabeol pp. 162–163. Weon-man’s first son, Dong-ch’an, succeeded his father as president of Kolon Group in 1977, while the second son, Dong-bo, took the presidency of Kolon Highway Tour Co. and married into a prominent politician’s family. Dong-bo’s wife is Kim Ye-ri, daughter of Kim Jong-pil, a leading official in President Park’s party and more recently leader of his own opposition party that allied with Kim Daejung’s party to win the presidency in late 1997. Weon-man’s first daughter, Yi Mi-ja, married Pak Seong-ki who served as president of Samgyeong Development until it was absorbed by Kolon in 1973, and then as president of Kolon Hotel, and then finally of Korea Violin Company, which he made independent in 1985. The second daughter, Yi Mi-hyang, married Ho Yeong-in, president of Samnip Food Products. 24 For a review of state funding for enterprise, including collusion, see Meredith Jungen Woo, Race to the Swift: State and Finance in Korean Industrialization (New York: Columbia University Press, 1991), and “Introduction: Chalmers Johnson and the Politics of Nationalism and Development,” in Meredith Woo-Cumings (ed.), The Developmental State (Ithaca, New York: Cornell University Press, 1999), pp. 1–31. 25 FKI, Han’guk gyeongje yeon’gam 1980, p. 321. 26 Founders served as both owners and top executives at these closely held firms. Patriarch Lee Chong-song had founded Choongnam and retained 24 percent of the shares. Dainong and Pangrim remained private under family ownership and management. Kim Yong-joo and family managed Chonbang and held 10 percent of the shares, with cross-shareholding through Shinhan Flour representing a further 8 percent of shares. Founder Sull Won-sik retained 32 percent of the shares at Taihan. The Kim family under CEO Kim Kak-jung held major shares in Kyungbang, with the Kim’s Samyang Company holding 8 percent as well. CEO Suh Min-seok and

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29 30 31 32 33

34 35 36 37

38

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family held 17 percent of the shares at Dongil, and at Ilshin, CEO Kim Ch’ang-ho and family held 20 percent of the shares. KOFOTI, Seomyu yeonbo 1980, p. 15, and Seomyu saneop byeollam 1996, p. 58. Chairman Kim Sang-ha and family held 26 percent of the shares at Samyang. The Japanese polyester giant Teijin held 33 percent of the shares at Sunkyong-Teijin, and CEO Choi Jong-hyon held 7 percent. Likewise Toray held 23 percent of the shares at Cheil Synthetics, the future Saehan Industries, and Samsung Group founder and Saehan CEO Lee Byung-chull and family held 7 percent. Daehan Fiber remained privately held. Chairman Cho Suck-rai held 24 percent of the shares in Tongyang Nylon, today’s Hyosung, and Hyosung Trade held a further 14 percent. CEO Lee Dong-chan and family held 21 percent of the shares at Korea Hapsum, the future Kohap, and Toray held 17 percent. Kim Han-su and family managed Hanil Synthetics and held 28 percent of the shares. The Lee family under patriarch Lee Imyong likewise managed Taekwang and held 21 percent of the shares. JTN (April 1980), p. 23. JTN (June 1978), p. 35. JTN (February 1979), pp. 39–40. “The government had to back up the makers not only with the higher prices for domestic usage but also with various administrative advantages including taxes.” JTN (April 1980), p. 22. Japan Textile News (April 1976), p. 85. This was a comment by Mr Kyung Soo Park, Director, Bureau of Textile Industry, Ministry of Commerce and Industry. The US Agricultural Attaché noted that “considerable administrative guidance” was necessary to insure that local spinners supplied local weavers and garment makers, given the below cost price on yarn mandated by the government. Gordon S.Nicks, “Annual Cotton Report 1976,” Report of Agricultural Attaché, Seoul to USDA, October 28, 1976, p. 6. National Archives, USDA, FAS, Folder—KR Korea 1976. See also report of March 18, 1977, p. 4. JTN (April 1980), p. 23. On price controls, see JTN (October 1978), p. 26 and (June 1979), p. 28. Hyung-kook Kim, “The Political Economy of Industrial Adjustment Strategies in South Korea: A Comparative Study of the Textile, Steel and Semiconductor Industries,” PhD dissertation, Political Science, Duke University, 1988, p. 4. Karl Moskowitz, “Ownership and Management of Korean Firms,” in Kae H.Chung and Hak Chong Lee (eds), Korean Managerial Dynamics (New York: Praeger, 1989), p. 73. Rhee Jong-chan noted the HCI drive brought back earlier patterns of personalistic ties between state and major entrepreneurs. See his The State and Industry in South Korea: The Limits of the Authoritarian State (New York: Routledge, 1994); Kim Eun Mee earlier offered a similar conclusion about state ties with spinners in the 1980s, in “From Dominance to Symbiosis: State and Chaebol in the Korean Economy, 1960– 1985,” PhD diss, Brown University, 1987, p. 186. Japan Textile News (April 1976), p. 85. The article noted mills had not applied for Ministry of Commerce and Industry permission for expansion, despite MCI promotion of an additional 200,000 spindles. Indeed, millers scoffed at MCI targets of 5 million spindles, arguing that 3 million appeared the limit for Korea. TPH, 1960, p. 125. M.G.Wedman, Acting Director, US Mission, Seoul, “Korean Textile Industry Survey, 1969,” p. 92. Airgram to Department of State from American Embassy Seoul, December 1, 1969. Civil Reference Section, USDA/FAS Records, Accession No. 166–76–7, Records Group 166. JTN (June 1979), p. 28. JTN (October 1978), p. 26, (September 1979), p. 48. T’ae-hyeong Yi, “Seomyu saneopgye eui naemak” (The inside story of the textile industry world), Sindonga 3 (March 1980):234–251.

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44 A chronicle of SWAK petitions and MCI directives can be found in Seomyu yeonbo 1974, and in issues of SWAK’s Bangjeok (Cotton textiles) monthly journal in the same year. 45 Planning Department, SWAK, “Mulga anjeong gwa gyuje” (Regulations and price stabilization), Bangjeok April-May, 1973:23–28. 46 Chun Chul-soon, Managing Director SWAK, “The Cotton Industry in Korea—Past, Present and Future,” in JTN, The Asian Cotton Textile Outlook 1992 (Tokyo: JTN, 1992), p. 38. 47 Japan Textile News (September 1977), p. 86. 48 Kim, “From Dominance to Symbiosis,” p. 185. 49 Karl Moskowitz, “Limited Partners,” in Karl Moskowitz (ed.), From Patron to Partner (Lexington, MA: D.C. Heath & Company 1984), pp. 163–164. 50 “The South Korean Bourgeoisie: A Class in Search of Hegemony,” in Hagen Koo (ed.), State and Society in Contemporary Korea (Ithaca, New York: Cornell University Press, 1993), pp. 95–130. 51 Jong-il You, “Labour Institutions and Economic Development in the Republic of Korea,” in Gerry Rodgers (ed.), Workers, Institutions and Economic Growth in Asia (Geneva: International Institute for Labour Studies, 1994), p. 181. 52 Sookon Kim, “Korean Labor-Management Relations,” in Lee-Jay Cho and YoonHyung Kim, (eds) Korea’s Political Economy: An Institutional Perspective (Boulder, GO: Westview, 1994), p. 634, Table 20.2. 53 Federation of Korean Textile Workers’ Unions (FKTWU), Brief History of FKTWU (Seoul: FKTWU, 1992), p. 24. 54 An English translation of the “Labor Dispute Settlement Act,” promulgated in April of 1963 and amended December 1974, can be found in Korean Legal Center, Laws of the Republic of Korea (Seoul: Korean Legal Center, 1975), pp. 839–846. 55 Han’guk Minju Nodongja Yeonhap (Korean Federation of Democratic Labor), 1970 nyeondae ihu Han’guk nodong undongsa (The Korean labor movement from the 1970s) (Seoul: Han’guk Minju Nodongja Yeonhap, 1994), pp. 87–88; Jang-jip Choi, Labor and the Authoritarian State: Labor Unions in South Korean Manufacturing Industries, 1961– 1980 (Seoul: Korea University Press, 1989), pp. 127–128. 56 Han’guk Minju Nodongja Yeonhap, 1970 nyeondae, pp. 192–197. 57 Young-gi Park, “Myeonbang saneop” (Cotton spinning and weaving), in Su-geon Kim and Tae-hyeon Ha, (eds) Nosa gwangye sarye yeon’gu (Case studies of labormanagement relations) (Seoul: Korea Development Institute, 1982), pp. 29–99. 58 Ok-Jie Lee, “Labor Control and Labor Protest,” p. 185. 59 Frederic C.Deyo, Beneath the Miracle: Labor Subordination in the New Asian Industrialism. (Berkeley, CA: University of California Press, 1989). 60 Choi, Labor and the Authoritarian State, p. 23. 61 You, “Labour Institutions and Economic Development in the Republic of Korea,” p. 184; Hyeong-bae Kim, “Labor Law in Korea,” in Pyeong-ho Pak, Chu-su Kim, Kweon-seop Cheong, Hyeong-bae Kim, and T’ae-jun Kweon (eds), Modernization and Its Impact upon Korean Law (Berkeley, CA: Center for Korean Studies, 1981), pp. 65– 134. 62 Jang-jip Choi, Labor and the Authoritarian State, p. 160, and his “A Corporatist Control of the Labor Union in South Korea,” Korean Social Science Journal 11 (1984):22–55. 63 Park, “Seomyu saneop (Textile industry),” pp. 28–99. 64 Choi, Labor and the Authoritarian State, pp. 138–139. 65 I interviewed Mr Suh at his office on June 28, 1993. 66 Han’guk Minju Nodongja Yeonhap, 1970 nyeondae, pp. 89, 369–373, 494–501. 67 Teok-je Pak and Ki-seong Pak, Han’guk eui nodong johap (Labor unions in Korea), vol. I (Seoul: Han’guk Nodong Yeon’guweon (Korean Labor Institute), 1989). p. 169, Table 4–18.

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68 Ok-jie Lee, “Labor Control and Labor Protest, p. 239; Tae-seong Yi, “Eoyong nojo keu siltae” (The current situation of coopted labor unions), Weolgan Jungang (June 1980):310–325; Min-jeong Kim, Gireun meoreodo woeropji anne (Though the road is long it is not lonely), Weolgan Jungang (June 1980):326–339; Heung-su Kim, “Jintong hanin nodonggye” (The agony of the workers’ world), Sindonga (May 1980):224–237. 69 Frederic Deyo, “State and Labor: Modes of Political Exclusion in East Asian Development,” in Frederic Deyo (ed.), The Political Economy of the New Asian Industrialism (Ithaca, New York: Cornell University Press, 1987), p. 185. 70 Han’guk Ilbo, January 22, 1980, p. 8. 71 T’ae-seong Yi, “Eoyong nojo,” p. 324. 72 Deyo, Beneath the Miracle. 73 Ho-Keun Song, “The Politics of Liberalization and Worker Struggle in Transition to Democracy: South Korea,” paper presented at the American Sociological Association Annual Meeting, August, 1993, Miami, Florida; J. Samuel Valenzuela, “Labor Movements in Transitions to Democracy: A Framework for Analysis,” Comparative Politics 21, 4 July 1989):445–471. 74 Michael Launius, “The State and Industrial Labor. Bureaucratic-Authoritarianism and Corporatism in Korea’s Fifth Republic,” PhD dissertation, University of Hawaii, 1990. 75 Neil Fligstein, “Markets as Politics: A Political-Cultural Approach to Market Institutions,” American Sociological Review 61 (August 1996):663. 76 Robert Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton, NJ: Princeton University Press, 1990), p. 28. 77 Regarding the changing balance of power between state and jaebol, see Eun Mee Kim, Big Business and Strong State: Collusion and Conflict in South Korean Development, 1960–1990 (Albany, New York: State University of New York Press, 1997). 78 Laverne Brabant, Agricultural Trade Officer, “Doing Business in Korea,” USDA/ FAS GEDES Voluntary Report from Daniel B.Conable, Agricultural Counselor, American Embassy Seoul May 6, 1985, p. 4. This article was prepared for Foreign Agriculture Magazine. Material available in USDA/FAS, Folder KS Korea (Seoul) 1985.

4 Industry maturity, 1980–2000 1 Moon Kyu Park, “Interest Representation in South Korea: The Limits of Corporatist Control,” Asian Survey vol. 27, no. 8 (August 1987):903–917; Carter Eckert, “The South Korean Bourgeoisie: A Class in Search of Hegemony,” in Hagen Koo (ed), State and Society in Contemporary Korea (Ithaca, New York: Cornell University Press, 1993), pp. 95–130; Eun Mee Kim, Big Business, Strong State: Collusion and Conflict in South Korean Development, 1960–1990 (Albany, New York: University of New York Press, 1997). 2 Kwangmin Park, “Large Corporations and the Dominant Wing of the Capitalist Class in South Korea,” PhD dissertation, Michigan State University, Sociology, 1995; Jae-Jean Suh, “Han’guk jabonga gyegeup eui sahoejeok, jeongchijeok yeonjulmang yeongu” (A study of social and political networks of the Korean capitalist class), Han’guk Sahoehak (Winter 1988):47–67; Pyeong-yeong Pak, “Han’guk eui dokjeom jabon gwa gugga” (Korea’s monopoly capital and the state), Gyeongje wa Sahoe (Spring 1992), no. 13:54–78. 3 For a review of collusion in government—business ties from the 1980s see Mark L. Clifford, Troubled Tiger: Businessmen, Bureaucrats, and Generals in South Korea (Armonk, New York: M.E.Sharpe, 1994). 4 In a recent review, Stephen Haggard observed, “We still have no convincing theory as to how Korea managed to combine close business-government ties and extensive corruption with highly competitive firms.” Stephan Haggard, “Review of Eun Mee

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Kim’s Big Business, Strong State: Collusion and Conflict in South Korean Development, 1960– 1990,” Contemporary Sociology 27, 3 (May 1998):297–298. Peter Evans asked similarly why embeddedness does not devolve into unbounded clientelism and corruption, undermining the effectiveness of the state. Initially he pointed to the insulated bureaucracy of an authoritarian state where autonomy in dealing with capital insured priority of national interest over the competing interests of individual clients. Evans and others later turned from state to society, and from insulation to engagement with a focus on socially embedded ties of state and capital, probing the texture of interest exchange that fosters positive-sum outcomes without destructive rentseeking. Gary Hamilton recently highlighted the same tension with his thesis of the double embedding of Korean firms in social institutions as well as in an institutionalized political economy. Gary G.Hamilton, “Asian Business Networks in Transition; or, What Alan Greenspan Does Not Know about the Asian Business Crisis,” in T.J. Pempel (ed.), The Politics of the Asian Economic Crisis (Ithaca New York: Cornell University Press, 1999), p. 54. Economist Intelligence Unit (EIU), South Korea, Country Forecast Third Quarter, 1998 (London: EIU, 1998), p. 4; Han’guk Saneop Eunhaeng (Korea Development Bank), Seolbi tuja gaehwoek josa (Survey of facility investment plans), no. 58 (Dec. 1997):52; Gwansecheong (Korea Customs service, ROK), Muyeok tonggye yeonbo (Statistical yearbook of foreign trade, December 1997) (Seoul: Gwansecheong, 1998), p. 81. Han’guk Hwahak Seomyu Hyeophoe (Korea Chemical Fibers Association), Hwaseom (Chemical Fibers) (March 2000):90. Although growth in textile exports pales in comparison to that of electronics or autos, local production had long dampened demand for foreign textiles with imports of $4.5 billion in 1999 representing just 3 percent of total Korean imports. Cotton yarn exports of $225 million as recently as 1995 fell to about $180 million annually in 1997 and 1998, and then to $168 million in 1999. Yet the spinning and weaving industry has recovered other export markets with a combined total of $867.2 million of yarn and fabric exports in 1999, fueled by 51 percent growth in exports of cotton fabrics. Ministry of Commerce, Industry and Energy, “Statistics on Foreign Trade,” reported on the website of the Spinners and Weavers Association of Korea, www.swak.org (accessed, May 8, 2000). KOFOTI, Seomyu saneop byeollam 1996 (Textile industry handbook 1996) (Seoul: KOFOTI, 1997), Table 2.1, p. 58; SWAK, Bangjeok (Cotton textiles) Jan. 1997), Statistical Section, p. 1. See also the website of the Spinners and Weavers Association of Korea, www.swak.co.kr. Kim, “Myeonbang kongeop,” p. 37; KOFOTI, Seomyu saneop byeollam 1999, p. 24. The GSM-102 program provided longer repayment terms than domestic banks, lower rates, and a stable source of credit for less financially sound mills that would not be likely to even get loans locally. GSM loans in the early 1990s covered 40 percent to 50 percent of Korea’s total purchases of US cotton, Textile Asia (Nov. 1990):86. International Cotton Advisory Committee, Cotton: Review of the World Situation, vol. 53, no. 3 (January-February 2000):17. Demand continues for higher quality cotton yarns, but has faded in all categories of cotton blended yarns, prompting calls for further specialization of blends. More alarming has been the fall in manufacture of cotton and cotton blended yarns, dropping from 454 billion tons in 1990 to only 275 billion tons in 1999. SWAK, Bangjeok (Cotton textiles) Jan. 1997), Statistical Section, p. 4. SWAK webpage, www.swak.org/whatnew.html (accessed, June 2000). SWAK webpage www.swak.org/whatnew.html (accessed, June 2, 2000). Fiber Organon (June 2000):107. National Statistical Office, Report on Mining and Manufacture 1998, cited on the webpage of the Korean Chemical Fibers Association (KCFA), www.kcfa.org. See also KCFA, Hwaseom byeollam 1999 (Chemical Fibers Handbook 1999) (Seoul: KCFA, 1999), p. 66, Table 10.

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14 Chul-soon Chun, Managing Director SWAK, “The Cotton Industry in Korea—Past, Present and Future,” in JTN, The Asian Cotton Textile Outlook 1992 (Tokyo: JTN, 1992), p. 38. 15 The brief histories of both Kabool and SK Chemicals have been drawn from interviews at the firms, as well as from the following sources: Maeil Gyeongje Sinmunsa, Hoesa byeollam: sangjang beobin (Annual corporation reports: listed firms), vol. 1 (Seoul: Samhwa Publishing, annual); Asia-Pacific Infoserv., Inc., Korea Company Yearbook (Seoul: Asia-Pacific Infoserv., annual); Korea Chamber of Commerce and Industry (KCCI), Korean Business Directory (Seoul: KCCI, annual); Seoul Gyeongje Sinmun, Jaebeol gwa gabeol (Jaebol and families) (Seoul: Seoul Gyeongje Sinmun, 1991); Joseon Ilbo Gyeonjebu, Jaegye eui inchaedeul (Leaders of the chaebol) (Seoul: Joseon Ilbo Gyeonjebu, 1984); Jeonguk Gyeongjein Yeonhaphoe (Federation of Korean Industries, FKI), Han’guk gyeongje yeon’gam 1996 nyeon banbyeolchaek: Han’guk jaegye insarok 1996 (Supplement to the Korean economic annual 1996—biographies of Korean business circles) (Seoul: FKI, 1996). 16 Kabool, Saeop bogoseo 1999.1.1–1999.12.31 (Report of activities, January 1–December 31, 1999) (Seoul: Korea Stock Exchange, 1999), p. 16. 17 Ibid., p. 55. 18 This material was cited on the Kabool website on May 10, 2000, http:// www.Kabool.co.kr 19 For a study of factory schools, see Seehwa Cho, “Gender, Labor, and Schooling: Factory Schools at Textile Mills in South Korea,” PhD dissertation, University of Wisconsin Madison. 20 His eldest son Pak Yu-sang has served as vice-president of the Kabool Group and married the daughter of Yi Kyu-ho, former Minister of Construction. The second son, Pak Hyo-sang, served as Managing Director of Kabool Textiles. A third son, Pak Han-sang, served as a director of Kabool Construction, and married a daughter of Taehan Flour president Yi Chong-gak. Pak Che-eul’s daughter Kyeong-hi married Yi Nak-hwa, the president of Teokseong Trade, whose father-in-law was Kim Myeongweon, founder of the Kirin Brewery subsidiary in Korea. Dedication of family members to the industry is evidence of the firm’s commitment to textiles. 21 Kabool Spinning, Saeop bogoseo 1999.1.1–1999.12.31 (Report of activities, January 1 31, 1999) (Seoul: Korea Stock Exchange, 1999), p. 50. 22 Osaka Senken, JTN Monthly (September 1995), p. 31. 23 This material was cited on the Kabool website on May 10, 2000, http:// www.Kabool.co.kr. 24 The firm retains 75 percent of the shares in Kabool Electronics and Kabool Metals, and 59 percent of the shares in Changshu Textiles. Kabool Textiles is the majority shareholder in the offshore spinning affiliates, and holds 42 percent of the shares in Chosun Life Insurance. Asia-Pacific Infoserv., Inc. Korea Company Yearbook Spring 2000 (Seoul: Asia-Pacific Infoserv., 2000), p. 75 25 This material was cited on the S K Chemicals website on May 5, 2000, www.skchemicals.com. 26 Hwaseom (March 2000):80–81. The firm also produces TPA, a critical chemical input for polyester production, and holds a 12.3 percent share of the local market for TPA sales. “Je 29 gi ban’gi bogoseo,” p. 23. A manager on the Corporate Planning Team remarked in 1996 that a decade earlier chemicals accounted for only 10 percent of sales, but added that the firm now projected the sales share of chemicals to rise to as much as 40 percent in the next decade. Exports accounted for three-quarters of total sales in 1999, reinforcing its reputation as a leading synthetics and textile producer for foreign markets. 27 Report reprinted in Business Korea (December 1991), p. 34. 28 Korean Investors Service, Korea Company Annual, Spring 1997, p. 115. Another son of the founder and uncle of Tai-won, Chey Dong-il is chair of the board and CEO at

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SKC, and his son, Chey Jae-weon, holds 7 percent of the shares. SK Chemicals in turn holds 55 percent of the shares in Sunkyong Keris, an affiliate in Indonesia, 50 percent of the SKUCB, and 49 percent of SK Pharmaceuticals. Jaebeol gwa gabeol; Joseon Ilbo Gyeonjebu, Jaegye eui inchaedeul (Leaders of industry). Business Korea November 1990, p. 19. Joseon Ilbo, June 11, 1997, p. 5. JTN Monthly (December 1995), p. 31. JTN Monthly (June 19 95), p. 16. See also S K Chemicals webpage, www.skchemicals.com/old-home/wwwroot/cyber/eng/skki.htm (accessed, June 2, 2000). SK Chemicals itself is the major shareholder in SK Engineering and Construction with 25 percent of the shares. Jaejeong Gyeongjebu (Ministry of Economy and Finance), Gyeongje Hyeomnyeogguk (Division of Economic Cooperation), Haewoe tuja hyeonji beobin hyeonhwang 12.1999 (Current status of corporations with investments abroad as of December 1999) (Seoul: Ministry of Economy and Finance, 1999), p. 105. SK Chemicals webpage, www.skchemicals.com (accessed, June 2, 2000). SK webpage, “Vision,” www.skchemicals.com/old_home/wwwroot/cyber/eng/ vision.html (accessed, June 2, 2000). In a speech at his appointment as CEO, Han Young-su cited strengths in dyeing technology at Kabool’s plant at the Taegu Pisan Dyeing Complex, and the vast array of machinery in place across the world. But apart from such strengths, he offered no immediate answer for stemming continuing losses since 1997 at both Kabool Corporation and Kabool Textiles. “Kabeuli saraya Han’guk seomyu saneop hwoeaeng” (Kabool survives with the resurgence of the Korean textile industry), Yeongnam Ilbo, cited on Kabool webpage, www.Kabool.co.kr (accessed, March 28, 2000). Reviewing the performance at Sunkyong in Ulsan, I am reminded of the fears of the Keris Marketing Director back in 1992 of not only rising production costs in Korea, but of shrinking local markets down the line of serial production. He warned of “strong competition in supplying a shrinking number of big synthetic fabric weavers.” An adjustment away from textiles towards chemicals will demand capital and new technologies that may well be beyond the capabilities of independent firms without group support. “SK Chemicals Finishes Restructuring,” September 9, 2000. This report was found on the webpage of SK Chemicals, http://www.skchemicals.com (accessed, November 11, 2000). Han’guk Gyeongje Sinmun (Korean Economic Daily), “Birth of the Biggest Synthetic Fiber Company in Korea,” July 7, 2000. The article can be found on the SK Chemical website: http://www.skchemicals.com Hwaseom (March 2000), pp. 80–81. National Statistical Office, Report on Mining and Manufacture 1998. Cited on www.kofoti.org. Su-ki Kim, “Myeonbeong gongeop” (Cotton spinning industry), Hwaseom (Chemical Fibers) (March 2000):43. National Statistical Office Republic of Korea, Monthly Statistics of Korea, June 1997 (Seoul: Tonggyecheong, 1997), p. 114. See also, Chun, “The Cotton Textile Industry in Korea,” p. 39. JTN Monthly (February 1995), p. 18, JTN Monthly (March 1995), p. 17. His brother Lee Kwang-ho holds 2.7 percent of the shares and serves as Executive Director, and another brother, Lee Chae-ho, holds 1.6 percent of the shares. Dongil Spinning, Saeop bogoseo 1999.1.1–1999.12.31 (Annual report, January 1– December 31, 1999). “Hearing of Kukje Chair, Yang Cheong-mo, March 1989,” in Daehan Minguk Kukhoe (ROK National Assembly), Gukhoe Teukpyeol Wiweonhoe Hoeeuirok Mokcha (Index of

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the proceedings of the Assembly’s Special Committees), sessions 142–150, from July 7, 1988 to July 5, 1990 (Seoul: Korean National Assembly Business Office, 1990), pp. 46–59. Jie-Ae Sohn, “Fate Sealed?” Business Korea (December 1991):32–35. “Reorganization of Synthetic Fiber Producers in Controversy Again,” JTN Monthly (April 1999):54–55 Korean Economic Daily, “Birth of the Biggest Synthetic Fiber Company in Korea,” July 7, 2000. The article can be found on the S K Chemical website http:// www.skchemicals.com “South Korea: Spandex Venture,” Textile Asia (March 2000):74. Joseon Ilbo (April 25, 2000). Korea Times (June 2, 2000), p. 9. http://www.toray.co.jp/e/release/news/nr991020.html. This was announced in a press release of October 20, 1999. Seongnan joined the Korean Chemical Fibers Association (KCFA) in June of 1999, Kum Kang Trading in January of 2000, and the Toray/Saehan joint venture in April of 2000. KOFOTI, Textile Yearbook 2000 (Seoul: KOFOTI, 2000), p. 406. Kum Kang Trading suffered a 63 billion won loss in 1998, and 1.5 billion in 1999, but recovered to post a 970 million won profit in 2000. Efforts to reduce concentration among leading industrial conglomerates led to Samsung’s decision to move the former Cheil Synthetics into the new Saehan Media group of patriarch Lee Byung-chull’s son, Lee Ch’ang-hi. Saehan Concrete, Saehan Development, and Saehan Industries (formerly, Cheil Industrial Synthetics) now constitute a new top fifty chaebol of their own, owned and managed by Lee Ch’anghi’s family including Lee Chae-gwan, Mo Song-jin, and others. The Hyosung Group renamed their flagship Tongyang Nylon “Hyosung T. & C. (i.e., Technology and Creation)” in 1996 to better convey diverse applications of polymer and other new technologies at the firm. Hyosung T. & C., together with Hyosung Living Industry Co., Ltd., remained leading polyester producers, but in 1998 were reintegrated into one company titled “Hyosung Corporation.” See webpage of Hyosung, section on company history. http://www.hyosung.co.kr. Seomyu saneop byeollam 1996, p. 42. JTN Weekly (January 2, 1998), pp. 3–4. Titled DSI Inc., the joint venture was established on January 26, 2000. Saehan Industries, Bungi bogoseo 00.1.1–00.31.4 (Quarterly report, January 1, 2000—April 31, 2000) (Seoul: Korea Stock Exchange, 2000), p. 86; KOFOTI webpage, June 9, 2000, “Textile Industry,” www.kofoti.org. Alan Cawson, “Corporatism,” in William Outhwaite and Tom Bottomore (eds), The Blackwell Dictionary of Twentieth-Century Thought (New York: Blackwell, 1993), pp. 113– 116. Alan Cawson, “Is There a Corporatist Theory of State?” in Graeme Duncan (ed.), Democracy and the Capitalist State (New York: Cambridge University Press, 1989), pp. 233–252. Wolfgang Streeck and Philippe C.Schmitter, “Community, Market, State—and Associations? The Prospective Contribution of Interest Governance to Social Order,” in Wolfgang Streeck and Philippe C.Schmitter (eds), Private Interest Government (Beverly Hills, CA: Sage Publications, 1985), pp. 1–28. Wolfgang Streeck and Philippe C.Schmitter, “From National Corporatism to Transnational Pluralism: Organized Interest in the Single European Market,” Politics and Society 19, 2 (June 1991):155. See my paper, “Corporatism and Collective Action in Korean Textiles,” presented at a conference at the University of British Columbia entitled, “Toward an Industrial Society: South Korea,” on December 13, 1996.

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67 KOFOTI, Seomyu saneop byeollam (Textile yearbook, 1999) (Seoul: KOFOTI, 1999), pp. 359–367. 68 Korea joined GATT (General Agreement on Trade and Tariffs), and affiliated with the Long-term Cotton Fabrics Agreement, on December 31, 1964. SWAK, Seomyu yeonbo 1964, p. 148. 69 Jeonguk Gyeongjein Yeonhaphoe (Federation of Korean Industries, FKI), Jeongyeongyeon saeop jong’ram 1995 (Report of FKI Activities, 1995) (Seoul: FKI, 1996); Seomyu yeonbo 1968, p. 66; Eui-young Kim, “Rethinking the Role of Business Interest Groups in the Political Economy of Korea: A Focus on the Textile Industry,” paper presented at the conference on “Transformation in the Korean Peninsula toward the 21st Century: Peace, Unity and Progress,” East Lansing, Michigan, July 7–11, 1993. 70 KCFA, Hwaseom byeollam 97 (Chemical fibers annual 1997) (Seoul: KCFA, 1997), p. 320; Seomyu yeon’gam 97, p. 62. 71 Korea Development Bank, Industry in Korea 2000 (Seoul: Korea Development Bank, 2000), p. 203. TPA is an abbreviation for Terephthalic Acid. 72 Tashiro Shirai, “A Theory of Enterprise Unionism,” in Taishiro Shirai (ed.), Contemporary Industrial Relations in Japan (Madison, WI: University of Wisconsin Press, 1983), p. 118. 73 Jong-il You, “Labour Institutions and Economic Development in the Republic of Korea,” in Gerry Rodgers (ed.), Workers, Institutions and Economic Growth in Asia (Geneva: International Institute for Labour Studies, 1994), pp. 187–188. 74 Han’guk Nodong Yeon’guweon (Korean Labor Institute), 2000 nyeon KLI Nodong tonggye (Korean Labor Institute labor statistics for 2000) (Seoul: Korean Labor Institute, 2000), p. 144. Han’guk Gyeongyeongja Ch’onghyeophoe (Korean Management Association), Nodong Gyeongje Yeon’gam (Yearbook of the labor economy 1997) (Seoul: Korean Management Association, 1997), p. 409. Statistics can also be found on the website of the Korean International Labor Foundation (KOILAF), www.koilaf.org. 75 Frederic Deyo, “State and Labor: Modes of Political Exclusion in East Asian Development,” in F.Deyo (ed.), The Political Economy of the New Asian Industrialism (Ithaca, New York: Cornell University Press, 1987), p. 185. 76 Korean Labor Institute, 2000 nyeon KLI Nodong tonggye, p. 147. I interviewed Jung Dukjin, Director, Organization and Education Bureau, Federation of Korean Textile Workers Unions, on October 12, 1999. 77 Federation of Korean Textile Workers Unions, “Saeop bogoseo 1996,” pp. 50–53. 78 www.koilaf.org 79 Textile Asia (December 1986), p. 80.

5 Capital 1 Neil Fligstein, “Markets as Politics: A Political-Cultural Approach to Market Institutions,” American Sociological Review 61 (August 1996):656–673. 2 Stephan M.Haggard, “Business, Politics and Policy in East and Southeast Asia,” in Henry S.Rowen (ed.) Behind East Asian Growth: The Political and Social Foundations of Prosperity (London: Routledge, 1998), p. 83. 3 Greg Noble emphasized “profitability discounted by risk” as the leading priority of business, even at the cost of occasional infringement on property rights. Gregory W. Noble, “Review of Rowen’s Behind East Asian Growth: The Political and Social Foundations of Prosperity in American Political Science Review 94, 1 (March 2000):225–226. 4 Stephan Haggard and Susan Collins, “The Political Economy of Adjustment in the 1980s,” in Stephan Haggard, Richard N.Cooper, Susan Collins, Choongsoo Kim, and Sung-Tae Ro (eds), Macroeconomic Policy and Adjustment in Korea, 1970–1990. (Cambridge, MA: Harvard University Press, 1994), pp. 75–107; Subir V.Gokarn, “Korea: Industrial and Financial Restructuring,” in Pradeep Agrawal et al. (eds),

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Economic Restructuring in East Asia and India: Perspectives on Policy Reform (New York: St. Martin’s Press, 1995), pp. 22–53; Lee-Jay Cho and Yoon-Hyung Kim (eds), Korea’s Political Economy: An Institutional Perspective (Boulder, GO: Westview, 1994); Joseph J. Stern, Ji-Hong Kim, Dwight H.Perkins, and Jung-Ho Yoo, Industrialization and the State: The Korean Heavy and Chemical Industry Drive (Cambridge, MA: Harvard, 1995). Chung-in Moon, “The Politics of Structural Adjustment in South Korea: Analytical Issues and Comparative Implications,” Korea Journal (Autumn 1991):55–68, and “Trade Friction and Industrial Adjustment: The Textiles and Apparel in the Pacific Basin,” in Stephen Haggard and Chung-in Moon (eds), Pacific Dynamics: The International Politics of Industrial Change (Boulder, GO: Westview Press, and CIS-Inha University Press, 1989), pp. 185–206. Byung-kook Kim, “The Political Economy of Industrial Adjustment Strategies in South Korea: A Comparative Study of the Textile, Steel and Semiconductor Industries,” PhD dissertation, Political Science, Duke University, 1988. See also Byoung-do Lee, “Politics of Industrialization: the Textile Industry in South Korea and the Philippines,” PhD dissertation, Northwestern University, 1992. Regarding the results of the Textile Modernization Fund, see The World Bank, Korea: Managing the Industrial Transition (Washington, DC: The World Bank, 1987), p. 163. Charles W.Anderson, “Political Design and the Representation of Interests,” Comparative Political Studies 10, 1 (1977):141. Soon Cho, “Government and Market in Economic Development,” Asian Development Review 12, 2 (1994):147. Samyangsa, “Saeop bogoseo 1998.7.1–1999.6.30” (Report of activities, July 1, 1998— June 30, 1999) (Seoul: Korea Stock Exchange, 1999), pp. 49–52. “Samyang’s Kin Sang-Eung—Humble Roots to High-tech Prowess,” Business Korea (April 1990):90. Seoul Gyeonje Sinmun, Jaebeol gwa gabeol (Jaebol and families) (Seoul: Seoul Gyeonje Sinmun, 1991), pp. 164–165; Jeonguk Gyeonje Yeonhaphoe (Federation of Korean Industries, FKI), Han’guk gyeongje yeon’gam 1996 (Korean economic yearbook) (Seoul: Jeonguk Gyeonje Yeonhaphoe, annual); Jeonguk Gyeonje Yeonhaphoe (Federation of Korean Industries, FKI), Han’guk gyeongje yeon’gam 1996 nyeon banbyeolchaek: Han’guk jaegye insarok 1996 (Supplement to the Korean economic annual 1996—biographies of Korean business circles) (Seoul: Jeonguk Gyeonje Yeonhaphoe, 1996). Saehan Industries, “Saeop bogoseo 1999.1.1–1999.12.31 (Report of activities, January 1—December 31, 1999),” (Seoul: Korea Stock Exchange, 1999). Family ties have also served the Samsung Group well. Lee Byung-chull appointed his third son, Lee Keun-hee, as his successor at the Samsung Group. In-laws of Keunhee include Hong Jin-gi, former Minister of the Interior, the former Seoul mayor Yang T’aek-sik, Kim Han-su, founder of Hanil Synthetics, and former President Roh Tae-woo. Lee Byung-chull’s second daughter, Lee Suk-hee forged perhaps the most important link to the business community with marriage into the family of Koo Inhoe. Koo is founder of the LG Group, past chairman of the powerful Federation of Korean Industries, and chair of the Korean International Trade Association. Koo is himself related to Lee Chae-jun, chair of the Daelim Group. The patriarch’s second son and founder of Saehan Media, Lee Ch’ang-hee married into the family of a Japanese broker for the Mitsui Corporation. Jaebeol gwa gabeol, pp. 20–21; Han’guk jaegye insarok 1996. Choongnam Spinning, “Saeop bogoseo” (Report of activities) (Seoul: Korean Stock Exchange, 1995), p. 571; Asia-Pacific Infoserv., Ind., Korea Company Handbook Spring 2000, p. 62. Lee Chun-ho is related through marriage with Lee Yae-ch’an, a military officer, Kim Ch’ang-yun, Chair of Tonggwang Communications, and through him with Kim Hyo-hwan, formerly a director of Namgook Industries, and Kim Seong-hwan, past President of the Bank of Korea. The latter is also related to Yang Cheong-mo of the

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now defunct Kukje Group. The second son, Lee Chae-ho, married the daughter of Pak Seong-gyu, president of Samil Industries, with in-laws including Kim Chongcheol, former leader of the Government Party, and Kim Chong-hee, founder of the Korea Explosives Group, who in turn is related to various government officials. The third son in the Choongnam family, Lee Kwang-ho, married the daughter of Chin Hyeonsik, former Minister of the Interior, and is related through him to Jeon Byeong-rim, President of Sama Marine Transport. Lee Mi-ho, youngest daughter of the family, married Cheong Seok-mo of the National Assembly. Jaebol gwa gabeol, pp. 356–357; Han’guk jaegye insarok 1996. The mother company absorbed Dongil Sewing Thread in 1976 and Dongil Knit three years later. It also organized a prosperous joint venture with a leading fashion and garment firm in Japan, Dongil Renown in 1982. Dongil Spinning, “Saeop bogoseo (Report of activities),” (Seoul: Korean Stock Exchange, 1995), pp. 59–60; Chi Yang-chin, Dongil Bangjiksasa (A history of the Dongil Spinning Company) (Seoul: Dongil Spinning, 1982). Karl Moskowitz, “Ownership and Management of Korean Firms,” in Kae H.Chung and Hak Chong Lee (eds), Korean Managerial Dynamics (New York: Praeger, 1989), pp. 65–77. “Jeongbu kia cheori dillaema” (The government’s dilemma in dealing with Kia) Han’guk Ilbo July 18, 1997), p. 10; “Kia’s Failure Raises Questions About Survival of Firms without a Single Owner,” Korea Times (July 18, 1997), p. 9. Textile Asia (December 1991):119–120; Textile Asia (March 1993):91–92. Korean Federation of Textile Industries, Textile Yearbook 2000 (Seoul: KOFOTI, 2000), pp. 21–23. Interview with Lee Joon-ho, July 2, 1996, President of Choongnam Spinning, and with Lim Joon-sik, Manager, Import Department, Choongnam Spinning, August 31, 1992. Choongnam Spinning, “Saeop bogoseo” (Report of activities) (Seoul: Korean Stock Exchange, 1995), p. 1. JTN. Textile Asia (March 1993):90–91. See “Saehan signs Investment Deal with Toray of Japan” Korean Times, June 16, 1999, p. 8. The Japanese firm will invest $500 million in Saehan, a base film, spunbond and yarn Manufacturer based in Gumi, Gyongsang-pukdo. It will be the largest amount of Japanese money ever poured into Korea at the industry level and the largest amount of foreign capital inflow in a single investment in the synthetic fiber sector. Saehan will sell the base film division of Saehan’s Gumi no. 1 factory and the whole Gumi no. 2 factory to the envisioned firm, which will come into being this fall. Toray will pay $500 million total to cover the joint ownership of the factory and operational costs.

27 Jin-Moon Kim, “Samyang Group—Driving for Diversification,” Business Korea (March 1993):28–31; “Samyang’s Kim Sang-Eung—Humble Roots to High-tech Prowess,” Business Korea (April 1990):90–91. 28 Samyangsa, “Bangi bogoseo (semi-annual report, December 1995),” (Seoul: Korean Stock Exchange, 1995), p. 65; Daewoo Securities Research Center, “Samyangsa (2859),” Enterprise Analysis 96–01–03–229 (Seoul: Daewoo Securities, 1996). The wholly owned Samyang Tex, a small weaving and dyeing firm offers Samyang an outlet midstream as well. 29 Samyang, “Saeop bogoseo 1998.7.1–1999.6.30” (Report of activities, July 1, 1998— June 30, 1999) (Seoul: Korea Stock Exchange, 1999), p. 12. 30 Saehan Industries, “Saeop bogoseo 1999.1.1–1999.12.31” (Report of activities, January 1—December 31, 1999) (Seoul: Korea Stock Exchange, 1999), p. 16.

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31 JTN Weekly (February 6, 1998), pp. 5–6. 32 Su-ki Kim, “Myeonbang gongeop,” p. 37; Jaejeong Gyeongjebu (Ministry of Economy and Finance), Gyeongje Hyeomnyeogguk (Division of Economic Cooperation), Haewoe tuja hyeonji beobin hyeonhwang 12.1999 (Current status of corporations with investments abroad as with investment abroad as of December 1999) (Seoul: Ministry of Economy and Finance, 1999), p. 416. 33 Dongil Bangjik Jusik Hoesa, “Yeongeop bogoseo” (Report of operations 1995) (Seoul: Korean Stock Exchange, 1995), p. 12.1 visited Dongil offices in Jakarta in both 1992 and 1996, as well as Dongil headquarters in Seoul. 34 Managers complained in 1996 of problems with wages negotiations and retention of trained personnel, as well as with supply of electricity and local procurement of reliable inputs. Samyang plants in Korea provided polyester for production of high tenacity polyester sewing thread, despite extensive local production of polyester in Indonesia. Dongil has recently invested in a spinning plant and marketing firm in Egypt titled DIB-Egypt, holding a 95 percent share of an enterprise with a paid-in capital of $1 million. Dongil Spinning, Yeoncha bogoseo 1999.1.1–1999.12.31 (Annual report January 1, 1999—December 31, 1999) (Seoul: Korea Stock Exchange, 1999), P. 11. 35 Choongnam Bangjik Jusik Hoesa, “Saeop bogoseo 1995” (Report of activities 1995) (Seoul: Korean Stock Exchange, 1995), p. 4. 36 Choongnam has now finished construction of a wholly-owned second venture titled Choongnam Vica in Dongnai Province. Registering a capital of $9.5 million, the latter mill will operate 38,000 Choongnam spindles, 850 looms, and one processing line from its opening late in 1998 with an overall investment of about $50 million. Choongnam Indocut is yet a third offshore venture under construction in Gujurat Province near Bombay, India, with a capital of $7 million. This 50/50 joint venture with the local Vadra Firm will operate 50,376 spindles transferred from Choongnam’s Korean mills. 37 Jin-Moon Kim, “Samyang Group—Driving for Diversification,” Business Korea (March 1993):30; Jusik Hoesa Samyangsa, “Yeongeop bogoseo 1995” (Operations report 1995) (Seoul: Korean Stock Exchange, 1995), p. 17 38 Jusik Hoesa Samyangsa, “Bangi bogoseo” (Semi-annual report, July-December 1995) (Seoul: Korean Stock Exchange, 1995), p. 66. 39 “Cheil Synthetic Textiles—Selling Technology Overseas,” Business Korea (July 1988): 73; Cheil Synthetics Inc., “Cheil Synthetics Inc.,” (Seoul: Cheil Synthetics Inc., 1995), back page. 40 Arthur Andersen, Jusik hoesa Saehan, jaemu jepyo e daehan gamsa bogoseo 1999.1.1– 1999.12.31 (Auditor’s report on the finance of Saehan Industries) (Seoul: Korea Stock Exchange, 1999), p. 34. 41 Saehan Industries, “Saeop bogoseo 1999.1.1–1999. 12.31” (Report of activities,. January 1—December 31, 1999) (Seoul: Korea Stock Exchange, 1999), p. 74. 42 KOFOTI, Seomyu saneop byeollam (Textile yearbook, 1998). Seoul: KOFOTI, 1998; Hwaseom (March 2000). 43 Han’guk Sujurip Eunhaeng, Hoewoe Tuja Yeonguweon (Korea Export/Import Bank, Foreign Investment Research Institute), “Urinara hoewoe tuja eui hyeonhwang gwa hwalseonghwa chiweon pang’an yeon’gu” (A study of Korea’s current foreign investment and plans for support to extend it) (Seoul: Korea Export/Import Bank), December 1989, pp. 108–121. See also their “Hoewoe tuja jido (Procedures for foreign investment),” December 1991, pp. 157–159. Jaejeong Gyeongjebu (Ministry of Economy and Finance). Gyeongje Hyeomnyeogguk (Division of Economic Cooperation), Haewoe tuja hyeonji beobin hyeonhwang 12.1999 (Current status of corporations with investments abroad as with investment abroad through December 1999) (Seoul: Ministry of Economy and Finance, 1999).

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44 The Ministry of Commerce and Industry (MCI) was renamed the Ministry of Trade, Industry, and Energy (MOTIE) on March 23, 1994. MOTIE was renamed the Ministry of Commerce, Industry and Energy (saneop jaweonbu) (MOCIE) on February 24, 1998. Textiles are the responsibility of the Textile and Consumer Goods Industries Division of the Electronics, Textile and Chemical Industries Bureau under the Vice-Minister. See http://www.mocie.go.kr/history.html 45 KOFOTI webpage, “About KOFOTI,” www.kofoti.or.kr (accessed June 2, 2000). 46 Textile Asia (November 1991):82; Textile Asia (September 1993):97; Korea Company Handbook Spring 2000. 47 One survey of Korean investors in Southeast Asia reported firms concerned with securing stable local demand, and a reliable dealers’ network to survive “fierce competition.” “Evaluation of Manufacturing Companies’ Overseas Investment,” Korean Business Review (July 1991):29–32. 48 Kim was convicted of accumulating 16.6 billion won. Jungang Ilbo (July 1, 1997), p. 3. Summaries of the judgments against former Presidents Chun and Roh can be found in Donga Ilbo, Donga yeon’gam 1997 (Donga yearbook 1997) (Seoul: Donga Ilbo Company, 1997), pp. 585–586, and 591. 49 Korea Herald (May 3l, 1997), p. 10. 50 Y.H.Lee, “The Relationship between the State and the Jaebol, 1980–1993,” Korea Observer 26, 1 (Spring 1995):63–91. 51 A summary of the court verdict against executives of the Hanbo group details close ties to banks and government bureaucracies. Joseon Ilbo (June 3, 1997), p. 10. 52 Miles Kahler, “Legalization as Strategy: The Asia-Pacific Case,” International Organization 54, 3 (Summer 2000):549–571.

6 State 1 Mark Granovetter, “Economic Action and Social Structure: The Problem of Embeddedness,” American Journal of Sociology, 91, 3 (Nov. 1985):481–510; William James Booth, “On the Idea of the Moral Economy,” American Political Science Review, 88, 3 (Sept. 1994):653–667. 2 A local government survey in the spring of 2000 reported a total of 2,208 weavers in the city of Taegu and surrounding area of North Gyeongsang Province in the spring of 2000, a decrease of 18.4 percent from the total just two years earlier. “Equipped to Weave,” Textile Asia (May 2000):70. “Taegu, the world’s largest synthetic filament fabric producing district had nearly 69,000 looms, including 33,000 water-jet loom at end of 1999. However, only about 70% of looms are said to be running today.” JTN January 5, 2001, p. 3. 3 Stephen Haggard and Chung-In Moon, “Institutions and Economic Policy: Theory and a Korean Case Study,” World Politics XLII, 2 (January 1990):210–237; Peter Evans, Embedded Autonomy: States and Industrial Transformations (Princeton, NJ: Princeton University Press, 1995). 4 Some segments of the economy remain plan-rational, others market-rational with the state role limited to regulation. Eun Mee Kim, “Contradictions and Limits of a Developmental State: With Illustrations from the South Korean Case,” Social Problems, 40, 2, (May 1993):228–249. Chung-in Moon, “The Demise of a Developmentalist State? Neoconservative Reforms and Political Consequences in South Korea,” in James Cotton (ed.), Politics and Policy in the New Korean State: from Roh Tae-Woo to Kim Young Sam (New York: St. Martin’s, 1995), pp. 67–84. For a broader comparative view of ties between business and state, see Taehoon Moon, “The Relationship between Business and Government in Three Policy Areas in Korea: Economy, Environment, and Technology,” PhD dissertation, State University of New York at Albany, 1992; Meredith Jung-en Woo-Cumings, “Introduction: Chalmers Johnson

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and the Politics of Nationalism and Development,” in Meredith Woo-Cumings (ed.), The Developmental State (Ithaca, New York: Cornell University Press, 1999), pp. 1–31; James Cotton, “The Asian Crisis and the Perils of Enterprise Association: Explaining the Different Outcomes in Singapore, Taiwan and Korea,” in Richard Robison, Mark Beeson, Kanishka Jayasuriya and Hyuk-Rae Kim (eds), Politics and Markets in the Wake of the Asian Crisis (London: Routledge, 2000), pp. 151–168. Complicating the state role in the textile industry is the political environment of the IMF era where earlier styles of business-state cooperation have become the enemy. President D.J.Kim himself attacked that earlier pattern in his inaugural address in February of 1998, citing three causes for the financial crises: “a collusive link between politics and business, government-directed banking practices, as well as the large business groups setting up uncompetitive subsidiaries.” Korea Times (February 26, 1998), p. 1. Uncompetitive subsidiaries refer to jaebol efforts to monopolize markets, often with sales at below cost. Banking practices denote state-control of commercial as well as public banks in Korea, and a state gatekeeper role in allocation of credit. Collusion, state control of banking, and cut-throat competition have been documented across the chronicle of industry formation, growth, and maturity in Korean textiles. “Spinning Yarns and Renaissance,” Business Korea (November 1988), pp. 68–69. The Ministry of Commerce and Industry (MCI) was renamed the Ministry of Trade, Industry, and Energy (MOTIE) on March 23, 1994. MOTIE was renamed the Ministry of Commerce, Industry and Energy (saneop jaweonbu) (MOCIE) on February 24, 1998. Textiles are the responsibility of the Textile and Consumer Goods Industries Division of the Electronics, Textile and Chemical Industries Bureau under the Vice-Minister. See http://www.mocie.go.kr/history.html http://www.knet.co.kr/business/etc/kofoti; KOFOTI, “The Textile Industry in Korea 1997,” (Seoul: KOFOTI, 1997), p. 1; “KOFOTI Plays Key Role in ROK Textile Modernization,” Korea Herald (May 19, 1994). South Korea joined GATT (General Agreement on Trade and Tariffs), and affiliated with the Long-term Cotton Fabrics Agreement, on December 31, 1964; Seomyu yeonbo 1964, p. 148. A sister organization, the Korean Garments and Knitwear Export Association occupies an office in the same World Trade Center Tower in Seoul’s fashionable Samseong District. I interviewed officials at both the Korea Garments and Knitwear Export Association (Han’guk Seomyu Jepum Suchul Johap) and the Korea Export Association for Textiles (Han’guk Seomyu Jikmul Suchul Hyeophoe) in October of 1992. See publications by both organizations such as their annual, “A Summarized Guideline for Textile Export Quota Operation,” “Present Status,” and “Directory of the Board.” Sang-yun Kang, “Taegu Endeavors to Develop High-Tech Industries,” Business Korea (November 1994), pp. 38–40; “Brisk Investments in Dyeing and Finishing Industry Implemented in 1994,” The Asian Textile Flash September 21, 1995, p. 7; “Taegu Economic Future Bright,” Korean Business Review (October 1995), pp. 50–53; “Interworld—Korea: Taegu Kyungbuk Textile Industry Standing at a Turning Point,” JTN (February 1990), pp. 95–97. “Textile Industry to Impose Voluntary Curbs on Exports,” Korea Herald (February 26, 1987). “KOFOTI Plays Key Role in ROK Textile Modernization,” Korea Herald (May 19, 1994); Deuk-hwan Yu, “Korea’s Textile Industry at Transformational Stage,” Korean Business Review (December 1995), pp. 48–49. Eui-young Kim, “Rethinking the Role of Business Interest Groups in the Political Economy of Korea: A Focus on the Textile Industry,” paper presented at the conference on “Transformation in the Korean Peninsula toward the 21st Century: Peace, Unity and Progress,” East Lansing, Michigan, July 7 to 11, 1993. Carl B.Hamilton and Chungsoo Kim, “Republic of Korea: Rapid Growth in Spite of Protectionism Abroad,” in Carl B.Hamilton (ed.), Textile and Trade and the Developing

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Countries (Washington, DC: World Bank, 1990), pp. 159–181; Ji-hong Kim, “Korea: Market Adjustment in Declining Industries, Government Assistance in Troubled Industries,” in Patrick Hugh and Harry Meissner (eds), Pacific Basin Industries in Distress: Structural Adjustment and Trade Policy in the Nine Industrialized Economies (New York: Columbia University Press, 1991), pp. 357–417; see also Ji-hong Kim, “Restructuring of the Textile and Garment Industry in Korea,” in Saha Dhevan Meyanathan (ed.), Managing Restructuring in the Textile and Garment Subsector (Washington, DC: The World Bank, 1994), pp. 175–203; Yung Bong Kim, “The Growth and Structural Change of Textile Industry,” in Chong Kee Park (ed.), Macroeconomic and Industrial Development in Korea (Seoul: Korea Development Institute, 1980), pp. 185–276; Chung-in Moon, “Trade Friction and Industrial Adjustment: The Textiles and Apparel in the Pacific Basin,” in Stephen Haggard and Chung-in Moon (eds), Pacific Dynamics: The International Politics of Industrial Change (Boulder, GO: Westview Press, and CIS-Inha University Press, 1989), pp. 185–206. “Governmental Plans to Renovate Textile Industry,” JTN Monthly (September 1995), p. 30. Korea Herald, December 5, 1985; July 21, 1986; August 25, 1987; July 30, 1988; May 6, 1989; December 9, 1990; May 18, 1992; September 10, 1992; March 9, 1993; June 18, 1995. The funding process was described in interviews at KOFOTI, MOTIE, and with the Economic Attaché of the Korean Embassy in Washington, DC in April of 1997. KOFOTI, Textile Yearbook 2000 (Seoul: KOFOTI, 2000), p. 129. For the variety of state aid available through the Korean Federation of Textile Industries, see KOFOTI, “Seomyu saneop jiweon anneseo December 1995 (A guide to government aid for the textile industry 1995)” (Seoul: KOFOTI, 1995); Gugga Gyeongjaengryeok Ganghwa Mingan Euiwonhoe (Private Sector Committee for Improving National Competitiveness), Seomyu saneop teukbyeol wiweon bogo sahang (Report of categories of special aid for the textile industry). July 9, 1996. Taegu Yeomsek Gongdan Gongeop (Taegu Dyeing Industrial Center—Dycen), “Taegu Yeomsek Gongdan Gongeop (Taegu Dyeing Industrial Center)” (Taegu: Dycen, 1996); Ho-jung Yoon, Executive Managing Director of the Taegu Kyungbuk Textile Industries Association introduced me to textiles in Taegu in an interview of June 1996. Park Won-ho, Planning Department of the Korea Textile Development Institute in Taegu provided further insights. I returned for interviews in June of 2000 with Yoon’s successor, Bae Dae-hee, and officials at Korea Textile Development Institute and the Korea Dyeing Technology Center. For an overview of state policy in the textile industry, see Saneop Jaweonbu (Division of Industrial Resources), MOTIE (Ministry of Commerce, Industry, and Energy), Saneop jaweon baekso 1999 (1999 White Paper on resources for industry) (Seoul: Myngsinsa, 2000), pp. 518–545. Seomyu Gisul Jinheungweon (Institute for Development of Textile Technology), Taegu seomyu saneopsa (History of the textile industry in Taegu) (Taegu: Han’guk Chulpansa, 1990), pp. 599–600. Firms purchase plots of land within the district, and pay off the infrastructure loans through annual assessments. Some 115 companies had located plants in the Pisan district by 1999, employing 13,500 workers. Han’guk Yeomsaek Gisul Yeon’guso (Korea Dyeing Technology Center—Dyetec), “Han’guk yeomsaek gisul yeon’guso hyeonhwang 1999 (Current Situation of Korea Dyeing Technology Center, 1999) (Taegu: Dyetec, 1999). Member firms of the Center Cooperative join in procurement of German dyestuffs to obtain the best prices, and benefit also from joint procurement of electricity and especially steam from the Center generator. I asked about supply of energy, steam, and water to individual plants and was told of monthly contracts based on six month to annual production plans. Korea Dying Technology Center, Dyetec, webpage www.dyetec.or.kr, “Introduction,” 1999. See also their list of equipment under “Equipment.”

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24 “Korean Textile and Apparel Industry,” JTN Monthly (May 2000):64. 25 “Korean Textile Industry,” JTN (November 1987), p. 41. 26 See Statistics Section of the website of the Korean Federation of Textile Industries. http://www.kofoti.or.kr/statistics/nation/d_facilities.html2/28/01. KOFOTI, Seomyu saneop tonggye 1996 (Statistics of the textile industry 1996) (Seoul: KOFOTI, annual), pp. 216–217. 27 MOTIE, Taegu City Government, and the Taegu Dyeing Industrial District, “Yeomsaek gisul yeon’guso (Korea Dyeing Technology Center),” report of December 1994, p. 75. Lee Ki-poong, Principal Researcher, Dyeing and Finishing Division, and Ryu Jong-woo, Manager of Planning Department in June of 1996 introduced me to the work of the Center. 28 Dyetec, “Han’guk yeomsaek gisul yeon’guso hyeonhwang 1999,” p. 3. Calculations in US currency are based on an exchange rate of 1,000 won to the dollar. 29 Dyetec, “Yeomsaek gisul yeon’guso hyeonhwang mit baljeon gyehwoek” (Current status and development plan for Dyetec) (Taegu: Dyetec, 1999). 30 Taegu Gyungbuk Gyeonjikmul Gongeop Hyeopdong Johap (Taegu Kyungbuk Knitting and Weaving Industry Cooperative), “’94 Hyeonhwang (Current status 1994),” (Taegu: Taegu Kyungbuk Knitting and Weaving Industry Cooperative, 1996), and “Jeonggi chonghoe seoryu 2/15/96” (Documents of the periodic assembly, February 15, 1996). 31 Taegu City, Milano Project Office, “Milano Beurojekteu chujin hyeonhwang” (Current situation of progress in the Milano Project May 2000) (Taegu: Taegu City Government, 2000). The Taegu Kyungbuk Textile Industries Association oversees four credit facilities: (1) textile material development fund, budgeted for 40 billion won, with 2 billion won already in place in 1999; (2) improvement of production capacity, budgeted for 79 billion won, with 7 billion in place 1999, and 9.6 billion won more in place by 2000; (3) induction of dyeing technology, budgeted for 49 billion won, with 4 billion won in place by 1999, and 3.5 bill more in 2000; and (4) waste water treatment fund, budgeted for 40 billion won, with 4 billion in place by 1999, and 4 billion more in 2000. 32 The webpage of the City of Taegu reports that of the total of 7,240 manufacturers in Taegu, 2,671 or 36.9 percent are textile firms. www.tci.or.kr (accessed, May 28, 2001). 33 Han’guk Seomyu Gisul Jinheungweon (Korean Textile Development Institute), “Jiyeok seomyu saneop eui 21 segi bijyeon” (A vision of the local textile industry for the 21st century) (Taegu: Korean Textile Development Institute, 1995). 34 For the role of KIET see Chae-deuk Yi, “Seomyu saneop” (Textile industry) in Korean Institute for Industrial Economics and Trade (KIET), in KIET (ed.), Han’guk saneop eui bijeon gwa balcheon jeollyak (A vision and development strategy for Korean industry in the 21st century) (Seoul: KIET, 1994), pp. 507–552. 35 MOCIE provides the funding for the Korean Institute for Industrial Economics and Trade (Han’guk Gyeongje Saneop Muyeok Yeon’guweon). For a sampling of industry petitions for further state aid, see the textile section of annual editions of the Federation of Korean Industries, Han’guk gyeongje yeon’gam (Korean Economic Yearbook). 36 Gugga Gyeongjaengryeok Ganghwa Mingan Euiwonhoe (Private Sector Committee for Improving National Competitiveness), “Jonghap muyeok sangsa, sinbal, seomyueop eui gyeongjaengryeok siltae mit ganghwa bang’an” (Status of competitiveness and plan for improvement in the general trading companies, shoe, and textile industries), December 1993, (Seoul: Federation of Korean Industries, 1993). 37 Tongsang Saneopbu (Ministry of Technology, Industry, and Energy, MOTIE), “Je 2 hoe sinsaneop baljeon mingan hyeomnryeok hoeeui: jikmul saneop 7/1/96” (The second Joint Public-Private Meeting on Development of New Industries: the Weaving Industry, July 1, 1996) (Seoul: MOTIE, 1996).

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38 “New Textile Centre,” Textile Asia (February 1999):59; “Taegusi eseoneun ‘Milano peurojikteu’ reul maryeon hesseumnida” on the webpage of the City of Taegu, www.metro.Taegu.kr. 39 Tae-young Park, “The Finalized Plan for Upgrading Taegu Textiles,” Korea Textile Industry News, 1999, special edition for ITMA ‘99:90–91. 40 Saneop Jaweonbu (Division of Industrial Resources), MOTIE (Ministry of Commerce, Industry, and Energy), Seomyu saneop baljeon jeollyak gandamhoe 2000.5.19 (Discussion of a strategy for the development of the textile industry, May 19, 2000) (Taegu: Korean Textile Development Institute, 2000). 41 Tae-il Seo, “2001 nyeon Millano Peurojekteu—bongyeok jeok eopgye jiweon seobiseu chegye gachueojil geot” (The Milano Project in 2001—basic funding to bring along the service sector), Taegu Sangeui (Journal of the Taegu Chamber of Commerce and Industry), No. 430 (January-February, 2001):12–15. 42 “The Development of the Textile Industry in Taegu, South Korea,” PhD dissertation, Geography, University of Hawaii, 1997. 43 Michael J.Piore and Charles F.Sabel, The Second Industrial Divide: Possibilities for Prosperity (New York; Basic Books, 1984); Charles F.Sable and Jonathan Zeitlin, “Stories, Strategies, Structures: Rethinking Historical Alternatives to Mass Production,” in Charles F.Sable and Jonathan Zeitlin (eds), World of Possibilities: Flexibility and Mass Production in Western Industrialization (Cambridge: Cambridge University Press, 1997), pp. 1–33. 44 Ronald Dore, Flexible Rigidities, Industrial Policy and Structural Adjustment in the Japanese Economy, 1970–1982 (Stanford, CA: Stanford University Press, 1991); Gary Hamilton, “Asian Business Networks in Transition; or, What Alan Greenspan Does Not Know about the Asian Business Crisis,” in T.J.Pempel (ed.), The Politics of the Asian Economic Crisis. (Ithaca, New York: Cornell University Press, 1999), p. 54. 45 Charles Sable, “Constitutional Orders: Trust Building and Response to Change,” in J. Rogers Hollingsworth and Robert Boyer (eds), Contemporary Capitalism—The Embeddedness of Institutions (Cambridge: Cambridge University Press, 1997), pp. 167–168. 46 Hagen Koo and Eun Mee Kim, “The Developmental State and Capital Accumulation in South Korea,” in Richard P.Appelbaum and Jeffrey Henderson (eds), States and Development in the Asian Pacific Rim (Beverly Hills, CA: Sage Publications, 1992), p. 134.

7 Labor 1 Han’guk Tonggyecheong (National Statistical Office, ROK), Monthly Statistics of Korea, August 1998 (Han’guk tonggye weolbo) (Seoul: National Statistical Office, 1998), p. 99; Economist Intelligence Unit (EIU), South Korea, Country Forecast Third Quarter, 1998 (London: EIU, 1998), p. 13. 2 Han’guk Nodong Yeon’guweon (Korean Labor Institute), 2000 nyeon KLI Nodong tonggye (Korean Labor Institute labor statistics for 2000) (Seoul: Korean Labor Institute, 2000), p. 150. 3 KLI, KLI Nodong tonggye 2000, p. 63. 4 “Landmark Accord on Layoffs Struck,” Korea Times (February 7, 1998) p. 1 5 Ho-keun Song, “Who Benefits from Industrial Restructuring? Reflections on the South Korean Experience in the 1980s,” Korea Journal 31, 3 (August 1991):69–84. 6 Thomas A.Kochan, “Industrial Relations and Human Resource Policy in Korea: Options for Continued Reform,” in Lee-Jay Cho and Yoon Hyung Kim (eds) Korea’s Political Economy: An Institutional Perspective (Boulder, GO: Westview Press, 1994), pp. 663–97. 7 T.J.Pempel and Keiichi Tsunekawa, “Corporatism Without Labor? The Japanese Anomaly,” in Philippe C.Schmitter and Gerhard Lehmbruch (eds) Trends Toward

218

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9

10

11

12

13 14

15

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Corporatist Intermediation (Beverly Hills, CA: Sage, 1979), pp. 231–270; Walter Gallenson with the collaboration of Konosuke Okada, “The Japanese Labor Market,” in Hugh Patrick and Henry Rosovsky (eds) Asia’s New Giant: How the Japanese Economy Works (Washington, DC: Brookings Institution, 1976), pp. 670–671; Tashiro Shirai, “A Theory of Enterprise Unionism,” in Taishiro Shirai (ed.), Contemporary Industrial Relations in Japan (Madison, WI: University of Wisconsin Press, 1983), pp. 117–141. Others have observed the remarkable ability to blend what appear to be contradictory traditions within Korean society. Vincent Brandt discovered a remarkable tension between democratic aspirations and aristocratic or yangban ideologies of authority in his study of a Korean fishing village, and a competition between a communityoriented egalitarian tradition and a lineage-oriented hierarchical tradition. The former emphasizes formal Confucian hierarchies based on kinship relations, the latter is informal, spontaneous, and more involved with Shamanistic and animistic rituals. Vincent Brandt, A Korean Village—Between Farm and Sea (Cambridge, MA: Harvard University Press, 1971), pp. 230–232, and “Korea” in George C.Lodge and Ezra F. Vogel (eds) Ideology and National Competitiveness: An Analysis of Nine Countries (Boston: Harvard Business School Press, 1987), pp. 207–239. Others have cited the remarkable accommodation of what appear to be quite divergent traditions in law. The body of contemporary Korean law retains layers of earlier Confucian directives, Japanese, and now Western law in what was recently termed, “a hybrid legal culture.” Joonhyung Hong, “Rule of Law and Law Reform in Korea,” The Korean Journal of Policy Studies 10 (December 1995):54; David I.Steinberg, “Law, Development, and Korean Society,” Journal of Comparative Administration 3, 2 (Aug. 1971):215–256. “Corporatism and Cooperation among Japanese Labor,” Comparative Politics 28, 4 (July 1996):379–398. For an overview of collective action among labor since the 1970s, see Seung-kyung Kim, Class Struggle or Family Struggle? The Lives of Women Factory Workers in South Korea (Cambridge: Cambridge University Press, 1997), pp. 97–128. She argues that the demonstration at Dongil Textile in the early 1970s was particularly significant both as symbol and action. Hyun-Seog Yu, “Industrial Structure and Labor Movement: Comparative Study of South Korea and Taiwan,” in Gerry Rodgers (ed.), Workers, Institutions and Economic Growth in Asia (Geneva: International Institute for Labour Studies, 1994), pp. 165– 185. Roger L.Janelli, Making Capitalism: The Social and Cultural Construction of a South Korean Conglomerate (Stanford, CA: Stanford University Press, 1993); Ok-Jie Lee, “Labor Control and Labor Protest in the South Korean Textile Industry, 1945–1985,” PhD dissertation, Sociology, University of Wisconsin-Madison, 1990. When asked by a New York Times reporter why labor unions are not as militant as they were three years ago, Lee Yong Hwan, executive director of the Federation of Korean Industries replied: “Please remember that Asia, including Korea, is rooted in Confucian values that emphasize harmony and respectful relations among different classes and peoples; in difficult situations, those values get stronger.” Stephanie Strom, “Pitfalls in Cutting Korea’s Lifetime Work Force,” New York Times (February 24, 1998), p. D4. Frederic C.Deyo, Beneath the Miracle: Labor Subordination in the New Asian Industrialism (Berkeley, CA: University of California Press, 1989). Ho-Keun Song, “The Politics of Liberalization and Worker Struggle in Transition to Democracy: South Korea,” paper presented at the American Sociological Association Annual Meeting, August, 1993; J.Samuel Valenzuela, “Labor Movements in Transitions to Democracy: A Framework for Analysis,” Comparative Politics 21, 4 (July 1989):445–471. Michael Launius, “The State and Industrial Labor: Bureaucratic-Authoritarianism and Corporatism in Korea’s Fifth Republic,” PhD dissertation, University of Hawaii, 1990.

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16 Rodney Clark, The Japanese Company (New Haven, CT: Yale University Press, 1985). 17 Lee, “Labor Control and Labor Protest in the South Korean Textile Industry, 1945– 1985,” p. 163. 18 The Samyang Union is affiliated with the Democratic Textile Alliance (Minju Seomyu Yeonmaeng). See Samyangsa, Saeop pogoseo 1998.7.1–1999.6.30 (Report of activities, July 1, 1998-June 30, 1999) (Seoul: Korea Stock Exchange, 1999), p. 57. 19 I conducted interviews with union leaders at Samyang and at Sungdo Apparel in 1992, and at the Federation of Korean Textile Workers Unions, and the national center, Federation of Korean Trade Unions, and returned to the textile federation and national center in 1997 and 1998. For an extensive case study of labor union organization at a major textile firms, see T’ae-gi Kim and Pak Ae-seong, Nosa gwangye sarye yeon’gu (Case studies of labor-management relations), vol. 1 (Seoul: Han’guk Nodong Yeon’guweon, 1992), pp. 22–52. 20 You, “Labour Institutions and Economic Development in the Republic of Korea,” pp. 187–188. 21 Korean Labor Institute, 2000 nyeon KLI Nodong tonggye (Korean Labor Institute labor statistics for 2000), pp. 144, 147. 22 Korean Labor Institute, 2000 nyeon KLI Nodong tonggye (Korean Labor Institute labor statistics for 2000), pp. 144, 147. p. 151. Data drawn from a Korean Chamber of Commerce and Industry survey. “Labor-Management Councils” is a translation of the term Nosa Hyeobeuihoe. 23 Korean Labor Institute, 2000 nyeon KLI Nodong tonggye (Korean Labor Institute labor statistics for 2000), p. 147. Data gathered by the Ministry of Labor. The name “Democratic Textile Alliance” is a translation of Minju Seomyu Yeonmaeng. 24 Jeonguk Seomyu Nodong Johap Yeonmaeng (Federation of Korean Textile Workers Unions FKTWU). “Saeop bogoseo 1998” (Report on activities 1998) (Seoul: FKTWU, 1998), pp. 50–53. 25 http://www.kctu.org Korean Council of Trade Unions (KCTU) “Our History.” 26 I met with Mr Ahn Pong-sul, Director of the International Department at the FKTU in March of 1998, and with his predecessor Mr Kim Bong-suk, and his assistant, Kim Sung-jin, in October of 1992. See also the website of the FKTU www.fktu.org. 27 Pong-sun Ahn, “The Economic Crisis in Korea and Its Impact on Labor and FKTU Strategies,” paper presented at the Labor Summit Meeting of ICFTU-APRO in Singapore, February 10–11, 1998, p. 6. 28 Hagen Koo, “The Dilemmas of Empowered Labor in Korea,” Asian Survey 40, 2 (March/April 2000):232–233. 29 Yu, “Industrial Structure and Labor Movement.” 30 Young-Hee Shim-Han, “Social Control and Industrialization in Korea—On the Corporatist Control of Labor,” Korea Social Science Journal (1986):95–123; Launius, “The State and Industrial Labor,” 1990. 31 Young-bum Park, “Wage-fixing Institutions in the Republic of Korea,” Discussion Paper DP/51/1992 for the Labor Institutions and Economic Development Program (Geneva: ILO, 1992); Choongsoo Kim, “Wage Policy and Labor Market Development,” in Stephan Haggard et al. (eds) Macroeconomic Policy and Adjustment in Korea, 1970–1990 (Cambridge, MA: Harvard Institute for International Development and Korea Development Institute, 1994), pp. 185–230. 32 Yu, “Industrial Structure and Labor Movement: Comparative Study of South Korea and Taiwan,” pp. 165–185. 33 Data on the Councils provided in Korean Labor Institute, 2000 nyeon KLI Nodong tonggye; see also Hoon Kim, “The Actual Conditions and Tasks of the Joint Consultation Committee in Korea,” in Korea Labor Institute, compil., International Symposium on Labor-Management Consultation at Enterprise (Seoul: Korea Labor Institute, 1992), pp. 79–103.

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34 Yeon-han Kim, “Danch’e kyoseop siltae e gwanhan yeon’gu (A study of the current state of collective bargaining),” July 1997 (Seoul: Han’guk Nodong Yeon’guweon, 1997), p. 46. 35 Yeong-cheol Chang, Nosa Hyeobeuihoe Sarye Yeon’gu (Case studies of Labor-Management Councils) (Seoul: Han’guk Nodong Yeon’guweon, 1997), p. 14. 36 See an earlier review of labor’s response to automation see Jang-ho Jo, Yoon Seungjin and Yun You-jin, Han’guk nodong sijang eui gujojeok munjejeom gwa daechaek bang’an (The labor market in Korea—problems and alternatives) (Seoul: Korean Chamber of Commerce and Industry, and the Korea Economic Research Institute, 1992), pp. 244–260. 37 KOFOTI, Textile Yearbook 2000 (Seoul: KOFOTI, 2000), p. 405. 38 Dennis L.McNamara, “From Social Compact to Wage Contract: Tripartite Negotiation of Adjustment in Korea,” paper presented at the Conference on Korean Studies in the Millennium, at the University of Hawaii, February 21, 2000. 39 “Tripartite Committee Becomes Legal Entity,” Korea Times (June 6, 1999). 40 One-ki Kim, Chair, First Tripartite Commission, The Tripartite Commission, Brochure dated November 1998, p. 7. 41 Kim, The Tripartite Commission, p. 10. 42 See the webpage of the Korean Employers’ Federation, www.kef.or.kr (accessed, January 1, 2000). 43 Interview with Noh Jin-kwi, Senior Director, Policy Office and FKTU Research Center, Federation of Korean Trade Unions, October 13, 1999. Interview with Sun Han-seung, PhD, Chief Expert Advisor, Tripartite Commission, October 12, 1999. Turmoil at the helm of the Korean Confederation of Trade Unions has impeded labor initiatives at the Tripartite Commission. KCTU interim president, Dan Byungho, was re-elected to a full three-year term early in 2001. 44 Korea Herald, “Tripartite Commission Cements Agreement on Thorny Labor Issues,” February 10, 2001, reprinted in KOILAF (Korean International Labor Federation), Korean Labor News, January-March 2001 (Seoul: KOILAF, 2001). 45 Barry K.Gillis and Dongsook S.Gillis, “Globalization and Strategic Choice in South Korea: Economic Reform and Labor,” in Samuel S.Kim (ed.), Korea’s Globalization (Cambridge: Cambridge University Press, 2000), pp. 29–53. 46 Koo, “The Dilemma of Empowered Labor in Korea,” p. 246.

8 Conclusion 1 Ha-Joon Chang, The Political Economy of Industrial Policy (New York St. Martin’s Press, 1994), p. 119. 2 See for instance Jesse Biddle and Vedat Milor, “Economic Governance in Turkey: Bureaucratic Capacity, Policy Networks, and Business Associations,” in Sylvia Maxfield and Ben Ross Schneider (eds), Business and the State in Developing Countries (Ithaca, New York: Cornell University Press, 1997), pp. 282–283. 3 Peter Evans distinguished between embedded ties and capture, and also provided an excellent description of features of a Weberian bureaucracy. See Evans, “State Structures, Government-Business Relations, and Economic Transformation,” in S. Maxfield and B.R.Schneider (eds), Business and the State in Developing Countries (Ithaca, New York, Cornell University Press, 1997), pp. 63–87. 4 Samuel Kwasi Buame highlighted connections as a means of both collective survival and a countervailing mechanism against institutional inadequacies. See Neil Fligstein, “Markets as Politics: A Political-Cultural Approach to Market Institutions,” American Sociological Review, 61 (August 1996):656–673. 5 Karl J.Fields, “Strong States and Business Organization in Korea and Taiwan,” in Maxfield and Schneider (eds), Business and the State in Developing Countries, p. 149.

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6 Biddle and Milor, “Economic Governance in Turkey, pp. 282–283. 7 Ziya Onis, “Organization of Export-Oriented Industrialization: The Turkish Foreign Trade Companies in a Comparative Perspective,” in Tevfik F.Nas and Mehmet Odekon (eds), Economics and Politics of Turkish Liberalization (London: Associated University Presses, 1992), pp. 93–94. 8 Biddle and Milor, “Economic Governance in Turkey, p. 308. 9 Mitchell Bernard and John Ravenhill, “Beyond Product Cycles and Flying Geese: Regionalization, Hierarchy, and the Industrialization of East Asia,” World Politics 47, 2 Jan. 1995):177, Walter Hatch and Kozo Yamamura, Asia in Japan’s Embrace: Building a Regional Production Alliance (Cambridge: Cambridge University Press, 1996). Tesa Morris-Suzuki, “Japanese Technology and the New International Division of Knowledge in Asia,” in Shojiro Tokunaga (ed.), Japan’s Foreign Investment and Asian Economic Interdependence (Tokyo: University of Tokyo, 1992), pp. 135–152. Shumpei Kumon, “Japan as a Network Society,” in Shumpei Kumon and Henry Rosovsky (eds), The Political Economy of Japan vol. 3, Cultural and Social Dynamics (Stanford, CA: Stanford University Press, 1992), pp. 109–145, and Ken-ichi Imai, “Japan’s Corporate Networks,” in Shumpei Kumon and Henry Rosovsky (eds), The Political Economy of Japan, vol. 3, Cultural and Social Dynamics (Stanford, CA: Stanford University Press, 1992), pp. 198–230. T.J.Pempel, “The Enticement of Corporatism: Appeals of the Japanese Model’ in Developing Asia,” in Dennis L.McNamara (ed.), Corporatism and Korean Capitalism (London: Routledge, 1999), pp. 39–83. 10 Dennis L.McNamara, “Trade and Technology Transfer—Japanese Networks of Investment in Asia.” Seminar presentation for the Institute of Industrial Economics, Chinese Academy of Social Sciences, Beijing, July 14, 2000; “China versus Thailand— Supporting Japanese Industry:” Paper presented at panel on ‘Japan’s Asian Nexus,” American Political Science Association Annual Meeting 1999 in Atlanta, GA, September 3, 1999. 11 Why focus on dyeing? Because Toray, Teijin, and other upstream Thai producers need to upgrade processing, particularly dyeing, in order to move upscale in international markets and increase higher value-added export sales. 12 Among Japanese garment companies, Gunze has a joint-venture with Chonbang, and Renown with Dongil. 13 Nicole Woolsey Biggart, “Institutionalized Patrimonialism in Korean Business,” Comparative Social Research 12 (1990):128. 14 JETRO (Japan External Trade Organization), “A Study on Industrial Sector Development in the Kingdom of Thailand—Second Year Final Draft Report,” June 1989, p. C4. 15 “Competitive Clientelism and Economic Governance,” p. 242. For an overview of the strengthening of pluralism and waning of corporatism due to political and economic ties of region and international market, see Wolfgang Streeck and Philippe C.Schmitter, “From National Corporatism to Transnational Pluralism: Organized Interest in the Single European Market,” Politics and Society 19, 2 (June 1991): 133–164. 16 McNamara, Textiles and Industrial Transition in Japan; “Corporatism and Cooperation among Japanese Labor,” Comparative Politics 28, 4 (July 1996):379–398; “Bridging State and Society, East and West,” Research Paper B–10, Institute of International Relations, Sophia University, August 1994; “Association and Adjustment in Japan’s Textile Industry,” Pacific Affairs 66, 2 (Summer 1993):206–218; and “A Corporatist Anomaly: US Cotton Sales to Japan,” The Journal of International Studies (Tokyo: Sophia University), no. 30 (January 1993):51–71. 17 Kang wrote of the Korean GTCs as “almost exclusively externally oriented to the point of neglecting domestic trading activities.” See Myung Hun Kang, The Korean Business Conglomerate: Chaebol Then and Now (Berkeley, CA: Institute of East Asian Studies, University of California, 1996), p. 180.

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Index

accumulation, ‘illicit’ 27, 29, 125, 186 acetate 82, 86 acquisitions and mergers 57, 91, 113 acrylic 49, 57, 92 adjustment policy 106–7, 112–21, 125–6, 153, 162–4, 166–8 Agency for International Development (AID) 53 Amsden, Alice H. 11, 16, 176 Anderson, Charles W. 106 Asahi Chemical 53 Asian Regional Organization of Textile Workers 164 Assets 51, 56, 87, 90, 92, 108; distribution of 91, 103 Association of Automoblie Manufacturers (Turkey) 171 authoritarianism, bureaucratic 18 Bangkok Bank 175 Bank of Korea 1, 33, 37 banks/banking system 2, 40, 103, 147; corruption in 36; independent 185, 186; loans to firms 34, 36–7, 38, 58, 125; ownership of firms 89, 90, 184 Baroda Rayon 120 Bernard, Mitchell 173 Bianchi, Robert 47 Biddle, Jesse 171, 172 Biggart, Nicole Woolsey 8, 9, 11, 176 Blau, Peter 14 blended yarns and fabrics 49, 55, 57, 76, 77, 102, 112; state promotion of 48, 53, 61, 62, 65, 70, 71 Bolle, Martin 38 Boyer, Robert 8 bureaucratic authoritarianism 18 business associations 12, 13–14, 17, 171, 172, 176–7, 182–3, 185; see also

Federation of Korean Industries; Korean Chamber of Commerce and Industry business circles (chaegye) 107 buyouts 57 capital 51, 56, 80, 87, 92, 108; authorized 89–90; sources of see finance; foreign aid; loans, bank capitalism 12–13; see also syncretic capitalism caprolactum 98 cartel behaviour 64, 66, 74 Cawson, Alan 95–6 chaegye (business circles) 107 Chang Ha-joon 17, 169 Chang Uk-hyun 91 Chang Yeong-cheol 163 Cheil Industries 59, 109, 144 chemical inputs 61, 101; localization of 60, 73 chemical production 98, 103; see also Heavy and Chemical Industries campaign Chemical-Textile Federation 100 Chemtex 52 Cheonggye Garment Workers’ Union 67 Chey Jong-gon 59, 82 Chey Jong-hyon 59, 82, 83, 143, 148 Chey Tae-won 82, 83 China 15, 22, 119, 175 Cho Ho-min 82, 85 Cho Soon 185–6 Cho Suck-rae 59, 94 Choi, Dai-Kwan 18 Choi Jang-jip 68, 70, 155, 166 Choi Tae-won 94 Chonbang 56, 87, 88, 90, 116 Chonnam 31, 32

Index

Choongnam 11, 56, 57, 58, 79, 87, 88, 89, 90, 108–19 passim, 123–4, 163 Chosen Spinning 31 Chosun Dynasty 25, 44 Chosun Life Assurance 81 Chosun Textile Company 31, 32, 37, 38 Chun Chul-soon 96 Chun Doo-hwan 102, 125 Chungang Dyeing 111 civic traditions 9 clientelism 3, 14–17, 20, 21, 23, 25, 36–8, 40–8 passim, 72, 73, 75, 76, 105, 125– 6, 141, 181, 185, 186; and access to finance 36–7, 40, 41, 42–3, 45, 125, 150; competitive 175; and corruption 66, 102, 125, 175–6; historical embeddedness of 22; in labor relations 155, 166; Thailand 175 Coleman, James 9, 29 Collier, R.B. and Collier, D. 40 colonial era 29, 30, 44, 45 Commerce, Industry and Energy, Ministry of (MOCIE) 96, 97, 98, 103, 133, 135, 136, 139, 149 Commerce and Industry, Ministry of (MCI) 38, 39, 60–6 passim, 73, 132, 134, 138, 185 comparative advantage 24, 171 competition 56, 77, 81, 103, 149, 167; excessive 143; interest group 20, 21 competitiveness 142–7 compression 46, 47, 48, 61, 62, 178–80, 182 concentration 22, 25, 34, 42, 107, 124, 127, 156, 183; origins in colonial textile industry 29–30; in spinning industry 33, 38, 41, 45, 56–7, 109; in synthetics industry 94, 95, 109; see also oligopoly Confucian tradition 32, 68, 154, 155 contract 3, 19–21, 22, 25, 40–1, 46, 48, 75, 124–5, 127, 166, 185 cooperation 140, 142–7, 179 coordination 143, 171–3, 178, 180–1, 182; of market and society 8; state-led 46, 47, 48, 49–50, 54–5, 61, 62 corporate workout programs 88, 90, 92, 147 corporatism 3, 13–14, 17–19, 20, 21, 36, 38–41, 75–6, 106–7, 166, 186; dominance in growth years 25, 66, 72, 73; historical embeddedness of 22; in labor relations 47, 69, 70, 155, 156, 167;

247

and offshore investment 122–4; sectoral 72, 76, 95–6, 106, 125, 126, 149, 177–8, 179; societal 19, 105; state 18, 19, 38, 44, 73, 76, 107; and trade associations 43, 47, 69, 95–6, 122–3, 126, 127, 141, 150, 181, 185; see also mesocorporatism corruption 36, 37, 64, 66, 102, 124, 125, 171, 175–6, 186 cotton: exports 65; prices 63–4, 65, 73; production 24, 55, 61, 62, 65, 70, 145; supplies 34, 49, 61, 64, 66, 77; supplies, from US 33, 34, 35, 39, 50, 63, 76 cotton cartel scandal (1973) 64, 74, 186 Cotton Council International 96 Cotton Textiles Export Association 134 credibility 1, 2, 130, 150, 166 cronyism 6, 17, 175, 176 Crouch, Colin 17 Cumings, Bruce 18, 36 Daehan Fiber 57, 58, 90 Daewoo 11, 118, 144, 155 Dainong 3, 50–2, 54, 56, 57, 59, 77, 79, 87–8, 89, 90, 103, 117, 118, 178 debt 6, 51 debt guarantees, cross- 6 Democratic Textile Alliance 156, 158, 159, 162 democratization 2, 4, 18, 19–20, 103, 176, 177, 181, 185 depressed industries’ program 71, 94, 175, 179 Dewan Mushtag Group 119 Dewan Salman Fibre Ltd 119 Deyo, Frederic C 68, 69, 100, 155 Diamond, Larry 20 diversification 51, 78, 86, 103, 107, 112, 114–15, 126, 132, 133, 167, 171, 179 Doner, Richard F. 175, 177 Dongbang 57, 116, 117 Dongil 11, 56, 57, 59, 68, 69, 87, 88, 90, 108–13 passim, 115, 117, 118, 119, 123, 163 Dongil-Renown 108 Dongyang 91, 111 Dore, Ronald 46 Dowling, Richard 36–7, 43 dumping 22, 135, 139, 145, 178 Dupont-Saehan 95, 175 Durkheim, Emile 9, 71 Dyecen 142 dyeing sector 101, 136–40, 142, 144, 148

248

Index

Dyetec (Korea Dyeing Technology Center) 133, 134, 136–40, 141, 142 Eckert, Carter 32, 66 Economic Planning Board 185 employment 24, 58, 77, 89; of foreignworkers 89; part-time 89; reduction in 108; in spinning industry 49, 51, 56, 80, 87, 108; in synthetics industry 51, 92, 108 employment security 153 enterprise family, ideology of 68 enterprise unions 99, 100, 154, 157, 158, 167 Evans, Peter 130–1, 148 exchange: economic 14; social 14 exchange rates 44, 45 export associations 134–5 export incentives 47, 57, 60, 61, 70 export quotas 47, 49, 50, 54–5, 61, 70, 97, 121, 134–5, 142, 143 Export-Import Bank 103, 122 export-orientation 2, 24, 48, 49–50, 146, 170, 171, 185 exports 11, 24, 34–5, 45, 48, 55, 65, 72, 76, 77, 102, 145, 146 fabric stocks, warehousing of 145 Fabric and Yarn Export Association 134 Fair Trade Commission 185 familism 22, 25, 26, 41, 46, 95, 127, 141, 153, 182, 185; and labor relations 156, 157, 167; in spinning industry 27, 29, 30, 44, 45, 51–2, 54, 57, 59, 79, 90, 109, 110–11; in synthetics industry 51–2, 59, 83, 86, 94, 109, 110; see also kinship ties fashion industry 107, 132, 137, 144, 145, 148 Federation of Korean Industries 12, 52, 126, 135, 148, 160, 182 Federation of Korean Textile Industries 52, 126, 181 Federation of Korean Textile Workers Unions (FKTWU) 56, 67, 156, 158–9, 160, 161–2, 162, 164, 167 Federation of Korean Trade Unions (FKTU) 37–8, 40, 67, 69, 158, 159, 160, 161 finance 42, 56, 58, 78, 93–4, 102–3, 106, 125, 149; see also foreign aid; loans, bank financial crisis 1–2, 6, 50, 51, 87, 185 financial reform 106, 107 Financial Supervisory Commission 42, 95

financial system 2 flexible production 147 Fligstein, Neil 7, 20–1, 71, 105, 106 foreign aid 29, 31, 33, 34, 38, 39, 42–3, 47, 48, 49, 53, 76 foreign workers 89 Free Enterprise Law (1954) 42 Fukugawa, Yukiko 26 Fukuyama, Francis 9, 10 Gallenson, Walter 154 garment industry 101, 107; Turkey 171 General Service Manager (GSM) creditprograms 63, 66, 76 general trading companies 60, 83, 84, 143, 180–1; Japan 24, 132, 174, 178, 180 globalization 75, 78, 82, 95, 101, 115, 126, 131, 132, 177; and labor 165–6, 168, 184; and the state 87, 133, 148, 184 Goldthorpe, John 21 Granovetter, Mark 7, 186 Greenspan, Alan 6–7 Guillén, Mauro F. 11 Gunze 116 Haggard, Stephan 105–6, 130 Hamilton, Gary G. 8, 26, 147 Hanbo Steel 77 Hanil Synthetics 3, 57, 58, 88, 89, 91, 92, 103, 143 Hankook Synthetics 91, 92, 94 Hanvit Bank 81, 94 Hatch, Walter 173 Heavy and Chemical Industries (HCI) campaign 2, 42, 48, 55, 56, 57, 59, 60, 63, 66, 67, 70, 71, 73, 76, 98, 185 Henderson, Gregory 9, 42 Hollingsworth, J.Rogers 8 Honam Oil Refinery 114 Hong Ji-ho 86 Hong Kong 77 human capital 9 Huvis 86, 93 Hyosung 24, 58, 59, 60, 78, 91, 92, 93, 94, 183 Hyundai 155 identity 8 Ilshin 56, 57, 79, 87, 88, 90, 113 Im Hyug-baeg 18 import substitution 11, 24, 26, 27, 35, 38, 50, 77, 170, 171, 185 import tariffs 70, 130

Index

imports 44, 45, 49, 77, 102; of US cotton 33, 34, 35, 39, 50, 63, 76 India 118, 120, 169 Indonesia 6, 116, 118, 119, 124 industrial circles (sangeopgye) 107 industrial districts 71, 137 Industrial Promotion Law (1986) 136 industrial relations see labor relations industrial restructuring 106, 186 industrialization 25 Industry Rationalization Fund 97 institutions, formation of 7–8, 11, 169–70 interest groups 20, 21, 132–40; see also business associations; trade associations interest rates 143 International Confederation of Free Trade Unions (ICFTU) 37, 168 International Cooperation Agency (ICA) 33; see also Agency for International Development (AID) International Cotton Advisory Committee 97 International Labor Organization (ILO) 2, 149, 168 International Monetary Fund (IMF) 1, 3, 4, 5, 107, 147, 153, 182 International Textile Manufacturing Federation 97 investment 130–1; Japanese 51, 58, 61, 93; in technology 89, 90; see also offshore investment and production Itochu 174 jaebol 1, 2, 3, 10, 11, 12, 24, 25, 26, 41, 44–5, 58–9, 107, 141, 156, 157, 183, 185 Janelli, Roger 155 Japan 1, 8, 22, 44, 45, 77, 97, 106, 173– 4, 177–81; business groups (keiretsu) 26; colonial rule 30; general trading compnies 24, 132, 174, 178, 180; investment in synthetics industry 51, 58, 61, 93; labor relations 154; trade associations 96, 97, 177, 178, 179–80 Japan Chemical Fibers Association 177, 179 Japan International Cooperation Agency (JICA) 174 Japan Productivity Organization 174 Japan Spinners Association 69, 96, 97, 177, 178, 179 Japan Textile Federation 177

249

Japanese Trade Organization (JETRO) 176 Jeon Tae-il 67 Johnson, Chalmers 20, 22 joint ventures 91, 92, 95, 98, 108, 109, 113, 116 Joongang Textile Finishing Co. 110, 113 Jung Duk-jin 164 Kabool 78–81, 82, 84–5, 86, 87, 88, 90, 115, 137, 142 Kan T’ae-seung 144 Kanegafuchi (Kanebo) 28, 30, 31 Kang Il-mae 29, 39 Kang, Myung Hun 26 Katzenstein, Peter 19 keiretsu (business groups), Japan 26 Keumgang Trading 92 Keumsong 31, 32, 37, 52 Kia Motors 77, 111 Kim Byung-kook 106 Kim, D.J. 2, 141, 144, 164 Kim Eui-young 135 Kim Eun Mee 131, 149 Kim Hoon 163 Kim Hyon-chol 125 Kim Hyung-duk 112 Kim Hyung-kook 61, 183–4 Kim Jin-eui 54 Kim Jong-bin 90 Kim Joungwon 42 Kim Kak-choong 57, 90 Kim Kyong-dong 43 Kim Sang-eung 110 Kim Sang-ha 94, 110, 143 Kim Sang-hong 57, 110 Kim Seong-gon 52 Kim Seong-su 28, 29, 57 Kim Seung-ho 96 Kim Sun-tae 38 Kim, Y.S. 17, 102 Kim Yeong-t’ae 69 Kim Yong-wan 29 Kim Youn-su 28, 29, 57, 59 Kim Young-ho 90, 96 kinship ties 9, 22, 53, 75, 76, 79, 83, 125, 141, 147, 182, 185; see also familism; marriage Ko Seok-jin 53 Kochan, Thomas 32, 154 Kohap 24, 57, 58, 60, 91–2, 93, 94, 98, 183 Kolon 24, 49, 50–4, 57, 58, 59, 60, 78, 91, 92, 93, 94, 98, 101, 123, 143, 162, 175, 183

250

Index

Koo Ch’ang-nam 143 Koo, Hagen 149, 160, 165–6 Korea Apparel Export Association 64 Korea Asset Management Corporation 42, 95 Korea Chemical Fibers Association 64, 97 Korea Congress of Independent Industrial Trade Union Federations 159 Korea Council of Trade Unions (KCTU) 159 Korea Dyeing Technology Center (Dyetec) 133, 134, 136–40, 141, 142 Korea Employers’ Association 160 Korea First Bank 81 Korea High Fashion Association 132 Korea International Trade Association (KITA) 133 Korea Nylon 52, 53; see also Kolon Korea Polyester 53, 57 Korea Textile Development Institute (KTDI) 133, 139–40, 140 Korea Trade-Investment Promotion Association (KOTRA) 122 Korean Chamber of Commerce and Industry 12, 52, 144, 182 Korean Chemical Fibers Association 42, 55, 126 Korean Confederation of Trade Unions 165 Korean Congress of Trade Unions 100 Korean Council of Trade Unions 160 Korean Employers Federation 165 Korean Export Association for Textiles (KEAT) 134–5, 141, 142 Korean Federation of Chemical-Textile Workers Unions 100 Korean Federation of Textile Industries (KOFOTI) 48, 71, 89, 97–8, 101, 102, 122, 123, 133–7 passim, 139, 140, 141, 142, 160, 172 Korean Federation of Textile Workers Unions (KFTWU) 19, 69, 96, 100, 101, 164 Korean Federation of Trade Unions 100, 154, 160, 165 Korean Foreign Exchange Fund 76 Korean Institute of Industrial Economics and Trade (KIET) 141, 143, 144 Korean-Japanese Business Association 52 Korean Labor Institute 163 Korean Productivity Center 143 Korean Reconstruction Bank 34, 37 Korean Textile Labor Union Federation 32 Korean Trade Union Congress 158, 159

Korean Traders Association 52, 133 Korean War 31 Krueger, Anne 183 Kukje 90–1, 103, 186 Kuraray 113 Kyeongseong Spinning and Weaving Company 28 Kyungbang 12, 27–32 passim, 35, 43, 56, 57, 59, 79, 87, 88, 89, 90, 109, 110, 111, 113, 116 Kyungbuk Weaving and Knitting Industry Cooperative 139 labor 11, 73, 75, 76; mobility of 99 Labor-Management Councils 100, 158, 163 labor movement 12, 32, 37–8, 55–6, 67– 70, 74, 99–101, 102; see also trade unions labor relations 40, 66–70, 69, 70, 99–101, 103, 152–68 Landa, Janet 14 Landé, Carl 15 language problems 163 Launius, Michael 70, 155 law, and interest exchange 127, 129 lay-offs 153 Lee Byoung Doo 19 Lee Byung-chull 59, 94, 109 Lee Byung-ho 133 Lee Chun-ho 90, 110 Lee Dong-chan 94 Lee Ho-jin 90, 94 Lee Jae-kwan 92, 94, 110 Lee Jong-seong 57, 110 Lee Jun-ho 57, 96 Lee Ok-jie 155, 157 Lee Sik-jin 90, 94 Lee Ung-yeol 54, 94 Lee, Y.H. 13 legal system 2 legalization 19 liabilities 51, 56, 87, 92, 108 Liberal Party 32, 37, 38, 39, 40, 41, 43, 45 liberalization, market 2, 4, 106, 166, 176, 177, 181, 185 Lim, Hyun-chin 18 Lin Chen-yuan 1–2 loans: bank 34, 36–7, 38, 58, 125; policy 48 localization 13, 24, 60, 72, 73, 74, 132 Lyle and Scott 51 marketing 131

Index

marketing-manufacture integration 50, 59–60, 71 markets 34–6, 70, 77; liberalization of 2, 4, 106, 166, 176, 177, 181, 185 marriage 41, 53, 57, 59, 72, 83, 110, 153, 182 Mellon, Sydney 38 mergers and acquisitions 57, 91, 113 meritocratic procedures 20 mesocorporatism 95–6, 103 Metro Products Company 50 Midopa Department Store 50, 51, 52, 54 Milano Project 42, 47, 130, 133, 139, 140, 145–6, 148, 170, 181 Milor, Vedat 171, 172 Mitsubishi 114, 119, 123 Mitsui 94, 110 Moon Chung-in 106, 130 Moskowitz, Karl 62, 65, 111 Multi-Fiber Arrangement 97, 134 multinational corporations (MNCs) 22 Murakami, Yasusuke 14, 186 Nam Chang-hee 16, 36 Nasan Textiles 144 networks 46; Nikkei 173–4 Noh Jin-kwi 158 Nunes, Edson de Oliveira 48 nylon 49, 50, 52–3, 54, 57, 58, 60, 92, 98 O’Donnell, Guillermo 18, 19–20 offshore investment and production 76, 78, 87, 112, 115–27 passim, 147, 150, 167, 168; labor relations in 162–4; spinning industry 79, 80, 85, 86, 103, 107, 115–19, 120, 123, 126–7, 162–3, 179; synthetics industry 83–4, 86, 119, 120–1, 123 Oi, Jean 15 oligopoly 24–5, 27, 41, 45, 46, 48, 53, 55, 59, 95, 157 Olson, Mancur 27 Onis, Ziya 171, 172 Organization for Economic Cooperation and Development (OECD) 2, 144, 149, 168, 183 Original Equipment Manufacture (OEM) export strategies 145 Pack, Howard 183 Pae Sung 36 Pae Teok-chin 65, 66, 72 Paek family 27–8 Paek, Woon-seon 18

251

Pak Sun-t’aek 144 Pakistan 119 Pangrim 56, 79, 88, 116, 117, 124 Park Chang-ho 78–9, 81, 90 Park Chon-il 37 Park Chunghee 25, 29, 49, 56, 66–7, 72 Park Dong-sik 94 Park Kyu-taeg 146 Park Moon Kyu 18–19, 76, 90 Park Soon-won 32 Park Sung-chul 94 Park Tae-young 144–5 Park Yong-hak 51–2, 54, 57, 143 Park Young-bum 162 paternalism 32, 67–8, 69–70, 100, 154–5, 157, 167; developmental 155 patrimonialism 16–17, 36, 152, 176, 185 patron-client structures see clientelism Pempel, T.J. 154 petrochemical production 98 Piore, Michael J. 103, 147 Pisan Dyeing Industrial Center 138 pluralism 21, 46, 47, 103, 177–8 Polanyi, Karl 7, 16, 130 political funding 40, 42–3, 102, 103, 125 politicized interests 36–8, 43 polyester 24, 49, 50, 53, 54, 55, 58, 60, 62, 88, 92, 94, 109, 114; as dominant material 57; offshore production of 86; prices 64, 112; production capacity in 77, 82, 88, 91, 93; state promotion of 48, 71 Powell, W.W. 46 power 186 price controls 35, 44, 45, 49, 50, 61, 62, 63–4, 70, 71, 141 price(s): as basis for contract 20; cotton 63–4, 65, 73; polyester 64, 112; predatory 22 production: costs 72; flexible 147; valueadded 71, 72, 112, 113, 124, 130, 131, 132, 154, 171; vertical integration of 26, 33–4, 50; see also offshore production and investment; serial line production profits 51, 56, 87, 88, 92, 108 property rights 2 protectionism 35, 44, 45, 48 Putnam, Robert 9 quotas see export quotas Ramsay, Ansil 175, 177 rational actor model of exchange agents 7

252

Index

rationalization 13 Rationalization Fund 136 Ravenhill, John 173 rayon 86 Renown Inc. 108, 113 rent-seeking 169, 171, 183, 186 resource allocation, network forms of 46 Rhee, Syngman 27, 28, 29, 32, 37, 38–9, 40, 42–3, 43, 44 Riken 114 Roh Chung-kyu 132 Roh Tae-woo 102, 125 Rohlen, Thomas P. 14, 186 Ryu Jong-woo 138 S.Y.Textile 119 Sable, Charles F. 103, 147 Saehan 24, 57, 58, 59, 88, 91–4 passim, 101, 108–11 passim, 113, 114, 115, 119, 120, 123, 175, 183 Saehan Media 93, 109, 115 Sako, Mari 46 Samnam Chemicals 98 Samnan Petrochemical 114 Samni 77 Samsung 11, 58, 59, 60, 93, 98, 109, 113, 114, 115, 120 Samyang 12, 24, 57, 58, 59, 86, 88, 91–5 passim, 98, 108–14 passim, 115, 119, 120–1, 123, 148, 157, 162, 183 Samyang Kasei Co 114 sangeopgye (industrial circles) 107 Schmitter, Philippe C. 12, 18, 96 school ties 8, 9, 22, 185 Scott, James 15 Seligman, Adam 10, 186–7 Seoul Bank 52, 90 serial line production 7, 25, 34, 47, 48, 49, 50, 56, 59, 60–2 passim, 63, 70, 71, 73, 95, 130, 131, 132, 135, 182; Japan 173–4 shareholding, cross- 6, 41 Shikibo 118 Shinhan Flour 113 Shirai, Tashiro 99 Shoemaker, James E. 31 Shue, Vivienne 15 Sin Dong-kweon 38 SK Chemicals 24, 78, 82–4, 85–6, 91, 92, 93, 94, 95, 98, 175, 183 small and medium-sized firms 42, 141–2, 44, 146, 148, 149, 153 Snyder, Scott 184–5 social capital 9

Social Compact 164 social welfare net 165–6 societal interests 130, 131 Song Ho-keun 70, 153, 155 spandex 94–5 Special Textile Law (1967–74) 178–9 specialization 12, 78, 81, 107, 112–14, 126, 133, 148, 167, 179 Spinners and Weavers Association of Korea (SWAK) 19, 29, 33–4, 38–43 passim, 52, 69, 72, 86–7, 94–9 passim, 103, 107, 122–3, 126, 160, 164; and cotton supplies 35, 39, 64, 66, 172, 183; and prices 35, 63, 64, 65, 141 spinning industry 3, 11, 24–36, 41, 49– 57 passim, 58, 59, 60–6 passim, 71–4, 76, 78–81, 84–5, 87–91, 102, 103, 108–11, 159; diversification in 51, 78, 86, 103, 107, 114–15; employment in 49, 51, 56, 80, 87, 108; offshore investment and production 12, 79, 80, 85, 86, 103, 107, 115–19, 120, 123, 126–7, 162–3, 179; specialization in 12, 78, 81, 107, 112–13, 126, 133, 179 Ssangyong Cement 52 stabilization policies 2, 166 status 8 Stepan, Alfred 185 stock exchange 2, 185, 186 Strachan, Alan 38 Streeck, Wolfgang 96 Structural Adjustment Fund 136 sub-contracting 12, 55, 137, 142, 178 Suh Chong-ik 57, 110–11 Suh Min-seok 57, 68, 90, 111 Sull Bum 90 Sull Kyong-dong 37 Sull Won-bon 57 Sull Won-sik 57, 90 Sun Hill Glucose Co. 113 Sung Pae 16 Sungdo Apparel 157 Sunkyong 12, 49, 53, 57, 58, 59, 78, 82– 3, 93, 98, 100, 159 supply and demand 13, 60, 72, 131, 132, 135, 169, 171 syncretic capitalism 3, 4, 5, 7, 21–3, 47, 75, 152, 166, 169–70, 174, 181–4 synthetics industry 3, 11, 12, 25, 41, 42, 48–54 passim, 55, 57–62, 65, 77, 82–6, 88, 91–5, 102, 103, 108, 109–11, 159; diversification in 115; employment in 51, 92, 108; offshore investment and production 83–4, 86,

Index

119, 120–1, 123; specialization in 113–14 Taechang 27–30, 31, 32, 37, 43 Taegu Kyungbuk Textile Industries Association 138–9, 140, 146, 172 Taehan 11, 57, 116, 117 Taekwang 57, 58, 87, 88, 90, 92, 93, 94, 111 T’aep’yung Spinning 52 Taeseong Wool Spinning 112 Taihan 56, 87, 88, 90 Taiwan 97 tariffs 70, 130, 143 tax breaks 62, 72 taxes, ‘quasi-’ 125 technology 143, 145; and diversification 51; investment in 89, 90 Teijin 53, 58, 59, 82, 174, 175 terminations 153, 167 Textile Adjustment Plan 97 Textile Modernization Fund 106, 136 Textile Vision (1995–2000) 98, 137, 140, 181 Thai Textile Institute 174 Thai Textile Manufacturers Association 176 Thailand 6, 173, 174, 175, 176 Tongkook 78, 87, 88, 90, 115, 116, 124, 137, 142, 162 Tongyang Nylon 53, 57, 59, 98 Toray 50, 53, 94, 109, 110, 174, 175 Toray Saehan 92, 109 Toyobo 30 TPA (terephthalic acid) 98, 114 trade associations 38, 39, 46, 76, 95–9, 102, 107, 125, 132–42, 143, 147, 148, 149, 180, 181, 182, 183, 185; and corporatism 43, 47, 69, 95–6, 122–3, 126, 127, 141, 150, 181, 185; Japan 96, 97, 177, 178, 179–80; and offshore investment 122–3; see also Korean Federation of Textile Industries (KOFOTI); Spinners and Weavers Association of Korea (SWAK) trade balance 24 Trade, Industry, and Energy, Ministry of (MOTIE) 133, 139, 140, 144 trade liberalization 78, 87 trade policy 35, 44, 121 trade unions 32, 37–8, 55–6, 67, 68–9, 99, 100–1, 153–61 passim, 163, 165, 167 training 143, 145

253

transaction costs 2, 7, 9 transparency 2, 3, 4, 6, 9, 171, 178, 182 Tripartite Commission 164–5 trust 1, 2, 7, 9, 10, 23, 130, 150, 166, 186–7 Turkey 169, 171–2 Turkish Clothing Manufacturers Association 171 Turkish Industrialists and Businessmen’s Association 172 unemployment 153 Unger, Danny 12 Union of Chamber and Commodity Exchanges (Turkey) 172 United Nations, aid funding 31, 33, 38 United States 1, 22, 45, 77, 178; aid funding 33, 38, 39, 48, 49, 53, 76; cotton supplies to Korea 33, 35, 50, 63, 76; military government 30, 32, 44 Unitika 30 Upham, Frank 19 Urban Industrial Mission 68 Valenzuela, J.Samuel 155 vertical integration of production 26, 33–4 Vicotex 119 Vietnam 117–18, 119 vortex theory 9 wages 66, 69, 89, 100, 101, 102, 153, 161–2, 163; minimum 153 Walder, Andrew 15 Wank, David 15 weaving 26, 33–4, 49, 55, 59, 71, 76 Weber, Max 6, 46 Westphal, Larry E. 183 White, Harrison 105 Williamson, Oliver 7 women 89; labor action 55–6, 67 Woo-Cumings, Meredith 26, 40 wool yarn and fabric 112, 145 working conditions 66, 69, 153, 163 World Bank 1, 106 World Trade Organization (WTO) 2, 134, 143, 149, 183 Yamamura, Kozo 173 Yangbaek Foundation 52 Yasonta Group 120 Yi Chong-seong 37–8 Yi Dong-ch’an 52, 53 Yi Hyo-seong 53 Yi Kyeong-suk 53 Yi Sang-hi 53

254

Index

Yi Tae-hyeong 64 Yi Ung-yeol 53 Yi Weon-man 52, 53, 54 Yoo Moon Jee 16–17, 182 You Jong-il 66, 68 Young Hwa Weaving and Dyeing Co. Ltd. 119

Yu Deuk-hwan 97 Yu Hyeon-sik 144 Zensen Federation of Textile Unions 69, 96, 152, 164 Ziegler, Harmon 18