Speech before the Los Angeles World Affairs Council on September 10, 1999:
His Excellency Lee Hoi-changThank you, President Mack. It’s great to be here this afternoon. This is my first stop on what amounts to a rather expedited round-the-world tour! From here I will travel to New York, then to Washington D.C., and on to Berlin before returning home next weekend. In all my stops I hope to advance the discussion on the major challenges Korea faces on the eve of the millennium, as we strive to become a greater force for peace and prosperity in Asia.
The opportunity to begin my trip here at the Los Angeles World Affairs Council is indeed an honor, and I’m gratified by your hospitality. It’s truly a privilege to be among so many people with Asian expertise and interests.
Today I’d like to offer my perspective on three related tasks Korea faces for the millennium: first, developing a vibrant market economy; second, achieving a mature democracy; and third, improving peace and stability on the Peninsula. Now, as you might recognize, these are not new challenges for Korea. In fact, through various ups and downs, we have been working toward these goals for nearly half a century. And we have achieved some notable successes, accomplishing both industrial development and democratization even while maintaining a fragile peace on the Peninsula. But our work is not yet complete.
A Vibrant Market Economy
I’ll begin with our economy, for decades an increasingly powerful engine that propelled Koreans from the stark poverty of war to a comfortable modern existence. Then, just as we seemed to hit cruising speed, the engine stalled -- and the economy collapsed. Beginning in late 1997, Korea suffered hundreds of business failures per day, and thousands of people lost their jobs literally overnight. As unemployment increased, suicides increased. We saw cases of parents abandoning their children to orphanages, no longer able to provide for them. And legions of students abandoning their college education as financial support suddenly dried up.
But despite these harrowing ordeals, Koreans refused to abandon hope. They dug down deep to recover their economy and take their jobs back. They even donated their trinkets made of gold to the collection campaign to overcome the foreign exchange shortage. Eventually, the economy began to revive. And now, fortunately, thanks to these early indicators of recovery, Koreans are regaining confidence and the international community is regaining faith in the Korean economy. How was this recovery possible? The short answer is: thanks to the spirit and sacrifice of Korean laborers, taxpayers, consumers and investors.
The next steps belong to the government. It is time to resolve the problems of the Korean economy by implementing meaningful, long-term solutions, rather than spending time glorifying short-term gains. For the following reasons, I’m deeply concerned about the future direction of our economy, and not at all confident that the administration is set to do what’s needed.
First, the most worrisome aspect of the current situation is the Kim Dae-jung administration. Like its predecessors, the administration seems to depend excessively on pump-priming measures in order to win popular approval by appearing to overcome the economic crisis quickly. In this case, the price of goods can become unstable and restructuring delayed. Improper management of the macro-economy can only plant the seeds of the second crisis. The worst scenario for the Korean economy would be that the government squanders public funds only to return the economy to the starting point of the crisis.
Second, I would say that the ongoing restructuring efforts have largely been ineffective. Some of the restructuring plans are flawed, or at best, inefficient to begin with. The government-controlled financial sector is far from being transformed into a market-oriented industry. In sum, the root cause of the economic crisis lies in the incompetent, irresponsible and patriarchal government, which still prefers to keep a virtual stranglehold on the banking and corporate sectors.
A third concern is that, to overcome the financial crisis, the government has employed vast sums of money, which ultimately came from the pockets of the people. The result is that the government has created a new burden for itself -- a growing deficit and increasing debt. In fact, restructuring in Korea has to some extent consisted of exchanging private sector debt for public debt. In 1998, the government budgetary deficit accounted for 4.2 percent of the nation’s GDP, and that figure is likely to continue to rise. At the same time, government debt exceeded 70 trillion won, and also is expected to increase.
Fourth, many new social problems have emerged during the course of restructuring, such as the huge number of unemployed, the virtual collapse of the middle class, a widening gap between rich and poor, and an overall decline in the standard of living. But as Korea’s safety net to protect people from such problems is still in a rudimentary stage as compared to that of many advanced countries, these issues have added to our economic instability.
Based on these and other problems, it is hardly safe to say that Korea has overcome the economic crisis. In my capacity as opposition leader, I would like to offer some guidelines that I think are essential to a true and lasting economic recovery.
First, it is an essential element of political leadership that top priority be placed on long-term benefits to the economy. Economic development should - under no circumstances - be sacrificed to the desires of various interest groups pursuing short-term gains. In the management of the macro-economy, political expedience has no place. The government owes it to the Korean
people, who have sacrificed so much, to create a responsible vision and then implement the changes necessary for prosperity in the long term.
Second, Korea needs to maximize its resources in order to build the capability to elevate the Korean economy to the levels of advanced industrialized countries. Even in this increasingly globalized world economy, it is clear that no existing foreign system or model will be sufficient to put an end to all of Korea’s problems. It is important for us to preserve the strengths of the Korean economy while shoring up its weaknesses. For example, the reform of chaebol (business conglomerates) to the extent that they can survive the pressures of competition in the market should be allowed to play their role. On the other hand, financial institutions should be freed from the characteristic, unnecessary government interference that has burdened many to the point of insolvency.
Third, our economic program for the new century should maximize the benefits of a market economy by placing relations among the government, the financial sector, the corporate sector and labor on the right track. It is imperative that we clearly define the limits, rights, and obligations of each economic player.
Fourth, the government should move forward to create a comprehensive social safety net that embraces both the government-guaranteed safety net and private sector initiatives. This way, in the future we will be better prepared to cope with problems such as high unemployment and the widening gap between rich and poor.
A Healthy, Mature Democracy
The necessary underpinning for a vibrant market economy must be a healthy, mature democracy. Democratization in Korea has undergone a long, hard struggle, starting with a half-century of colonial rule, followed by a devastating war, division, and the threat of dictatorship. With the unyielding efforts of the Korean people, our hope for democracy stayed alive and, during the last decade in particular, began to take root.
However, the process to consolidate democracy has not been easy. While the constitution has been amended to give the people the right to elect their president, restore the freedom of the press and establish the rule of law, an all-powerful, imperial presidency has continued. Rule of person, not the rule of law, has persisted. Even the election of Kim Dae-jung, a well-known activist for democracy, has not changed old-style "politics as usual." Old habits indeed die hard.
Today, power is tightly centralized in the hands of the Blue House, such that the President essentially makes or breaks all major decisions. The normal operation and influence of the National Assembly has been disrupted. The democratic policy-making process is often ignored, while the authoritarian method of ramming through policy decisions made behind closed doors continues. Government agencies are still used as instruments to engage in political suppression of the opposition. Collusion between politicians and businessmen remains persistent. And last, but by no means least, the selective application and even misapplication of judicial authority for political gain threatens the rule of law.
Koreans, who expected and indeed deserve a lot more than this, are deeply frustrated. Despite the first change of power in nearly half a century, there has been no real change in leadership. How do we restore confidence and consolidate mature democracy? In short, we need a new kind of leadership.
Above all, we need a leader who values the rule of law over the extension of personal power, who prizes principle over political expedience, who views politics as a battleground of ideas, not a game of eliminating the opposition by any means. We need a leader who can articulate a long-term vision for society and inspire people to pitch in and help achieve that vision. At the very least, we need a leader who is truly versed in and committed to democratic thinking and practices. Then, and only then, our people can enjoy the full freedom of democracy.
Harmony on the Peninsula
The third and final task Korea faces on the eve of the millennium is every bit as critical as the first two. We must manage the fragile peace on the Peninsula and prepare for the day when unification will come. Clearly, this task is easier said than done. Even now, President Clinton and all the major leaders of Asia are gathering in Auckland, New Zealand, for the annual APEC summit. A top agenda item for the American, Korean and Japanese leaders is: what to do about North Korea?
First, we need to accept the reality of North Korea, which possesses both a shrinking economy and an expanding military threat. To deal with this paradox, we need a flexible and balanced policy that finds the right mix of deterrence and engagement -- like carrots and sticks, rewards and punishments.
The bedrock of any policy dealing with the North should be maintaining a credible deterrence and close cooperation with the United States. If an armed clash occurs on the Peninsula again, the Republic of Korea and the United States could counter the North’s attack and emerge victorious in the end -- but the cost would be dear. The South Korea-U.S. deterrent builtup during the Cold War still remains vital today.
Once deterrence is established, we need to turn our attention to the North, and the root of the problem: the fact that it remains sealed off from the rest of the world as the last Stalinist regime on earth. To this end, we must craft a policy of selective, conditional engagement where contacts and exchanges are promoted to help advance the freedom and welfare of the North Korean people. We must also bear in mind that the rulers in Pyongyang view outside aid as a means to maintain their political system and prolong their power at all cost. Therefore, aid to North Korea has to be carried out under firm principles and conditions. In the absence of such principles, we must make it clear to the North that there will be no more free lunch.
Another priority of our North Korea policy should be to undertake preparation for unification. To this end, our first order of business must be to get our own house in order. If unification were to happen tomorrow, certainly we’d adjust somehow, but with the current state of our economic and political system, it would not be easy. Of course, we would prefer that unification be realized peacefully and gradually in stages. But we must be prepared for all eventualities.
Conclusion
The international environment is changing rapidly and profoundly. Yet at times history provides us with opportunities to create, rather than simply respond to, situations conducive to achieving certain goals. Our ultimate goal for the millennium is to reunite peacefully with our compatriots in the North, such that a 21st Century Korea would become a pillar of democracy, prosperity and peace in Asia and the world. To this end, we will continue to work closely with the United States, our ally and friend for this century and the next.
Thank you very much.