Korea's labor laments.

After years of relative acquiescence in market reforms, organized labor appears to be a new and disruptive player in 1997. Korea, where the onset of labor strife has slowed economic growth, may be the most dramatic example, but other countries share its labor woes. Argentina, for example, must cut its high labor costs to reduce a near-record 17.3 percent unemployment rate and improve productivity. President Carlos Menem is attempting to fundamentally weaken the negotiating strength of organized labor and undermine its main source of funding - mandatory health-care programs. But the labor leadership, with strong support from the Peronist Party, is recalcitrant, and little progress has been made. In Brazil, President Fernando Henrique Cardoso is finding organized labor vociferously opposed to privatization and to a more flexible labor code.

In Korea, the dispute has escalated still further - spawning a political impasse between the government of President Kim Young Sam and the country's labor union movement. The two principal labor organizations - one recognized by the government and the other an outlawed group that, nevertheless, has organized effectively - called the country's largest labor strike on December 26, 1996, in protest of Parliament's secretive passage of a labor law that the unions fear could lead to widespread layoffs. The law gives more power to management while postponing the right of multiple unions to operate at any work site until 2000. In addition, it allows businesses greater freedom to lay off workers, increase working hours, and substitute labor for striking workers. It effectively terminates South Korea's life-long employment system.

The government's rationale for the new legislation is clear. The country is expected to register a record $23 billion current account deficit in 1996, or the second-largest in the world after the U.S. As a result of labor strife, stock prices in Seoul plunged to their lowest level in three years. Korea's economic growth rate fell to about 6 percent a year, from 8 percent or 9 percent, in previous decades. While an impressive rate for many countries, the drop increased tensions over the allocation of resources within the economy. The government argues that competitiveness and capacity to export - Korea is the world's sixth-largest automaker, for example - requires adapting to new global conditions. Ironically, the current crisis represents the legacy of a successful effort to industrialize in the 1970s and 1980s, when Korea was a low-wage country. Now, it is economically sandwiched between other countries with lower wages, such as China and Indonesia, and advanced nations with higher technology, like Japan. Daewoo Electronics, for example, is moving its consumer electronics manufacturing to lower-wage nations in Asia and Latin America.

Korea's rapid industrialization and the militancy of its labor movement made the country the world leader in labor strife during the last 10 years, which led to wage increases averaging 15 percent a year over the same period. As its government points out, there is no country in the world where annual wages continued to rise at that rate. In large part, previous governments sought to preclude greater labor violence with wage increases and by continuing to guarantee lifetime employment.

The labor leadership argues that part of its strategy is to protest the high-handedness of the government's labor revisions. Until 1987, Korea's unions were tightly controlled by military or authoritarian governments. With a democratic opening in 1987, the unions became an important force for the consolidation of democratic institutions. Since there were no consultations with the political opposition or with the unions prior to the December secret session during which the proposals were approved, these unions saw the decisions of the government as a major step back. They also argue that the labor legislation was originally intended to enhance the rights of workers to unionize as well as to help management. Yet the final law postponed or ignored these reforms due to government fears that such rights would lead to disruptions. The unions are also wielding public opinion as a weapon against the government. Polls indicate that a majority of Koreans believe the unions have made an important point about both wages and political democracy.

While it is highly improbable that the strikes will immobilize the government, a compromise is needed. After years of authoritarianism with the legitimate demands of the market for greater competitiveness and productivity in the next century, the South Korean government is discovering the difficulties of institutionalizing democratic institutions. How South Korea resolves the labor dispute will be watched by other Asian countries who have experienced, or will, the same phenomenon in the near future as they wrestle with the twin challenges of greater political freedom at home and an increasingly demanding and competitive global economy.

Riordan Roett is the director of the Latin American Studies Program at the School of Advanced International Studies, Johns Hopkins University, in Washington.