Key Points

  • With South Korea facing serious economic problems and North Korea nearing political collapse, the Korean peninsula is entering a period of turbulence and change.
  • The U.S., which has 37,000 troops in South Korea, bears important responsibilities to help end the cold war in Korea.
  • The South Korean presidential election of Kim Dae Jung, long-time leader of the democratic opposition, has created an important opportunity for easing tensions in Korea.

North and South Korea—with a population of 70 million people in a strategic corner of Northeast Asia—have received more media attention over the past three years than at any time since the end of the Korean War in 1953. In December 1997 the U.S. and the International Monetary Fund crafted a $57 billion bailout to rescue South Korea from a financial crisis that clouded the reputation of the once-vaunted Korean “economic miracle.” Since 1994, when the U.S. almost went to war over allegations that North Korea was developing nuclear weapons, enormous attention has been focused on the northern part of the Korean peninsula. In 1997, news emerged of massive starvation caused by natural disasters and the collapse of North Korea’s economic system. With South Korea facing unprecedented economic challenges and North Korea seeking ways to avoid the fate of its former communist allies in Eastern Europe, the Korean peninsula will remain volatile (and a major focus on U.S. foreign policy) for years to come.

Many of Korea’s problems stem from Japan’s brutal colonization between 1910 and 1945 and the peninsula’s tragic division in the aftermath of World War II. Cold war tensions on both sides of the border exploded in 1950, when North Korea sought to unify the country under the leadership of Kim Il Sung and overthrow the pro-U.S. government in the South. The U.S. forces, which were sent to intervene in what was essentially a civil war, never left. Today, 37,000 U.S. troops remain in South Korea, concentrated near the border with the North as a “tripwire” to automatically ensure U.S. involvement if another war erupts. South and North Korea remain two of the most militarized countries on earth, with over two million soldiers under arms.Over the past 30 years, South Korea has risen from a major recipient of U.S. aid to become a major exporter of automobiles, steel, and semiconductors as well as the fifth-largest market for U.S. goods. Its political system has also undergone a major transformation. In 1986 millions of South Koreans demanded an end to two decades of military dictatorship, forcing the unpopular government of Chun Doo Hwan to agree to direct presidential elections. The democratic movement took a historic turn in December 1997, when Kim Dae Jung, the country’s leading dissident, was elected president.

With the advent of democracy, Korean workers organized what has become one of the strongest labor movements in the world. In 1996 Korean unions launched a general strike to successfully defeat a labor law that made it easier for companies to fire workers. Unions now play a key role in their country’s economic restructuring.

North Korea is a Stalinist state where decisionmaking is highly concentrated in the ruling Workers Party and the military, but has entered a period of rapid change. In the early 1990s, North Korea reached a state of crisis following the Soviet demise, which deprived the country of cheap oil supplies and a key market. With his plans for a self-reliant economy in shambles, and apparently fearing a U.S. military strike, Kim Il Sung forced a confrontation with the U.S. in 1993 by building a “secret” plutonium facility that was quickly discovered by U.S. intelligence. War was averted when former President Jimmy Carter initiated negotiations with Kim, who died in 1994 and was succeeded by his son, Kim Jong Il. In 1995, the North agreed to stop the plutonium project in exchange for improved relations with the U.S. and international assistance in building a nuclear power system using U.S.-designed light water reactors.

In March 1998, the United States, South and North Korea, and China began formal talks to end the Korean War. Meanwhile, the North is trying to head off a collapse by slowly opening parts of its economy to foreign investment and technology.

Problems with Current U.S. Policy

Key Problems

  • The Pentagon has too much power over U.S. policy in Korea and frequently overestimates the North Korean threat in order to preserve U.S. military interests in Korea.
  • The IMF program in South Korea is forcing Korean workers to bear the burden of mistakes made by corporations and banks, planting the seeds for future political unrest and instability.
  • U.S. policymakers and businessmen view Korea through the prism of the cold war, and not as a sovereign, independent nation.

Despite vast changes in Seoul and Pyongyang, cold war thinking still dominates the U.S. approach to Korea. To justify the continued presence of 37,000 U.S. troops and the sale of billions of dollars worth of U.S. weapons in Korea, the Pentagon has consistently overestimated the military threat from North Korea. During a visit to Seoul in January 1998, U.S. Defense Secretary William Cohen warned the financially strapped Korean government not to delay purchases of over $1 billion worth of U.S. aircraft and weapons. To do so, he said, “would send the wrong signal and enhance and escalate tension on the Korean Peninsula.”

The standoff between North and South is indeed dangerous, and the U.S. military has an important role to play as the two sides move toward rapprochement. But North Korea is not the only factor in U.S. policy; U.S. troops in Korea are also part of Washington’s forward deployment in Asia and the defense of Japan. Many analysts doubt that North Korea, which lacks an industrial base and is rapidly losing the ability to feed and clothe its people, has the capacity to mount a full-scale war against the combined forces of the U.S., South Korea, and Japan.

Meanwhile, the Pentagon has single-handedly blocked the Clinton administration from backing a global treaty against land mines signed by over 100 nations in December 1997. U.S. generals contend that the thousands of antipersonnel mines along the 155-mile Demilitarized Zone are an essential component of deterrence.

The Pentagon continues to invent new reasons (and new enemies) for maintaining U.S. troops in Korea. The latest rationale, explained by Defense Secretary Cohen, is the economic crisis in Asia. In February 1998 Cohen told the House Banking Committee that U.S. security interests would be threatened if the financial crisis worsened, and he linked the 100,000 U.S. soldiers in Japan and South Korea to the stability of the region. “It’s very clear that business follows the flag,” he said. “There won’t be investment where there isn’t stability.”

The cold war also hangs like a shadow over the troubled South Korean economy. Under terms of the December 1997 IMF bailout, South Korea is undergoing severe shock treatment designed to curb the power of its huge conglomerates (called chaebol) and reform a banking system where lending decisions were often made by the government. The painful reforms will slow Korean growth rates from around 6% in 1996 to 2% in 1998. Unemployment could reach as high as one million as corporations faced with bankruptcy lay off workers. At the same time, South Korea’s economy, which has been highly protected since the early 1970s, will be forced to open up, leading to unprecedented levels of foreign ownership.

In media coverage of the crisis, it has almost been forgotten that Chun Doo Hwan, the U.S.-supported dictator who ruled South Korea from 1980 to 1986, was convicted in 1996 of accepting millions of dollars in bribes from the chaebol. Those companies relied on their close ties to Chun, and his successors, Roh Tae Woo and Kim Young Sam, to create the state-led, bureaucratic, crony capitalism that has come back to haunt South Korea today.

Another overlooked issue is the role played in the Korean export economy by the U.S. government and the large New York banks that will receive a huge chunk of the IMF bailout. South Korea began its export thrust in the mid-1960s by providing shoes, clothing, and construction workers (and later mercenaries) to U.S. forces in Vietnam. In 1965, under strong U.S. pressure, the military ruler Park Chung Hee signed a normalization treaty with Japan, Korea’s former colonizer. As part of the deal, Japan provided nearly $1 billion in loans and investments that helped jump-start Korean manufacturing industries, including its textile and steel industries. In 1972 President Nixon recognized Japan’s role in South Korea when he revised the U.S.-Japan Security Treaty with a clause stating that Korea was “essential” to Japanese security. By the late 1970s South Korea and Japan had a relationship resembling the U.S. and Mexico today, with Korean workers using Japanese technology and components to make products sold on the world market.

In 1979-1980 the Korean political and economic system nearly collapsed when Park was shot to death by the head of the powerful Korean CIA and Chun took over in a military coup that left hundreds of people dead in the southwestern city of Kwangju. During that time the Carter administration literally begged U.S. banks and corporations to continue investing in and lending to South Korea. The financial crunch continued until 1983, when the Reagan administration pressured Japan to cough up nearly $4 billion to ease Chun through the crisis. That money flowed in despite the deep fractures within Korean society, the imprisonment of hundreds of dissidents, and Chun’s atrocities in Kwangju. Moreover, loans from key New York institutions like Chase Manhattan and Citibank were made with full knowledge of the heavily leveraged nature of the Korean economy and the close, incestuous relationship between government bureaucrats, Korean banks, and the chaebol.

Although the IMF and the Clinton administration have exerted enormous pressure on South Korea to reform its economic system and accept higher unemployment, they have said virtually nothing about the New York banks’ responsibilities. It was only after Congress and critics from the right and left complained that the IMF was bailing out the U.S. banks that those institutions agreed to reschedule $24 billion worth of loans owed by South Korea and extend its interest payments.

Toward a New Foreign Policy

Key Recommendations

  • The U.S. must rethink its military posture in Northeast Asia, where 100,000 troops stationed during the cold war now face an undefined threat.
  • In South Korea, the U.S. and the IMF should promote solutions that require sacrifices from corporations and banks rather than placing the burden on workers and consumers.
  • The U.S. should try to defuse the crisis in North Korea through economic assistance and less confrontational military tactics.

The new adminstration of President Kim Dae Jung provides a historic opportunity for U.S. policy in Korea. For the first time since its founding in 1948, South Korea has chosen a president with no political and financial ties to the Korean business and military elite. His record as an opposition leader has made an important difference in South Korea’s economic crisis. Because of his stature among Korean workers, Kim, in the days before he became president, was able to forge an agreement between labor, business, and government to allow companies facing bankruptcy or other emergencies to lay off workers. In return, unions won the right to engage in political activities and run candidates for office, while teachers and government workers will be allowed to join unions for the first time.

Kim has also used his political clout to criticize and reform the giant chaebol, who bear the chief responsibility for bringing the Korean economy to the point of bankruptcy. Though a final agreement between labor and business on the IMF-mandated changes and layoffs will be difficult (some unions have rejected the compromise), the fact that Korean workers are represented by independent unions has made it possible for them to share in national economic decisionmaking. That situation is in sharp contrast to Indonesia, for example, where authoritarian government and a lack of labor rights is fomenting serious political unrest.

To prevent Korean workers from bearing the brunt of IMF austerity measures, the U.S. should ensure that the U.S. banks and corporations that profited from the Korean export system share the burden by taking losses on loans and giving Korean companies more time to repay their debts. At the same time, increased attention should be paid to supporting growth in Korean domestic industry and agriculture in order to ease pressure on the chaebol to export their way out of the crisis. That would alleviate Washington’s fears of widespread U.S. unemployment from the widening U.S. trade deficit with Asia.

Regarding North Korea, Kim Dae Jung’s election signals more openness in Seoul toward dialogue with Pyongyang. Given that reality, the U.S. should take steps to improve its bilateral relationship with the North and to move toward full normalization by lifting economic sanctions and stepping up bilateral discussions on political and security issues. At the same time, the U.S. government should continue its policies to ease the humanitarian tragedy in the North by providing badly needed food and medicine. It is also critical for Washington to push ahead with the four-way peace talks that began in March, allowing all sides to begin discussing the framework to go beyond the present armistice and formally end the state of war that exists in Korea.

For the peace talks to succeed, however, U.S. military policies in Northeast Asia must change in a fundamental way. As a first step in creating trust and confidence, the U.S. government should renounce the use of landmines in Korea and set an early date for their removal, clearing the way for U.S. support of the Ottawa landmine treaty. The U.S. and South Korean governments must also change the status of the U.S.-Korean Combined Forces Command, under which a U.S. general commands South Korean troops in times of war. By taking full control of its armed forces, South Korea will alter an imbalanced military relationship that has no counterpart elsewhere in the world.

It is also essential to begin a discussion on the presence of over 100,000 U.S. military personnel in South Korea and Japan. The end of the cold war and the breakup of the Soviet Union have undermined the arguments for a forward U.S. military posture in Asia.

In the final analysis, helping South Korea through its economic crisis, formally ending the Korean War, and working toward the eventual peaceful unification between North and South requires the U.S. to deal with Korea as an independent nation. The arrogance of the past, when the democratic rights of the Korean people were overlooked in the name of U.S. security and economic interests, has created deep mistrust on both sides of the DMZ. With South Korea on the road to democracy and North Korea seeking a peaceful way to enter the world community, it is time to finally bring an end to the last cold war.

by Tim Shorrock