Korea’s ‘Arbeit Macht Frei’ Bubble

This week, several new reports, chiefly those from the New York Times and the LA Times, describe a journalists’ group tour of the Kaesong Industrial Park, possibly the only place on earth where the spirits of P.T. Barnum(*) and Lavrenti Beria cohabitate.

A Paradise Within a (Worker’s) Paradise

In North Korea, a nation that is essentially one vast open-air prison, Kaesong is the new prison laundry — a relatively cushier, marginally less despotic part of the institution into which you can finagle your way for enough cigarettes (or worse). Your level of moral comfort with Kaesong’s particular form of capitalism probably depends on your perspective.

At Kaesong, the minimum wage for the 48-hour week is $57.50. But $7.50 is deducted for “social charges” paid to the North Korean government. The remaining $50 is paid to a North Korean government labor broker. None of the South Korean factory managers interviewed would guess how much of the $50 salary ends up in the pockets of workers.

“The exact amount is determined by North Korean authorities,” said Kim Dong Keun, a South Korean who chairs the Kaesong Industrial District Management Committee.

Under labor contracting arrangements in Russia and Eastern Europe, North Korea’s government often withholds half of their workers’ salaries.

Exact answers to the question were not immediately available, so James Brooke of the New York Times did something remarkable. He asked. (In the process, he did much to redeem his newspaper, and just after I castigated the bias and laziness of another of its reporters).

Attempts to interview seamstresses at the Shinwon factory elicited evasive responses and intervention by South Korean guides.

“No interviews with North Korean officials or employees are allowed,” Mira Sun, the foreign press aide to South Korea’s president, Roh Moo Hyun, lectured reporters by loudspeaker in one bus after reporters tried to interview seamstresses.

Barbara Demick of the L.A. Times was able to learn the answer anyway:

The monthly salaries of $57.50 for each North Korean worker — regardless of position — are paid directly to the North Korean government, which in turn gives the workers about $8, more than double the average monthly salary. South Korean companies have asked repeatedly to pay the workers directly and to give bonuses for better work, but have been refused.

Contrary to some of the other reporting – including Brooke’s otherwise excellent report – a worker at Kaesong will earn about 40 cents per day (not 23 cents an hour). Assuming 20 workdays per month and 8 hours per day, that’s 40 cents a day, or a nickel an hour. It’s hard to image how a family can live on that, even in North Korea, and even taking the state’s crumbling public distribution system into account. It says much that this is still an above-average wage in North Korea.

[Update 9/06: There’s another point I failed to note when I originally put this post up. The figure of $57.50 has since been advised upward to around $63 or so, to reflect the increased buying power of the South Korean won against the dollar. Anyone see a problem here? Well, unless the North Koreans are letting their workers collect their wages in South Korean won — chances of that are just south of nil — the $57 and $63 figures are meaningless, because the real wage that matters is paid in North Korean currency. These figures almost certainly come from converting North Korean won to South Korean won at the highly inflated official exchange rate, versus the actual market value of North Korean currency. How inflated? This calculator will tell you that 10,000 North Korean won are worth over four million South Korean won, or $4,544.77 American(!). At that rate, $63 is equal 138.62 won. However, the actual market value of North Korean currency is falling like a stone due to hyperinflation. Recently, the Daily NK reported that 1,200 won buys 1 kilogram of rice. Presuming that the North Koreans pay the workers that entire amount, which we already suspect they don’t, a person simply can’t live on 2.2 pounds of rice for nearly a year. So where does this leave us? With more questions than answers.]

There are other differences between Kaesong and “ordinary” sweatshops, where, say, underpaid Indonesian workers make sneakers for low wages.  (For now, set aside the question of the mendacious idealism used to sell Kaesong.) Surabaya Johnny can at least theoretically choose other employment, and  stands a realistic chance of doing so at better pay, thanks to rising real wages in the manufacturing sector. It’s not all rosy, to be sure, but there’s a tangible greater good for which you can argue. This isn’t an argument that Kaesong’s proponents can make.

And then there’s the question of collective bargaining. I mean, union label, anyone?

Not only are the wages the lowest in Northeast Asia, but independent labor unions are banned.

“Strikes?” Hwang replied dismissively in response to a reporter’s question. Raising crossed arms, he said with a slight smile: “Absolutely not.”

So much for “freedom of association and the effective recognition of the right to collective bargaining,” a principle of which South Korea clearly runs afoul with Kaesong, and which ought, in a just world, to get it summarily kicked out of the International Labor Organization. And it bears endless repetition that while South Korea’s manufacturing jobs are outsourced to this high-tech corporate plantation, South Korea’s normally ferocious and violent labor unions haven’t uttered a peep. You could guess why, but doing so would be unnecessarily strenuous.

Finally, if things don’t work out for Surabaya Johnny at his current job, they probably won’t get this bad for him, or for his family.

Capitalism’s Worst-Kept Conspiracy

These uneasy questions go unanswered by the politicians and power elites of both Koreas, who have formed an alliance of convenience cemented by an ethical blindness not seen since Snuppy was whelped. As with the half-forgotten ruckus over Hwang Woo-Seok, Kaesong presents another complex relationship between “ends” and “means,” and how badly such relationships can end when their pretended premises unravel. Of the means, I’ve said about as much as we’ll be allowed to know. We can be reasonably certain that they won’t include attaching desperately needed human rights conditions to aid or investment in North Korea.

As for the ends, the theory behind Kaesong is that there is a higher social purpose for this Gulag of Tomorrow, where high tech meets low wage. The idea is that Kaesong’s seductive, corrupting power will be the harbinger of North Korea’s gradual reform toward prosperity, and perhaps even a relative degree of political liberalization. It’s a new variation on an old idea, although it was catchier in the original German:

I’ve previously compiled a lengthy parade of loss-making partnerships with the North Korean regime that have left neither the investors nor ordinary North Koreans any richer, and sometimes feeling trapped between two governments. Kaesong proves that for the South Koreans, sadder does not always mean wiser.

It’s probably also a safe bet that Kaesong won’t do much to advance the capitalist subversion of North Korea anytime soon, given the North’s extraordinary  determination to keep out subversive ideas. Demick’s article for the L.A. Times notes the isolation of the area around Kaesong, the armed guards and fences around it, and the careful attention paid to preventing contact between ordinary North and South Koreans, including separate stores, cafeteria, and clinics exclusively for the visitors. To the extent that Arbeit Macht Frei goes beyond being a self-serving cover for capitalism at its worst, the North Koreans are on to it:

The North Koreans aren’t fools, after all. Kim Jong Il is reported to be personally obsessed with the fate of Romania’s Nicolae Ceaucescu (as in, avoiding), and even ordered his underlings to watch the videotaped executions of Ceaucescu and his wife, over and over again. In the context of Eastern Europe, Kim has lectured that “[t]oday, the imperialists and reactionaries are tenaciously scheming to blow the wind of bourgeois liberalism into us,” and predicts the end of his regime if North Korea opens itself to the outside world:

People will ideologically degenerate and weaken; cracks will develop in our socialist ideological position; and, in the end, our socialism will helplessly collapse. A case in point is the bitter lesson drawn from the miserable situations of the former Soviet Union and Eastern European countries.

True to the Dear Leader’s guidance, the North Koreans are enforcing the hermetic seal rigorously:

South Koreans have covertly tried to give medicine from their private clinic to ailing North Koreans.

One South Korean employee was accused of trying to bribe a North Korean soldier when he gave him two packages of instant ramen noodles, said a military source who requested anonymity.

In a more serious incident, a South Korean was caught trying to distribute Christian literature, which is strictly forbidden in the communist country, the source said.

If anything, it’s South Koreans who are  subjected to the North Koreans’ ideology:

Mobile telephones, newspapers, books, videos, laptops, magazines, MP3 players and many other appurtenances of 21st century life have to be checked on the south side of the border.

Also best left behind are any wisecracks about the North Korean regime, in particular those involving its leader, Kim Jong Il. [I suppose there’s another story behind that!]

“You’ve got to watch what you say,” said Kim Yi Gyeom, a South Korean telecommunications worker standing in a long line of Monday morning commuters waiting to go north. “The spirit of openness has not come to North Korea yet.”

Another observation from Demick’s LA Times report:

North Korean patriotic music in praise of Kim blares over the loudspeakers of a futuristic warehouse where North Korean women in crisp blue uniforms stitch athletic shoes using brand-new sewing machines.

The Washington Post’s Anthony Faiola adds more:

South Koreans are not permitted beyond a bright green perimeter fence that is guarded by armed soldiers and separates the complex from a decaying North Korean village rife with communist slogans, including one telling all residents to “celebrate the greatness” of North Korea.

Nor does reform look likely in the future, even after nearly a a decade of South Korean appeasement. The hope to which advocates of tyranny-sustaining investment always clung was a series of very limited market reforms, initiated in 2001 (much more at the section entitled “Economic Reform?”). Late last year, however, even those reforms were reversed, a point even a South Korean diplomat had to concede when I questioned him on it recently. (Even Stalin ordered similar, modest reforms in the 1920’s, only to reverse them, clamp down again, and order more purges later.)

It’s harder than ever to see how Arbeit will macht Frei in North Korea. Stripped of its idealistic cladding, then, Kaesong looks like an especially pernicious new bastard of sweatshop and gulag.

The Strange Dance of the Isms

This makes for some fascinating reading, especially watching  Kaesong’s fans on the far left go all glisteny-eyed over the promise of Kaesong, letting the schmaltzy corporate propaganda wash over them like so much  815 Cola, arousing them to heats of unificationista passion.  Of course, I speak of Christine Ahn, writing in the International Herald Tribune:

At Incheon International Airport in South Korea, flat-screen televisions beam a Samsung cellphone commercial of a concert with South Korea’s pop icon, Lee Hyo Ri, and the North Korean dancer Jo Myung Ae. Korea’s most popular female stars, they sing a song about parted lovers with the lyrics, “Someday we will meet again, although no one knows where we’re going, someday we will meet again, in this very image of us separated.”As they hold hands, the blue “One Korea” flag rolls down behind them, and as they turn to watch the flag, Lee Hyo Ri says, “That day I was so nervous because the story wasn’t just about the two of us.”

Here was Samsung, one of Korea’s most powerful corporations, popularizing reunification. And the South Korean government was also sending a clear message to all foreigners landing on Korean soil: Reunification is happening, slowly, but surely.

Later, Ahn trumpets the growth of inter-Korean “economic exchanges.”  Reading this, you might not immediately guess that Ahn is a ferocious anti-globalization / anti-free trade  author-activist, a Dennis Kucinich groupie,  and an advocate of state-managed food redistribution.

Nationalism, meet socialism.

Again.

It’s almost too logically and morally oblivious, too intellectually dishonest,  to comprehend. If you hate globalism when it’s partially balanced by a free labor market, mostly-rising wages, and the right to strike, you can’t simultaneously love the Arbeit-Macht-Frei politics of Kaesong, a legally and morally unchecked union of factory bosses and concentration camp guards, where workers are silenced, unions are banned, and wages are a nickel an hour.

Even if a dour German Marxist playwright were sufficiently moved by the social injustices of Kaesong to write a storyline about class struggle there, the premise would be too unbelieveable to make good theater. A musical about a Kaesong Johnny would end, well, something like the reality that enclosed Brecht and Weill as they ranted on about the injustices of global capitalism.

How little times change.

In the end, however, the cultural isolation of Kaesong’s hand-picked workers will fail. The workers will eventually take note of the health and prosperity of their southern counterparts, and they will talk about it. And when the regime’s security forces find out, they will do what they did after learning that some members of the nation’s cheerleading squad talked about what they saw in Busan. Kaesong itself will not be immune to that reaction. That means that predictions of explosive growth at Kaesong will prove premature, and that Kaesong will be fortunate to remain what it is now: a small, carefully sealed cash cow for Kim Jong Il’s regime.

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Update: Edited, and re-edited. Also, don’t miss Don Kirk’s CSM story, which I received moments after putting up this post. I think Don’s last rental carn (a Kia) was made in Kaesong, based on its performance.

Another Update: South Korea is raiding the nation’s unemployment insurance fund to pay for job training at Kaesong. Hel-LO! Any UNIONS out there? Sheesh.

Yet Another Update: The Anti-Unification Ministry wants to relax the payment structure for non-performing loans for the Kumgang joint venture.