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Hidden admiration toward the US in FTA, portrait of US, the ‘epitome of neoliberalism’
Jung, Wook-Sik/OhMyNews April 15th 2007
In 2006 the Roh administration announced, without any national debate or consent, the go-ahead for Free Trade Agreement (FTA) with the US. In its background was the desire to revamp the South Korean economy through exposure to an external ‘shock’, the source of the shock being the US. Such wish was possible because there exists the sentiment of looking up to the US’s economic system – numerous people praising the FTA probably aren’t any different.
However, is the US economic system so superior that it should become the future economic model of South Korea? To this question, the socioeconomic realities of the US society provide a negative answer. Numerous statistics for the past 25 years the US has implemented neoliberal policies in domains such as WTO and NAFTA warn us, who are at the point of deciding to choose FTA and developmentalism which are choices with no return.
Thick shadows behind economic development
President John F. Kennedy has left the famous words “A rising tide lifts all boats.” It means, if the ‘pie’ gets larger, the portions each person gets also becomes larger. It was said in praise of economic developmentalism.
However the myth of economic developmentalism is being revealed as false. The rising tide, in fact, is engulfing a large number of people.
Between the years 1980 and 2004, the GNP per capita of an American has increased by 2/3. However, when inflation ratio is deducted from the increase ratio in wage, it can be seen that the real wage has decreased slightly. Also, the household income of the lowest 5% in the income level has increased by 8% and the next 5% group has experienced 17% increase. Considering the fact the average labor hours per household has increased by 25% in the same period of time, this can but only be serious inequality in income.
On the other hand, the top 5% income group has experienced 59% household income increase and the top 1% has doubled in their income. The top 5% income group was earning 6.7 times more than the bottom 5% in 1980 but this figure had changed to 9.8 by 2005.
CEO income – 300 times that of laborer
The income disparity between Chief Executive Officers (CEO) and laborers is even more serious. In 1970, CEO income was about 30 times more than that of laborers. This increased to 42 in 1982 and today, CEO receives around 300 times more income than laborers. Such income gap between CEO and laborers is very significant in comparison with other countries. US’s income gap between CEO and laborers is twice higher than other 13 economically developed powers.
Such gap could be understood as the CEO receiving his fair share in increasing the corporation’s profits. However, this is not true. In 13 years since 1990, corporate profits increased 128% while CEO income has increased 313%.
Concerning this matter, team led by Lucian Bebchuck of Harvard University and Yaniv Grinstein of Cornell has analyzed CEO incomes, corporation size, corporate profits and production. According to the research, 1,500 American corporations have, in 2003 alone, ‘overpaid’ their CEOs by $8.7 billion. This number does not include CEOs’ pensions and when pensions are taken into consideration, the amount would be far higher.
To this, the Washington Post has said, “billions of excessive dollars flowing into the hands of CEOs is a serious danger signal to the legitimacy of capitalist system. This paper has stressed that the cause of such excessive compensation to the CEOs lies in legal and institutional flaws.
CEOs’ pays are discussed in the board of directors and the institutional measures that can insure autonomy of these boards are not in place. Wall Street Journal has also pointed out that the excessive compensation of CEOs arises largely from connections between board members of corporations and consulting firms who provide the actual advices on CEO salary.
Clever suppression of labor unions
While the CEOs’ salaries are increasing astronomically, laborers’ wages are either stagnating or shrinking. The cause of this phenomenon has been suggested to be due to legal and institutional suppression against labor unions. The percentage of labor union membership was at 20% in 1980 which has dropped down to 13% in 2005. This mainly is the result of US’s neoliberal policies.
However, it should be also noted that among the causes of such drop in labor union membership, bad domestic law is playing its part. For example, managers can summon laborers at any time and give them anti-union education and can also prohibit any discussion concerning labor unions during working hours. What’s more, employers sometimes fire employees who form labor unions. This is in fact illegal but due to incredibly light penalties to violation, it is not being prevented. Also, in October of 2006, National Labor Relations Board, a federal body, has narrowed the definition of a ‘laborer’. This has made labor union membership even more difficult.
As can be seen, regulatory measures against excessively high CEO wages are not in place but, on the other hand, clever suppression against labor unions – which are vital to securing adequate wages for laborers and in protecting their rights – is increasing. This is the reality of American corporate-laborer relations. Seeing the problem in current situation, Washington Post – which views are politically center-to-conservative – is saying that such unreasonable practices should be remedied even for the sake of rescuing capitalism from running aground.
Cycle of poverty and inequality in access to education
In American society, the problem of ‘inheriting’ poverty is also a serious problem. According to Washington Post, people who were in the bottom 5% income group and became adults in the years between 1968 and 1998, today, 42% of them are still in the bottom 5% group. This shows that through polarization of income and ‘inheritance’ of poverty, the inequality in American society is becoming deep-rooted.
Among the causes of such phenomenon is the deepening inequality in income and in access to education. For instance, the level of income among poverty-level households has hardly increased for the last 25 years but university tuition fees have more than doubled. Consequently, for children in less well-off households, entrance into university is becoming more and more difficult.
Such inequality in access to education is directly linked to the income gap between high school graduate worker and university graduate worker. The income gap between the two groups was at 75% in 1979 which has increased to 130% recently.
Breaking American Dream and South Korea taking up the breaking dream
Such inequality in income and access to education leads to the conclusion that the American Dream – “work hard and show ingenuity and be successful” – is on the verge of being shattered. Also, it can be clearly seen that economic developmentalism relying on free trade and neoliberalism is worsening the problem and is not remedying the problem in any measure. Such phenomenon, although with some variances, are also being observed in South Korea.
Nonetheless, Roh administration and the conservatives are dreaming of ‘Americanization’ of South Korean economy through FTA with the US. American Dream, being shattered in its home, is being revived in South Korea.
Jung, Wook-Sik/OhMyNews April 15th 2007
In 2006 the Roh administration announced, without any national debate or consent, the go-ahead for Free Trade Agreement (FTA) with the US. In its background was the desire to revamp the South Korean economy through exposure to an external ‘shock’, the source of the shock being the US. Such wish was possible because there exists the sentiment of looking up to the US’s economic system – numerous people praising the FTA probably aren’t any different.
However, is the US economic system so superior that it should become the future economic model of South Korea? To this question, the socioeconomic realities of the US society provide a negative answer. Numerous statistics for the past 25 years the US has implemented neoliberal policies in domains such as WTO and NAFTA warn us, who are at the point of deciding to choose FTA and developmentalism which are choices with no return.
Thick shadows behind economic development
President John F. Kennedy has left the famous words “A rising tide lifts all boats.” It means, if the ‘pie’ gets larger, the portions each person gets also becomes larger. It was said in praise of economic developmentalism.
However the myth of economic developmentalism is being revealed as false. The rising tide, in fact, is engulfing a large number of people.
Between the years 1980 and 2004, the GNP per capita of an American has increased by 2/3. However, when inflation ratio is deducted from the increase ratio in wage, it can be seen that the real wage has decreased slightly. Also, the household income of the lowest 5% in the income level has increased by 8% and the next 5% group has experienced 17% increase. Considering the fact the average labor hours per household has increased by 25% in the same period of time, this can but only be serious inequality in income.
On the other hand, the top 5% income group has experienced 59% household income increase and the top 1% has doubled in their income. The top 5% income group was earning 6.7 times more than the bottom 5% in 1980 but this figure had changed to 9.8 by 2005.
CEO income – 300 times that of laborer
The income disparity between Chief Executive Officers (CEO) and laborers is even more serious. In 1970, CEO income was about 30 times more than that of laborers. This increased to 42 in 1982 and today, CEO receives around 300 times more income than laborers. Such income gap between CEO and laborers is very significant in comparison with other countries. US’s income gap between CEO and laborers is twice higher than other 13 economically developed powers.
Such gap could be understood as the CEO receiving his fair share in increasing the corporation’s profits. However, this is not true. In 13 years since 1990, corporate profits increased 128% while CEO income has increased 313%.
Concerning this matter, team led by Lucian Bebchuck of Harvard University and Yaniv Grinstein of Cornell has analyzed CEO incomes, corporation size, corporate profits and production. According to the research, 1,500 American corporations have, in 2003 alone, ‘overpaid’ their CEOs by $8.7 billion. This number does not include CEOs’ pensions and when pensions are taken into consideration, the amount would be far higher.
To this, the Washington Post has said, “billions of excessive dollars flowing into the hands of CEOs is a serious danger signal to the legitimacy of capitalist system. This paper has stressed that the cause of such excessive compensation to the CEOs lies in legal and institutional flaws.
CEOs’ pays are discussed in the board of directors and the institutional measures that can insure autonomy of these boards are not in place. Wall Street Journal has also pointed out that the excessive compensation of CEOs arises largely from connections between board members of corporations and consulting firms who provide the actual advices on CEO salary.
Clever suppression of labor unions
While the CEOs’ salaries are increasing astronomically, laborers’ wages are either stagnating or shrinking. The cause of this phenomenon has been suggested to be due to legal and institutional suppression against labor unions. The percentage of labor union membership was at 20% in 1980 which has dropped down to 13% in 2005. This mainly is the result of US’s neoliberal policies.
However, it should be also noted that among the causes of such drop in labor union membership, bad domestic law is playing its part. For example, managers can summon laborers at any time and give them anti-union education and can also prohibit any discussion concerning labor unions during working hours. What’s more, employers sometimes fire employees who form labor unions. This is in fact illegal but due to incredibly light penalties to violation, it is not being prevented. Also, in October of 2006, National Labor Relations Board, a federal body, has narrowed the definition of a ‘laborer’. This has made labor union membership even more difficult.
As can be seen, regulatory measures against excessively high CEO wages are not in place but, on the other hand, clever suppression against labor unions – which are vital to securing adequate wages for laborers and in protecting their rights – is increasing. This is the reality of American corporate-laborer relations. Seeing the problem in current situation, Washington Post – which views are politically center-to-conservative – is saying that such unreasonable practices should be remedied even for the sake of rescuing capitalism from running aground.
Cycle of poverty and inequality in access to education
In American society, the problem of ‘inheriting’ poverty is also a serious problem. According to Washington Post, people who were in the bottom 5% income group and became adults in the years between 1968 and 1998, today, 42% of them are still in the bottom 5% group. This shows that through polarization of income and ‘inheritance’ of poverty, the inequality in American society is becoming deep-rooted.
Among the causes of such phenomenon is the deepening inequality in income and in access to education. For instance, the level of income among poverty-level households has hardly increased for the last 25 years but university tuition fees have more than doubled. Consequently, for children in less well-off households, entrance into university is becoming more and more difficult.
Such inequality in access to education is directly linked to the income gap between high school graduate worker and university graduate worker. The income gap between the two groups was at 75% in 1979 which has increased to 130% recently.
Breaking American Dream and South Korea taking up the breaking dream
Such inequality in income and access to education leads to the conclusion that the American Dream – “work hard and show ingenuity and be successful” – is on the verge of being shattered. Also, it can be clearly seen that economic developmentalism relying on free trade and neoliberalism is worsening the problem and is not remedying the problem in any measure. Such phenomenon, although with some variances, are also being observed in South Korea.
Nonetheless, Roh administration and the conservatives are dreaming of ‘Americanization’ of South Korean economy through FTA with the US. American Dream, being shattered in its home, is being revived in South Korea.
