Facing Up To Reality

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DONALD MACINTYRE SeoulAfter five years as a construction site manager at Samsung, Chung Hwan Oak was more used to giving orders than taking them. So making sales calls for his new catering business turned out to be particularly hard on his pride. After bowing deeply, Chung, 49, would pitch his hot-pot lunches--steaming vegetables seasoned with shrimps and fiery pepper sauce--then explain how he'd lost his job at the giant conglomerate. Often people just slammed the door in his face. Those who listened didn't offer him a chair. The frosty treatment stung, but Chung knew what was behind it. In status-conscious Korea, Samsung is at the top of the job heap--catering is near the bottom. Running a restaurant wasn't a respectable thing to do, says Chung. The hardest part of shifting gears was pride.

That was a year ago. Today customers are flocking to Chung as word of his tasty food spreads. Friends who once scoffed at his restaurant plans want advice on how to set up their own catering joints. The definition of what's respectable in South Korea has changed fast since economic collapse punched a hole in the Korean Dream. When the country was vaulting to economic success, parents aspired to get their sons into white-collar jobs at giant chaebol, or conglomerates, like Samsung. A year of life under the yoke of a humiliating $58 billion bailout from the International Monetary Fund has crushed all that. A bright horizon of lifetime jobs and seemingly nonstop growth has suddenly dimmed. In its place: soaring unemployment, a more competitive role in the global economy and diminished expectations for a country that had been living beyond its means.

Now, a generation that grew up taking rising living standards for granted is throwing the old model out the window. Out-of-work managers are rolling up their sleeves and starting their own businesses. Some are going back to the farm, reversing the path trodden by an earlier generation as industrialization took off. After watching scores of big companies go under, university graduates are heading off in new directions as well. A job at a big chaebol is no longer seen as a ticket to the good life. Young Koreans are picking smaller, healthier companies, where they have more chance to make a mark. A new pragmatism is replacing the old emphasis on size, prestige and face, says Kim Nong Ju, a career counselor at Yonsei University in Seoul. It's a tremendous change. Koreans used to want to wear the pin of a big business group because that is what their fiancee's parents would look at.

The pressure to adapt is only going to increase. Korea's economy may be sputtering back to life, but unemployment is expected to hit a record high of 9% this year. A fragile detente with labor is unravelling, threatening to slow the whirlwind of reforms President Kim Dae Jung set in motion in his first year in office. A radical labor union marched through the streets of Seoul on Feb.27, demanding a halt to layoffs. But even Korea's notoriously feisty unions recognize that the old culture of job security is gone. The country's worst recession in nearly half a century is already forging an economy that will be more flexible and competitive. Korean society was headed in the wrong direction, says Kim Hyoung Hwan, who started his own shoe-repair business last year after losing his job. This is a healthy correction.

In the old Korea, wearing the pin of a top chaebol conveyed prestige, improved marriage prospects, even promised better treatment at government offices. Graduates of the best universities--Seoul National and Yonsei--aimed for the top five chaebol: Hyundai, Samsung, Daewoo, LG and SK. Those who didn't make the cut tried for the next rung down. Getting a son into a big concern, or an important ministry, won bragging rights for parents. Family pressure often weighed more heavily in career choices than personal inclination.

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The honorable status of stable, white-collar jobs reflects deeply engrained traditions. For hundreds of years, Korea was dominated by a class of Confucian literati who valued scholarship over any kind of manual labor. These attitudes persisted in modern Korea. But they clashed head-on with another Confucian mindset when the economy cratered in late 1997. As unemployment soared, thousands of men faced the unthinkable: joblessness in a society where a man's worth is still defined by his ability to provide for his family. Ashamed to face their wives and children, men who lost their jobs in the first months of the crisis would dress for work, then while away the day in a coffee shop. Unable to bear the loss of face, some resorted to suicide. Others, like Chung, decided to swallow their pride.

Chung never imagined he could one day fall off the ladder to the good life. His job at Korea's second-biggest chaebol brought respect from the neighbors and middle class comforts--a car, a nice home, enough money to send the kids to university. There was enough left over for movies and friends' weddings. But IMF, as Koreans call the crisis, turned Chung's world upside-down. As construction orders fell off, Samsung pressured him to retire. He looked for work, but middle-aged managers weren't a hot commodity in a recession. When a consultant suggested the catering business, his friends told him he was throwing away his university training. But with money running low, he took the plunge. There was tremendous pressure to keep up face, says Chung. A few months after IMF, people started throwing face away.

Today Chung and his wife rise at dawn to prepared ingredients for the hot pots. He delivers meals to offices, where customers use a hot-plate to stew their lunches right at their desks. Chung's wife stays at their hole-in-the-wall shop, chopping vegetables and tracking orders on a small computer. The hours were shorter at Samsung, and the pay was higher. Now movies and weddings are out. But his friends are envious, worried that their own jobs could be next. Despite the hard work, Chung says his life is better today. I am so happy, he says, his broad features crinkling into a smile. I have a tremendous sense of achievement.

That is music to the ears of President Kim. Since taking office a year ago, just after the economy started to tank, Kim has launched one of the most ambitious economic makeovers any country has ever attempted. His vision: a nimble, globally competitive economy to replace a system built on debt, endless expansion and limitless export markets. To make it work, he needs to create a flexible, U.S.-style labor market in which companies are free to hire and fire as they please. He also needs people who are willing to adapt to the new economic realities. Koreans like Chung are breaking the old attitudes, Kim told Time. They have the frontier spirit.

Shoe-repair shop owner Kim Hyoung Hwan, 33, might be startled to hear himself described as a pioneer. But his shop in the port city of Inchon is a good place to see some of the changes sweeping across Korea. After losing his job as a purchasing manager, Kim noticed that people were spending more on shoe repairs to save money amid the economic turndown. Demand was also rising as companies cut back on the certificates for new shoes they used to hand out to employees. So over his wife's objections, Kim found a partner and poured his savings into the shoe shop.

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A graduate of a technical high school, Kim has brought his engineering smarts to an old-fashioned business. Curb-side shoe repairmen are still a common sight in Korea, so Kim's store is a shock to many customers. It's stocked with a huge array of heels, soles and polishes. Shoes Kim has miraculously salvaged sit out on display. Up by the front window is the computer he uses to track orders and customers. Boasts Kim, a slim man with big, gold-rimmed glasses: They are surprised when I tell them I programmed it myself.

Money is still tight--regular drinking nights with friends have dwindled to once every two months at most. He regrets putting his wife to so much trouble and sometimes blurts out an apology when he has had enough to drink. But Kim says he is happier running his shop--he had always wanted to be his own boss. And despite the economic uncertainty, he sees an upside to the crisis. Korea's economy had lost its bearings during the years of go-go growth, he says. Society, too, had somehow gone out of whack.

In the farming town of Yaesan, 130 kilometers south of Seoul, Song Byung Chae has also found that hard times have brought unexpected blessings. He is part of a privately run volunteer program aimed at getting jobless city folk back to work, down on the farm. In this rolling landscape renowned for its apple orchards, city-bred former section-chiefs and business-owners are getting hands-on lessons in how to raise everything from mushrooms to chrysanthemums and canaries. Most of them are out of work for the first time in their lives.

On a recent day, Song, 43, watches intently as an instructor explains the finer points of growing chrysanthemums inside a greenhouse the size of several tennis courts. A videotape marketing manager back in Seoul, Song lost his job in September when his company folded. This is not a career choice the university graduate had ever contemplated--right now, feeding his wife and kids is his first priority. But Song says he wouldn't swap his new life for his old one. The hard times have brought his family closer together. Getting out of the Seoul rat race has improved his mental health and even helped him shed a few pounds. Says Song: I feel as if I've been liberated.

The same could be said for Korea. As Koreans shift gears, talent is getting spread through the economy in a way that was never possible before. In the old Korea, graduates from a good university wouldn't think about going anywhere but a big company. The best and the brightest got bottled up in jobs at big chaebol, where they became bureaucrats, not entrepreneurs. But entry into a good school was a double-edged sword, says photojournalist Kim Woo Kyoung, a university graduate who recently left a large television network to set up his own media company. Students scored points in the status game, but they felt social pressure to stick to a narrow range of respectable career choices. During his student days, Kim fantasized about becoming a taxi driver just to have a chance to drive around and meet ordinary people. Says Kim: IMF has broken down the university-credential wall.

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The system discriminated against people with the wrong degree, or, worse still, no degree. At a university graduation ceremony last month, President Kim said Korea has to cure itself of what he called the elite university disease. Kim himself is a rarity in Korean politics: he didn't earn an undergraduate degree, although he later picked up a handful of honorary doctorates. The chaebol may be getting the message. This year, the top five say they are looking beyond the big universities when they recruit this spring (although the slump has forced them to slash hiring to just 2,000 students, a fifth of their usual quota). As Korea's economy restructures and opens up to foreign competition, big companies are starting to look at what prospective employees bring to the table besides a fancy diploma.

Nowhere is the difference more evident than at Housing & Commercial Bank. A clunky state-run institution until two years ago, it was the only bank in Korea allowed to make mortgage loans to home buyers. Lending money used be a relaxed affair. Loan officers decided what a property was worth after a quick look at the house and a chat with the owner or a local real-estate agent. Assessments were so rough, the bank could count only 30% of the assessed value as collateral. The system was also open to bribery--slipping an envelope of cash to a bank official was a good way to boost your property value, according to Kim Jun Tae, head of the now-privatized bank. The culture was very bureaucratic, says Kim. I told people we have to be doing business, we have to sell things.

Since Kim became chief executive last year, that's exactly what bank employees have been doing. With property assessments now computerized, thanks to help from U.S. consulting firm McKinsey & Co., they spend their time drumming up new business. They had better: 30% of their paycheck is now tied to performance. Improved efficiency means home owners today get 70% of the assessed value of their homes as collateral. Kim wants his employees to think like entrepreneurs and sends frequent e-mails to hammer home the message. He even brings in guest speakers from outside the world of banking, then broadcasts the talks to every bank branch before opening hours. A Chinese chef recently shared his views on survival in the new global economy, reminding the bankers: If you don't make the best Chinese food, you won't survive.

Meanwhile, the government is prodding less reform-minded banks and companies to get with the program. It has pushed through tough new regulations to curb the excessive lending that helped to push the economy to the edge of collapse. It has shut down deadbeat banks and companies. And it has opened a long-closed market to overseas ownership (foreigners now own more than 55% of Housing & Commercial). The dramatic reforms have forced everybody to become more competitive. And they've helped spark recovery much sooner than most experts expected. The government predicts growth will bounce back to an annual rate of 2% by the second half of this year--the economy shrank 5.9% in 1998. There is no country in the OECD that has made such rapid changes in 14 months, said Donald Johnston, secretary-general of the Organization for Economic Cooperation and Development, at a recent press conference in Seoul. Historians may look back and say this crisis has left a healthy legacy.

Yet it also promises to be a painful one. President Kim's policies are pushing up unemployment, at least for the short term. The government prediction of 9% unemployment this year is stunning in a country used to levels closer to 2%. At a televised town hall-style meeting two weeks ago, Kim seemed to be preparing the nation for more adversity: It is too early to open the champagne bottles, he said. Labor Minister Lee Ki Ho has warned that more layoffs are inevitable. Europe's cumbersome job-protection laws have left millions unemployed on the Continent, while the tough-love system in the U.S. has brought unemployment down to low levels, he noted. Korea has chosen the U.S. model. We have to be prepared for massive layoffs, says Kim. There is no other way.

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That's small comfort for people like Kim Jung Mi, 30, who was fired without notice last June l. In a country where women still occupy few positions in the top levels of business, they have often been the first to get the axe when restructuring starts. A saleswoman in a small bookstore, Kim had held her job for five years. But her boss refused to give even a month's notice. As a never-married mother, she already had a tough life--Kim's family shunned her when she decided to keep her child seven years ago. But nothing had prepared her for the sudden dismissal. I felt so betrayed, says Kim. The shock was too big for me.

So big it triggered an emotional breakdown. Kim stopped eating for days at a time and slipped into depression. A friend had to care for her son. Eventually Kim sought help, and friends found her a psychiatrist willing to provide free therapy and medication. Since January she has been working as a clerk in a government-sponsored public-works program. That will provide enough money to pay for food and the tiny unheated basement apartment she has moved into. But Kim hasn't found a job yet. She doesn't know what she and her son will do when the money runs out.

The crisis has brought anguish for countless others as well. Suicide, alcoholism, divorce and crime have jumped in the past year. Shelters for out-of-work businessmen have sprouted in Seoul and other cities. There are more orphans, as fathers and even mothers abandon children they don't think they can feed. The government is trying to build a social safety net from scratch. Spending on job training and support for the unemployed is set to rise 36%, to $1.6 billion, this year. But it is not clear how long the government can contain the resentment of those who don't have the skills to shift gears.

Labor leaders complain that workers are bearing the brunt of restructuring, while big companies get off easy. Korea's cantankerous unions kept a lid on protests last year, fearful of a backlash from the public. But last month they showed their patience was wearing thin when a militant union walked out of a three-party committee--representing labor, government and companies--set up last year to navigate the crisis. The radical Korean Confederation of Trade Unions accused the government of ignoring workers' demands and not doing enough to prevent unemployment. Companies promised to use every possible means to avoid layoffs, says Lee Kap Young, head of the confederation, an umbrella group of unions that claims 550,000 members. Instead, Lee says, they are taking advantage of the crisis to shed workers. Vowing an all-out fight this month, the union fired the first volley with last month's rally in Seoul. The muscle-flexing remains low-key for now, but if Seoul doesn't get the message, the union promises to escalate its confrontation with government. Another major union has threatened to pull out of the three-party committee if the government doesn't change its hard-nosed stance on layoffs. We trusted the President, says Lee, who complains that union members feel betrayed by Kim. Now we are going to show we will no longer tolerate being the only ones to bear the pain.

But even Korea's unions have lost some of their old fire. We understand that times are changing and so values are changing, too, concedes Lee. For the Chungs, that has certainly eased the burden of learning to live with less. It's not just the growing acceptance among friends and customers. When Chung threw away his face, he and his wife worried they would be scorned by their three children. But the kids surprised them. The Chungs' teenage son helps his father with deliveries. When Mrs. Chung fretted about their drop in status, the teenager reminded his mother of a story she had told him as a child about how the local cleaning man wasn't born a cleaning man but was just playing the hand fate dealt him. The Chungs' 20-year-old daughter, now a sophomore attending Yonsei University in Seoul, comes by to help her mother dish out bowls of steaming white rice to go with the hot pots. My daughter said what we're doing is admirable, Mrs. Chung recalls. We both cried when our children told us how proud they were. As the Chungs are discovering, sometimes less is more.

With reporting by Stella Kim/Seoul

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